More on why BTC isn't 'digital gold'

“Jay 4.669 [all your coinbase are belong to us]” (ha!) had a comment in reply to my last article that is useful for illustrating a related point about why BTC is not digital gold.

lol - when demand rises the price goes up.. and yes so does the cost to insure and secure the gold… are you kidding? did you make this up out if thin air?

Let’s think about this. What actually happens to the functionality of gold as the price increases from demand? It’s not what “Jay 4.669 [all your coinbase are belong to us]” thinks and it’s nothing like BTC.

When the price of gold rises, it means that any individual amount of physical gold is worth more, which means someone can carry more value now in a smaller physical quantity of gold than before, which means it is actually now cheaper for that person to transport and transact with gold than it was before.

For example, if you have a gold coin worth $1, and the value of that coin rises to $2, you can now carry $1 around in half a coin, or half the weight and physical space it took you when the whole coin was only worth $1. An increase in the price of gold makes using it easier. Nobody wants to carry around a big bag of coins or a bar of gold, but dust or small pieces? No problem.

And since you can carry the same amount of value on your person in a smaller physical quantity of gold, it’s actually easier for you to keep it secure and, indeed, private.

But BTC doesn’t work like this. As demand grows, it becomes more expensive to transact with or to transport from one address to another. If fees rise too high, it means you might need to consolidate coins for them to be practically useable, or move them to exchanges, making your Bitcoin far less secure and private than if you could keep them spread across many addresses in small quantities. In fact, certain smaller quantities of Bitcoin actually become impossible to practically use because the fees involved in transacting are worth more than the amount in Bitcoin with which you want to transact.

So much for BTC as ‘digital gold.’ Gold doesn’t get functionally worse when more people want it, it gets better.

If you want to use a cryptocurrency that works better as digital gold, use big-block Bitcoin.

It costs practically nothing to transport, practically nothing to transact with, practically nothing to divide, and it is much cheaper to secure and keep private because you can keep fractional quantities spread across as many addresses as you want.

And if you think it works now when it has minority market-share, just like gold, it will get even cheaper with economies of scale.

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