Bitcoin has a reduced risk of collapse Unlike traditional monies that rely on governments. When currencies fall, it leads to hyperinflation or the wipeout of one’s savings in a minute. Bitcoin exchange rate isn’t controlled by any government and is a digital money available worldwide.
Bitcoin is easy to carry. A billion Dollars in the Bitcoin can be stored in a memory stick and placed in one’s pocket. It is that easy to transfer Bitcoins compared to paper cash.
The general Notion is that Bitcoins Are ‘mined’… intriguing term here… by solving a difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; yet again interesting- to a computer. Once established, the new Bitcoin is put into an electronic ‘wallet’. It is then feasible to trade actual goods or Fiat currency for Bitcoins… and vice versa. Furthermore, as there’s not any central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘managed’ by authority.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist rather loud that ‘for sure, Bitcoin is cash’… and not just that, but ‘it is the best money , the cash of the future’, etc.. . The proponents of Fiat shout just as loudly that paper currency is money… and we all know that Fiat newspaper isn’t money by any means, as it lacks the most important attributes of real cash. The issue then is does Bitcoin even qualify as money… never mind that it being the cash of the near future, or the very best money .
Compared to Fiat, Bitcoin does not Do too badly as a medium of trade. Fiat is only accepted in the geographical domain of its issuer. Dollars are no good in Europe etc.. Bitcoin is accepted internationally. On the flip side, very few retailers now accept payment in Bitcoin. Unless the approval grows , Fiat wins… although at the cost of trade between nations.
The first condition is a lot Tougher; cash has to be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in only a few decades. This is about as far from being a ‘stable store of value’; as you can buy! Truly, such profits are an ideal illustration of a speculative boom… like Dutch tulip bulbs, or real mining companies, or even Nortel stocks. Do you have any ideas at this stage? No question, we are just getting going with all that can be acknowledged about bitcoin revolution. It is really similar to other related issues that are important to people. Continue reading and you will see what we mean about important nuances you need to know about. Try examining your own unique requirements which will help you further refine what may be necessary.
The concluding talk will solidify what we have uncovered to you up to this point.
Of course, Fiat fails as well; For instance, the US Dollar, the ‘main’ Fiat, has dropped over 95 percent of its worth in a couple of decades… neither fiat nor Bitcoin qualify at the most important measure of money; the capacity to store value and preserve value through time. Actual money, which is Gold, has shown the capacity to maintain value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as cash.
Finally, we come to the second Feature; that of being the numeraire. This is really interesting, and we can see why the two Bitcoin and Fiat fail as money, by looking closely at the question of their ‘numeraire’. Numeraire refers to the use of cash to not just save value, but to at a way step, or compare worth. In Austrian economics, it’s considered impossible to really measure value; after all, value resides just in human comprehension… and how can anything else in consciousness actually be quantified? But through the principle of Mengerian market action, that’s 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’s money.
So how do we establish the worth of Fiat… ? Through the idea of ‘purchasing power’… that is, the value of Fiat is determined by what it can be exchanged for… a so called ‘basket of goods’. However, his clearly suggests that Fiat has no value of its own, instead appreciate flows from the value of the goods and services it might be exchanged for. Causality flows from the merchandise ‘purchased’ to the Fiat number. After all, what difference is there between a one Dollar invoice and a trillion Dollar invoice, except that the number printed on it… and the buying power of the amount?