Bitcoin has a reduced risk of collapse Unlike traditional monies that rely on authorities. When currencies collapse, it contributes 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 stored on a memory stick and placed in one’s pocket. It’s that simple to transfer Bitcoins compared to paper cash.
The general idea is that Bitcoins ‘ are ‘mined’… interesting term here… by solving an increasingly hard mathematical formula -harder as more Bitcoins are ‘mined’ into existence; yet again interesting- on a computer. Once created, the new Bitcoin is put into a digital ‘wallet’. It is then possible to trade actual goods or Fiat money for Bitcoins… and vice versa. Furthermore, as there’s not any central issuer of Bitcoins, it is all highly dispersed, 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 only that, but ‘it’s the best money , the cash of their future’, etc.. . Well, the proponents of Fiat shout as loudly that paper money is cash… and we all know that Fiat paper isn’t cash by any means, as it lacks the most important attributes of real cash. The question then is does Bitcoin even qualify as money… not mind it being the money of their future, or the very best money ever.
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 great in Europe etc.. Bitcoin is accepted internationally. On the flip side, very few retailers currently accept payment in Bitcoin. Until the acceptance grows geometrically, Fiat wins… although in the cost of exchange between countries.
The first condition is a lot Tougher; cash has to be a stable store of value… today Bitcoins have gone from a ‘value’ of $3.00 to around $1,000, in just a few decades. This is about as far from being a ‘stable store of value’; since you can get! Truly, such profits are a perfect illustration of a speculative boom… such as Dutch tulip bulbs, or real mining companies, or even Nortel stocks. While this is all relevant to your discovery, a few items about bitcoin revolution software carry more weight than others.
But that can vary a bit, and it really just will depend on how you want to use the information. We really are just getting started here, and hopefully you will be excited about what more is in store. Keep reading to discover even more, and what we will do is include a few more critical topics and recommendations for you to consider. Even following what is next, we will not quit there because the best is yet to come.
Of course, Fiat fails here as well; For instance, the US Dollar, the ‘main’ Fiat, has dropped over 95% of its value in a couple of decades… neither fiat nor Bitcoin qualify in the most important measure of money; the capacity to store value and conserve value through time. Real money, which is Gold, has shown the capacity to hold value not just for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as money.
Finally, we return to the next Attribute; 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 the ‘numeraire’. Numeraire describes the usage of cash to not only store value, but to in a sense step, or compare value. In Austrian economics, it’s considered impossible to really measure value; after all, significance resides only in human comprehension… and how can anything in consciousness really be quantified? Nevertheless, through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if just momentarily… and this market price is expressed concerning the numeraire, the most marketable good, that is money.
So how do we set the worth of Fiat… ? Through the concept of ‘purchasing power’… which is, the worth of Fiat is determined by what it can be traded for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no significance of its own, rather value flows from the worth of their goods and services it might be exchanged for. Causality flows from the goods ‘purchased’ to the Fiat number. After all, what difference is there between a 1 Dollar bill and a hundred Dollar invoice, except the number printed on it… along with the buying power of this number?