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 someone’s savings in a minute. Bitcoin exchange rate is not controlled by any government and is an electronic money available globally.
Bitcoin isn’t hard to carry. A billion Bucks in the Bitcoin can be saved on a memory stick and placed in one’s pocket. It’s that simple to transport Bitcoins compared to paper money.
The general idea is that Bitcoins ‘ are ‘mined’… interesting expression here… by solving a difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; yet again intriguing- to a computer. Once created, the new Bitcoin is put into an electronic ‘wallet’. It is then possible to trade real goods or Fiat money for Bitcoins… and vice versa. Additionally, since there is not any central issuer of Bitcoins, it’s all highly dispersed, thus resistant to being ‘handled’ by jurisdiction.
Naturally proponents of Bitcoin, Those who profit from the growth of Bitcoin, insist fairly loudly that ‘for certain, Bitcoin is cash’… and not just that, but ‘it is the best money ever, the money of the future’, etc.. . Well, the proponents of all Fiat shout as loudly that paper money is cash… and we all know that Fiat newspaper is not cash by any means, as it lacks the most important attributes of genuine cash. The question then is does Bitcoin even be eligible as money… not mind that it being the cash of their future, or the best money ever.
Compared to Fiat, Bitcoin doesn’t Do too badly as a medium of trade. Fiat is only accepted in the geographical domain of its issuer. Dollars are no good in Europe etc.. Bitcoin is approved internationally. On the other hand, very few retailers now accept payment in Bitcoin. Until the acceptance grows , Fiat wins… although in the cost of trade between nations.
The first condition is 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 few decades. This is about as far from being a ‘stable store of value’; as you can get! Indeed, such profits are a perfect illustration of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or Nortel stocks. Well, what do you feel about that so far? There is a great deal in the body of knowledge surrounding bitcoin revolution. Yes, it is true that so many find this and other related subjects to be of great value. You should be careful about making too many assumptions until the big picture is more clear. Try examining your own unique requirements which will help you further refine what may be necessary. The rest of our talk will add more to what we have said so far.
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 couple of decades… neither fiat nor Bitcoin qualify at the most important measure of cash; the capacity to store value and preserve value through time. Actual money, that is Gold, has shown the capacity to maintain value not just for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as money.
Ultimately, we return to the next Attribute; that 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 describes the usage of money to not just save value, but to at a way step, or compare worth. In Austrian economics, it is considered impossible to actually measure value; after all, significance resides only in human consciousness… and how can anything 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 only momentarily… and this industry price is expressed concerning the numeraire, the most marketable good, that’s money.
So how do we set the worth of Fiat… ? Through the idea of ‘purchasing power’… that is, the value of Fiat depends upon what it can be traded 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 ‘bought’ into the Fiat number. After all, what difference is there between a one Dollar bill and a trillion Dollar invoice, except that the number printed on it… along with the purchasing power of the amount?