Why is Bitcoin called "digital gold"? What's better than gold?

Why is Bitcoin called "digital gold"? What's better than gold?

As Bitcoin becomes a mainstream financial instrument, it has been dubbed "digital gold" not only because of its high price volatility, but also because of its gold-like scarcity, value-storage function, and ability to fight inflation. In this article, we'll take a closer look at why Bitcoin is called "digital gold" and analyze why it has an advantage over gold. Let's learn how Bitcoin has become a new form of value storage in the modern financial market, and how it compares to traditional gold.

Bitcoin scarcity: the heart of digital gold

One of the core reasons why Bitcoin has been dubbed "digital gold" is because of its scarcity. Unlike gold, there is a limit to the total amount of Bitcoin that can be mined - only 21 million Bitcoins can be mined. This number cannot be changed, meaning there is a limited supply of Bitcoin. This scarcity makes Bitcoin a desirable asset for many investors because it does not depreciate in value as central banks print money like fiat currencies do. This allows Bitcoin to remain stable or even increase in value in the face of inflationary pressures, similar to the function of gold.

The scarcity of Bitcoin is not only reflected in its total volume, but also in the rate at which it is produced. The difficulty of mining Bitcoin increases over time, which means that the supply of Bitcoin will not increase rapidly. This is similar to the process of mining gold, which requires gold to be discovered gradually at increasing mining costs. The scarcity of Bitcoin makes it a safe-haven asset for investors.

Bitcoin vs. Gold: Which has the edge?

Gold has a long history as a store of value and a steady market demand. Many investors believe that gold is resistant to negative factors such as currency devaluation and economic crises. As a digital asset, Bitcoin has advantages that gold cannot match in terms of ease of trading, liquidity and value-added potential.

Bitcoin is far more liquid and efficient than gold. Transactions in gold require physical delivery and can involve expensive fees and storage costs. Bitcoin, as a digital asset, is instantaneous and low-cost for both transfers and transactions. With a digital wallet, you can transfer and pay for Bitcoin worldwide without relying on third-party organizations.

Bitcoin also has the potential to increase in value. Although gold has increased in value steadily over the past few centuries, it has done so at a relatively slow rate. In contrast, Bitcoin's price has experienced multiple price spikes since its inception, and each one has attracted a large amount of investor attention. In particular, since 2020, the price of Bitcoin has grown significantly as institutional capital has come on board, and it has been recognized as an asset that can withstand traditional market fluctuations.

Bitcoin Security: The Guarantees Behind Blockchain Technology

The security of Bitcoin is one of the reasons it is called "digital gold". Gold's value storage function relies on its physical nature, but there are still risks associated with its storage and transportation, such as theft or catastrophic loss. In contrast, Bitcoin is built on blockchain technology, a decentralized data structure that ensures that every transaction is transparent and tamper-proof.

Blockchain technology allows Bitcoin to be verified without relying on any single third-party organization, but rather on a global network of computers. This means that the storage and transfer of Bitcoin is not affected by national or banking policies, nor is it threatened by external economic crises or regime changes. This makes Bitcoin much more secure and gives it an advantage over traditional gold in its ability to serve as a store of value.

Bitcoin's Portability and Globality: A Store of Value Everywhere

Another major advantage of Bitcoin is its extreme portability and global nature. Although gold is a globally recognized asset, its physical nature makes it cumbersome to trade across borders. Not only does it need to be physically transported, but it also requires additional fees to ensure security. With Bitcoin as a digital asset, there is no need for physical transportation - all you need is a digital wallet and you can trade anywhere, anytime.

This makes Bitcoin particularly important for international capital flows, especially in some economically unstable countries or regions, where Bitcoin has become a hedging tool. For example, in Argentina or Turkey, when the local currency depreciated severely, residents often chose to protect their wealth by transferring funds to digital assets such as Bitcoin. Bitcoin's global liquidity makes it a borderless way to store value.

Bitcoin and Gold: Future Trends

As the digital asset market continues to grow, Bitcoin will become increasingly important. Bitcoin not only attracts individual investors, but also institutional investors. Many well-known financial institutions and corporations have begun to include Bitcoin in their asset allocation and to accept Bitcoin payments. In the future, with the emergence of more commercial applications and financial products, Bitcoin will further strengthen its function as "digital gold".

Compared to gold, Bitcoin still faces some challenges. For example, the price is relatively volatile, which makes some conservative investors still skeptical about it. Many countries are still exploring the regulation of cryptocurrencies, which could affect the future of Bitcoin.

Frequently Asked Questions Q&A

Q1: Why does the price of Bitcoin fluctuate so much?
The high price volatility of Bitcoin is mainly due to the volatility of market demand, the influence of investor sentiment and the uncertainty of government policies. Compared to gold, the Bitcoin market is still relatively small, so the inflow and outflow of large sums of money can cause sharp price fluctuations.

Q2: How can I safely store Bitcoin?
The safest way to store Bitcoin is to use a hardware wallet, which protects your private keys from hackers. In addition to this, you can also use multi-signature wallets or cold wallets to further enhance security.

Q3: Are Bitcoin and Gold interchangeable?
Bitcoin and gold have different strengths and are not complete substitutes for each other. Bitcoin is better suited to be used as a digital asset and as a tool for international trading, while gold is better suited to be used as a store of value for physical assets. They can complement each other in asset allocation.