Why Bitcoin Is Better Than Gold, With Wences Casares

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Xapo CEO and founder Wences Casares explains why, after a 5,000 year reign, gold has been surpassed by bitcoin as the ideal ledger.

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Transcript: Bitcoin is a new digital currency that is perhaps the best form of money that we have ever seen. It’s important because most of us don’t understand money very well and perhaps the concept that is hardest for us to understand about money is that money is and has always been a ledger. And people often ask: “What is money backed with?” And the truth is money’s not backed with anything. It has never been backed with anything. The euro is not backed with anything in particular and neither is any other currency in the world. And gold, for example for that matter is not backed with anything either.

Some people think that gold has value because we use it for jewelry but it’s actually the other way around. Gold is valuable because it’s very scarce and because it’s very scarce it has been the best ledger we’ve found in 5,000 years. In bitcoin we have something that is as good a ledger as gold, meaning it’s incredibly scarce. There will never be more than 21 million bitcoin. It’s even more scarce than gold.But in history we have had this tradeoff between things that have been very, very good store of value like gold for example and things that have been good for payment like the Portuguese escudo, the U.S. dollar, American Airline miles, or Facebook credits. Those things are better for payment but they’re not so good as a store of value historically. And the things that are good for a store of value like gold are not good for payments.

In bitcoin we have something for the first time that is incredibly superior than anything we have seen before as a store value and also as a form of payment.It’s hard to have a rigorous discussion about bitcoin without understanding money. And the best way to understand money is to understand the history of money. Anthropologists agree that there’s no tribe, much less a civilization, that ever based its commerce on barter. There’s no evidence. Barter never happened. And that’s counterintuitive to most of us because we are taught in school that we first barter and then we made money because barter was too complicated.

Well, barter never happened and that’s one of the key myths about money. So then you would ask the anthropologists, “So how did we do commerce before money if there was no barter? There was no commerce.” No, there was plenty of commerce and the way that commerce would happen is that let’s say that someone in our tribe killed a big buffalo and I would go up to a person and say hey, “Can I have a little bit of meat?” And that person would say “No” or “Yes, Wences, here’s your meat.” And then you would go up to a person and say “Hey, can I have a little bit of meat?” and that person said “Yes, here’s your meat.”And basically we all have to keep track in our heads of what we owed other people or what our people owed us. And then someone would come to me and say “Hey Wences, can I have a little bit of firewood?” and I would say “Sure, here’s your firewood.” And I have to remember that I owe that person a little bit, that this person owes me a little.

And we all went about our business with these ledgers in our minds of who owes us what and what do we owe to whom. Very subjective system often these debts didn’t clear or clear in ways that were not satisfactory to both parties. Until about 25,000 years ago someone very, very intelligent came up with a new technology that really took off. So a person came to me and said “Hey, can I have a little bit of firewood?” and I said “Sure, here’s your firewood.” And this person said “This time we’re going to try something different. Here are some beads for you.” And I said “I don’t want beads. I don’t care for beads. I don’t need beads.” He said “It’s not about that. We are going to use beads as the objective ledger of our tribe. Instead of each of us having to remember what we are owed the beads are going to keep track for us. An objective ledger to keep track of debt.” [TRANSCRIPT TRUNCATED]

Directed/Produced by Jonathan Fowler, Elizabeth Rodd, and Dillon Fitton

17 COMMENTS

  1. Great talk, Wences. I'd like to point out, though, that because of the open nature of the blockchain, Bitcoin isn't entirely fungible. Since all transactions can be tracked, it's possible for companies to not accept or "blacklist" certain bitcoins associated with illegal/immoral activities such as gambling, porn, etc. Don't get me wrong, I love bitcoin. But that one draw back could prove problematic down the road when bitcoin is more popular. For that reason, I've begun to diversify into Monero, which is a cryptocurrency that is truly fungible.

  2. Is the value in bitcoin due to there being no counterparty risk? That is supposed to be the feature that makes gold valuable beyond its uses for jewelry.  Is it possible that bitcoin will eventually change the monetary system such that gold will only be valued for its use in industry and jewelry?  That would probably mean gold is incredibly overvalued and people should sell their gold.

  3. Why not just invest in tangible things of worth, such as precious metals/cars/houses… ect. This just seems like a huge disaster waiting to happen. If the united states, Russian, Chinese government, even the U.N. treasury can get hacked, (all of which have all ready happened BTW) Whats to stop these "less powerful" entities with less financial backing, from getting hacked? I mean look what Edward Snowden, one man, got away with. And what he took has little to no monetary value. Imagine the internet hounds clamoring at a chance to get some cryptocurrency on websites with mediocre security protocols and servers.

  4. Bottomless, the exchange rate is a huge mistake. Bitcoin is an alternative Economy for the Digital Society… if you do not believe in it just stay away from it and leave it for those who want to use it… it is still in its infancy and creating the Network to support it… may not be the only at the end but will for sure stay.

  5. Bitcoin fluctuates far too much to store for long periods of time, it has less than 10 years on the market and its already crashed and jumped like crazy. The only thing it has over the dollar is that its virtual and cannot be destroyed.

  6. I do not believe Bitcoins or any other virtual currencies is going to be the backbone of money. Gold, on the other hand, will be the main stay. There are a many advantages that virtual currencies possess over gold that is mentioned. But the one factor that virtual currencies lacks that gold don't is the intrinsic (natural) value. What I mean by that is the chemical properties attached to gold. Bitcoins do not have any. They are not tangible.

    Gold has a wide range of chemical properties. Gold glitters, they do not corrode, they are malleable, they are an excellent conductor of heat and electricity etc.

    Due to the chemical properties of gold. Numerous industries have to use gold in their products in order to function. The electronics, jewelry and dentistry industries utilize gold in their products.

    Because of the properties of gold, there will always be buyers of gold, hence, a constant demand and intrinsic value comes along. That is why gold has been money for 4,000 years.

  7. I can't understand the fifth quality of money that he says. He lists scarce, durable, divisible, transportable, [something I can't make out], and fungible. Recognizable? I don't know.

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