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 an instant. Bitcoin exchange rate is not controlled by any government and is a digital currency available globally.
Bitcoin is easy to carry. A billion Bucks in the Bitcoin can be saved on a memory stick and placed in one’s pocket. It is so simple to transport Bitcoins compared to paper money.
The general idea is that Bitcoins ‘ are ‘mined’… intriguing expression here… by solving a difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again interesting- on a computer. Once created, the new Bitcoin is put into a digital ‘wallet’. It is then possible to trade real goods or Fiat currency for Bitcoins… and vice versa. Furthermore, as there’s not any central issuer of Bitcoins, it’s all highly distributed, thus resistant to being ‘handled’ by jurisdiction.
Naturally proponents of Bitcoin, Those who profit from the development of Bitcoin, insist fairly loud that ‘for certain, Bitcoin is money’… and not just that, but ‘it is the best money , the money of their future’, etc.. . Well, the proponents of Fiat shout just as loudly that paper money is money… and most of us know that Fiat newspaper is not cash by any means, as it lacks the main attributes of genuine cash. The question then is does Bitcoin even qualify as money… not mind that it being the cash of the future, or the best money .
Compared to Fiat, Bitcoin does not Do too badly as a medium of exchange. Fiat is only accepted in the geographical domain of its issuer. Dollars are no great in Europe etc.. Bitcoin is accepted internationally. On the other hand, not many retailers now accept payment in Bitcoin. Unless the approval grows geometrically, Fiat wins… although in the cost of exchange between nations.
The primary condition is a great deal Tougher; cash must be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in just a few decades. That is about as far away from being a ‘stable store of value’; as you can buy! Truly, such profits are a perfect example of a speculative boom… such as Dutch tulip bulbs, or junior mining companies, or even Nortel stocks. Hopefully it is very clear that bitcoin revolution is something that can have quite an effect on you and others, too. Sometimes there is simply way too much to even attempt to cover in one go, and that is important for you to recognize and take home. There is a lot, we know, and that is the reason why we are taking a very short break to state a few words about this. This is the sort of content that people need to know about, and we have no problems stating that. If you continue, we know you will not be disappointed with what we have to offer in this article.
Of course, Fiat fails as well; As an example, the US Dollar, the ‘primary’ Fiat, has lost over 95% of its value in a couple of decades… neither fiat nor Bitcoin qualify at the most crucial measure of cash; the capacity to store value and conserve value through time. Actual money, which is Gold, has shown the capacity to maintain value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as money.
Ultimately, we return to the second Feature; this of being the numeraire. This is actually 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 store worth, but to in a sense measure, or compare worth. In Austrian economics, it is deemed impossible to really quantify value; after all, value resides just in human comprehension… and how can anything else in consciousness really be measured? But through the principle of Mengerian market action, that is interaction between offer and bid, market prices can be established… if just briefly… and this market price is expressed in terms of 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 depends upon what it can be exchanged for… a so called ‘basket of goods’. However, his clearly suggests that Fiat has no value of its own, but instead value flows from the value of their goods and services it may be traded for. Causality flows from the merchandise ‘bought’ into 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… along with the buying power of the amount?