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 an instant. Bitcoin exchange rate isn’t controlled by any government and is an electronic currency 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 simple to transport Bitcoins compared to paper cash.
The general idea is that Bitcoins ‘ are ‘mined’… intriguing expression here… by solving a hard mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again interesting- to a computer. Once created, the new Bitcoin is set into an electronic ‘wallet’. It’s then feasible to exchange actual goods or Fiat currency for Bitcoins… and vice versa. Furthermore, since there’s no central issuer of Bitcoins, it’s all highly distributed, hence resistant to being ‘managed’ by jurisdiction.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist rather loudly that ‘for sure, Bitcoin is cash’… and not just 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 money by any means, as it lacks the main attributes of genuine money. The question then is does Bitcoin even be eligible as cash… never mind that it being the money of the 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 own issuer. Dollars aren’t any great in Europe etc.. Bitcoin is accepted internationally. On the other hand, very few retailers now accept payment in Bitcoin. Unless the acceptance grows geometrically, Fiat wins… although in the cost of trade between countries.
The first condition is that a great deal Tougher; money must be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to about $1,000, in just a few years. This is about as far from being a ‘stable store of value’; as you can buy! Indeed, such gains are an ideal illustration of a speculative boom… like Dutch tulip bulbs, or real mining companies, or Nortel stocks. While this is all relevant to your discovery, a few items about bitcoin revolution software hold more weight than others.
But that can vary slightly, and it really just will depend on how you want to use the information. We really are just getting started here, and hopefully you will be thrilled about what more is in store. The last half of the article will offer you a lot more solid info about this. Even after what is next, we will not quit there because the best is yet to come.
Of course, Fiat fails here as well; For instance, the US Dollar, the ‘primary’ Fiat, has dropped over 95% of its value in a couple of decades… neither fiat nor Bitcoin qualify at the most crucial measure of cash; the capacity to store value and preserve value through time. Actual money, that is Gold, has shown the capacity to hold value not just for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as cash.
Ultimately, we return to the next Feature; that of being the numeraire. Now this is actually intriguing, 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 money to not only store worth, but to at a way step, or compare value. In Austrian economics, it’s considered impossible to actually measure value; after all, value resides just in human comprehension… and how can anything else in consciousness really be quantified? Nevertheless, through the principle of Mengerian market action, that is interaction between offer and bid, 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 establish the worth of Fiat… ? Through the idea of ‘purchasing power’… which is, the worth of Fiat is determined by what it can be exchanged for… a so called ‘basket of goods’. However, his clearly implies that Fiat has no value of its own, but instead value flows from the worth of their goods and services it may be exchanged for. Causality flows from the merchandise ‘bought’ 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… and the buying power of the number?