Since centuries ago, gold has been seen as an object of high value by many groups of people in the world. It is important to know that gold itself has no value – it is just a shimmering lump of stone. The value of gold stems from the (somewhat puzzling) fact that everyone agrees that gold has a certain value, and therefore it is considered valuable. The reason why people choose gold over other objects is important to understand – because gold has certain characteristics that make it a better ‘store of value’ than any other object:
First, gold is rare . This means that the amount of gold is limited (there is only so much gold in the world – if there is too much then everyone can have it and the gold will have no value). Gold is also soft (gold can be melted and molded into small units such as coins, and more importantly when you change its shape into smaller units, it will not lose its value – unlike diamonds). Gold is also stable and does not degrade, is easy to recognize and difficult to imitate (fake copies).
Bitcoin has all of the same characteristics as gold. The number of Bitcoin is limited (there is only a certain amount to be produced), Bitcoin can be broken down into smaller units without losing the value of the unit (1 Bitcoin = 100,000,000 Satoshi – the smallest unit of Bitcoin, the same as cents in Dollars or pennies in Pounds, so we can buy less than one Bitcoin), Bitcoin technology is also stable and will not degrade, nor is it possible to fake Bitcoin. On the other hand, unlike gold, you can move Bitcoin anywhere in the world in a matter of minutes, regardless of the amount of Bitcoin. That’s why people call Bitcoin digital gold, but better digital gold .
Bitcoin also has value as a payment system. The more people use Bitcoin for payments, the more valuable this payment system will be. Buying Bitcoin is like buying Visa stock, then using that stock to buy soda on 7-11. Because you pay with your Visa shares, there are more places to use Visa, the (payment system) Visa is expanding and getting more valuable, so the value of the Visa shares will become even more valuable (including the value of your own Visa shares!).
Bitcoin’s value stems from these gold-like characteristics, as well as its function as a payment system like Visa.