Bitcoin has a low risk of collapse Unlike traditional monies that rely on governments. When currencies collapse, it contributes to hyperinflation or the wipeout of someone’s savings in an instant. Bitcoin exchange rate is not regulated by any government and is a digital money available globally.
Bitcoin isn’t hard to carry. A billion Dollars in the Bitcoin can be saved in a memory stick and placed in one’s pocket. It is that easy to transfer Bitcoins compared to paper cash.
The general Notion is that Bitcoins ‘ are ‘mined’… interesting expression here… by solving an increasingly difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again intriguing- on a computer. Once created, the new Bitcoin is put into a digital ‘wallet’. It’s then possible to trade actual goods or Fiat currency for Bitcoins… and vice versa. Additionally, as there’s no central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who profit from the growth of Bitcoin, insist rather loudly that ‘for certain, Bitcoin is cash’… and not just that, but ‘it is the best money ever, the money of the future’, etc.. . The proponents of all Fiat shout just as loudly that paper currency is money… and most of us 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 money… not mind it being the cash of the near future, or the best money .
Compared to Fiat, Bitcoin doesn’t Do too badly as a medium of trade. Fiat is only accepted in the geographic domain of its own issuer. Dollars aren’t any great in Europe etc.. Bitcoin is accepted internationally. On the flip side, not many retailers now accept payment in Bitcoin. Unless the acceptance grows geometrically, Fiat wins… although at the cost of trade between countries.
The primary 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. That is about as far away from being a ‘stable store of value’; since you can get! Truly, such profits are a perfect example of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or Nortel stocks. Do you have any thoughts at this stage? No question, we are just getting started with all that can be acknowledged about bitcoin revolution. It is really comparable to other related topics that are important to people.
You won’t ever really know about any one element because there are a lot of diverse situations. If you are uncertain about what is needed for you, then just take a better look at your particular situation. You will find out the rest of this article contributes to the groundwork you have built up to this stage.
Naturally, Fiat fails as well; For instance, the US Dollar, the ‘main’ Fiat, has lost over 95 percent 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. Actual money, that is Gold, has shown the capacity to hold value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as cash.
Finally, we come to the second Feature; this of being the numeraire. Now this is really interesting, and we can see why both Bitcoin and Fiat fail as cash, by looking closely at the question of the ‘numeraire’. Numeraire describes the use of money to not only save worth, but to in a sense measure, or compare worth. In Austrian economics, it’s deemed impossible to really quantify value; after all, value resides just in human consciousness… and how can anything in understanding actually be quantified? But through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if just briefly… and this industry price is expressed concerning the numeraire, the most marketable good, that’s money.
So how do we set the worth of Fiat… ? Through the concept of ‘buying power’… that is, the worth of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no value of its own, but instead appreciate flows from the worth of their goods and services it may be exchanged for. Causality flows from the merchandise ‘purchased’ to the Fiat number. After all, what difference is there between a one Dollar bill and a hundred Dollar invoice, except that the number printed on it… and the buying power of this amount?