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Forever is a long time. When you want to create lasting wealth for the rest of your life, and for your heirs, you’re looking for ultra-reliable value builders. Gold springs to mind. Real estate parcels are another option. Some stocks might work, but you’d have to make sure that the companies you’re picking can stick around for decades.
These days, you can add Bitcoin (BTC -1.49%) to that exclusive list. Yes, that’s right. A small handful of top cryptocurrencies can challenge gold and real estate when it comes to defending your hard-earned wealth for the long haul, and Bitcoin remains the king of the hill it created in 2009.
Image source: Getty Images.
Bitcoin was always meant to handle this job.
The system is explicitly compared to gold in the original whitepaper describing Bitcoin’s inner workings and long-term goals.
“The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation,” the document says. “In our case, it is CPU time and electricity that is expended.”
That’s it, really. At its heart, Bitcoin is a ledger system that can manage financial transactions, keeping track of each digital coin’s ownership situation on a shared global platform, protected by several layers of encryption. This blockchain beast doesn’t come with frills like smart contracts or lightning-quick transaction settlements. It’s all about unbreakable security on a global scale, all managed by a developer community with no central figure or controlling company.
The network will stop generating more coins when there are 21 million bitcoins in existence. At the current rate of production and planned increases to the mining difficulty, the last bitcoin should appear somewhere around the year 2140.
So there’s a hard limit on the long-term supply of bitcoin units, comparable to how the Earth has a limited supply of obtainable gold. You’d need to take extraordinary measures to exceed the limit imposed by gold reserves.
I mean really extraordinary. Find a way to mine asteroids for more gold, develop some sort of nuclear fusion that makes gold atoms out of other materials, or figure out how to separate gold from the planet’s core and deliver it to the surface. None of this will happen in our lifetime, and quite possibly never.
Likewise, bitcoin’s limit is absolute unless you get a majority of the core network to accept a different code base with different goals. In this case, you need a majority of bitcoin holders and miners to vote against their own financial interests. Otherwise, you can copy the bitcoin code and tweak it to your heart’s content, hoping that the new fork can win the crypto community’s favor and push the original bitcoin off the throne.
This has been attempted a couple of times, but the results have been modest at best. One code fork created Bitcoin Cash (BCH -3.11%) in 2017, putting more control in the hands of large mining operations. Bitcoin Cash was worth $1,615 per coin when leading crypto-trading platform Coinbase (COIN -2.71%) listed it on December 19, 2017 — near the absolute peak of the 2017 cryptocurrency bull market. Today, the coin price is down to $111.
Other forks include Bitcoin Gold (BTG -2.65%) (designed for mining by graphics cards, not specialized mining processors) and Bitcoin SV (BSV -1.80%), which applies a more radical version of Bitcoin Cash’s policy change. Bitcoin Gold has lost 97% of its initial value and Bitcoin SV is down by 41% in its three-year history. Despite the brutal market correction in 2022, the original Bitcoin has gained 165% in SV’s lifetime and 3% against Bitcoin Cash’s 97% crash:
Bitcoin Price data by YCharts
And you could argue that every single altcoin on the market — more than 20,000 of them — wanted to beat Bitcoin at its own game in some way. So far, they have failed. Bitcoin remains the most popular and valuable digital currency on the market.
The crypto market is evolving as we speak. In particular, last month’s FTX debacle may have inspired national and global lawmakers to take urgent action on regulating the crypto industry. When (not if) that happens, Bitcoin will have a firmer financial footing as the market starts to clean out scammers and ridiculous crypto projects. Important leaders, such as Rostin Behnam of the Commodity Futures Trading Commission and Gary Gensler from the Security and Exchange Commission, are leaning toward regulating Bitcoin as a gold-like commodity, not a stock-like security.
So I’m not winning points for originality here, but facts are facts. The original cryptocurrency continues to offer data security, long-term stability (with some temporary speed bumps along the way), and an unmatched value-storage profile. Other names may surge for a while and then fall out of favor again, but this system was built to last.
Bitcoin is the cryptocurrency to put under your digital pillow for the next hundred years or more.
Anders Bylund has positions in Bitcoin, Bitcoin SV, and Coinbase Global. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
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