Blockchain-based gold reserve currency 'is the future,' claims Peter Schiff | The Crypto Mile

On this week's episode of Yahoo Finance's The Crypto Mile, our host Brian McGleenon is joined again by renowned gold bug Peter Schiff. Often misunderstood as a critic of blockchain and digital currencies, Schiff took time to clarify his stance. He argued for blockchain technology to be combined with the inherent value of gold to make the precious metal a "better monetary instrument than it was in the past". "We don't have to ignore blockchain technology, we can use it to improve the divisibility and the portability of gold and make it an even better monetary instrument than it was in the past," he added. Schiff argues that gold should be reintroduction as the world's primary monetary reserve, but updated and renewed by blockchain technology. "With the internet, with blockchain, there is a major improvement in the functionality of gold to act as a medium of exchange and as a unit of account," Schiff explained.

Video Transcript

BRIAN MCGLEENON: We are joined by Peter Schiff, internationally renowned gold bug and equally famous for his criticism of Bitcoin as an equivalent store of value. We're looking at the emergence since like 2011 just after the 2009 financial crash, Satoshi Nakamoto, Bitcoin. Now, where does Bitcoin come into this? Do you think that this is a good competitor of a store of value against gold? Like your renown somebody who's quite critical of that. Has your stance changed?

PETER SCHIFF: No, I don't think Bitcoin in its present form has a role in a post-fiat world. You know, I think Bitcoin, like a lot of the other coins that are out there, 20-- it's a lot of thousand-- they're the equivalent of fiat as far as I'm concerned. Their value doesn't come from the inherent use of Bitcoin for anything like gold, right? Gold's value is derived by its properties as a precious metal. It's a valuable commodity, it's the most useful metal that we have.

BRIAN MCGLEENON: So it does really saw on physical properties.

PETER SCHIFF: Right. And it doesn't lose those properties over time, which is important to be a store value because if you decayed if you rotted, you couldn't store it. But gold will be here indefinitely. And so it really can be a store of value, but also a medium of exchange, unit of account. So it works as well as money. We know that it's worked for thousands of years as money.

We're not reinventing the wheel. But I do think that gold can work better as money. We don't have to ignore the technology that we have, the internet or the blockchain. We can use that to improve the divisibility, the portability of gold and make it an even better monetary instrument than it was in the past. Legitimate currency, which we had at one point, was backed by gold. Fiat currency is backed by nothing.

So Bitcoin is backed by nothing. So it's kind of like a Fiat cryptocurrency. If you have a cryptocurrency that's backed by real money, now you have something legitimate that I think could work. And so I think that is the future. To the extent that Bitcoin opened the door to that future by letting the world see what blockchain can do, that's probably a good thing.

But to the extent that people think that you could substitute Bitcoin for gold and have a monetary system that works, that can't happen because there is no underlying value in Bitcoin. Bitcoin is a pure Ponzi. It's a pyramid. The demand for Bitcoin is based on the belief that you can sell it to somebody else at a higher price. And the only reason that other person is willing to pay a higher price is because he believes that he can sell it to somebody else at a higher price.

BRIAN MCGLEENON: But there's a lot of people talk about the purity of the Bitcoin code and the mathematics behind it, the fact that it's only 21 million Bitcoin ever, it's capped, and stuff like that. And then they make comparisons with gold. So say for instance, new gold mined opens, somebody says, oh, it's only got this amount. But then you look that they're actually hiding the fact that it's got a much greater amount of gold capacity that's been mined there. Does that then not mean that gold isn't the heart or the sound money that you say it is?

PETER SCHIFF: No. I mean, the gold supply has been pretty constrained for centuries. I mean, maybe it increases by about a percent a year. And that is a level of inflation that is certainly tolerable. In general, in a free market economy, prices will decline by more than 1% a year because of improvements and efficiencies and economies of scale and productivity.

Even if you have a money supply growing by 1% a year, I mean, that's about the population of the Earth. So I think it's a pretty good mix. You don't need a fixed quantity that can never expand. So the whole idea that there's only 21 million I don't think is a big selling point for Bitcoin. But also, it's not just about the supply.

You also have to look at demand. There's no real demand for Bitcoin. There's only demand as a speculative asset. There is real demand, industrial demand for gold. People need gold for all sorts of things. And they're willing to buy it. Something like half of the demand now is real. It's not investors, it's not central banks. It's real uses. And so those buyers are there.

But also, I don't really get why it even makes a difference that there's only 21 million Bitcoin because there's 100 million satoshis in each Bitcoin. And fundamentally, there's really no difference between a Bitcoin and a satoshi other than the number. Because there's nothing you can do with one satoshi. And so there's nothing you can do with a hundreds million of them. So in reality, we should be talking about the supply of satoshis, not the supply of Bitcoin.

BRIAN MCGLEENON: You did recently find a use case for Bitcoin.

PETER SCHIFF: Yes.

BRIAN MCGLEENON: OK. Can we just-- so you're interested in Bitcoin ordinals, which are a little bit like NFTs from a theory.

PETER SCHIFF: Well, so yeah. So one of the knocks about Bitcoin was like, look, this is part of the NFT craze from 2021/2022 that people were putting these NFTs on the Ethereum blockchain. And it was like, oh, you see. There's a use case for Ethereum because I can trade these worthless NFTs with my worthless Ethereum. Well, now you could do the same thing on Bitcoin with ordinals.

But a friend of mine who's an artist who lives in Puerto Rico with me, big Bitcoin guy. He's been Bitcoin since the beginning. So he's done very well. He made a painting for me of gold because we're always joking about Gold, Bitcoin. And he's having a show in New York that's going on right now.

And so I decided, look, let's auction off this gold painting. It's an oil painting on linen. And let's make 50 prints of this painting. So you can either buy the original painting that's signed by me and the artist or you can buy one of these 50 prints. But what we decided, because he's into this and because I know I have a big following in the crypto community, let's also create the ordinals.

And people can buy the originals if they think they're going to go up. But as far as I'm concerned, we're giving the originals away for free. I'm auctioning off the prints. And they're real. You can hang them on your wall, you can frame them. It's a piece of art. And it's also a collector's item because there's only 50 of them

By having an ordinal that goes with each print and the original oil, whoever buys it, their name gets inscribed on that. And there's a record. Now, if they want to go ahead and sell it to somebody, then they can sell it. And they can prove they own it because they have the ordinal that corresponds to that print. And then the buyer's name will now be on there, his wallet or whatever.

And so now he can have, OK, you have the lineage from the auction that proves that this is the original print. It's not some counterfeit that somebody just produced. And so does that add some value because it makes it easier to authenticate the original status? And if anybody is interested who is looking at this, you can go, there as a website. It's onemarketprice.com/gold.

BRIAN MCGLEENON: It is interesting because there are a lot of people would argue that the virtual world is becoming as important or even in the future more important than the physical world. So this like you getting into Bitcoin ordinals is kind of an acceptance of that?

PETER SCHIFF: Well, not really because the ordinal is tied to an actual work of art in the real world. Now, I agree that at some point, it could look like "Ready Player One." I don't know if you have "Ready Player One," but I can see people spending more time in a virtual reality world the way they would play a video game or watch a movie to the point that it could almost substitute for real life experiences.

But you can have a big digital meal. But if that's all you eat, you're going to starve to death, right? You need actual food, right? And so we can't just replace real food with digital food. And the same thing with it comes to money and it comes to gold. The computers that are making that virtual reality possible probably need gold. So you have to have that. So there are things that lend themselves to being virtual.

And, yes, could you have a virtual art collection? Sure. But I don't really see how that can ever really be scarce because when you're talking about virtual, you can have an unlimited supply of something that only exists in cyberspace. But a real physical object has some natural constraints to how many there can be.

BRIAN MCGLEENON: So you do concede that if you have a virtual currency, it could be pegged to gold in the real world, maybe like a digital currency or even a central bank digital currency that's backed by gold.

PETER SCHIFF: If you wanted it to have real value outside of that community. But I mean, obviously, you could have a virtual currency inside a video game that didn't have any value outside the game. But I think to the extent that it had value outside of the game would make it actually better.

BRIAN MCGLEENON: So lastly, you talked about your friend, you have a friend who is a Bitcoin maximalist. For those people that love sound money, whether it's gold, would you say in the short term that people should have a portfolio spread that should include some Bitcoin?

PETER SCHIFF: Well, I mean, look, if you want to put a small piece of your portfolio in Bitcoin just in case, I'm not going to really argue with somebody. Just look, I put 1% in Bitcoin. If you want to do that, go ahead. Because if you're wrong and you lose everything, well, you've lost 1%. It's survivable. The rest of the 99% that's not in Bitcoin you can easily make up for that loss, right? As you start to get a bigger position, then it becomes a different story where I'm saying, look, that's just too much.

And there are a lot of people that got into Bitcoin a long time ago need to take some chips off the table. Just like a gambler at a craps table, don't leave all your bets up until the seven rolls and you've lost everything. Keep putting chips in your pocket so when a seven eventually comes up, which it inevitably does, you don't go home empty-handed. You've got winnings because you took down some bets. So you've got to do that in Bitcoin.

You can't be overly exposed. Now, personally, I just am so sure that I'm right on where Bitcoin is going to go, I don't even want to waste 1% of my portfolio on it. I think there are other speculative assets that I'd rather gamble on that I think have more upside potential and less downside risk than Bitcoin. So that's where I want to place my bets.

BRIAN MCGLEENON: Where would they put it?

PETER SCHIFF: Well, like gold mining stocks, junior mining stocks, where I think you can make 50 or 100 times your money, which is maybe what people think they're going to make in Bitcoin. I doubt it. I mean, I think Bitcoin is going to have a hard time even making a new high. And if it does make a new high, even getting to 100,000 is going to be a stretch. That's only four times your money.

BRIAN MCGLEENON: Well, Peter Schiff, thank you very much for coming on this week's episode of "The Crypto Mile" and taking us back down to Earth.

PETER SCHIFF: OK. My pleasure.

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