,
25 tweets,
5 min read
Read on Twitter
1/It is no wonder gold became hard money. It’s rare, difficult to mine, has utility, fungible, divisible among others. It has been used as money for thousands of years.
2/Though govts have corrupted its monetary use through centralization and price manipulation, gold is still believed to be a safe haven asset. In fact, gold’s price is approaching a 600 year high. 
3/Modern gold resurgence has its roots in a series of policies that began in the late 1800s culminating in fiat monies. Let’s take a brief look at gold’s monetary role in the US.
4/Shortly after 1834, “gold became the principal coin of domestic commerce." The strict gold standard began in 1879 and when silver was confined to fractional currency usage.
(src Congressional Research Service)
(src Congressional Research Service)
5/Roosevelt signed Executive Order 6102 on April 5, 1933 which made it illegal to hoard gold coins, gold bullion, and gold certificates in an effort to spur economic growth during the Great Depression.
6/Gold had to be turned in to the Federal Reserve for $20.67/oz. Hoarders faced a penalty of $10,000 USD (nearly $200,000 adjusted) and up to 10 years in prison. This nationalization effort marked the end of the true gold standard.
7/The Gold Reserve Act of 1934 required all gold and gold certificates held by the Federal Reserve to be sold to the U.S. Department of Treasury. It also adjusted gold’s price to $35/oz.
8/On Aug 15, 1971 Nixon suspended gold’s convertibility to USD. This was spurred by stagflation and a potential global run on U.S. gold reserves. More USD was held by foreign nations than gold backing those dollars. Nixon effectively deflated the dollar’s value.
9/In 1973 the U.S. completely abandoned the gold standard and currencies began to float against one another (the beginning of the fiat era). Gold’s price was no longer fixed.
10/President Ford signed Pub.L. 93–373 on August 14, 1974 which allowed U.S. citizens to own and hold gold effective January 1, 1975.
11/December 31, 1974 the first gold futures contracts were traded. Released from the peg gold became a favored hedge against fiat. It’s price has since skyrocketed.
12/Gold bubbles.
(Gray bars are recessions.)
(Gray bars are recessions.)
13/These are “paper” trades. No gold moves from one account to another. Investors are not claiming physical custody of any substantial amount of gold. There is no such thing as a gold node, no lightning channel moving gold flakes around. Here is gold’s on chain settlement.
14/In fact, some have argued an audit will lead back to many “empty” vaults. Gold may have been fractionally reserved/rehypothecated away! A US gold reserve comprehensive audit has not been performed in decades.
15/Gold has poor portability and in the West as a SOV limited direct ownership. History has shown it is not censorship resistant. Gold stores cannot be adequately determined. Gold itself may not be easily verified by the layperson.
16/Gold miners de-securitize gold by expending energy to extract it out of the earth. They are rewarded with fiat. Bitcoin miners securitize Bitcoin by adding computational resources to the network. They are rewarded with bitcoins.
17/Gold proof of work.
18/Bitcoin proof of work.
19/Though markets continue to treat gold as a store of value its inability to function as a MOE and UOA in the modern world risks its substantial devaluation. Gold’s use case as physical money fails. Tokenizing gold does not mitigate verification issues.
20/Bitcoin satisfies the need for borderless, non-sovereign, censorship resistant money. It can power a digital economy. “Bitcoin is network money for a network economy” @goorha . As permissionless money it enables an economic paradigm fitting for today’s hyperconnected youth.
21/Bitcoin is programmable money and has broad and niche use cases. Bank settlement, micropayments, smart contracts among others. There is much to be discovered. Bitcoin is still in its infancy, like early electricity. We haven’t even reached the appliance phase.
22/Our relationship with money has evolved. Gold (or any other traditional physical representation) is no longer needed. Money can be "insubstantial" and "ephemeral" as long it represents the act of exchanging value.
23/Bitcoin is the response to real suppression of monetary freedom. 100+ years of CB policies and 45 years into the fiat experiment we have few options. Gold has been co-opted and can no longer act as an economic brake.
24/Bitcoin is positioned to restyle our markets and restore economic sanity absent for so long. Bitcoin is sound and well suited to function as money. Bitcoin is the better money. Bitcoin > Gold.
