#Bitcoin
Your assertion that gold’s role as a store of value (SoV) predates fiat currency and persists independently of it overlooks the historical mechanisms through which gold’s monetary role has consistently intertwined with centralized control and, ultimately, fiat systems.
While gold’s inherent properties scarcity, divisibility, portability, and near-universal desirability have long positioned it as a preferred medium of exchange and SoV, these same attributes render it vulnerable to capture and manipulation, fostering centralization that paves the way for fiat-like systems.
My argument is not that gold lacks value absent fiat but that its practical application as money throughout history reveals a paradox: its strengths enable its adoption, yet its physicality ensures its capture, leading to systems of control that mirror or evolve into fiat arrangements. Historically, gold’s role as a SoV has been inseparable from power dynamics.
From the Roman Empire’s aureus to medieval European coinage, gold’s concentration in the hands of rulers, conquerors, and elites often through war, tribute, or monopolistic mining enabled its use as a tool of centralized authority.
The spoils of conquest, such as the influx of New World gold into Spain during the 16th century, illustrate this capture.
The resulting supply shock fueled inflation, destabilizing economies across Europe, as documented by historians like Fernand Braudel, who noted price increases of 300-400% in Spain over a century.
Similarly, the California Gold Rush of 1848-1855 disrupted monetary stability, flooding markets with gold and undermining its purchasing power locally.
These examples counter your claim that gold’s supply growth has consistently been outpaced by productivity.
While human productivity has indeed grown, gold’s supply is neither predictable nor stable; technological advancements in mining (e.g., hydraulic mining in the 19th century or modern cyanide leaching) and transportation (e.g., transatlantic trade routes) have repeatedly introduced supply shocks, altering its scarcity and value in localized economies.
Your point about money demand and purchasing power is well-taken but incomplete.
The purchasing power of gold depends not only on economic activity outpacing supply growth but also on the absence of manipulation.
Gold’s physical nature makes it prone to adulteration (e.g. debasement with base metals, as seen in Roman and Byzantine coinage) and centralized control, whether by mints, banks, or governments.
The emergence of fractional reserve banking in the 17th century, rooted in goldsmiths issuing receipts for gold they held, directly ties gold to fiat-like systems.
These receipts, circulating as currency, often exceeded physical gold reserves, creating a proto-fiat mechanism prone to overissuance and crises, evidenced by the collapse of early banking houses like the Medici.
This historical trajectory demonstrates that gold’s use as money facilitates centralized systems of credit and control, which are precursors to modern fiat currencies.
You dismiss concerns about gold’s vulnerabilities as “simple forgery”, but this underestimates the systemic implications.
Adulteration, hoarding, and monopolistic control are not mere aberrations but intrinsic to gold’s physicality.
Unlike a purely digital or decentralized asset, gold’s verifiability requires trust in intermediaries mints, assayers, or banks which invites manipulation.
The transition from gold-backed to fiat currencies in the 20th century, culminating in the abandonment of the gold standard in 1971, was not an anomaly but a culmination of gold’s limitations: its centralization enabled governments to shift to fully fiat systems, unmoored from physical constraints yet built on the trust gold once commanded.
Your critique of a fixed supply, referencing the “only 21 million” philosophy, is a valid caution against dogmatic monetary policy.
However, my argument does not hinge on advocating a fixed supply but on exposing gold’s paradox: its monetary properties make it desirable, yet its physicality ensures its capture and centralization, linking it to fiat systems across history.
The supply shocks you downplay, coupled with technological shifts in mining and transport, have repeatedly disrupted gold’s stability as an SoV.
These flaws, capture, manipulation, and erratic supply mean that gold’s role as money, while enduring, is neither independent of nor immune to the centralized, fiat-like systems it engenders.
Far from being a stable SoV in isolation, gold’s history reveals a cyclical pattern of concentration and control, challenging the notion that it stands apart from fiat dynamics.
#Bitcoin
And to address bitcoin's hard cap.
Even a tiny amount of money, like one dollar, could theoretically supply an entire economy if it’s divisible enough.
Author of The Bitcoin Standard, Saifedean writes: “What matters in money is its purchasing power, not its quantity, and as such, any quantity of money is enough to fulfil the monetary functions, as long as it is divisible and groupable enough to satisfy holders’ transaction and storage needs.”
This comes from a summary of the book on Medium, which captures the essence of his argument about divisibility being key to a currency’s functionality, not its total amount.
Something else he's said that I agree with: Money’s effectiveness depends on how well it can be divided to meet economic demands, not how much of it exists. For example, even a single dollar could work if it could be split into tiny fractions for transactions, much like how Bitcoin’s is almost infinitely divisible supports its scalability and rids any concern of "elasticity".
A fixed supply, when paired with sufficient divisibility, can dynamically adapt to demand through market-driven adjustments in purchasing power, not artificial supply expansion. In summary, Bitcoin’s current and potential infinite divisibility through protocol upgrades or layered solutions eliminates the need for an elastic supply while preserving its scarcity.
This makes it a superior alternative to gold, which is prone to capture and supply shocks, fiat, which suffers from centralized overissuance or any ever increasing commodity, even if the increase is predictable.
Additionally, Bitcoin’s strictly capped supply of 21 million coins, paired with its scalable divisibility, distinguishes it from cryptocurrencies with perpetually increasing issuance, even if predictable.
Such coins, akin to commodities, risk gradual dilution of value and susceptibility to centralized mining incentives, undermining their long-term reliability as a store of value compared to Bitcoin’s unalterable scarcity.
By enabling transactions at increasingly granular levels, Bitcoin ensures that its fixed supply of 21 million coins can meet the demands of a global economy without diluting investors, rendering the elasticity argument obsolete.
Saifedean argues that Bitcoin’s fixed supply is a cornerstone of its value as a money.
Unlike fiat currencies, which central banks can print at will, or even gold, which can see supply shocks from new mining tech or discoveries, Bitcoin’s hard cap is coded into its protocol, making its scarcity absolute and predictable.
This fixed supply with new issuance halving roughly every four years mimics the increasing difficulty of extracting gold but without the physical world’s vulnerabilities, like new mines flooding the market.
In the book, he says Bitcoin’s supply schedule “ensures that at any point in time, there will only ever be a fixed amount in circulation, and no authority can change or violate this,” which he contrasts with gold’s historical supply swings, like the Spanish conquest or the California Gold Rush mentioned earlier.
This ties into his broader point that scarcity, enforced by code rather than physical limits, makes Bitcoin resistant to the capture and manipulation gold falls prey to.
