A common phrase used to explain Bitcoin is “Bitcoin is digital gold.” This statement implies a few things:
- People will always value gold (because people have always valued gold), even if it’s not that functionally useful. Therefore people can value Bitcoin in the same way, even if it’s not that functionally useful.
- Bitcoin is not government sponsored or backed. There is no central bank dictating gold’s or Bitcoin’s money supply.
- Neither asset can be inflated by politicians. There is a fixed amount of gold in the world and a maximum of 21 million Bitcoins.
- Bitcoin and gold are both fungible.
- Bitcoin and gold act as a hedge against the risk of inflationary fiat currencies.
Let’s consider the risks and benefits of Bitcoin in a scenario in which a government becomes unstable and politicians begin inflating their currency to stay in power.Read More