The article on the chainless website discusses interdisciplinary financial issues. It is complicated and lengthy, involving many basic concepts that are very similar and very different. This article sorts out some differences between Bitcoin, gold, stocks, US dollars, and legal tender and makes a conclusive comparison, which helps to understand the article.
The difference between Bitcoin and gold
Bitcoin is also called digital gold. There are many similarities between them. What are the differences between them?
1. Bitcoin is not a global consensus; gold is a global consensus, and no less than 3 billion people own gold.
2. Bitcoin is not a reserve currency at present; gold is a reserve currency and appears in the reports of central banks of various countries.
3. Bitcoin’s current use is very narrow, while gold’s civil and industrial uses are very wide.
4. Bitcoin has no physical object, and gold has a physical counterpart.
5. The issuance of Bitcoin is limited; the issuance of gold is unlimited, and the reserves of gold are unknown.
6. Price increases do not affect the issuance of Bitcoin. Price increases affect the issuance of gold.
7. Bitcoin’s cost is the computing power bottom, and gold’s cost is the mining cost.
8. Bitcoin cannot be counterfeited, but gold can be counterfeited, which isn’t easy to identify.
9. Bitcoin transactions do not require credit, but gold transactions require credit intermediary.
10. Bitcoin delivery is convenient, but gold delivery is inconvenient.
11. Bitcoin storage is inconvenient, but gold storage is convenient.
12. Bitcoin is still in the growth stage, and gold is in the maturity stage.
13. In the future, Bitcoin can measure the total global wealth, but gold cannot.
14. the Bitcoin standard may succeed in the future, while the gold standard has failed.
Differences between Bitcoin and Stocks
Bitcoin and stocks have many similarities, but what are the differences between them?
1. Bitcoin does not represent the value of the Bitcoin system, while stocks represent the value of a project or system.
2. The intrinsic value of Bitcoin remains unchanged, like gold, while the inherent value of stocks is uncertain.
3. Only external factors affect the value of Bitcoin, while both external and internal factors affect the value of stocks.
4. Demand determines Bitcoin’s value, while the value of stocks is determined by the system they represent.
5. To analyze Bitcoin, you only need to examine external factors, and unlike stocks, Bitcoin does not require analysis reports.
6. Bitcoin has no price ceiling, while stocks have a price ceiling.
7. Bitcoin’s computing power bottom is a “cost price,” while stocks do not have the concept of cost price.
8. Bitcoin cannot be valued, while stocks can be valued.
9. The only driving force behind Bitcoin’s rise is the expansion of demand, while the rise in stocks depends on the rise in system value.
10.The demand for Bitcoin is manifested in the increase in the number of consensus members and the amount of money. In contrast, the demand for stocks manifests in the system value increase.
11. The demand for Bitcoin is uncertain and event-driven, making it difficult to predict; however, the response of stocks to events can be expected.
12. Bitcoin has a long-term upward trend, while stocks do not.
The difference between Bitcoin and the US dollar
Bitcoin and the US dollar have many similarities. What is the difference between them?
1. Bitcoin only has the function of storing value and paying value and is not a complete currency. The US dollar is a currency that stores value, pay, and pricing scales.
2. Bitcoin is not a pricing scale currency; the US dollar is a scale currency, a pricing unit.
3. Bitcoin has no centralized issuing agency, and the US dollar is a centralized issuance.
4. Bitcoin issuance is based on unchanging rules; the issuance of the US dollar has significant variables; that is, there is an over-issuance of the US dollar.
5. Bitcoin is not responsible for economic development. The issuance of the US dollar is responsible for economic development.
6. Bitcoin cannot boost the economy by adjusting interest rates, and the Federal Reserve’s interest rate adjustment is a conventional means.
7. Bitcoin will not be destroyed, and the US dollar can be destroyed.
8. Bitcoin prices fluctuate wildly, and US dollar prices fluctuate little.
9. Bitcoin is unsuitable for payment scenarios, and the US dollar is ideal.
10. Bitcoin has no risk of depreciation, and the US dollar has the risk of depreciation.
11. Bitcoin is an asset currency like gold. The US dollar is a credit currency.
12. Bitcoin has more than 10% of “dead coins”, and the “dead coins” of the US dollar are still used by banks.
13. Bitcoin can be used to achieve a standard currency that is more stable than the US dollar.
The difference between legal tender
Legal tenders are all credit currencies, but the characteristics of legal tenders in different countries are very different. Legal tenders can be divided into standard, stable, and vouchers. The following selects several representatives for analysis.
Standard Currency
The US dollar is the standard currency. In addition to the value of stored value and payment functions, the standard currency is also the pricing scale of commodities, that is, the pricing unit. The US dollar has a “central bank” independent of the national government, the Federal Reserve. The United States has unified fiscal power. The Federal Reserve regulates the economy based on three indicators: inflation, employment, and economic growth. In 2023, the US dollar accounted for 47.08% of the world’s trade settlement volume (data source).
The euro is the standard currency. In addition to the value of stored value and payment functions, the standard currency is also the pricing scale of commodities, that is, the pricing unit. The euro has a “central bank” independent of the EU countries, the European Central Bank. The EU does not have unified fiscal power. The European Central Bank regulates the economy based on three indicators: inflation, employment, and economic growth. In 2023, the euro accounted for 22.95% of the world’s trade settlement volume.
From the perspective of independence, the euro is better.
Stablecoin
The Hong Kong dollar is a currency anchored to the US dollar, and its issuance principle is the same as that of the stablecoin USDT of cryptocurrency. The Hong Kong dollar does not have an independent monetary policy. USDT does not need to be responsible for economic development, while the Hong Kong dollar must be accountable for local economic development. Therefore, Hong Kong must ensure a fiscal surplus to maintain the stability of the Hong Kong dollar.
Vouchers
The RMB is a voucher. In 2023, it accounted for 4.61% of the world’s trade settlement volume, ranking fourth in trade settlement volume. However, the RMB is not a freely circulated currency in the world, and the price of the RMB is not the market price but the price released by the People’s Bank of China. When released, it refers to the index of a basket of currencies. But there is no commitment to link with the index. China’s monetary policy has excellent flexibility, but it also brings opacity and has lost international credit. Due to the nature of vouchers, China has a huge advantage in dealing with domestic financial risks, but the RMB has a considerable disadvantage in international trade. Currency swap agreements are used to make up for the disadvantages of international trade, but they bring massive loopholes.
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