Original article: Isaiah Austin , Bitcoin Magazine

Compiled by: Yuliya, PANews

Labeling Bitcoin as "digital gold" is a misunderstanding of this revolutionary form of currency. This statement simplifies Bitcoin into an asset with only the function of storing value, obscuring its deeper technological advantages and financial potential.

Analogy is a common way for humans to understand new things. Faced with the unprecedented concept of Bitcoin, people naturally tend to look for a reference model. Before the general public has a deep understanding of the underlying mechanism of Bitcoin, "digital gold" is undoubtedly an intuitive and easy-to-accept analogy. Bitcoin is scarce, universally used, and has a storage function, so it seems natural to be called "digital gold."

This narrative has driven adoption at the institutional and sovereign level, and was even written into the first paragraph of President Trump’s executive order on the establishment of a strategic Bitcoin reserve: “Bitcoin is often referred to as ‘digital gold’ due to its scarcity and security.”

This is an undeniable achievement. However, if Bitcoin is to realize its true potential, this narrative must be updated.

Bitcoin is not "digital gold".

To equate it with gold is to belittle a monetary innovation that has completely disrupted the traditional financial system. Bitcoin’s fundamental properties make gold’s proud qualities obsolete, while at the same time, it is faster, safer, and more decentralized than fiat currencies.

Scarcity and finiteness

The key reason why gold has long been a store of value is its scarcity. Over the past century, annual gold production has only increased by about 1% to 2%. The difficulty of exploration, coupled with high labor, equipment and environmental costs, makes large-scale expansion of production uneconomical.

This naturally occurring supply constraint has given gold currency status since 3000 BC: in ancient Rome, a high-end robe cost as much gold as a tailored suit would cost today, demonstrating its stable value.

However, in the era of Bitcoin, it is inappropriate to use assets with fluctuating supply as a measure of value. Bitcoin is not scarce, but "limited". Its total supply is forever locked at 21 million and will not increase due to technological breakthroughs or cosmic mining.

Through mathematics and technology, for the first time, humans have a fixed total amount of tradable currency, the significance of which goes far beyond what "digital gold" can cover.

Differentiability

Although gold can be cut, it is hardly “highly differentiable.” This property is only achieved with saws, laser equipment, and precision scales. Therefore, gold is suitable for large transactions but difficult to use for daily payments.

At current market prices, 1 gram of gold is worth about $108. If you pay for a sandwich with gold, you have to scrape off a dime, which is obviously not feasible in reality.

Historically, humans have mitigated this problem by issuing gold coins with a defined metal content. However, this also opens the door to currency debasement.

For example, the Lydian stater coins of 600 BC were issued in Lydia (modern-day Turkey) and were originally struck in electrum (an alloy of gold and silver) with a gold content of about 55%.

After the conquest of the Persian Empire in 546 BC, gold coins were gradually adulterated with base metals such as copper to reduce the gold content. This practice led to a decrease in the actual value of the coins, and by the end of the 5th century BC, their gold content was only 30%-40%.

Gold cannot be differentiated as an asset, and this defect has prevented it from being effectively used for a long time in history. In order to conduct small transactions, citizens usually give gold to the government in exchange for 1:1 coins. However, this mechanism often leads to currency dilution and the collapse of social trust due to the manipulation of power by the elite.

In history, no monetary system based on gold has been able to avoid devaluation in the end. The actual demand for micro-transactions has forced the public to rely on paper money and small currencies issued by the state, thus losing control over wealth.

Bitcoin has achieved a fundamental breakthrough in this regard. Its smallest unit, "satoshi", is equal to 1/100 million of a bitcoin. Currently, 1 satoshi is worth about $0.001, and its differential power has surpassed that of the US dollar. Bitcoin transactions do not require the help of any institution or government intermediary, and users can always directly use the smallest unit of account to trade, making it a truly non-intermediary currency system.

Therefore, in terms of divisibility and unit of account, it is almost a joke to compare gold with Bitcoin.

Auditability

The last time the U.S. government formally audited its gold reserves was in 1974, when President Ford allowed reporters to enter Fort Knox, Kentucky, to view the vaults, and found nothing unusual. But that was half a century ago.

To this day, speculation still lingers as to whether the Fort Knox gold is still intact. Some time ago, there was even news that Musk would live-stream the audit process, but this "upcoming" audit soon came to nothing.

Unlike gold, which is rare and requires low-frequency manual audits, Bitcoin verification is automated. Through the proof-of-work mechanism, new blocks are added every 10 minutes, and the system automatically verifies the legitimacy of transactions, total supply, and consensus rules.

Compared with the third-party trust mechanism that traditional audits rely on, Bitcoin realizes trustless, open and transparent on-chain verification. Anyone can independently verify blockchain data in real time, and "don't trust, verify" has become the consensus principle of Bitcoin.

Portability

The portability of Bitcoin is self-explanatory. Gold is large and heavy, requiring special ships or planes to be transported across borders. Bitcoin is stored in a wallet, and its "weight" is always zero, no matter how much money is.

But the real advantage of Bitcoin is not its portability, but the fact that it does not require physical "movement". In reality, receiving a payment in gold means that you must bear the transportation costs and the trust risk of the middleman. In cross-border transactions, the third parties involved include the deal maker, the export logistics team, the transport personnel, the consignee, and the custodian, and each link is a link in the chain of trust.

Bitcoin does not require any intermediaries. Users can complete cross-border payments directly through the blockchain, and the entire transaction process is open and verifiable, with no risk of fraud. This is the first time that humans have truly possessed "electronic cash."

Conor Mulcahy of Bitcoin Magazine once pointed out: "Electronic cash is a type of currency that exists only in digital form and is used for peer-to-peer transactions. Unlike electronic money that relies on banks and payment processors, electronic cash mimics the anonymity and direct exchange characteristics of physical cash."

Before the birth of Bitcoin, peer-to-peer non-face-to-face transactions were still theoretical assumptions. Critics who believe that "if you can't see or touch it, it's not real" will eventually be phased out in this era of accelerated digitalization.

Not all Bitcoin “adoption” is worth celebrating

If the goal is simply to drive up the price of Bitcoin, then the "digital gold" narrative is indeed effective, governments, institutions and individuals will continue to enter the market, and prices will continue to rise.

But if Bitcoin is to be seen as a technological revolution that will change the liberal order, its communication methods must be rethought. For Bitcoin to take a central place in the global financial freedom system, it must educate the uninitiated and communicate its uniqueness to them, rather than relying on simplistic metaphors.

Bitcoin deserves to be recognized as a new form of currency, rather than a digital substitute for gold.