What type of money is accepted by cultures around the world and keeps it value even the government collapses? Since Old Testament times, the answer is gold. And the precious metal is unlikely to lose favor with goldbugs anytime soon.
Cameron and Tyler Winklevoss, however, argue that the virtual currency Bitcoin can serve as a substitute to gold. Speaking on Wednesday at a BusinessInsider event in New York, the twins argued that Bitcoin is not only a permanent new feature of the financial landscape, but added that a single Bitcoin will one day be worth $40,000 (one unit is now worth a record $400 apiece).
The Winklevosses, famous for their role in the early days of Facebook, are hardly neutral, of course. They own buckets of Bitcoin –around $40 million worth at current prices — and are planning to launch a way for people to buy it via the stock market. But that doesn’t mean they’re wrong about the benefits of Bitcoin versus gold.
As the twins point out, Bitcoin is better because it’s more portable, more liquid and more divisible. They also noted that Bitcoin is immune from quantitative easing (ie printing money) by central banks, and that speculative mania is hardly unique to virtual currencies.
“People speculate with US dollars … There’s nothing predictable about the supply or US dollars.”
The Winklevosses also made the case, espoused by technology experts and other investors, that we’re entering Bitcoin 2.0, where Bitcoin is regarded not just as a currency or a platform — but as a protocol and a platform that can replace Western Union and other anachronistic institutions now used to move money.
So what’s the catch? Well, there’s the fact that, unlike gold, Bitcoin only exists in the digital ether and could vanish altogether if people renounce it’s value. There’s also the threat that it could become a MySpace or Napster — superseded by a superior replacement. One contender is Ripple.
“Ripple’s vision is to focus on payment system aspect, [to help people move] bitcoins, dollars, euros or yen. The platform can be used for existing fiat currencies,” according to Ripple Labs’ Phil Rapoport who also spoke on the panel, along with tech investor Jeremy Liew of Lightspeed Ventures.
This means that Ripple, which also offers a digital currency of its own, could quickly replace Bitcoin as both a currency and a platform. Will it?
“It could, but it’s unlikely. It’s a winner-take-all landscape, and Bitcoin is the runaway winner,” according to the Winklevosses.