US dollars and other fiat currencies are not ideal money due to their centralized nature, and so the market is applying great pressure to replace them with something better. A lot of people think gold and silver are the future of money (e.g., GoldMoney.com) because they have better properties than dollars. But I think bitcoin is actually the better alternative because it has technical features that gold and silver can never have—in particular, faster and cheaper transmission.

Gold (and similarly silver) has at least two advantages over bitcoin: 1) Gold has thousands of years of history of use as money, and is thus an extremely reliable store of value. 2) Gold has some uses besides being money (i.e., “intrinsic value”). I think the second point is actually not much of an advantage for gold. Although its intrinsic value helps to ensure it will always retain some value, most of the value of gold comes from its use as money, and not its use as jewelery or as an electrical conductor. On the first point, gold has bitcoin beat—gold is certainly one of the most reliable stores of value in history. Bitcoin, being very new and very volatile, is not nearly so reliable. However, this does not mean bitcoin cannot become more reliable. It just carries with it a higher risk.

Bitcoin has at least two advantages over gold: 1) Transmission fees are radically lower for transactions over long distances. 2) Transmission is radically faster for transactions over long distances. Thus we see that bitcoin is a technological advance over gold. These advantages make bitcoin appealing in a way gold can never be. The only way to endow gold with these properties is to trade gold IOUs instead of actual gold. But if we followed that path, the central parties would inevitably become corrupted, and we would eventually find ourselves back in the fiat currency world we have today.

Gold and silver will surely exist as money for a long time yet. But they are not the future of money. Bitcoin is.

Relevant links:

• Against the Gold Standard
• Libertarian Goldbugs Hating On Bitcoin
• Why are Libertarians Against Bitcoin?

More articles in the archive.