Several elements contribute to the value of Bitcoin: being a means of payment, limited in quantity (no more than 21 million units) and above all – because otherwise the previous qualities would lose their interest – its decentralization. Nobody can get their hands on it to control it, there is no central server that a hostile power could monopolize, the transaction database (the blockchain) is, on the contrary, shared in several thousand copies on the network.

It is the same for gold, which was used as a model for crypto-currency, which was inspired by its qualities (means of payment, a quantity that increases little from year to year as it is rare in the earth’s crust). More precisely, there has always been a balance- sometimes a conflict- between its decentralization and its centralization.

In the Middle Ages, the gold coins you had in your purse, or in your safe, were your exclusive possession. But, contrary to appearances, decentralization was not complete because governments and principalities very often had the unfortunate tendency to reduce the percentage of gold in the coins they put into circulation. As a result, a part of the precious metal was taken away, and this was reflected in an increase in prices (the money losing value).

With the invention of the bank, the generalization of credit during the Industrial Revolution, and the establishment of the gold standard, centralization took a leap forward. Henceforth, one could hardly handle gold anymore (except for a few coins) but banknotes, which one could formally exchange for gold if one wished. The gold was in the banks. The trapdoor shut at the outbreak of World War I, when the warring governments suspended convertibility in order to turn the printing press to feed the armament effort (note that this is precisely why the war lasted so long. If they had had to finance themselves with gold, the countries would have stopped the conflict after a few months. Let us recall that Louis XIV sold the silverware of Versailles to wage war against the Netherlands).

During the inter-war period, centralization reached its climax with the totalitarian regimes (Soviet Union, Nazi regime) which outright prohibited the possession of gold, followed, tragically, by Roosevelt’s United States (the confiscation of gold in 1933). Complete centralization “kills” gold: the government can then make it disappear from circulation (totalitarian regimes), or manipulate it (attempts to re-establish the gold standard in the 1920s and 1930s) without a real market price existing, which causes the money market to become dysfunctional.

The post-war period did not change much, the Bretton Woods accords maintaining this model of a centralized gold. Paradoxically, Richard Nixon’s famous televised intervention on August 15, 1971, proclaiming the end of convertibility between gold and the dollar, gave gold’s decentralization its chance again. Governments lost interest and individuals realized that it was a very effective protection against the inflation that appeared in the 1970s. Governments were convinced that it would become a commodity like any other. A complete mistake, it became an asset of choice for savers. Zero interest rates and the printing press from 2000 reinforced this interest, and the current period, with the coronavirus crisis, even more so.

But beware, “decentralization” means owning your own gold. Paper gold, ETFs, is centralized gold (in the banks) of which you only have a right of ownership, something very fragile, especially in times of crisis. If it is stored in a bank vault it is better, but the risk is not negligible (bankruptcy of the bank, occurrence of a confiscatory power), as well as keeping it at home, for obvious risks of theft. The vault of a non-bank company located in a country that guarantees the right of ownership: here is the best possible “property”.

Of course, gold remains partly centralized, in the central banks which, not crazy, have kept it (except for a few who have sold part of it), and even some are acquiring it (in Asia, in the Middle East). Hyperinflation threatens, and the collapse that goes with it, we know, with the central banks that are spinning their printing presses like never before. Then, perhaps we will return to the gold standard…  Will it then be necessary to bring back gold in exchange for banknotes? No, we won’t be fooled twice. We’ll have to keep our gold, we’ll have to maintain, at least in part, its decentralized form to preserve its value, and to guarantee our freedom.