Why Gold Isn't a Viable Currency: Insights from a Top Satoshi Candidate

Nick Szabo, a leading candidate for the identity of Satoshi Nakamoto, shares compelling views on why gold is not an effective currency. He argues that the centralization of gold storage has led to its decline in monetary function, contrasting it with the decentralized nature of cryptocurrencies like Bitcoin.

Key Takeaways

Nick Szabo discusses the failure of gold as a currency due to issues of centralization and trust.
Despite gold hitting record highs, its effectiveness as money has diminished, particularly due to risks associated with its storage.
Cryptocurrencies, especially Bitcoin, offer a solution to the problems faced by gold, reinforcing the reasons for their existence.

Why Gold Isn't a Viable Currency: Insights from a Top Satoshi Candidate

The Decline of Gold as Currency

Nick Szabo, recognized as a pivotal figure possibly linked to Satoshi Nakamoto, recently contributed valuable insights regarding gold's role in the modern economy. With the price of gold reaching record highs and the cryptocurrency market experiencing fluctuations, this discussion has become especially relevant. Peter Schiff cited these developments as evidence that the cryptocurrency market is becoming more active.

The core of Szabo's argument revolves around one critical question: if gold were such an ideal form of currency, why has it diminished in its monetary function? Szabo asserts that gold's decline wasn't due to a loss of value among people but rather because of issues associated with centralization.

Trust and Centralization: The Downfall of Gold

When gold was safely secured in bank vaults, it became overly reliant on trust and the integrity of custodians. This situation created opportunities for exploitation.

BTC vs Gold by TradingView

In essence, gold's shortcomings as a currency were not a result of its inherent volatility or limited supply. The real problem stemmed from the need for safe storage and the dependency on those safeguarding the gold.

Szabo further elaborated that gold is vulnerable to theft. Transporting significant quantities of gold is challenging, time-consuming, and risky, prompting merchants to utilize bills of exchange for large transactions. The advent of telegraphy expedited these payments, by allowing merchants to settle debts electronically rather than physically transporting gold across borders.

Current Market Context

Szabo's remarks come at a pivotal moment, as the BTC to gold ratio has recently plummeted to the low 20s after remaining above 30 for several months. This shift provides an opportunity for gold proponents to claim a significant victory.

Nevertheless, the long-term outlook for cryptocurrencies remains bright. If gold falters due to the influence of custodians, and if Bitcoin's structure alleviates that risk, each time gold outperforms, it serves as a reminder of the fundamental reasons behind the creation of bearer digital assets.

In conclusion, Szabo highlights pivotal arguments about the inadequacies of gold in today's financial landscape, emphasizing the resilience and innovative potential of cryptocurrencies like Bitcoin.