The general idea is that Bitcoins ‘ are ‘mined’… intriguing term here… by solving a 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’s then feasible to trade actual goods or Fiat money for Bitcoins… and vice versa. Furthermore, as there’s no central issuer of Bitcoins, it is all highly dispersed, hence resistant to being ‘managed’ by jurisdiction.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist rather loud that ‘for certain, Bitcoin is cash’… 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 currency is money… and most of us know that Fiat paper 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 that it being the money of their near future, or the very best money .
Compared to Fiat, Bitcoin doesn’t 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 flip side, very few retailers now accept payment in Bitcoin. Unless the approval grows geometrically, Fiat wins… although in the cost of exchange between nations.
The primary condition is that 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 only a couple decades. This is about as far from being a ‘stable store of value’; as you can get! Truly, such profits are a perfect example of a speculative boom… like Dutch tulip bulbs, or real mining companies, or Nortel stocks. We believe the above thoughts and suggestions must be taken into account in any conversation on bitcoin revolution software. Of course we strongly suggest you discover more about them.
They will serve you well, though, in more ways than you know. Getting a high altitude overview will be of immense benefit to you. So we will provide you with a few more important points to think about.
Naturally, Fiat fails as well; As an instance, the US Dollar, the ‘primary’ Fiat, has lost over 95% of its value in a couple of decades… neither fiat nor Bitcoin qualify at the most crucial measure of money; the capacity to store value and preserve value through time. Real money, which is Gold, has shown the capacity to hold value not only for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as money.
Finally, we come to the second Feature; that of being the numeraire. This is actually interesting, and we can see why the two Bitcoin and Fiat neglect as money, by looking closely at the question of the ‘numeraire’. Numeraire describes the usage of money to not just store value, but to in a sense measure, or compare worth. In Austrian economics, it’s considered impossible to actually quantify value; after all, significance resides only in human consciousness… and how can anything in understanding really be measured? Nevertheless, through the principle of Mengerian market action, that’s interaction between offer and bid, market prices can be established… if just momentarily… and this market price is expressed in terms of the numeraire, the most marketable good, that is money.
So how do we establish the value of Fiat… ? Through the idea of ‘purchasing power’… which is, the worth of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. However, his clearly suggests that Fiat has no value of its own, but rather value flows from the value of the 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 1 Dollar invoice and a hundred Dollar bill, except that the amount printed on it… and the buying power of the amount?
Gold, on the other hand, isn’t Measured by what it trades for; rather, uniquely, it is quantified by a different physical standard; from its own weight, or mass. A g of Gold is a gram of gold, and an ounce of Gold is an ounce of Gold… no matter what number is engraved on its surface, ‘face value’ or differently. Causality is the opposite to that of Fiat; Gold is measured by weight, an intrinsic quality… not by purchasing electricity. Now, have you any notion of the worth of an oz of Dollars? No anything. Fiat is only ‘quantified’ by an ephemeral quantity… the number printed on it, ‘ the ‘face value’.
Bitcoin is further away from being The numeraire; not only is it simply a number, much as Fiat… but its value is quantified in Fiat! Even if Bitcoin becomes internationally accepted as a medium of exchange, and even though it manages to replace the Dollar as the approved ‘numeraire’, it can not have an intrinsic measure like Gold has. Gold is unique in being measured by a true, unchanging physical quantity. Gold is exceptional in preserving value for thousands of years. Nothing else in reach of humankind has this exceptional combination of qualities.