Anybody who is investing in Bitcoin knows how unpredictable markets can be…

How similar are Bitcoin and gold?

Unlike gold, Bitcoins is a completely digital currency. It can be traded over the internet. In fact, like modern fiat currency (government issued money), it has no real world commodity “backing” it. That is to say, if people stop buying Bitcoin, your Bitcoin becomes worthless. Some people would say that Bitcoin and gold are similar in that way. If nobody wanted to buy gold, it would be worthless. This is an argument ad absurdum (latin: to absurdity), because it could be applied to anything. There is a twofold difference between Bitcoin and gold. First, gold is used in jewelry and industry. Second, people have historically – for millennia – defaulted to gold. It is arguably part of our psychology. Every civilization associates it with value.

Bitcoin is a completely virtual currency. Its value is closely connected with trust. Specifically, trust in the secure “mining” (Bitcoin creation) and blockchain (Bitcoin transaction) algorithms that were developed and documented over the last decade.

A brief history of Bitcoin:

It was created by a group of programmers and entrepreneurs. What began as a paper on a digital economic currency published under pseudonym Satoshi Nakamoto is today an internationally recognized crypto-currency.

The idea of a virtual currency is not a new phenomenon. Some authors have attributed its roots in MMORPG (Mass Multiplayer Online Role-Playing Games). These are video games with digital markets for rare items. They work with an in-game currency and user accounts. Players covert traditional currencies into and out of these primitive game currencies. As a result, people are able to trade their time to acquire rare items for e-currency, and trade that for other services or currencies. What makes Bitcoin and gold similar is that neither is treated as “real money”. Despite that, both have fared well recently, and both can be used to purchase goods and services.

What Bitcoin has going for it:

Bitcoin’s developers have done a number of things right. They’ve also done a few things wrong, from a Venture Capitalist’s point of view. Among that done very well is the clarity and transparency of they Bitcoin message. Bitcoin.com is open, informative, and easy to work with. They also offer a lot of integration for Application Program Interfaces (APIs). Bitcoin has demonstrated to the world that it is going to be a serious “bank-free” currency. It is, perhaps for that reason, at the forefront of the financial technology (FINTECH) movement.

Ironically, Bitcoin and gold share a large consumer base. These are people concerned with the long-term stability and well-being of their countries and ways of life. Much like gold, bitcoin (still in it’s infancy) is prone to speculative bubbles. A great boon to the future of bitcoin would be to make it more accessible to the layperson. Most people just want anonymity and security. Someone needs to demystify bitcoin to people less confident in their technological capabilities.

Many economists, political theorists, and ordinary people agree that  Bitcoin and FINTECH will change our financial landscape. While the potential to be a real game changing technology exists, demand is still largely niche. It has yet to be seen if Bitcoin will be the technology that prevails in a world of PayPals and other virtual funds. Bitcoin has a long way to go to become the universally accepted currency. For now it seem to be on a growing better path. Bitcoin is getting plenty of attention from incubators, and will likely expand with future accessibility innovations.

Putting Together Bitcoin and Gold Currency

A Gold Based virtual currency called e-gold was recently shut down by US authorities in a case that implicates E-gold with conspiracy in money laundering. This is not an easy market, in which to navigate regulations. With that in mind, many regulations are aimed at consumer protection. The working of bitcoin are complicated. Our impression is that inexperienced investors should not put their money here. Currencies such as Bitcoin are risky because of technological challenges, high volatility, and much more. The most serious risk is that you really might lose all of your money, and since both bitcoin and gold are not interest-bearing, there is no income stream. Furthermore, without technological capabilities, you’d be hard pressed to sell your Bitcoin. If you’re selling gold on the other hand, we review the best gold buyers, just about anywhere.

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