In times of rising inflation, some argue that the financial world “back in the days” with the “gold standard” is to be brought back now in order to ease financial turmoils.
However, there is reason to believe that the so-called gold standard of past times was neither a true gold standard nor a financial system to welcome.
Dr. Craig Wright, who is now being known more and more as the person behind the famous pseudonym Satoshi Nakamoto, has already stated his opinions on gold, the so-called gold standard banking system, and BTC marketed as digital gold. And when Satoshi speaks, we better listen.
What is the problem with the “gold standard “of past times?
Remember when banks ran on gold as the underlying financial asset? They never truly did, according to Craig Wright. In his article titled “Banking Old Wine in New Bottles,” he wrote:
In part, this is why the United States moved away from the gold standard, or, more correctly put, the gold exchange standard. In reality, there was never a gold standard in use.
What Dr. Wright is describing here is that the banking systems that were perceived as being gold standard-driven gave out notes that claimed to be worth far more than the gold they actually had stored. The so-called gold standard was actually a gold exchange standard.
Why is this important in the context of Bitcoin?
Dr. Wright explains in his article that the current digital currency exchanges such as Coinbase are acting the same way as the so-called gold standard banking systems did. On most digital currency exchanges, you do not really move the digital currency when you trade them there. You only get a data entry in the exchange’s system if you buy or sell a digital asset. We do not even know whether Coinbase, Binance, or Bitfinex actually have the amount of digital assets such as BTC that are being traded in their systems.
This is the same as how the so-called gold standard banking systems worked. They gave out notes that were to be backed by gold, but the gold did—for the most part—not fit the amount of notes and did not move when notes were exchanged between parties. On digital currency exchanges, Bitcoins and other digital assets also do not necessarily move when being exchanged between the customers on their platforms.
“Coinbase, Square, and the other bucket shops that act as banks while flouting laws and removing consumer protection turn the financial system into a casino—where they act as the gatehouse to the virtual Fort Knox. They keep a record of the digital gold. But, as with Fort Knox, nobody knows what they hold. Fractional-reserve banking started with the same idea,” said Dr. Wright.
Bitcoin is not digital gold—we know that, but there is even more to discover!
Readers of CoinGeek already know that BTC is not digital gold. Bitcoin does not have the same attributes as gold and was never intended by Satoshi Nakamoto to have them anyways. BTC much more has all the negative sides of gold and none of the positive sides of it.
Yet BTC continues to be marketed as digital gold. So let us go with their premise for a second here. Let us say BTC is digital gold, okay?
However, do we even want a digital gold standard? Taking Dr. Craig Wright’s statements into consideration, we have to admit that even if BTC was digital gold, we would not want a system running on digital currency exchanges that mimic a true digital gold standard, while in reality, they are just giving out digital notes instead of actually moving coins when they are being traded on their platforms.
Do BTC and “digital gold proponents” even see that? If they ever get BTC to be digital gold, they would find themselves in the same old banking system as before when gold was said to be the standard but was only an exchange standard.
In other words: even if Bitcoin was digital gold, this digital gold exchange standard would not heal financial wounds in the system at all. If people could withdraw all their BTC from the known digital currency exchanges today, the deception would be visible.
Notes and cash, cash and notes—what is going on here?
Now let us go back to the title of the Bitcoin white paper. It says “peer-to-peer electronic cash system” there.
Imagine getting a note from your bank that states it is redeemable for gold:
- Is the note itself gold? No.
- Can you use the note to trade with others? Yes.
- Is the gold being moved? No.
- Are the notes being moved? Yes.
What is Bitcoin, though? If you transact in Bitcoin—not buying and selling on an exchange, but literally sending Bitcoins to another person—did you send a note that claims to be redeemable for Bitcoins, or did you send Bitcoins? You sent Bitcoins.
I personally asked Dr. Craig Wright whether he would prefer a gold standard or a Bitcoin standard. “Neither,” he said.
Okay, so Satoshi Nakamoto would not want a gold standard, but also not a Bitcoin standard. It could be confusing for many. In another article titled “Peer-to-peer digital electronic cash,” the following statements look like the usual stuff one hears about Bitcoin, but take a closer look to what is really said there :
Bitcoin is not a currency or an e-currency at present, but it could be. Importantly, tokenisation methods allow for the creation of a national currency on top of Bitcoin. Such a system would be an e-currency.
The truth of the matter is, Bitcoin is and was at its heart an electronic cash system that works as a peer-to-peer exchange. It is not because nodes act as peers, but rather individuals do.
Far too many people fail to understand what I said. At no point have I said that Bitcoin is a cryptocurrency, a currency in any form, or anything monetary-wise other than digital electronic cash.
Let me highlight these quotes above for you, because it is important:
- is an electronic cash system
- works as a peer-to-peer exchange (between people)
- can be used as digital electronic cash itself
Probably time for us to discuss cash more than gold, currencies, and digital assets. As far as I am concerned, we are still in the discovery phase of Bitcoin as a cash system. Even though “cash system” may sound easy to understand, it is not. Bitcoin’s history so far is proof of how hard it is to grasp.
Furthermore, have a look at the current discussion concerning Bitcoin as a commodity.
Watch the whole interview on Gold, Bitcoin & Hoarding Empires with Dr. Craig Wright:
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.