If you Like RunToGold on Facebook then we will give you one of the $2-3 30 page Mini-Guides for free. Just send us a message on Facebook and let us know which one you want: (1) Financial, (2) Political or (3) Personal.

digital bitcoin

Bitcoin Versus Gold By James Cox

by Trace Mayer, J.D. on February 21, 2013 · 17 comments

Reading time: 5 – 8 minutes

Editor’s Note: James Cox has written three good articles for GoldMoney. For some reason they rejected this well written and balanced article not on its merits but because it is too sensitive. Here are RunToGold the things we are most sensitive about are (1) our net worths in terms of gold ounces and (2) our freedom of speech; not whether seashells, metallic atoms or organized cryptographic hash are the best forms of money or currency.

Since gold has collapsed relative to Bitcoin for four consecutive years therefore we feel it not only important to discuss this new crypto-currency but vital to the financial safety and sensitivity of our readers. Bitcoin will not be ignored; the balance sheet demands it be paid attention to. Enjoy!

Bitcoin Versus Gold By James Cox

If you are reading this article you are almost certainly familiar with the fact that the life expectancy of any fiat currency is 27 years. Any given monetary system has a lifespan of 30-40 years. This current one started in 1971. So the gold and silver bugs, of which I count myself, happily point out that gold and silver are money and have been so for 5,000 years.

However, you may or may not be so familiar with Bitcoins. A decentralized censorship-resistant digital peer to peer currency created by Satoshi Nakamoto in 2009. Users of this currency can buy goods and services over the Internet, without having to pay bank fees or governmental tax. The transactions are anonymous other than a very long piece of code.


This has given to the rise of the ‘Silk Road’, which is the Internet’s black market. Whilst it is largely believed that Nakamoto is a pseudonym, the theme of anonymity is crucial to its success. In terms of music sharing, Napster failed because it had a centralized location where the authorities could address their response; whereas subsequent decentralized censorship-resistant file sharing systems like BitTorrent have succeeded. The same has accounted for previous digital currencies.

This above logic brings with it a difficult conundrum with regards to gold and money. Over the eons, bullion warehouses would keep gold and silver for their clients for a storage fee and provide a warehouse receipt for their customer’s wealth. This was abused by the Medici family in the 14th century and later mutated into the massive fraud of fiat currency and fractional reserve banking of today.


Apologists for this debt based fractional reserve monetary and financial system point out that gold cannot be forced down a wire. But given the birth of the Internet this is no longer relevant as it can be digitally allocated within a vault like in GoldMoney. Which brings us back to the subject of trust.

For a sound money banking system to succeed then every ounce of gold must be accounted for and be physically held somewhere secure and the service must be honest, transparent and offer the chance of physical redemption at anytime. Currently, the best and most trustworthy institution that offers this service is GoldMoney.


However, given that the financial and political elites have a fanatical dislike of gold and a fixed physical address for such a service then it becomes apparent that they also have the ability to hinder the institution with infinite restrictions and rules. These rules, constituting economic censorship, are usually not applied to the state favoured fractional reserve banks. Even in the cases of serious misconduct such as the LIBOR scandal the rules of fair conduct are simply overlooked by regulators. Consequently, this regulatory capture along with tax policy and legal tender laws puts sound money institutions at a huge disadvantage.


As a result, the current monetary system is so inefficient, expensive and egregiously unfair that the market craves an alternative. Bitcoins provide a creative and sophisticated solution that satisfies capitalism’s most desperate need – free money. Bitcoin allows the movement of any amount of money to anyone at anytime from anywhere and cannot be impeded, frozen, seized or confiscated.

This new monetary system is set to effectively stop supply at 21 million Bitcoins. This should happily dispel the belief that a currency needs to be constantly inflated to allow for market growth. Bitcoin is only 4 years old and gains people’s confidence with every passing day and some suppose that it may meet meet massive opposition from the governmental and financial elites should it manage to gain any additional traction.

A fascinating similarity between gold and bitcoins is that they both must be mined. With gold individuals mine through dirt and stone seeking particular atoms that are distributed based on an financial algorithm (ore grade) determined mainly by energy input costs and has resulted in a largely consistant annual increase in supply. With Bitcoin a software algorithm means that no matter how many people attempt to mine for the ‘blocks’ and receive the 25 bitcoin reward and results in a predictable increase in Bitcoin supply.


The moral of this story is that the free markets crave a solution to the pricing mechanism of economic calculation. Sound money, such as gold, remains a caged lion lashed about with regulation resulting in economic censorship. Even if censorship-resistant Bitcoins fail, and they could, they will still have played a part in this great saga of power versus market.

Bitcoin has demonstrated that the free markets demand a fixed and free currency supply. Bitcoin is forcing the elites to reconsider gold as a monetary system component in which they are still included in the narrative and not completely routed around.

They may see their frightening alternative as alluded to by the European Central Bank’s report on Bitcoin. If they do not comply with this market demand then their power base, derived from their ability to issue fiat currency, may be completely eroded and therefore their entire existence could be replaced at the click of a button by billions of individuals.

After all, who wants to buy a buggy whip, telegraph, 8-track tape, Tower Records or newspaper?

free bitcoin guide

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin


Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

13,879 random numbersEmail Email Print Print


ABOUT THE AUTHOR: Trace Mayer, J.D., author of The Great Credit Contraction holds a degree in Accounting, a law degree and studies the Austrian school of economics. He works as an entrepreneur, investor, journalist and monetary scientist. Follow him on Twitter. This is merely one article of 242 by .
Free Free Great Credit Contraction Sample

{ 17 comments… read them below or add one }

1 John February 22, 2013 at 1:51 am

I am not on Facebook because they demanded from me identity documents and I refused that imposition. I would recommend that everyone else keeps away from that government data collecting organisation.
As much as I would love to read one of your Mini-Guides Facebook is one step too far.

2 Mark February 22, 2013 at 2:02 am

Hi Trace,

What if MtGox had its bank account stopped(Barclays did stop it once) ?

What if no bank in the world dealt with any FX trade that used bitcoin ?

Bitcoin is only good if you can turn it back into fiat or gold, but what if that was banned ?



3 Trace Mayer, J.D. February 22, 2013 at 10:51 pm

Mark, Have you looked at Local Bitcoins? And now that Ripple has launched it might be possible to completely decentralize exchanges completely. Bitcoin and Ripple could be very complimentary. Add to the mix the new colored coins project and it starts getting really exciting at completely disinter mediating from the legacy organizations.

But your statement should probably be amended to: Bitcoin is only [better] good if you can turn it back into fiat or gold, but what if that was banned [in particular jurisdictions]?

Those jurisdictions that engage in economic censorship will reduce monetary freedom and the amount of wealth their economies can generate. Capital, both human and economic, will flee to jurisdictions where it is treated better, has more monetary freedom and is not shackled by economic censorship.

4 B. February 24, 2013 at 6:55 am

Trace, I think more and more readers are interested to change their 1 ounce gold to 1 ounce of bitcoin :) Maybe it would be vital to write article, which is the best ways how to buy bitcoins in terms of $1000 USD. Thanks for all the info you provide.

5 Trace Mayer, J.D. February 24, 2013 at 10:56 am

B., the Free Bitcoin Guide walks people through some of the better ways I have found through my experience. For $1,000 I think a Blockchain online wallet and Coinbase to buy via ACH from a bank account is probably the easiest and pretty safe.

6 mossmoon February 26, 2013 at 2:29 pm


Who is driving up the price? Right now, only speculators/investors should be buying and holding. As I understand it, bitpay and other currency converters are transacting at nanospeeds, so the exchange rate is irrelevant to them.

Let’s say for the sake of argument, no one buys and holds, that bitcoin was simply as means of exchange and nothing else. Would the sheer velocity of these converters like bitpay, given enough volume, drive up the exchange rate against fiat?

Thanks mate.

7 np March 1, 2013 at 5:03 am

Hi Trace,

since I don’t know how to contact you privately, please excuse the off-topic post about dropbox.

Because I still see dropbox recommendations here and on howtovanish, I would strongly caution against them. Have you seen:

If one must use it, I think encrypting your own data before uploading would be required. The same applies to any service that does not provide true end-to-end encryption, including any service that holds your keys.

8 Trace Mayer, J.D. March 4, 2013 at 6:17 pm

np, those are great points which is one reason why we usually always recommend using TrueCrypt in conjunction with Dropbox. On the About page you can find our secure contact options. This will save a click though:

Version: OpenPGP.js v.1.20121015
Comment: http://openpgpjs.org


9 Trace Mayer, J.D. March 4, 2013 at 6:22 pm

mossmoon, because the Bitcoin supply is known and limited the only variables are speculative and transactional demand. At the current rate of increase in things like Google searches, new wallet accounts, new BitPay merchants, transactions fees, etc. I estimate that the price of Bitcoins would need to rise $0.20-0.35 per day just to accomodate the increase in transactional demand. So, it is likely speculators, on total, that are selling out their stakes to people demanding bitcoins for transactions.

10 Kevin March 5, 2013 at 10:20 am

What do you attribute the latest runup in the price of bitcoin to? It has shot from 34 to 40 in just 2 days. These are massive gains and I can’t find a good reason why it is currently shooting through the roof- not enough people are talking about it out there.

11 Trace Mayer, J.D. March 8, 2013 at 9:08 am

Kevin, mostly due to lack of supply and problems at MtGox with processing orders. There have been some significant people talking about it like the Boost VC fund and their Bitcoin company ideas.

12 bitcoin megastore March 8, 2013 at 5:50 pm

Nice website, bookmarked for reading later. Found it over Reddit > http://www.reddit.com/r/Bitcoin/comments/19x1zz/potential_bitcoin_prices_infographic_for_you_to/

13 Mike March 23, 2013 at 7:43 pm

What happens if the bad guys, (globalists, bankers) buy up the whole lot of bitcoins? Leaving us with nothing? There’s only 21 million of them. Should be easy enough to print up some dollars for the purpose of hoarding all the bitcoins.

14 Trace Mayer, J.D. March 25, 2013 at 6:23 pm

Mike, that is a good question and I guess it depends on how many bitcoins you have and at what price you will part with them. After all, you know the saying, “He who has the gold makes the rules.”

15 carlos April 10, 2013 at 11:02 am

So what if an outfit like Goldmoney created a crypto currency. No mining just straight up fixed amount of coins. They then offered 1/3 of these coins to Goldmoney customers based on the total number of coins divided by the gold price. These coins are held securely and can’t be bought or sold by the client. This crypto currency would then have 33% gold backing. As an incentive for a client parting with his gold they are given 2/3 of the remaining coins. Once the market gets wind of a gold backed crypto currency being out there it could take off. based on it’s success it’s gold backing would be a smaller percent but it would never fall below 33% unless gold stored in vaults around the world is confiscated.

Bitcoin is in a bubble right now as it is not being used as a currency but as a store of wealth It’s value is in it being used as a dollar and not as gold. Everyone talks about the limited number of bitcoins but there is no limit to the number of crypto currencies that can be created and that is the rub. Somebody is going to create a better bitcoin but at least the genie is out of the bottle and I love it.

16 Trace Mayer, J.D. April 13, 2013 at 11:06 pm


A big problem with your hypothetical ‘gold backed’ crypto-currency is getting the computer processing power to secure the ‘blockchain’ of the crypto-currency. The Bitcoin network has about 800 petaflops or 61THs which is more computer processing power than the top 500 supercomputers combined. So it is an extremely secure blockchain which gives integrity to the ledger. And it is that integrity that distinguishes Bitcoin from other currencies.

The second largest crypto-currency, by market cap , is Litecoin and it has about 5-10Ghs of processing power and about $40m of market cap.

On the other point, Bitcoin is being used as a currency with Bitpay processing over $5m of transactions in March so your claim that Bitcoin ‘is not being used as a currency’ is patently false.

17 James July 11, 2013 at 1:13 pm

One of the best articles I have found on bitcoin and gold. I am very intrigued by the bitcoin and am considering investing in some. But I am 100% gold bullion and will be as it is real money. As you pointed out about fiat currencies changing or ending every few decades. Hopefully other’s get some valuable info out of this. Thanks for the links to your gold resources too! Cheers mate!!

Leave a Comment

Previous post:

Next post: