“Bitcoin is the new gold” is the finance statement du jour, with many op-eds arguing so across the web and the most credible publications. But this shines light only on a small part of the story because of Bitcoin’s highly volatile price. Yes, Bitcoin IS an excellent investment and value transfer vehicle, for the time being, just like gold was once. But make no mistake, that is only for today. Once the crypto’s value stabilizes — and it will — then there’s no doubt that the digital currency will serve mainly as a replacement for cash in daily transactions. For that very reason, I claim, over the long haul, Bitcoin is the new cash and the GPU family (including Google’s TPUs and ASIC chips), which is used to produce Bitcoin (among its many other mighty functions), will be the new gold instead. Let’s dive deeper into both the “Bitcoin is the new cash” and “GPU is the new gold” statements in the next few paragraphs:
Bitcoin is the new cash
Old habits die hard, indeed. Since Lydians introduced gold/silver coins in the 7th century BC (a.k.a the invention of money, according to many), we used the bearer instrument system to exchange value. Whoever held the paper, or coins, also held the direct power and will to use it.
For the population en masse, this started to change only in the 1980s with the invention and industrialization of credit cards. Now cash was transformed into a virtual thing, just like a score, not held in your hands physically but kept somewhere far away we all knew and trusted but never actually get to see (banks)
The new cash was absolutely mind-blowing. With fintech, it introduced instant online payments (Stripe, authorize.net), instant cross-border transfers (Wise), and more, rendering many old-school financial chores a thing of the past. Now, subscriptions (as a payment method) were more accessible than ever; renting (of things and services) was more popular than ever; both simultaneously rendering ownership obsolete and boosting the economy. Plus, as consumers, we no longer needed to mess with physical paper while shopping.
That came at a massive cost, though, and that was anonymity, with credit cards, banks, and governments possessing all our information. We got to see the downside of this surveillance economy thanks to Prism and other scandals, where we found out that the information of all netizens was aggressively monitored. You may defend the status-quo by voicing that this only bad for money launderers and tax evaders. But just like Edward Snowden says, “Arguing that you don’t care about the right to privacy because you have nothing to hide is no different than saying you don’t care about free speech because you have nothing to say.” Both privacy and free speech protect us from potential government overreach and abuse of power.
The good news is crypto is here to bring the best of both worlds. Not only it’s as fluid and programmable as fintech (enabled by credit cards) with all its benefits (if not more), but also it’s as anonymous as good old cash. One can use BTCPayServer to accept payments without intermediaries or leverage a cold wallet to store money, just like a Swiss bank account or vault at the convenience of your home.
For the time being, the only downside is the confirmation latency that’s in the fabric of Bitcoin’s proof-of-work algorithms, but there are many proposals in the works to solve this in myriad ways.
GPU is the new gold
Perhaps more contradictorily, I believe that GPU is here to replace gold as the store of value. For many decades, gold has been used, particularly outside the US, as a hedge against inflation and the USD. Before that, gold was used to produce coins (national currencies) for centuries.
GPU is the new gold because it is the underlying chip that empowers the machines/computers running the Bitcoin nodes. In other words, it is used to produce Bitcoins in a similar way to the gold being used to produce or back old-fashioned coins.
GPUs, like the precious metals that made coins & daily transactions a reality, are what makes the Bitcoin network possible. And therefore they’re a good investment for this new century. Maybe proof of work will give way to less resource-hungry algorithms like proof of stake, which Ethereum is considering shifting to ETH2. Nevertheless, GPUs are here to stay for multiple reasons;
- Proof of work is the most decentralized algorithm, and it won’t disappear at anytime soon. Bitcoin can solve its problems (enormous electricity consumption, high transfer fees) by increasing its block size and perhaps becoming less decentralized but still preserving its status as the universally reliable global ledger.
- GPUs are used in other promising emerging fields such as artificial intelligence. For example, Tesla Autopilot uses neural networks that take 70,000 GPU hours to train and output 1,000 tensors (predictions) at each timestep.”
- Virtual reality and augmented reality, other emerging technologies that will replace traditional media platforms today, also rely heavily on GPUs.
Thus, just like the precious metals which backed the financial system of the past, while in service of multiple other use-cases, GPUs will be backing the monetary system of the future.
Neither the stock performance of two GPU giants (Nvidia and AMD) nor the recent chip shortage news due to soaring demand does discredit this theory. On the contrary, the 15–20x increase that was performed over the last five years was no surprise to me, and I don’t expect they’re going to stop at any time soon. For a high-growth company like Amazon of the 2010s, the 200x PE ratios were no stranger to the stock markets. Thus the 80x PE ratios of GPU companies may still be considered a steal, particularly in today’s post-COVID hyper-leveraged world of assets.
Disclaimer: this article shall not be construed as investment advice, and the author of this article does hold crypto and GPU assets mentioned in this article.