Gold and Bitcoin, despite the rivalries of their sympathizers, share interesting parallels even in the sphere of mining.
One of the hottest controversies in the financial world is that between Bitcoin and Gold enthusiasts. This paper does not attempt to enter that arena of debate. On the contrary, it will try to point out another of the great similarities between both assets, mining.
It’s not certain whether the creators of Bitcoin did it with gold in mind, but everything indicates that they did. The scarcity, the divisibility and even the way they were generated, put more similarities in these two assets than could be seen at first glance.
Extracting gold is not as easy as it used to be, when adventurers only required a shovel and good intentions to get the metal. Exactly the same thing happens with Bitcoin in the digital realm. It’s not as easy now as it was back in the days when you only needed a CPU to get the coins. There are a lot of similarities like this.
How similar is Bitcoin mining to gold mining?
Although each of these assets exists in a different sphere of reality, they have a lot in common. Bitcoin exists in the virtual world, within everything related to the web and digital processes, while gold exists in the material world.
With a development within such different spheres, it could be assured that the similarities of both could not be so marked. However, reality shows that the parallels go far beyond the rhetoric of the cryptology proponents.
As you said, mining Gold and Bitcoin has become more complicated over the years. This difficulty is due to the scarcity of both assets, which forces miners to develop better techniques and use increasingly sophisticated and expensive equipment. Achieving them is no longer a matter of will, but of economic capacity.
Both activities began as the passion of a handful of adventurers. Then they became professional and now they are part of the day of important monopolies that control even the supply available for sale in the market.
Bitcoin could share another detail with gold, what will it be?
A more detailed look
One of the studies that has paid the most attention to this similarity between Bitcoin and gold mining, is the one made by Arvind Narayanan and Joseph Borneau in their book Bitcoin and Cryptocurrency Technologies.
The work explains the phases through which the two processes of extraction of these assets have passed. „If we consider the evolution of mining, we can see interesting parallels between Bitcoin and Gold mining,“ they explain.
At the same time they highlight that, in both cases of mining, both gold and Bitcoin, accessibility is decreasing. „Large companies have taken over most of the operations (and profits). Another pattern of similarity is that the main winners in mining have been equipment vendors, whether they are vendors of shovels or ASIC machines.
Gold mining and Bitcoin mining share similarities that make it seem like the creators of the latter did it with the gold metal in mind.
Bitcoin returns have been 5 times higher than gold returns
Mining development phases in both cases
The first step in the development of Bitcoin and Gold mining was through CPUs in the first place and Gold Pan in the second.
After that, Bitcoin mining evolved to GPUs. In turn, Gold was mined with the Sluice Box.
In the third stage, Bitcoin was mined, although with some difficulty, with the Field Programmable Gate Arrays (FPGA). In parallel, the gold metal had its equivalent in the Placer Mining.
The last step of this evolution, finds Bitcoin mining itself with the most advanced, the Application Specific Integrated Circuit (ASIC). As for gold, it is mined with the powerful Pit Mining or open-pit mining.
A violation of its own principles
Although gold has always served a clear purpose, to make people rich at any cost, Bitcoin was born with a more philanthropic philosophy. The fact that Bitcoin mining is centralized by a few monopolies goes against a philosophy of everyone generating their own money from their computers.
Be that as it may, you can be sure that the only realistic way to mine Bitcoin today is through these ASICs. Small-scale miners are increasingly vulnerable and prone to being thrown out of the game.