A popular view is that gold has no monetary role to play in a modern, technologically-advanced economy. This view is wrong in many ways, including that, thanks to technological advances, gold is now better suited to being money than it has ever been. This is because technology has eliminated the inconveniences that would otherwise limit gold’s usefulness as money, with BitGold being the latest evidence.

In a TSI commentary back in 2010, here’s how I summarised the reason that gold is better suited to being money today than it ever has been in the past:

“[The key is that] technology [now] allows gold ownership to simply and instantly be transferred without the need to physically move bullion. Almost all the monetary gold could remain locked in vaults, with ownership to a quantity of gold — anywhere from a tiny fraction of a gram to many kilograms, depending on what is being purchased — being effected electronically.”

Previous attempts have been made to create platforms that enable gold to be a convenient medium of exchange, with ownership instantly transferred electronically when a transaction is done, but BitGold is the first attempt that stands a good chance of being successful.

The choice of the name “BitGold” was obviously influenced by the growing popularity (and notoriety) of Bitcoin (BITCOMP), but BitGold and Bitcoin have almost nothing in common aside from being ways to store purchasing power and make electronic payments outside the banking system. Importantly, BitGold doesn’t have Bitcoin’s flaws, the most serious of which is that a Bitcoin, like a dollar or a Yen or a Ruble, has no use outside of its role as a medium of exchange.

Rather than being an electronic medium of exchange itself, BitGold is a platform for trading a substance (gold) that has historically been the world’s premier medium of exchange. Putting it another way, users of the BitGold system are not trading computer ‘bits’, they are trading ownership to specific pieces of physical gold stored in a vault.