Bitcoin has a low risk of collapse Unlike traditional monies that rely on governments. When currencies fall, it leads to hyperinflation or the wipeout of someone’s savings in a minute. Bitcoin exchange rate isn’t controlled by any government and is an electronic money available worldwide.
Bitcoin is easy to carry. A billion Bucks in the Bitcoin can be stored in a memory stick and placed in one’s pocket. It’s so easy to transfer Bitcoins compared to paper money.
The general Notion is that Bitcoins ‘ are ‘mined’… interesting term here… by solving a difficult mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; yet again interesting- on a computer. Once established, the new Bitcoin is put into an electronic ‘wallet’. It is then possible to exchange real goods or Fiat currency for Bitcoins… and vice versa. Additionally, as there is not any central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘managed’ by jurisdiction.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist rather loudly that ‘for certain, Bitcoin is cash’… and not just that, but ‘it is the best money , the cash of their future’, etc.. . Well, the proponents of Fiat shout as loudly that paper money is money… and most of us know that Fiat paper isn’t cash by any means, as it lacks the main attributes of real money. The issue then is does Bitcoin even qualify as money… never mind it being the cash of the future, or the very best money ever.
Compared to Fiat, Bitcoin does not Do too badly as a medium of exchange. Fiat is only accepted in the geographic domain of its issuer. Dollars aren’t any good in Europe etc.. Bitcoin is approved internationally. On the flip side, not many retailers now accept payment in Bitcoin. Until the approval grows , Fiat wins… although at the cost of exchange between countries.
The first condition is a great deal Tougher; money has to be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to about $1,000, in only a few decades. This is about as far from being a ‘stable store of value’; since you can buy! Indeed, such profits are an ideal illustration of a speculative boom… such as Dutch tulip bulbs, or junior mining companies, or Nortel stocks. As we have just stated, bitcoin revolution software is something that cannot be dismissed – or at least should never be ignored. There are so many possibilities and variations – twists and turns, that hopefully you see how difficult it can be to include all bases. But I wanted to pause for a moment so you can reflect on the value of what you have just read. We are highly certain about the ability of what we offer, today, to create a difference. Our final few items can really prove to be powerful considering the overall.
Naturally, Fiat fails as well; As an example, the US Dollar, the ‘main’ Fiat, has dropped over 95% of its value in a few decades… neither fiat nor Bitcoin qualify at the most important measure of money; the capacity to store value and conserve value through time. Actual money, which is Gold, has shown the capacity to hold value not only for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as money.
Finally, we return to the second Attribute; this of being the numeraire. This is really interesting, and we can see why the two Bitcoin and Fiat neglect as money, by looking closely at the question of the ‘numeraire’. Numeraire refers to the usage of cash to not only save value, but to in a sense step, or compare worth. In Austrian economics, it’s considered impossible to really measure value; after all, significance resides just in human comprehension… and how can anything else in understanding really be measured? Nevertheless, through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if only momentarily… and this market price is expressed concerning the numeraire, the most marketable good, that is money.
So how do we set the value of Fiat… ? Through the idea of ‘purchasing power’… which is, the value of Fiat is determined by what it can be traded for… a so called ‘basket of goods’. But his clearly implies that Fiat has no significance of its own, but rather value flows from the worth of their goods and services it might be traded for. Causality flows from the goods ‘purchased’ into the Fiat number. After all, what difference is there between a one Dollar bill and a hundred Dollar invoice, except the number printed on it… along with the buying power of this number?