Order a pizza or book a room at the Van Walsum Hotel in Rotterdam: more companies are accepting bitcoins as payment every day. And it’s no coincidence, because right now they’re more valuable than gold. Last week the bitcoin hit a new record. A single unit was worth $1293, versus $1228 for a troy ounce of gold.
What’s with the goldrush?
The value of bitcoin has tripled in the last year, largely due to its popularity in China, where the digital tender is used to get around currency restrictions. Speculation about the easing of US bitcoin regulations by president Donald Trump also increased the demand.
So are bitcoins the holy grail? Casper de Vries, Professor of Monetary Economics at Erasmus School of Economics, says not. ‘Bitcoins are just as much an alternative medium of exchange as two bottles of wine are. Untraceable and very fluctuant in value.’
Lack of trust
De Vries claims that, due to the popularity of bitcoin transactions among criminals, it won’t be rate-fixed any time soon. ‘People need trust. Nowadays in Africa, there’s an interesting development in alternative payments. Banks are very corrupt there, so people trade in US Dollars. But since more Africans are using smartphones, there’s a new tender: call minutes and phone cards.’
Another aspect affecting trust is the lack of regulation on bitcoin. In Europe, the European Central Bank (ECB) manages the production and inflation of Euros. Bitcoins are coined – or rather ‘mined’ – privately, using secret techniques and specialist hardware.
According to journalist and researcher Ties Keyzer, the future of bitcoin is not as solid as gold. In an article for PDOJ he claims that blockchain – the system behind it – has a far brighter future than bitcoin itself. When considering the potential of blockchain, he says, ‘bitcoin is just the tip of the iceberg.’
Maybe trading granny’s gold ring for bitcoins is not the best idea after all…