Beyond Millennia of Consensus and Mindset: Why Bitcoin is a Better "Gold"

Author: Bill Qian

This article is a sister piece to "How to Protect Wealth in Times of War."

Let's discuss the following questions: First, what exactly is wealth preservation; second, why has gold become the winner in modern times; third, why will Bitcoin be a better "gold" in the 21st century and beyond.

For the past 5,000 years, the competition for the "best store of value" has existed, but gold has gradually become the king of wealth storage due to its scarcity and the value consensus formed over millennia. At the same time, Bitcoin is slowly dissolving and shaking gold's market position, and in this process, it has brought our generation an epic opportunity for wealth creation and transfer.

"The History of Money"

To compare gold and Bitcoin, let's first talk about the largest category in this field: money.

Money has three core functions: medium of exchange, unit of account, and store of value. From shells and copper coins to modern fiat currencies (such as the US dollar and the euro), the medium of exchange and unit of account have continuously evolved. Meanwhile, gold, silver, land, and blue-chip stocks have long been mainstream choices for storing value.

In the history of currency, the US dollar during the Bretton Woods System was one of the few currencies that could simultaneously fulfill the three functions of a medium of exchange, unit of account, and store of value, but this was an exception and not common; moreover, the dollar's role as a three-in-one currency gradually unraveled after Nixon's television speech in 1971. Some might ask: then why do many people in emerging markets wish to use the dollar and save in dollars? Even when data shows that the dollar is continuously depreciating? I think the answer is: because they have no better choice; their own currencies are worse. This topic involves stablecoins, which we will discuss next time.

"How did gold become today's 'gold'?"

A good target for wealth storage must meet five characteristics: scarcity, durability, portability, divisibility, and social consensus. Silver, land, and diamonds are hard to beat gold on these five criteria.

Thus, after spending tens of thousands of years, gold finally gained consensus and recognition from humanity, becoming almost the唯一标的 for wealth storage.

"What are the limitations of gold?"

1. Storing gold requires expensive secure vaults and insurance, and sometimes even transportation costs, with higher expenses as the quantity increases. During World War II, the gold in the vaults of the Paris Bank was directly plundered by the German army, and the biggest lesson I learned from this is: the safe in the bank, is not safe at all.

2. In extreme times, the cost of liquidating gold is very high. A similar situation occurred during World War II, where whether you were in Shanghai, Paris, or Amsterdam, gold transactions often faced significant discounts, often 30-50% lower than the spot price, with even greater discounts in high-risk environments. Worse still, trading gold in conflict zones often comes with severe personal risks—once others know you hold gold bars, robbery and kidnapping can happen at any moment.

3. The government would further undermine the reliability of holding gold through methods such as confiscation and price controls. For example, in 1933, the United States required citizens to surrender most of their gold at a fixed price below market value, or face severe penalties. Note that at that time, the U.S. government required all citizens to surrender their gold at a fixed price of $20.67 per troy ounce. Subsequently, in 1934, through the Gold Reserve Act, the government revalued the official price of gold to $35 per troy ounce. This meant that the gold in the hands of all citizens was "devalued" by about 41% in just one year. The U.S. confiscated over 2,600 tons of gold at that time, which directly changed monetary policy and set the stage for the complete end of the gold standard in 1971. All of this happened in the United States, the lighthouse country that may have respected private property rights the most in the world during the 20th century.

4. In addition, the limitations of gold being insufficiently "digital" are also quite evident in today's digital economy. For example, you cannot send one kilogram of gold to your friend or another address through any electronic wallet.

"In 2009, Bitcoin appeared! What exactly is it?"

In 2009, Bitcoin, created by the pseudonymous (Satoshi Nakamoto), was the first decentralized digital currency. It operates on a global, public, and open computer network (commonly known as blockchain, which I always find difficult to understand) — a shared digital ledger that anyone can participate in and verify. New bitcoins are generated through "mining": computers need to solve complex mathematical problems, package transactions into new "blocks" and add them to the blockchain, and "miners" are rewarded with newly generated bitcoins. This process ensures the security and smooth operation of the entire system.