Why Bitcoin is Better Than Gold, with Wences Casares




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
Why Bitcoin is Better Than Gold, with Wences Casares

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25 Responses

  1. Michael Irwin August 28, 2014 / 3:59 pm

    1st

  2. 92bagder August 28, 2014 / 4:05 pm

    i dont think this guy doesnt understand economics 

  3. ilker yoldas August 28, 2014 / 4:07 pm

    How about cocaine? It’s used as a store of value and currency in Guerima,
    Colombia..

  4. misiek7676 August 28, 2014 / 4:14 pm

    Does he really believe that there will be only 21 mio bitcoins???

    And what if someone changes her/his mind? :)

  5. Nantchev August 28, 2014 / 4:14 pm

    My biggest issues with Bitcoin are: if you have no internet connection you
    cannot use your bitcoins at all. Not all of world has internet connection.

    And, if computer is broken, damaged, stole etc your hard drive (with wallet
    info) is either compromised, missing or needs to be removed.

  6. jwka2001 August 28, 2014 / 4:17 pm

    gold/silver is far better than bitcoin. I study monetary history and while
    i wish i had gotten into bitcoin back when i first heard about it at less
    than 10 an bitcoin, i would of just sold it when it got to the price of
    gold and sold and bought gold oz.. Of course this is what happend when the
    price of bitcoins reached the price of gold,, it fell because they traded
    bitcoins for gold…the real store of wealth.

    While i dont want to say bitcoins are bad, they just dont have a track
    record, but more importantly they arent money… they are a currency. They
    have all the things needed to be a currency, but dont have whats needed to
    be money

  7. MrBumbo90 August 28, 2014 / 4:18 pm

    Very nice. Why so many dislikes?

  8. MrBumbo90 August 28, 2014 / 4:19 pm

    Who produces bitcoins?

  9. Simon Christensen August 28, 2014 / 4:27 pm

    It should be noted however that he is the CEO of Xapo, a Bitcoin wallet
    company.
    Take it with a grain of salt.

  10. infinati August 28, 2014 / 4:32 pm

    This Bitcoin hoohaa is all fine and good as long as there is electricity,
    an internet that spans borders, and there is peace in the world. Oh, and
    making the enormous assumption that hackers will never figure out how to
    compromise this 100% virtual money.

    Gold has way less risk than Bitcoin.

    I believe digital credits is the future, but Bitcoin is not it’s final
    form, just the beginning.

  11. Alexandria School of Science August 28, 2014 / 4:37 pm

    What if the system is down or got hacked?

  12. Luis Garcia August 28, 2014 / 4:58 pm

    why is everyone trying to push Bitcons, its digital money that could be
    hacked and your life savings are gone. if we pay digital the government or
    bank can tax every small transaction, cash is efficient because it has the
    anonymous factor. Why don’t we know who created bitcons? the group that
    creates a new currency will be the one being benefited the most

  13. Josh Galt August 28, 2014 / 5:08 pm

    “Gold isn’t backed by anything” – FACEPALM! Gold is backed by the labour
    and production costs associated with mining it!

  14. FaBFaB66 August 28, 2014 / 5:25 pm

    Oh look, a bitcoin related company CEO talks about how good bitcoin is.
    Sometimes you fuck up royally, Big Think.

  15. Gary McCaffrey August 28, 2014 / 5:25 pm

    People are getting ass twisted about what he actually said here.

    Everything he said here is a fact.

    That does not mean that you should buy lots of bitcoin and forget about
    gold. That does not mean that bitcoin will ever be worth more than gold, it
    does not even mean that in 10 years time bitcoin couldn’t be worth $0.01

    He’s simply stating the facts that as a means of exchange and a means of
    stored value. Bitcoin trumps gold on every front, except the ability to
    hold it in your hand, but that is also one of bitcoins strengths over gold.

    Bitcoin could die tomorrow and never be used again, and all of what he has
    said would remain a fact. 

  16. phboomharris August 28, 2014 / 5:27 pm

    What he says makes sense but it’s with the assumption that the technology
    well still be there in the future, war or disaster large enough could could
    make its access impossible making it worthless. Good will still have value
    then but even then if large enough you would then not be able to reach the
    gold too. 

  17. Victor De Lima August 28, 2014 / 5:33 pm

    Money does not need to be backed. Money is printed based on how much of it
    is needed. Central Banks print money knowing that too much would cause
    inflation and too little would cause deflation, it’s their responsibility
    to target the right amount.

    Money has value because people want (demand) it. That’s basically what
    gives something value: The amount people are willing to pay for it. A piece
    of paper is worth nothing but a piece of paper with Nelson Mandela’s
    signature will be given value by people who believe Nelson Mandela’s
    signature is worth money.

    Same with gold: It doesn’t have value because it is scarce but because
    people demand it. If gold was not that shiny or smelled bad, nobody would
    probably want it and it would be worthless. The fact that gold is scarce
    just makes it harder to devalue, or more expensive when people really want
    it.

    Trust me, I’m an economist.

  18. Travis Spalding August 28, 2014 / 5:35 pm

    I agree that bitcoin is potentially better than gold but his first couple
    of statements regarding the backing of currencies and value is incredibly
    ignorant.

  19. Travis Spalding August 28, 2014 / 5:37 pm

    “Barter never happened.”
    Wtf?! Medium of exchanges arise from barter conditions… I agree that an
    extension of the supply of capital goods enough to begin civilization
    cannot occur without money such as silver or gold but to say barter never
    happened is beyond retarded.

  20. zerep rd August 28, 2014 / 5:40 pm

    These viewpoints and assertions are pretty profound. I wonder, could this
    man Wences Casares possibly be Satoshi Nakamoto? Each one of those insights
    could substitute for the motivation behind Bitcoin’s creation.

  21. PAC0SANCHEZ August 28, 2014 / 5:42 pm

    Bitcoin is fallable, one day computers will be powerful enough to crack the
    encryption.

  22. Ben Kuyt August 28, 2014 / 5:50 pm

    I’d rather not have the price of graphics cards break. Sorry.

  23. Simon 894 August 28, 2014 / 5:53 pm

    In 900 year we will be able to create gold from thin air. 

  24. BALLAsTvDotCom August 28, 2014 / 5:54 pm

    this was very well put i need to buy some lol

  25. the Urban Art Project August 28, 2014 / 6:01 pm

    ‘Money has never been backed by anything’ – That right there shows he knows
    nothing.
    All currency used to be backed by a tangible asset, as so it can not be
    made out of nothing (like we do today)
    Bitcoin takes a lot of energy to keep going, it has no real value besides
    it’s security (for now)
    It’s a great idea to not have money centralized (as we had at certain times
    in history), and the security part is also nice, but there are many
    downsides to bitcoin (energy req., internet req., and potentially may be
    able to be hacked)

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