Nick Szabo, a cryptographer and computer scientist who has occasionally been linked to Satoshi Nakamoto in the cryptocurrency world, compared Bitcoin and gold in terms of cost, storage, and transfer.
Szabo argued that Bitcoin has some significant advantages over physical gold, especially for individual investors.
According to Szabo, Bitcoin is “slightly cheaper” than physical gold when it comes to self-custody for individuals. This assessment includes storage costs and security risks. He also noted that Bitcoin’s transfer process is much faster and less expensive than gold in terms of verification and global consensus costs.
He pointed out that the additional costs involved in transferring and verifying physical gold are more cumbersome and expensive compared to the digital verification processes on the Bitcoin network.
Szabo stated that the picture is more balanced for institutional investors. He noted that the trust and control issues arising from storing Bitcoin at the institutional level limit the cost advantage, and therefore, Bitcoin is neither significantly cheaper nor more expensive than gold for institutions.
He added that in corporate custody processes, factors such as trust infrastructure, regulation, and operational control are key factors determining costs.
Szabo argued that Bitcoin’s self-custody costs could be significantly reduced for both individuals and institutions thanks to technological advancements. However, he noted that these technologies are still in their maturation phase, not widely understood, and require a support mechanism quite different from existing institutional trust structures.
He also emphasized that Wall Street and banks’ long-standing habit of centralized custody has slowed this transformation.
Szabo stated that while gold technology, with its approximately 6,000-year history, has limited room for improvement in reducing storage and verification costs, Bitcoin has a much higher potential for innovation. He described Bitcoin’s current concentration in large custodial institutions as “shameful centralization,” arguing that this concentration, particularly on Coinbase, a leading provider of custodial services, is merely a temporary phase in Bitcoin’s maturation process.
In contrast, Szabo stated that the centralized structure of gold in bank vaults is unlikely to change in the near future, suggesting that Bitcoin will evolve into a stronger and more distributed storage structure over time.
*This is not investment advice.
