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Digging deeper - Is bitcoin digital gold? A mining perspective

Author

Listed:
  • Baur, Dirk G.
  • Karlsen, Jonathan R.
  • Smales, Lee A.
  • Trench, Allan

Abstract

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 20 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 difficult to start and abandon a gold mine but much easier to start and abandon a bitcoin mine. This is reflected in a greater exposure of gold miners to gold prices and a smaller exposure of bitcoin miners to bitcoin prices. While the analysis demonstrates that bitcoin mining is less complex and less risky than gold mining, the similarities support the idea that bitcoin is digital gold.

Suggested Citation

  • Baur, Dirk G. & Karlsen, Jonathan R. & Smales, Lee A. & Trench, Allan, 2024. "Digging deeper - Is bitcoin digital gold? A mining perspective," Journal of Commodity Markets, Elsevier, vol. 34(C).
    • Handle: RePEc:eee:jocoma:v:34:y:2024:i:c:s2405851324000254
    DOI: 10.1016/j.jcomm.2024.100406
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    References listed on IDEAS

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    More about this item

    Keywords

    Bitcoin; Gold; Mining; Decentralized mining; Centralized mining; Proof-of-Work; Proof-of-Stake;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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