The Heavily Armed Conservative

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Gold and silver are no longer the most functional store of value

What is it that give gold and silver their value? I’m not talking about industrial use case here, as if you examine the raw data, the annual production rates of both gold and silver far exceed the actual industrial demand.

Gold and silver have long been staples of capital flow and store of value, but why exactly? That is a question nobody can really provide an absolute answer too, and I won’t even try to do it right now…but…there has to be a reason why silver and, particularly gold, have remained such a functional staple in financial transaction for so long throughout human history.

There are a few qualities that come to mind…durability, scarcity, divisibility, uniformity…In terms of currency, gold is much harder than silver, that is increased demand for gold does not directly proportionally correlate with increased supply, as the amount of gold we can pull from the earth every year is limited.

Silver on the other hand, is less immune to this phenomenon and can actually flex its annual production as price increases or decreases. There seems to a be a common misconception, however, that what drives the demand on gold and silver is their industrial use cases…this is a fallacy. In fact, the vast majority of gold and silver mined every year goes toward the jewelry¬†or speculative capital¬†market as a store of value, only about 15% of annual silver production is required to meet industrial demand and even less when it comes to gold. This means that market action makes up for close to 90% of the fluctuations of supply and demand and by correlation, price, in gold and silver.

Bitcoin though…Bitcoin is a different beast. There can only ever be 21 million Bitcoin. There CAN NOT ever be more than that. We have all of the same qualities that have made gold and silver the go to choice for a store of value for centuries upon centuries…durability, scarcity, divisibility, uniformity (Did you know there is such a thing as tainted bitcoin?).

Bitcoin is far easier scalable in the micro and the macro direction when it comes to divisibility and transportability and liability than gold and silver. It is far easier to send bitcoin across the world than a pallet of gold, and requires less physical space and security to store a Bitcoin private key than a mountain of silver.

But that’s not all, bitcoin isn’t prone to destructive thievery that plagued the ages of gold and silver as primary currency for generations…such as coin clipping, debasing, and scale fixing. 1 Bitcoin simply is 1 Bitcoin. It cannot be manipulated, it cannot be debased, it cannot be frauded.

This entire concept is what has been come to known as trustless. Bitcoin removes the need for trust in a 3rd party to verify value, handle transaction, or store and safeguard wealth. It is permission-less and borderless and uncensorable.

Many folks are unaware that because Bitcoin is a protocol, much like the HTTP protocol used on the internet, it can actually function without the internet at all! That’s right it is its own network, and in the years to come we will see entire new ecosystems built around this protocol (think about it like an Internet 2.0 or even 3.0), just as the internet grew in the early 1990s and beyond. We are still in the infant days of what bitcoin will one day become.

Did I mention the CEO of Square, one of the largest consumer transaction interface companies, thinks Bitcoin will be the future of money within the next 10 years?