“Gold is God’s money”1 implying there is no better form of money than that which was created by God to form the foundational layer of a monetary network. It had worked incredibly well as money for centuries, but the weakness of man led to its failure as the base monetary layer, not due to any of its inherent properties but rather because its inherent properties prevented it from being created at will.
The other challenge gold encountered was the inability for it to be moved and verified, efficiently, over large distances in a reasonable time, for a reasonable cost. As such the emergence of fractional reserve banking emerged.
Fractional reserve banking essentially resulted from gold being left on deposit with a central repository, and in return the depositor receives a paper deposit receipt, indicating the amount of gold held on deposit. These paper receipts obviated the need to use and trade in physical gold. But therefore, the number of paper claims on deposit increased in multiples over the actual gold in the bank.
Bitcoin, on the other hand, can be transmitted between parties, without a middleman, at the speed of light (with final settlement within 10 minutes), to anyone anywhere in the world. There is no need to create paper receipts.
1 Robert Kiyosaki, www.richdad.com
