Seriously, we had to do a double-take when we happened upon this NASDAQ post, Why is Bitcoin Worth More than Gold? Martin Tiller’s excellent article goes into how a new ETF which will track the virtual currency that the SEC will hopefully soon approve. The article is worth a read – we’ve excerpted some of it below but the bottom line is the author believes supply and demand has a lot to do with it.
What the creator of Bitcoin, the mysterious Satoshi Nakamoto, did was turn that notion on its head. What if currency, like gold, was both limited and scarce in nature? If that was the case, then as an economy expanded, the currency would become more, not less valuable, and increasingly small amounts of it would be needed to pay for things. That could be handled easily enough by simply using smaller and smaller fractions of the base unit of currency rather than more units, making the whole unit more valuable in relative terms over time.
That is exactly what has happened with bitcoin. The original protocol that established the currency limited the total amount that could ever be issued to around 21 million and, by making them increasingly hard to create, ensured that the rate of supply would diminish over time. That meant that, assuming the idea gained ground and bitcoin were accepted as payment for other things, the value of one bitcoin was literally programmed to increase over time.
The original idea was based very much on the supply of gold, and the creation of bitcoin, using increasing amounts of computing power, is even known as “mining.”
Why the double-take? Well in 2013, we penned 15 Reasons Bitcoins are Better than Gold and as far as we are concerned, this is the reason the virtual currency is now worth more than the metal. We’re of course kidding, but not really.
Even Jamie Dimon who tried to kill the Bitcoin revolution ended up wrong and looking bad because it seems he doesn’t really understand how the currency works and how resilient it is with 9,000 nodes all over the world.
We don’t get everything right here but forgive us for gloating a bit that we were spot on with this post back in 2013. We’d love to hear your thoughts about the future of cryptocurrencies and blockchain below.
We hope to see you soon at THE Blockchain Event, where we’ll get to experience growth of Blockchain, Bitcoin and FinTech together.