Bitcoin as a legal tender: Comparison with Gold and Fiat
This is a comparison of how Bitcoin -the first fuly decentralized digital legal tender in the world- measures up with Gold and Fiat.
Durability
Durability is simply the ability of something to last. Bitcoin, although not as durable as gold, is a durable asset. It isn't as durable as gold in the sense that it easier to lose your bitcoin than it is to lose your gold.
If you make use of a wallet that you are not in control of the private keys, like exchange wallets or marketplaces or forums, you are essentially leaving control of your bitcoin to someone else.
This makes gold more durable than bitcoin because gold is a physical solid and proper damage to the asset will take some serious accident in order to destroy gold.
Fiat on the other hand is not as durable as bitcoin. Fiat can be damaged in numerous ways. Tearing, burning, you name it. Granted fiat also includes coins but how many coins are valuable enough to make large transactions of over $10?
Access to bitcoin can be lost permanently if you lose access to your private keys.
Your bitcoin cannot be recovered. Which brings us to the next bitcoin quality.
Verdict: Gold comes out in shiny colours in this aspect. It's more durable than bitcoin but bitcoin definitely comes out on top of fiat.
Scarcity
Bitcoin is scarce. Unlike fiat.
Bitcoins that owners have lost cannot be recovered again. They'll be locked up forever. This reduces the size of bitcoin in circulation which in turn increases the valuation of bitcoin. Obviously.
It also as a finite supply of 21million coins and currently has only about 16million in circulation now. Fiat isn't. The government can easily decide to print more money whenever they feel like to create more money for the system. Bitcoin isn't like that. If you don't have it, you don't. There is no way ti game the system. This makes bitcoin a solid legal tender. It has to be scarce to generate more value.
Verdict: Bitcoin wins easy. Gold isn't as scarce as bitcoin. Fiat on the other hand might not even understand what the concept of scarce is.
Portability
Bitcoin and crypto assets have to be the most portable assets out there. Gold and fiat doesn't even come a tad bit close. Bitcoin is the undisputed king of portability. Bitcoin holders can move millions, even billions if you have them in a device as small as a flash drive. Bitcoin is entirely digital and there is no need to carry around huge, heavy loads like gold and fiat in other to move it from place to place.
Verdict: Bitcoin wins. Gold and Fiat don't even come anywhere close.
Fungibility
Fungibility is when a good or commodity can be substituted for another.
Gold wins here. Gold is one of the most recognisable and acceptable legal tender world wide. Any customer can make transactions with Gold anywhere in ths world.
Bitcoin is set to challenge gold, as it's already doing as well as fiat, in terms of fungibility. The only current major problem it has right now is that bitcoin does not have an established history as a legal tender. It is the newest kid on the block that claims to be a legal tender because it is a store of value. However, people are not entirely sold on the concept and how it works. Even a few juggernauts of technology are still skeptical as to how the technology works.
Verdict: Gold is slightly more fungibile than bitcoin and fiat.
Established History
Bitcoin is new. It's just 10 years old. Unlike gold and fiat which have been around for over centuries. People have come to trust gold as a valid legal tender. Fiat too. But it will take some time before they can come to accept Bitcoin as a source of legal tender. Bitcoin is still a very new and shiny greenhorn. It does not appeal much to the older generation albeit millennials being obsessed with it.
Verdict: Gold comes out on top easy. Gold has been used for thousands of years as a show for wealtha and trades. Fiat is still a relatively new legal tender when compared with gold. Bitcoin doesn't even come close to anyone of them
Verifiable
Here, bitcoin excels. Bitcoin uses something called a blockchain to verify transactions. A block chain is simply an immutable ledger. Transactions can be verified on the blockchain with ease. All you need is the transaction ID and you can verify whatever transaction you need to. You can also verify the amount of funds contained in any wallet on the bitcoin blockchain. This essentially means that the likelihood of receiving fake bitcoins in your wallet is non existent. Bitcoin will always appear be associated with your wallet once the transaction has been verified on the bitcoin blockchain.
Gold and fiat are not as verifiable. They have fakes floating around here and there, although trained eyes can recognise fakes from authentics with relative ease.
Verdict: Bitcoin comes out on top here. Bitcoin newbies and non experts can make transactions using bitcoin because they don't have to worry about the authenticity of the assets they receive. As long as these assets are on the blockchain and in their individual wallets. The same cannot be said for gold and fiat.
Divisible
Bitcoin can be divided into a million unit. A satoshi is a one hundred millionth of a single bitcoin ( 0.00000001 BTC). The unit has been named after Satoshi Nakamoto. The anonymous original publisher of the bitcoin whitepaper. Now if that isn't divisible, I dunno what is.
Fiat is not as divisible as gold speakless of bitcoin. Gold can be cut into smaller grams and made use of but fiat is not very divisble.
Verdict: Bitcoin wins. Hands down. Imagine being able to split a $1 of fiat into a million more pieces. Gold comes in second here leaving fiat in the dust.
Censorship Resistance
This has to be the most important feature of bitcoin. It's biggest selling point if you will. Transactions made with bitcoin is fairly anonymous. Unlike those made with fiat currencies and gold that leave a lot of paper trail.
Verdict: Bitcoin wins easily. Gold comes in second and fiat comes in last. Again.
Conclusion
Even though bitcoin is still relatively new, with millennials at the forefront pioneering usage of this asset, it does not mean that bitcoin is not valid as a means of legal tender. I think it is safe to say Millennials understand how bitcoin makes transactions censorship resistant, verifiable and also how fungibile it is.
So personally, I think bitcoin and crypto assets in general will win the legal tender wars long term. They have an interesting new set of features and fewer drawbacks than the old ways of accepting and moving money.
