Gavyn Davies makes many perceptive observations in his opinion piece “Cryptocurrencies have ambitions for gold’s position” (Opinion, January 11). Nevertheless, it appears to me Mr Davies omits to say an important level about bitcoin’s relationship with gold — and with cash — which is that each one three depend on the identical precept, and are, of their fundamentals, the identical factor. Every has no retailer of worth in any respect. The flexibility of every to be exchanged for items or companies relies upon completely on consensus and conference. Every displays the view that sooner or later another person will likely be prepared to trade it for one thing of worth or use at no matter stage they determine on the time.
When the Financial institution of England says on its banknotes “I promise to pay the bearer the sum of ten kilos” the promise is meaningless — certainly it’s deceptive — as a result of the federal government doesn’t promise any merchandise of intrinsic worth in any respect, it simply affords regardless of the market in kilos may sooner or later purchase, which might theoretically be nothing. Equally, it’s extensively assumed that gold is underpinned by an intrinsic retailer of worth due to the underlying demand for jewelry, however most gold is used for hypothesis, not jewelry. Its worth too is dependent upon consensus and conference.
Blockchain currencies are additionally solely value regardless of the consensus of individuals determine they wish to pay for them. However at the least it’s clear of their circumstances what their market is dependent upon. They’re being, in impact, extra trustworthy and clear.
Chief Government, Tail Wind Advisory & Administration, London WC2, UK