Digital gold.
Text: Fabian Schär
Bitcoin is a purely digital currency, so why does it have value? And what opportunities and risks are associated with it? Crypto expert Fabian Schär offers his perspective.
Why do people put their faith in Bitcoin even though it has no material value?
It’s not unusual for an asset with no material value to nevertheless have an exchange value. This also applies to national currencies. A Swiss franc can’t be consumed and does not entitle the holder to another asset. Its value is based on the expectation that other people will also accept it. In economics, this is known as a liquidity premium: People hold the asset because they can use it to transfer purchasing power and delay consumption to a future point in time. The mechanism works in a similar way with Bitcoin, albeit without a central bank. Decisive factors include scarcity, reliable rules, and network effects — in other words, the size of the community using and generating active demand for Bitcoin.
What advantages does Bitcoin have over the current monetary system?
One key difference lies in the source of trust. In today’s monetary system, we trust that central banks will exercise their mandate responsibly and not unduly expand the money supply. In the case of Bitcoin, part of this trust is replaced by rules and verifiability. Users can store funds themselves with no need for a bank and can trace transactions. In addition, the protocol limits the supply of Bitcoin to a maximum of 21 million units. Unilateral manipulation is more difficult and can be detected immediately.
Why is Bitcoin often compared to gold, and how is this misleading?
Bitcoin is compared to gold because it’s now discussed less as an everyday payment method and more as a store of value. Reasons for this include technical limits in terms of the number of processable transactions and, above all, wide exchange rate fluctuations that make everyday payments more difficult. As a form of “digital gold,” Bitcoin is intended to be a scarce, globally tradable alternative that can also exist outside the banking system and is not controlled by an individual state. There are, however, limits to this comparison: Gold has a monetary history stretching back millennia and is subject to a certain level of demand from industry, whereas Bitcoin has only existed for 17 years. Moreover, the fact that both are often held via banks, exchanges, funds or derivatives detracts from the idea of a direct and independent deposit.
Who does and doesn’t benefit from Bitcoin?
Many people could benefit from an open and globally accessible financial infrastructure. This is the case in places where, for instance, payment systems are expensive, slow or subject to political restrictions, or where monopolistic structures give rise to systemic risks and costs. Bitcoin can also act as an alternative asset for some investors — for example, as a means of diversification or as a potential hedge against systemic risks. At the same time, Bitcoin has some clear downsides. Examples include indications of market manipulation, as well as highly leveraged business models in the case of some companies — and widespread scams. Although many of these risks are not exclusive to Bitcoin, they can have different consequences in this context. People who want to invest in Bitcoin should begin by thoroughly studying the technology.
What surprises you most about the development of Bitcoin?
It surprises me that an asset conceived as an alternative to the traditional financial system is now often held via centralized providers and reflected in traditional financial instruments. I’d like to see a greater focus on public blockchain technology again and, in the case of Bitcoin, greater discussion of the technical features instead of just the price.
Fabian Schär is Professor of Distributed Ledger Technology (Blockchain) and Fintech at the University of Basel. He conducts research into public blockchains, decentralized financial instruments and financial market regulation.
More articles in this issue of UNI NOVA (May 2026).