In his latest video appearance, Peter Schiff explains in detail the difference between gold and bitcoins. His main point: gold is real money because it has an intrinsic value!
Schiff first sums up the similarities between gold and bitcoins. He sees the following similarities:
- one needs to put effort in mining bitcoins, so one actually expands real resources
- there is a cost associated with creating a bitcoin just like there is with gold (in contrast to central banks that create pretty much limitless amounts of currency)
- there is a limit there is a scarcity in that there are only 20 million bitcoins that can be mined
- both bitcoins and gold are divisible (the idea is that you can break your bitcoins up into smaller increments for transaction just like gold)
On the other hand, there are some differing characteristics between gold and bitcoins:
- one can instantaneously send bitcoin over the Internet
- gold has to be protected as it could be stolen
- it does not cost any money to store bitcoins in a digital wallet
Although bitcoins replicate all the properties of gold, there is one major fundamental difference: intrinsic value. Schiff explains:
Bitcoin does not have any intrinsic value. The reason gold became money was first it was valued as a commodity. It was a luxury good known throughout the world. You knew that if you needed something you could always buy it with gold (even if the person who accepted your gold didn’t want it he knew somebody else who did). Gold was uniquely suited to be money over a lot of other commodities and basically won the free market competition for money because it had a lot of other characteristics. These are the characteristics that bitcoin is replicating but they are not replicating the intrinsic value that made goal desirable in the first place. The only reason that anybody wants bitcoins is because they believe somebody else wants them; they want them to exchange them for the things that they want. People want gold for itself. Yes it can also be used to exchange but it has a value unique to itself. It has its own properties that are desirable; there is nothing you can do with a bitcoin except give it to somebody else.