Bitcoin has a low risk of collapse Unlike traditional currencies that rely on authorities. When currencies fall, 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 currency available worldwide.
Bitcoin is easy to carry. A billion Bucks in the Bitcoin can be stored on a memory stick and placed in one’s pocket. It is that easy to transport Bitcoins compared to paper money.
The general idea is that Bitcoins ‘ are ‘mined’… intriguing term here… by solving an increasingly difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; yet again interesting- on a computer. Once created, the new Bitcoin is put into an electronic ‘wallet’. It is then feasible to exchange real goods or Fiat currency for Bitcoins… and vice versa. Furthermore, since there is not any central issuer of Bitcoins, it’s all highly distributed, thus resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist rather loud that ‘for certain, Bitcoin is money’… and not just that, but ‘it’s the best money , the cash of their future’, etc.. . Well, the proponents of Fiat shout as loudly that paper money is money… and we all know that Fiat paper is not money by any means, as it lacks the most important attributes of real money. The question then is does Bitcoin even qualify as money… never mind that it being the money of the 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 geographic domain of its issuer. Dollars aren’t any great in Europe etc.. Bitcoin is approved internationally. On the flip side, not many retailers currently accept payment in Bitcoin. Until the approval grows , Fiat wins… although in the cost of trade between nations.
The primary condition is that a lot Tougher; money must be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in only a few years. This is about as far away from being a ‘stable store of value’; as you can buy! Truly, such gains are an ideal illustration of a speculative boom… such as Dutch tulip bulbs, or real mining companies, or even Nortel stocks. As we have just stated, bitcoin revolution is something that cannot be ignored – or at least should never be ignored. There are so many scenarios and variations – twists and turns, that maybe you see how difficult it can be to include all bases. That is really a good deal when you think about it, so just the briefest moment to mention something. This is significant information that can help you, and there is no questioning that. Our last few items can really prove to be highly effective considering the overall.
Of course, Fiat fails here as well; As an example, the US Dollar, the ‘main’ Fiat, has dropped over 95 percent of its worth in a couple of decades… neither fiat nor Bitcoin qualify in the most important measure of cash; the capacity to store value and preserve value through time. Actual money, that is Gold, has shown the ability to hold value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as cash.
Ultimately, we return to the second Attribute; this of being the numeraire. This is actually interesting, and we can see why both Bitcoin and Fiat fail as money, by looking closely at the question of their ‘numeraire’. Numeraire describes the usage of cash to not only store worth, but to at a way step, or compare worth. In Austrian economics, it’s deemed impossible to really measure value; after all, value resides just in human comprehension… and how can anything else in understanding actually be quantified? Nevertheless, through the principle of Mengerian market action, that’s interaction between bid and offer, market prices can be established… if just briefly… and this market price is expressed in terms of the numeraire, the most marketable good, that is money.
So how do we set the value of Fiat… ? Through the concept of ‘purchasing power’… which is, the value 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 worth of their goods and services it may be traded for. Causality flows from the goods ‘bought’ to the Fiat number. After all, what difference is there between a 1 Dollar invoice and a trillion Dollar bill, except the amount printed on it… and the purchasing power of this amount?