BTC as 'digital gold': a discussion

With BTC having failed to achieve significant adoption as a means of exchange, the 'purpose' of BTC was pivoted to that of 'digital gold', i.e., being a store of wealth.

Let's discuss this matter.

Gold serves as the global currency of last resort, and has done so for 4,000 years. In the event of a crisis, people have every confidence this archaic currency can once again serve as a widely-accepted means of exchange; you don't need a government, a financial system or any advanced technology. Indeed, all you need is a hammer and a die to beat gold bars into coins.

In other words, gold's status as the global currency of last resort is based upon two pillars; one is the suitability of its physical properties (such as immutability, rarity, and ductility) for long-term hoarding or fashioning into coins, and the other is a reasonably-held social-expectation of gold being widely-accepted for goods and services. We believe in gold because it has always worked. We believe others will always believe in gold for the same reason. Without this reasonably-held social-expectation, a bar of gold is just a doorstop.

This means gold is not an 'intrinsic' store of wealth; it is a store of wealth only because it is useful as the 'ultimate currency'. Cryptobros do not understand this when they see gold bars in a vault. All they see are immutable and scarce assets for which 'value' must be a rightful inheritance.

Therefore, an immutable internet token cannot reliably 'store' wealth unless there is a reasonably-held social-expectation that it can be used as a widely-accepted means of exchange down the line. In other words, the token must have an end-use beyond hoping for a greater fool because that cannot last in the long run.

BTC's claim to be 'digital gold' therefore hinges on there being a reasonably-held social expectation of it being a widely-accepted means of exchange should fiat currencies fail. It's a difficult argument to sustain when BTC has no history of being a successful currency. Furthermore, I would also question how robust the blockchain would be in the face of severe social crisis and/or technological obsolescence.

However, this hypothesis about value requiring an end-use is somewhat frustrated by things like fine wines, fine art and diamonds. None of these things, at face value, seem to have much use, and they seem to defy the greater fool theory, nonetheless, I would use them to store my wealth if needed and sleep well.

TL;DR

Cryptobros pivoted to the idea of BTC being 'digital gold' when BTC failed as a currency. Gold is the global currency of last resort with a 4,000-year-old history. Gold's 'store' of wealth function stems from a reasonably-held social-expectation that it can and will perform as a means of exchange should fiat currencies fail. BTC as 'digital gold' is troubled by a doubtful social-expectation that it will function similarly. Unlike gold, it has never performed this function. If not 'digital gold' then the Greater Fool theory holds.

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