Bitcoin has a low risk of collapse Unlike traditional currencies that rely on authorities. When currencies collapse, it contributes 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 saved on a memory stick and placed in one’s pocket. It’s that easy to transfer Bitcoins compared to paper money.
The general idea is that Bitcoins ‘ are ‘mined’… interesting expression here… by solving a difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again interesting- to a computer. Once created, the new Bitcoin is set into an electronic ‘wallet’. It is then possible to trade real goods or Fiat currency for Bitcoins… and vice versa. Additionally, as there’s no central issuer of Bitcoins, it’s all highly dispersed, thus resistant to being ‘managed’ by authority.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist fairly loud that ‘for certain, Bitcoin is cash’… and not just that, but ‘it is the best money ever, the money of the future’, etc.. . Well, the proponents of Fiat shout as loudly that paper money is money… and most of us know that Fiat paper isn’t money by any means, as it lacks the most important attributes of genuine money. The issue then is does Bitcoin even qualify as money… not mind that it being the money of the 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 own issuer. Dollars aren’t any good in Europe etc.. Bitcoin is approved internationally. On the flip side, not many retailers now accept payment in Bitcoin. Unless the acceptance grows , Fiat wins… although at the cost of exchange between nations.
The primary condition is a lot Tougher; money must be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to about $1,000, in only a couple years. That is about as far away from being a ‘stable store of value’; since you can buy! Truly, such profits are an ideal illustration of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or Nortel stocks. bitcoin revolution is such a wide field of study, and you do have to decide which of the overall pieces of the puzzle are more relevant to you. But in the end you are the only individual who can accurately make that call. Yet you do realize there is much more to be found out about this. The balance of this read holds much more that will help your specific situation. Even following what is next, we will not quit there because the very best is but to come.
Naturally, Fiat fails as well; For example, the US Dollar, the ‘main’ Fiat, has lost over 95 percent of its worth in a few decades… neither fiat nor Bitcoin qualify in the most important measure of cash; the capacity to store value and preserve value through time. Real money, that is Gold, has shown the capacity to hold value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as money.
Ultimately, we return to the next Attribute; that of being the numeraire. Now this is actually interesting, and we can see why both Bitcoin and Fiat neglect as money, by looking closely at the question of the ‘numeraire’. Numeraire describes the use of cash to not just store worth, but to at a way measure, or compare value. In Austrian economics, it’s deemed impossible to actually measure 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’s 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 establish the value of Fiat… ? Through the concept of ‘purchasing power’… which is, the worth of Fiat depends upon what it can be traded for… a so called ‘basket of goods’. However, his clearly implies that Fiat has no significance of its own, rather value flows from the value of the goods and services it might be traded for. Causality flows from the goods ‘bought’ into the Fiat number. After all, what difference is there between a one Dollar invoice and a hundred Dollar bill, except that the amount printed on it… along with the purchasing power of the amount?