Gold Vs Bitcoin Part 1
Four Problems With Gold-Backed Money
Commodity Money vs. Bitcoin
If you hate fiat, then you’re in good company. But that doesn’t necessarily mean you like Bitcoin. You might be one of those people who prefers tangible things like gold, silver, or other commodities. I don’t blame you. I like holding an ounce of silver or gold in my hand and admiring its shine. But that doesn’t mean it’s the best way to back money.
The Appeal of Hard Assets
First, let’s give credit where it’s due. Gold and silver-based systems work well in theory. They’re backed by limited, tangible resources that carry real utility. This makes them resistant to inflation and strong as stores of value.
They also function well as units of measurement. If a bank holds one ton of gold, it could issue paper notes representing that same amount, such as one bill per ounce of gold, capped at 35,108 total. Each note could then be exchanged for real gold, tying the monetary system to something measurable and scarce.
For thousands of years, civilizations trusted gold and silver for exactly this reason. The Egyptians stored value in gold, and the Sumerians relied on silver. Across cultures and centuries, humanity has always agreed that precious metals hold power.
The Cracks in the System
Still, what works well in principle doesn’t always survive contact with reality. Metal-based systems have several weaknesses that became more obvious over time.
1. Counterparty Risk. You have to trust custodians to be honest about their reserves and not overissue notes. The last independent audit of Fort Knox was in 1953.1 According to the U.S. Treasury, it holds 143.7 million troy ounces of gold, but how can we know for sure? In a metal-backed system, you must trust the people holding the gold completely.
2. Physical Burden. Gold and silver are heavy, costly to transport, and easy to steal. To solve this, banks issued paper claims to the gold in their vaults, but that simply reintroduced the same problem of trust.
3. Supply Uncertainty. We don’t actually know how much gold or silver exists. New discoveries, or even future asteroid mining,2 could flood supply and trigger inflation. What seems scarce might not stay that way.
4. Political Temptation. Governments hate limits. When hard money constrains their ability to fund wars, bureaucracies, or social programs, they eventually find a way around it.3 That is exactly why the U.S. abandoned the gold standard.
So while metal-backed systems feel safe and tangible, they come with fatal flaws: dependency on trust, physical inefficiency, uncertain scarcity, and political vulnerability.
Why We Can’t Go Back
The idea of returning to gold-backed money sounds comforting, like getting back together with a reliable ex. But you’d be forgetting the reasons you split up. Yes, fiat is a toxic relationship, but that doesn’t mean gold is the answer. What we need isn’t a reunion. We need an upgrade.
In the next article, we’ll explore why Bitcoin may be that upgrade and possibly the best form of money ever invented.
Final Word
Thank you for tuning in this week.
“All that glisters is not gold;
Often have you heard that told:
Many a man his life hath sold
But my outside to behold:
Gilded tombs do worms enfold.”― William Shakespeare, The Merchant of Venice
From Theory to Practice
Now that we’ve looked at the philosophy of sound money, let’s turn to the practical side of things. Inside my Crypto Confidence Skool, I help people put these ideas into action, showing exactly how to use crypto to build real-world financial confidence.
Inside the Confidence Classroom: Earning Yield (Practical)
This week in the Crypto Confidence Skool I am teaching hands-on strategies for earning yield through DeFi. It’s not just theory, but a step-by-step walkthrough of how to generate yield using methods like lending, staking, restaking, and more.
If you’re not yet a member, this is a great time to join. You can sign up and start your free one week trial to see if Crypto Confidence is the right fit for you.
DISCLAIMER: This article is for informational and educational purposes only and should not be construed as financial, investment, tax, or legal advice. The author is not a licensed financial advisor, and nothing in this article constitutes a recommendation to buy, sell, or hold any cryptocurrency, gold, or other asset. Cryptocurrency investments are highly volatile and risky, and you could lose all of your invested capital. Past performance does not guarantee future results. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. The author operates a paid cryptocurrency education course and may hold positions in assets discussed.
https://www.mining.com/fort-knox-explainer-why-verifying-the-us-gold-reserves-matters/?
https://theprint.in/opinion/giant-asteroid-has-gold-worth-700-quintillion-but-it-wont-make-us-richer/260482/?
https://www.stlouisfed.org/open-vault/2017/november/why-us-no-longer-follows-gold-standard?