Monday, 17 August 2020

Comparing Bitcoin to Stocks

 


  Let’s extend this comparison to stocks so that we can better understand the pros and cons of the two asset classes.

classes.
Question
Bitcoin
Stocks
Scarcity
Is the asset scarce? Is the supply limited?
Yes
(21 million BTC maximum guaranteed.)
Depends
(Companies can always issue more stock.)
Counterfeit Resistance
Is the asset hard or impossible to fake?
Yes
(It is independently verifiable via blockchain.)
Yes, but…
(Stocks are verified by companies, but may require auditing.)
Portability
Can you use or transfer the asset anywhere?
Yes
(Can be used to pay or to transfer value anywhere in the world.)
Not quite
(Generally can’t use stocks outside of the stock market.)
Decentralization
Is this asset independent in a way that no central authority controls it?
Yes
(Creating and governing it involves a network of decentralized nodes or computers.)
No
(All stocks come from just one company, and are usually held by a few controlling shareholders.)
Divisibility
Can one unit of this asset be divided into smaller quantities?
Yes
(There are 100,000,000 satoshis in one bitcoin.)
Sometimes
(Generally not divisible, unless a company engages in a stock split.)
Durability
Is this asset protected in the long-term?
Yes
(As a digital asset, Bitcoin won’t deteriorate.)
Depends
(Stocks are reliant on a company’s longevity.)
Fungibility
Can this asset be traded for other goods or assets?
Yes
(You can use Bitcoin to pay for other asset classes, as well as a wide array of goods.)
Yes to a limited extent
(You can cash in or cash out, or you may enter certain deals, but you don’t usually use stocks to pay for goods on a whim.)
User-friendliness and Awareness
Is the asset easy to use? Is it known to more people?
Not quite yet
(Though awareness is increasing, Bitcoin has a long way to go in terms of general knowledge. Given its 10-year history, this is understandable.)
Not quite
(Just a tiny fraction of the world’s population deal with stocks, despite its centuries-old existence as an asset class.)

 

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