With the recent announcement of a potential joint-effort to mine asteroids, in combination with the acceleration in efforts toward commercial space-flight, some interesting tertiary considerations arise – especially in relation to the fundamentals of money.

Gold is valuable and stable. It is valuable in part because there is a stable supply. During the era of European expansion around the world, precious metals flooded the markets. That caused their values to decline, in some cases rapidly.

No matter what, gold has remained the most functional physical form of money thanks to its physical attributes. This doesn’t mean that it works best for price stability, though. What happens when supply increases rapidly? What will happen when asteroid mining hits its stride? An accelerating influx of resources would put pressure on market prices, of course. By one estimate, the amount of gold from just one asteroid could be more than 100,000 times the amount of all gold mined to date.

In the 2,900 cubic kms of Eros, there is more aluminium, gold, silver, zinc and other base and precious metals than have ever been excavated in history or indeed, could ever be excavated from the upper layers of the Earth’s crust.

That is just in one asteroid and not a very large one at that. There are thousands of asteroids out there.

Granted, these events may not happen for another two decades, but the likelihood of them eventually occurring is very strong. When that time comes, a currency under central control may work as the dollar has to maintain pricing stability. The question is: for how long? Looking at history, central control is guaranteed to fail. With gold experiencing a virtually unlimited supply as fiat currencies today, and becoming completely unwieldy when it comes to storage, another solution is necessary.

Anyone reading this site will quickly realise the solution is Bitcoin. Crypto-currencies in general will not just be an alternative, but absolutely necessary on many levels – especially ones structured as Bitcoin is, with a hard limit on supply. Unlike gold or any fiat/paper currencies, Bitcoin holdings today will be the same as they are a century from now – savings are both rewarded and protected.

Meanwhile, price stability is preserved by theoretically unlimited divisibility. For example: if I have 1 ounce of gold that’s worth USD$1,650 and want to buy something that’s only $165, I have a choice to make – walk away, or split up my gold ounce into tenths so I can use 1/10th as payment. Obviously, since gold is physical it can only be split so many times before keeping track of the divided pieces requires molecular tweezers. Even if it is held as a reserve in a Freegold or “reference-point” system, accounting can become unwieldy and prone to unscrupulous management. Any major influx of supply as discussed above would make its value plummet.

Bitcoin does not suffer these problems. Instead of expanding supply, it expands divisibility. It would be as if there were no more gold to be discovered in the universe and you could divide each ounce of gold into pieces smaller than atoms while still being able to easily keep track of it. Prices remain in a stable range and savings never erodes. For now, gold is an ideal money, and Bitcoin is a solution in search of a problem – what most don’t see is that the problem is approaching more quickly than we might think… two or three decades is a galactic sneeze.

By Sy Nejem, http://bitcoinmedia.com/off-planet-economics/