There is no direct analogy to compare Bitcoin mining with, but the gold market offers the best practical comparison for the legacy cryptocurrency mining market. Bitcoin’s similarity to gold is threefold; their shared value storage properties, use as settlement mediums for large transactions, and scarcity in mining.

At the protocol level, Bitcoin is increasingly progressing towards transactions of higher value, mirroring the use of gold for settlement on the world’s largest gold market, the LBMA. The true size of the global gold market has historically remained a mystery, with the LBMA recently revealing that they intend to improve transparency in their market over the coming months.

Despite this, the market caps of the leading gold companies are established and offer some compelling insights when compared to the young Bitcoin mining industry and its major players.

A Competitive Mining Market

Bitcoin mining is currently dominated by a few large players. Bitmain — the largest Bitcoin mining company who recently released their IPO prospectus — is expected to IPO at a valuation of $12-15 billion while Bitfury — who is third in Bitcoin mining and also weighing an IPO —  may IPO at a valuation of $3-5 billion. Considering how much of a stranglehold Bitmain has on the cryptocurrency mining industry right now (74.5 percent dominance in ASIC-based crypto mining) it is difficult to imagine that sufficient competition will emerge.

However, the gold mining market paints a different picture. According to a 2017 report on the market capitalization of gold mining companies, there is substantial competition in the sector. Newmont Mining Corp and Barrick Gold Corp lead the way at $18.56 billion and $14.37 billion, respectively, but the competition begins to stiffen significantly after that. Newcrest Mining Ltd and Franco-Nevada Corp both have market caps around $11 billion, and the subsequent 4 companies all have a market cap between $9-10 billion.

The gold mining market is much more competitive than the current Bitcoin mining market, perhaps signaling the eventual transition of Bitcoin mining to a more competitive landscape once it becomes more widely adopted. Interestingly, the market cap of the leading gold mining company is only slightly more than Bitmain despite the gold mining market being exceptionally larger than Bitcoin’s.

The real value of the gold market is unknown, but rough estimates put it at $7 trillion and some at potentially $103 trillion. The cryptocurrency market as a whole only has a market cap of approximately $211 billion, which doesn’t even take into account that we’re only comparing Bitcoin mining to gold mining. Bitcoin’s current market cap is roughly $110 billion, making it substantially smaller than gold. This highlights the relatively extreme centralization of Bitcoin mining to gold, at the moment.

For context, if Bitmain were to IPO at a $15 billion valuation, it would be the second largest gold mining company according to the earlier 2017 report.

Comparing Bitcoin to gold is becoming more common as their similarities continue to unfold. Although vastly dissimilar in how it is mined as well as the historical precedent for the market, gold offers some profound insights when analyzed relative to Bitcoin, particularly in mining competition. Speculation around the early-stage cryptocurrency mining market abounds. While it remains dominated by large players today, the gold market paints a more competitive alternative.