I keep hearing people like Peter Schiff and other economists talk about how great it would be to have a gold-backed Bitcoin. They say Bitcoin as a currency is great, but because it isn't a store of value and lacks intrinsic value it can't serve as money. So in order to fix this problem they say Bitcoin should be backed by gold. If you back it by gold you will get the best of both words: a great digital currency backed by the world's most popular store of value. But there's a problem with this...
Here's the thing. Bitcoin's strength comes from it not being physical. Yes, gold is great and all but there is a big problem with gold: somebody controls it. No matter what, because gold is physical, there is going to be some agency, whether private, central or governmental that is involved in the movement and storage of gold. And as long as there is a physical person or thing involved the government is going to be involved. And as long as the government is involved they are not going to let gold take over their fiat monopoly. So this is the problem with a gold-backed digital currency.
"The true value of bitcoin is that it is a free market competing currency up against all the government slop that we have been fed for years."
Bitcoin is a problem for the government because it's not physical. Because every bitcoin transaction can exist on any computer and because you can't stop bitcoin transactions with a government bitcoin has a huge strength over gold. Sure you can shut down exchanges, sure you can tax it, but even with this Bitcoin will live on, underground if it has to. You can't stop bitcoin transactions, you can't regulate transactions. As long as there is an Internet there will be a bitcoin or other form of cryptocurrency.
As soon as you take this unstoppable, non-physical currency and peg it to gold you put it back under government control. As soon as bitcoin is backed by gold the government is now able to regulate the currency. They can decide who transfers gold, they can decide the fees for it and blah blah blah. The gold backing of bitcoin is a great fantasy, but as long as we have governments who are hell bent on protecting their power you will never have a gold backed cryptocurrency that operates as a free market currency.
So our best bet is to concede that we are willing to give up backing it by gold to be able to challenge the fiat empire. Bitcoin is able to challenge fiat currency as-is because it can't be stopped easily. Sure it may not be perfect, but it is near-perfect given our current government paradigm that we live in. It is a fantastic solution to get free market money competing against the government monopoly which currently exists. Gold can't do that. Gold is already controlled and regulated heavily. Gold isn't free market money. And gold can be stopped by the government. Bitcoin stands in contradistinction to this.
I'm tired of hearing people talking about backing bitcoin with gold. It's a contradiction of terms. To even suggest that shows a lack of understanding of what makes Bitcoin valuable. The value in bitcoin isn't even its transaction abilities. I'll say that again -- the value of bitcoin isn't even that you can do fast, cheap transactions. The value of bitcoin is that it can't be stopped by the government. That is the true value. The true value of bitcoin is that it is a free market competing currency up against all the government slop that we have been fed for years. That's the value, and to not recognize this is to not understand Bitcoin.
Look at bittorrents. They've completely crushed the movie and music industry. The whole music industry has had to reinvent itself because of bittorrents. Bittorrents are bitcoin with data. Bitcoins are bittorrents for currency. What bittorrents have done to the music industry will soon happen with bitcoins to the goverment fiat industry. So buckle up and get ready for the ride. The government has never gone down without a fight.
Filed under:Business, Gold, Bitcoin