Feb 14, 2019 00:30 UTC
Feb 14, 2019 at 00:30 UTC
An economic and financial historian from Britain, Niall Ferguson, has recently stated during an interview to a blockchain media outlet that be considers Bitcoin to be “an option on digital gold”.
This acclaimed historian and author who has written extremely successful and widely lauded books such as “The Ascent of Money”, opined in the interview that Bitcoin, the pioneering cryptocurrency, was not going to be appropriately as money in anything beyond a rather “limited sense”. He blamed the immense volatility of Bitcoin for this.
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However, he went on to compare Bitcoin to gold in the form an asset that can used as insurance or security. Just like people use gold as a means of security today, Bitcoin, being an asset not easy to confiscate and having a relatively high value, may be used in the same way.
“So far, the most important contender to be a “cryptocurrency” has been bitcoin. And bitcoin itself is only money in a very limited sense, which I would define as follows: It is an option on digital gold. By this I mean that bitcoin’s role in the foreseeable future is as a liquid asset that is hard to confiscate, and thus serves as a type of insurance. You might hold your private keys the same way the European wealthy used to hold gold jewelry and precious stones. However, the experiment launched by Satoshi Nakamoto in 2008 is not yet finished. To own bitcoin today is to have an option on Satoshi’s experiment succeeding.”
However, while his overall views were in favour of currency going digital, he was quite skeptical about stablecoins. He said:
“My skepticism is that a stablecoin backed with, or pegged to, fiat currency implicitly admits that it is not a substitute for fiat currency. And the thing you have to remember is that most major fiat currencies have performed very well indeed in recent years in terms of inflation. Building a substitute for something that is doing OK is not an obviously winning strategy.”
Comparing Bitcoins with stablecoins in favour of the former, he said:
“Stablecoin builders should remember that bitcoin is an unusual kind of asset, which isn’t closely correlated to other asset classes. Investors like that idiosyncrasy. Fiat-backed coin lacks this attractive property. The problem is that, in view of its massive volatility, bitcoin is incapable of being money as a means of payment. Some stability is crucial if we are to have an independent digital money. But whatever stability is achieved has to be algorithmic.”