Bitcoin is frequently likened to digital gold, a comparison that resonates with many. This analogy highlights that both Bitcoin and gold necessitate time, resources, and energy for their production. Furthermore, neither asset is backed by any government, and both enjoy widespread acceptance.

However, Bitcoin surpasses gold in a significant way: it allows for nearly instant transfers across the globe. Unlike gold, which is cumbersome to transport in large quantities and occupies physical space, Bitcoin can be sent digitally without diminishing its value. Additionally, Bitcoin's divisibility is superior; it can be divided mathematically, while gold requires physical alteration or equivalent pieces for smaller transactions.

While gold is scarce, Bitcoin is finite, capped at 21 million coins. This limited supply makes Bitcoin more scarce than gold.

Gold represents analog technology.

Bitcoin embodies digital technology.

Gold has proven its worth over millennia, and it continues to hold value. However, the digital nature of Bitcoin suggests it could serve a wider range of applications in the future. Despite these parallels, Bitcoin is not in direct competition with gold; one does not have to choose between the two. In many respects, Bitcoin can be seen as an evolution of gold, sharing some characteristics, yet representing a new technological advancement. Both are assets that traders monitor, but that does not mean they are inherently adversarial.

I believe Bitcoin will exhibit greater utility than gold moving forward, though gold's historical resilience against currency fluctuations is a lesson Bitcoin could benefit from.

# Bitcoin vs. Fiat

Bitcoin is not at odds with fiat currencies like the US dollar. Instead, it is a byproduct of the current global economic landscape. While it may be gaining value against fiat currencies, this trend reflects a broader economic symptom rather than an outright replacement of traditional currency.

Bitcoin operates without a centralized agenda or leadership; it exists purely as a digital asset with stable characteristics that are less susceptible to manipulation than fiat currencies or most other digital assets.

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# The Decline of the US Dollar

Ultimately, the value of all currencies reverts to the cost of their creation. Traditional currencies, such as the US dollar, can be produced at virtually no cost, leading to a long-term trend toward devaluation.

While it may seem exaggerated to claim that fiat creation incurs no cost, the reality is that government-backed currencies hinge more on human decisions than on inherent production costs.

Commodities like oil and gold do have associated production costs, which can sometimes serve as a price benchmark. This is true for Bitcoin as well. As a "proof of work" cryptocurrency, Bitcoin's creation involves considerable energy, labor, and equipment—similar to oil, gold, and other physical commodities.

Conversely, "proof of stake" cryptocurrencies, which require minimal energy for production, are more akin to fiat currencies. Their value often depends more on centralized decision-makers rather than on production costs.

# The Erosion of Fiat Value

Despite the gradual decline in the purchasing power of the US dollar, it remains the world's reserve currency, a status that will not change overnight. However, smaller fiat currencies are more likely to experience failure.

For instance, Argentina has undergone five currency debasements since 1970, and Turkey has seen its lira lose over 75% of its value against the dollar in just five years.

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# Historical Context: 15th-19th Century Currency

The issue of currency debasement is not a modern phenomenon. Factors like inflation, global debt crises, wars, and unreliable governments have existed throughout history. Over time, all fiat currencies tend to fail.

The Spanish dollar, also known as the piece of eight, is often considered the first global currency.

The piece of eight gained prominence due to its uniformity and intrinsic value, making it practical both within and beyond the Spanish Empire. Interestingly, it could even be divided into eight smaller pieces, known as "bits," for easier transactions.