Digging Deeper - Is Bitcoin Digital Gold? A Mining Perspective

Bitcoin is often labelled digital gold and many studies compare bitcoin and gold prices, returns and volatility. This paper digs deeper and compares the characteristics of bitcoin mining with gold mining to assess claims that bitcoin is digital gold. We identify twenty differences between gold and bitcoin mining. Gold miners locate where gold is present while bitcoin miners locate where cheap electricity is present. Gold mining has large barriers to entry relative to bitcoin mining making it relatively easy to start and abandon a bitcoin mine but much more difficult to start and abandon a gold mine. This is reflected in a greater exposure of gold miners to gold prices and a smaller exposure of bitcoin miners to bitcoin prices. The analysis demonstrates that bitcoin mining is significantly less complex and less risky than gold mining suggesting that the digitalisation of a commodity has clear benefits