Bitcoin has a low risk of collapse Unlike traditional monies that rely on authorities. When currencies collapse, 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 isn’t hard to carry. A billion Bucks in the Bitcoin can be saved in a memory stick and placed in one’s pocket. It is that simple to transport Bitcoins compared to paper cash.
The general idea is that Bitcoins ‘ are ‘mined’… interesting term here… by solving a hard mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again intriguing- on a computer. Once established, the new Bitcoin is set into an electronic ‘wallet’. It’s then feasible to exchange real goods or Fiat currency for Bitcoins… and vice versa. Additionally, as there is no central issuer of Bitcoins, it is all highly dispersed, thus resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist fairly loud that ‘for certain, Bitcoin is money’… and not only that, but ‘it is the best money ever, the cash of their future’, etc.. . The proponents of all Fiat shout just as loudly that paper currency is money… and we all know that Fiat paper is not money by any means, as it lacks the most important attributes of real cash. The issue then is does Bitcoin even qualify as cash… not mind it being the cash of the near 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 own issuer. Dollars are no great in Europe etc.. Bitcoin is approved internationally. On the other hand, not many retailers now accept payment in Bitcoin. Until the approval grows geometrically, Fiat wins… although at the cost of trade between countries.
The first condition is that a lot 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. That is about as far away from being a ‘stable store of value’; since you can buy! Indeed, such profits are a perfect example of a speculative boom… like Dutch tulip bulbs, or real mining companies, or Nortel stocks. Has what you have discovered added to your prior knowledge? No question, we are just getting going with all that can be acknowledged about bitcoin revolution. You can find there is much in common with topical areas directly resembling this one. Continue reading through and you will see what we mean about crucial nuances you need to know about. So what we advise is to really try to discover what you need, and that will usually be decided by your circumstances. We will tie all together plus give you a hint of other important information.
Of course, Fiat fails here as well; As an instance, the US Dollar, the ‘primary’ Fiat, has dropped over 95% of its worth in a couple of decades… neither fiat nor Bitcoin qualify in the most important measure of money; the capacity to store value and preserve value through time. Real money, which is Gold, has shown the ability to maintain value not just for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as money.
Ultimately, we return to the next Attribute; this of being the numeraire. This is actually interesting, and we can see why the two Bitcoin and Fiat fail as money, by looking closely at the question of their ‘numeraire’. Numeraire describes the use of cash to not just save worth, but to at a sense step, or compare value. In Austrian economics, it’s considered impossible to actually measure value; after all, significance resides only in human consciousness… and how can anything in understanding really be quantified? Nevertheless, through the principle of Mengerian market action, that is interaction between offer and bid, market prices can be established… if only briefly… and this industry price is expressed concerning the numeraire, the most marketable good, that is money.
So how do we establish the worth of Fiat… ? Through the idea of ‘purchasing power’… that is, the worth 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 significance of its own, but rather value flows from the value of the 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 hundred Dollar invoice, except that the number printed on it… along with the purchasing power of the amount?