The general Notion is that Bitcoins Are ‘mined’… interesting expression here… by solving a difficult mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; yet again intriguing- to a computer. Once established, the new Bitcoin is set into an electronic ‘wallet’. It is then possible to exchange real goods or Fiat money for Bitcoins… and vice versa. Additionally, since there is not any central issuer of Bitcoins, it is all highly dispersed, hence resistant to being ‘handled’ by jurisdiction.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist rather loudly that ‘for certain, Bitcoin is money’… and not just that, but ‘it is the best money ever, the cash of their future’, etc.. . The proponents of all Fiat shout just as loudly that paper money is money… and we all know that Fiat paper isn’t money by any means, as it lacks the most important attributes of genuine cash. The issue then is does Bitcoin even qualify as money… never mind that it being the money of the near future, or the very best money ever.
Compared to Fiat, Bitcoin doesn’t Do too badly as a medium of trade. Fiat is only accepted in the geographic domain of its issuer. Dollars are no great in Europe etc.. Bitcoin is accepted internationally. On the other hand, very few retailers currently accept payment in Bitcoin. Until the approval grows , Fiat wins… although at the cost of trade between nations.
The primary condition is that a lot Tougher; cash has to be a stable store of value… now Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in just a couple years. That is about as far from being a ‘stable store of value’; since you can buy! Indeed, such profits are a perfect example of a speculative boom… such as Dutch tulip bulbs, or real mining companies, or even Nortel stocks. We have included a few basic items about bitcoin revolution, and they are essential to consider in your research. But there is a great deal more that you would do well to study.
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 give you a few more important points to think about.
Naturally, Fiat fails here as well; As an example, 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 money; the capacity to store value and conserve value through time. Actual money, which 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.
Finally, we return to the next Feature; that of being the numeraire. This is really intriguing, and we can see why the two Bitcoin and Fiat fail as money, by looking closely at the question of their ‘numeraire’. Numeraire refers to the usage of money to not just store worth, but to at a sense step, or compare value. In Austrian economics, it is considered impossible to really measure value; after all, significance resides just in human consciousness… and how can anything else in understanding actually be quantified? Nevertheless, through the principle of Mengerian market action, that is interaction between offer and bid, market prices can be established… if only briefly… and this market price is expressed in terms of the numeraire, the most marketable good, that’s money.
So how do we establish the worth of Fiat… ? Through the concept of ‘purchasing power’… that is, the worth of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. However, his clearly implies that Fiat has no significance of its own, rather value flows from the value of the goods and services it might be traded for. Causality flows from the merchandise ‘purchased’ into the Fiat number. After all, what difference is there between a 1 Dollar bill and a hundred Dollar bill, except the number printed on it… along with the purchasing power of this amount?
Gold, on the other hand, isn’t Quantified by what it deals for; rather, uniquely, it’s quantified by a different physical benchmark; from its own weight, or mass. A gram of Gold is a gram of gold, and an ounce of Gold is an oz 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… maybe not by buying electricity. Now, have you really any notion of the value of an oz of Dollars? No such thing. Fiat is only ‘measured’ with an ephemeral quantity… the amount printed on it, ‘ the ‘face value’.
Bitcoin is further away from being The numeraire; not only can it be a few, much as Fiat… but its value is quantified in Fiat! Even if Bitcoin becomes internationally accepted as a medium of exchange, and even if it manages to replace the Dollar as the accepted ‘numeraire’, it can never possess an intrinsic measure like Gold has. Gold is exceptional in being quantified by a real, unchanging physical quantity. Gold is exceptional in preserving worth for thousands of years. Nothing else in touch of humankind has this unique blend of qualities.