Bitcoin has a reduced risk of collapse Unlike traditional monies that rely on authorities. When currencies fall, it leads to hyperinflation or the wipeout of one’s savings in a minute. Bitcoin exchange rate is not controlled by any government and is a digital currency available worldwide.
Bitcoin isn’t hard to carry. A billion Dollars in the Bitcoin can be stored in a memory stick and placed in one’s pocket. It is so simple to transport Bitcoins compared to paper cash.
The general Notion is that Bitcoins Are ‘mined’… interesting expression here… by solving a hard mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again interesting- to a computer. Once established, the new Bitcoin is put into a digital ‘wallet’. It’s then possible to exchange real goods or Fiat money for Bitcoins… and vice versa. Furthermore, since there’s not any central issuer of Bitcoins, it’s all highly dispersed, hence resistant to being ‘managed’ by authority.
Naturally proponents of Bitcoin, Those who profit from the development of Bitcoin, insist rather loud that ‘for certain, Bitcoin is money’… and not just that, but ‘it is the best money ever, the money of their future’, etc.. . Well, the proponents of all Fiat shout as loudly that paper currency is cash… and we all know that Fiat paper is not cash by any means, as it lacks the main attributes of genuine money. The question then is does Bitcoin even qualify as cash… not mind that it being the cash of their near future, or the very 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 good in Europe etc.. Bitcoin is accepted internationally. On the flip side, very few retailers currently accept payment in Bitcoin. Until the approval grows , Fiat wins… although at the cost of trade between countries.
The first condition is that a great deal Tougher; cash has to be a stable store of value… today Bitcoins have gone from a ‘value’ of $3.00 to about $1,000, in only a couple decades. This is about as far away from being a ‘stable store of value’; as you can get! Indeed, such profits are an ideal example of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or Nortel stocks. We want to say a quick word about our discussion re bitcoin revolution. However, one really important distinction here directly relates to your own goals. There are always some things that will have more of an effect than others. You realize that you are ultimately the one who knows which will have the greatest impact. We will now move forward and talk more about a few points in depth.
Of course, Fiat fails here as well; As an instance, the US Dollar, the ‘primary’ Fiat, has lost over 95 percent of its worth in a few decades… neither fiat nor Bitcoin qualify at the most crucial measure of cash; the capacity to store value and conserve value through time. Real money, that is Gold, has shown the ability to hold value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this critical capacity… both neglect as money.
Ultimately, we come to the next Feature; this of being the numeraire. Now this is really intriguing, and we can see why both Bitcoin and Fiat neglect as money, by looking closely at the question of the ‘numeraire’. Numeraire refers to the usage of money to not just save value, but to at a sense measure, or compare worth. In Austrian economics, it’s deemed impossible to really measure value; after all, significance resides just in human comprehension… and how can anything in understanding actually be measured? Nevertheless, through the principle of Mengerian market action, that is interaction between bid and offer, 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 concept of ‘purchasing power’… which is, the value of Fiat depends upon what it can be traded for… a so called ‘basket of goods’. However, his clearly implies that Fiat has no value of its own, but rather value flows from the value of the goods and services it might be traded for. Causality flows from the merchandise ‘purchased’ to the Fiat number. After all, what difference is there between a one Dollar invoice and a hundred Dollar bill, except the amount printed on it… along with the purchasing power of this amount?