Bitcoin has a low risk of collapse Unlike traditional monies that rely on authorities. When currencies fall, it leads to hyperinflation or the wipeout of someone’s savings in an instant. Bitcoin exchange rate is not regulated 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 transport Bitcoins compared to paper cash.
The general idea is that Bitcoins Are ‘mined’… intriguing expression here… by solving an increasingly hard mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again intriguing- to a computer. Once created, the new Bitcoin is put into an electronic ‘wallet’. It’s then feasible to exchange real goods or Fiat money for Bitcoins… and vice versa. Furthermore, since there’s not any central issuer of Bitcoins, it is all highly distributed, hence resistant to being ‘handled’ by jurisdiction.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist fairly loud that ‘for certain, Bitcoin is money’… and not just that, but ‘it’s the best money , the money of their future’, etc.. . The proponents of Fiat shout just as loudly that paper currency is money… and most of us know that Fiat paper isn’t cash by any means, as it lacks the most important attributes of genuine money. The question then is does Bitcoin even qualify as cash… never mind it being the money of the future, or the best money ever.
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 aren’t any great in Europe etc.. Bitcoin is accepted internationally. On the other hand, not many retailers currently accept payment in Bitcoin. Unless the approval grows geometrically, Fiat wins… although at the cost of trade between countries.
The first condition is a great deal Tougher; money must be a stable store of value… today Bitcoins have gone from a ‘value’ of $3.00 to about $1,000, in just a couple decades. This is about as far from being a ‘stable store of value’; as you can get! Indeed, such gains are a perfect illustration of a speculative boom… such as Dutch tulip bulbs, or junior mining companies, or even Nortel stocks. As we have just stated, bitcoin revolution software is something that cannot be ignored – or at least should never be ignored. No one really can adequately address all the different situations that could arise with this particular topic. That is really a lot when you think about it, so just the briefest instant to mention something. This is the type of content that men and women need to know about, and we have no problems stating that. The last outstanding areas for discussion may be even more important.
Of course, Fiat fails here as well; For instance, the US Dollar, the ‘primary’ Fiat, has lost over 95 percent of its worth in a couple of decades… neither fiat nor Bitcoin qualify at the most important measure of cash; the capacity to store value and preserve value through time. Real money, that is Gold, has shown the ability to hold value not just for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as money.
Finally, we come to the next Attribute; this of being the numeraire. Now this is really interesting, and we can see why the two Bitcoin and Fiat fail as cash, by looking closely at the question of the ‘numeraire’. Numeraire refers to the usage of cash to not only store value, but to in a way measure, or compare value. In Austrian economics, it’s deemed impossible to actually quantify value; after all, value resides only in human comprehension… and how can anything else in consciousness actually 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 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 ‘buying power’… which is, the worth of Fiat is determined by what it can be traded for… a so called ‘basket of goods’. However, his clearly suggests that Fiat has no value of its own, rather appreciate flows from the worth of the 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 one Dollar bill and a hundred Dollar invoice, except the number printed on it… along with the purchasing power of the amount?