Bitcoin is money. To understand why, it helps to start with what money actually is and how it has changed over thousands of years. Most people think of money as the notes and coins issued by their government. The more precise definition is a tool that serves three functions: medium of exchange, unit of account, and store of value. Bitcoin satisfies all three. It also improves on every previous form of money in ways that matter particularly for South Africans holding rand.
| Point | What it means |
|---|---|
| Money has three functions | Medium of exchange, unit of account, store of value. A good money performs all three well. |
| Gold won for a reason | Scarce, durable, divisible, portable, fungible. Gold outcompeted all other commodity monies because of these properties. |
| 1971 changed everything | Nixon ended dollar-gold convertibility. Fiat currencies became promises backed by government authority, with no supply limit. |
| Fiat currencies lose value | Every fiat currency in history has lost purchasing power over time. The rand has lost over 70% of its value against the US dollar in 20 years. |
| Bitcoin improves on gold | Fixed supply of 21 million, fully divisible, can be sent anywhere in minutes, verifiable by anyone. No government or central bank can change the rules. |
A brief history of money
Before money existed, people bartered. A farmer with surplus grain could trade it for tools, cloth or labour. Barter worked in small communities where people knew each other. It broke down when the person with the grain did not want what the blacksmith was offering, or when the quantities did not match cleanly.
Commodity money solved the coincidence-of-wants problem. Cattle, shells and grain all served as money at various times in history. The best commodities were ones that people widely wanted, that held their condition over time, and that could be subdivided without losing value.
Gold eventually won that competition. It is rare enough that producing more requires significant work. It does not corrode or degrade. It can be melted and divided precisely. One gram of gold is interchangeable with any other gram of gold. These properties made it the dominant form of money across civilisations for thousands of years.
Gold coins gave way to gold-backed paper. Instead of carrying heavy metal, people carried certificates redeemable for a fixed weight of gold held in a vault. This was more practical. The paper was only as trustworthy as the institution behind it, but the gold remained the anchor.
What happened in 1971
The Bretton Woods system, established after World War II, pegged major currencies to the US dollar at fixed rates. The dollar itself was redeemable for gold at a fixed price: 35 dollars per troy ounce. Countries held dollars as their reserve currency because those dollars could, in theory, be exchanged for gold.
By 1971 the United States had printed far more dollars than it had gold to back them. Foreign governments began presenting dollars for redemption. President Nixon closed the gold window in August 1971, ending convertibility unilaterally.
From that point, fiat currencies became promises backed by nothing other than government authority and legal tender law. Governments could expand the money supply at will. The anchor was gone.
The fiat problem
Without a supply limit, the purchasing power of fiat currencies declines over time. This is not a bug that bad governments introduce. It is a feature of a system with no constraint on money creation. Central banks target inflation explicitly. A 6% inflation target means prices are expected to roughly double every 12 years.
The rand is a clear illustration. Against the US dollar, the rand has lost over 70% of its value in the past 20 years. Against hard assets like property or gold, the picture is similar. Savings held in rand lose purchasing power not because of any dramatic event but through the steady, expected operation of the monetary system.
South Africans know this instinctively. That is why so many try to hold property, offshore currency or hard assets. The problem is that each of these solutions has its own complications: illiquidity, access restrictions, counterparty risk.
Bitcoin’s properties compared to gold and fiat
Bitcoin was designed with the properties of gold in mind, then improved on them for the digital age.
The supply is fixed at 21 million coins, set in the protocol and enforced by every participant in the network. No government, central bank or company can change this. The scarcity is not a policy position that can be reversed. It is a mathematical rule built into the system.
Each Bitcoin divides into 100 million satoshis. You do not need to buy a whole Bitcoin to participate. The divisibility far exceeds gold, which requires specialist equipment to cut and verify at small weights.
Bitcoin can be sent to anyone in the world in minutes, without a bank, without a correspondent institution, without permission from any authority. The transfer is settled on a public ledger that anyone can inspect. There is no equivalent for gold at small amounts across borders.
Bitcoin also adds properties that gold does not have at all: it is programmable, it operates without a central point of control, and anyone can verify the full history of all transactions and the total supply at any time. Gold held in a vault requires trust in the custodian. Bitcoin held in self-custody requires trust only in mathematics.
Frequently asked questions
Why can’t governments just ban Bitcoin?
Governments can restrict exchanges and make it difficult to convert Bitcoin to local currency. They cannot shut down the Bitcoin network itself, which runs across tens of thousands of nodes worldwide with no central point to target. Countries that have attempted outright bans have found that usage continues underground.
Is 21 million really fixed?
Yes. The 21 million cap is enforced by the consensus rules of the Bitcoin network. Changing it would require every participant, globally, to agree to adopt new software with different rules. In practice, the cap is as fixed as any rule in any open system can be. No serious proposal to change it has ever come close to consensus.
Does Bitcoin’s price volatility undermine its role as money?
In its current phase, yes: Bitcoin is volatile, which makes it a less convenient unit of account day to day. Its store of value properties are strongest over multi-year time horizons. As adoption deepens and the market matures, volatility has trended downward. This is consistent with a monetary asset in early adoption.
How does Bitcoin sit outside the rand system?
Bitcoin is denominated in bitcoin, not rand. Its supply is determined by protocol, not by the South African Reserve Bank. Its price in rand terms fluctuates, but the underlying asset is not subject to SARB monetary policy. Holding Bitcoin is one way to hold savings in an asset outside the rand money supply.
Where do I start if I have never bought Bitcoin before?
Understanding the basics of money and why Bitcoin exists is the right first step, which this article covers. The next step is understanding custody: how Bitcoin is held and secured. SimplB works with first-time buyers to cover both the purchase process and the custody setup in a single session.
Sources
- Bitcoin whitepaper: Satoshi Nakamoto’s original 2008 paper describing the Bitcoin system
- The Bitcoin Standard by Saifedean Ammous: detailed analysis of Bitcoin through the lens of monetary history
- South African Reserve Bank: official monetary policy publications and inflation data
Ready to get your Bitcoin position right?
SimplB helps South African investors buy and hold Bitcoin properly. A short call is a good place to start.
Talk to a Bitcoin SpecialistWritten by James Caw, Founder of SimplB. James has helped South Africans understand, buy and secure Bitcoin since 2015. SimplB operates as a Juristic Representative of CAEP Asset Managers, FSP 33933. Last updated: May 2026.
This article is for general educational purposes only and does not constitute financial, legal, tax or exchange control advice. The information reflects the regulatory position as at the date of publication. Your individual circumstances may differ and you should seek qualified professional advice before making any decisions.
