Bitcoin has a low risk of collapse Unlike traditional currencies that rely on authorities. When currencies collapse, it leads to hyperinflation or the wipeout of one’s savings in a minute. Bitcoin exchange rate isn’t controlled by any government and is an electronic 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’s that easy to transport Bitcoins compared to paper cash.
The general idea is that Bitcoins Are ‘mined’… intriguing expression here… by solving an increasingly difficult mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again intriguing- to a computer. Once established, the new Bitcoin is set into an electronic ‘wallet’. It is then possible to exchange actual goods or Fiat currency for Bitcoins… and vice versa. Furthermore, as there is 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 sure, Bitcoin is money’… and not only that, but ‘it is the best money ever, the cash of the future’, etc.. . The proponents of all Fiat shout just as loudly that paper money is cash… and we all know that Fiat newspaper is not cash by any means, as it lacks the main attributes of real money. The question then is does Bitcoin even be eligible as money… never mind it being the money of the future, or the very best money ever.
Compared to Fiat, Bitcoin doesn’t Do too badly as a medium of exchange. Fiat is only accepted in the geographical domain of its own issuer. Dollars aren’t any great in Europe etc.. Bitcoin is accepted internationally. On the flip side, not many retailers currently accept payment in Bitcoin. Unless the acceptance grows , Fiat wins… although at the cost of exchange between nations.
The first condition is a great deal Tougher; cash has to be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in just a couple years. This is about as far from being a ‘stable store of value’; as you can buy! Truly, such profits are a perfect illustration of a speculative boom… such as Dutch tulip bulbs, or real mining companies, or even Nortel stocks. Hopefully, just as with so many other areas regarding bitcoin revolution, you will need to pay more consideration to some things than others. Do take a close look at what you require, and then make a determination regarding how much different things apply to you. Yet you do realize there is much more to be discovered about this. 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 after what is next, we will not quit there because the very best is yet to come.
Of course, Fiat fails here as well; For instance, the US Dollar, the ‘primary’ Fiat, has lost over 95 percent of its value in a couple of decades… neither fiat nor Bitcoin qualify in the most crucial measure of money; the capacity to store value and preserve value through time. Actual money, which is Gold, has shown the ability to hold value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as money.
Finally, we come to the second Feature; this of being the numeraire. 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 step, or compare worth. In Austrian economics, it is considered impossible to actually quantify value; after all, significance resides only in human consciousness… and how can anything else in understanding really be measured? But through the principle of Mengerian market action, that is interaction between offer and bid, 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 establish the value of Fiat… ? Through the idea of ‘buying power’… which is, the value of Fiat depends upon what it can be traded 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 their goods and services it may be exchanged for. Causality flows from the goods ‘bought’ to the Fiat number. After all, what difference is there between a 1 Dollar invoice and a hundred Dollar invoice, except that the amount printed on it… along with the buying power of this amount?