The general Notion is that Bitcoins ‘ are ‘mined’… intriguing term here… by solving an increasingly difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again intriguing- to a computer. Once established, the new Bitcoin is put into an electronic ‘wallet’. It is then possible to trade real goods or Fiat currency for Bitcoins… and vice versa. Additionally, as there’s no central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who benefit from the development of Bitcoin, insist rather loud that ‘for sure, Bitcoin is cash’… and not just that, but ‘it is the best money , the cash of the future’, etc.. . Well, the proponents of all Fiat shout as loudly that paper currency is money… and we all know that Fiat newspaper is not cash by any means, as it lacks the main attributes of genuine cash. The issue then is does Bitcoin even qualify as money… never mind that it being the money of their near future, or the very best money .
Compared to Fiat, Bitcoin does not Do too badly as a medium of trade. Fiat is only accepted in the geographical domain of its own 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 countries.
The first condition is a great deal Tougher; cash must be a stable store of value… today Bitcoins have gone from a ‘value’ of $3.00 to around $1,000, in only a couple decades. That is about as far away from being a ‘stable store of value’; as you can get! Truly, such profits are a perfect example of a speculative boom… such as Dutch tulip bulbs, or junior mining companies, or Nortel stocks. What have just talked about is crucial for your understanding about bitcoin revolution app, but there is a lot more to think about. Of course we strongly recommend you discover more about them.
They will serve you well, however, in more ways than you realize. However, we always emphasize that anyone takes a closer look at the general big picture as it applies to this subject. So we will give you a few more important points to think about.
Naturally, Fiat fails here as well; As an instance, the US Dollar, the ‘primary’ Fiat, has lost over 95% of its worth in a few decades… neither fiat nor Bitcoin qualify in the most crucial measure of cash; the capacity to store value and preserve value through time. Real money, that 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 fail as cash.
Ultimately, we return to the second Attribute; that of being the numeraire. This is really interesting, and we can see why both Bitcoin and Fiat neglect as cash, by looking closely at the question of their ‘numeraire’. Numeraire refers to the use of cash to not only store worth, but to in a way step, or compare worth. In Austrian economics, it’s deemed impossible to actually measure value; after all, significance resides only 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 bid and offer, market prices can be established… if only 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 value 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, rather value flows from the worth of the goods and services it might be exchanged for. Causality flows from the goods ‘purchased’ into the Fiat number. After all, what difference is there between a one Dollar bill and a hundred Dollar invoice, except that the amount printed on it… along with the buying power of this amount?
Gold, on the other hand, is not Quantified by what it deals for; rather, uniquely, it’s quantified by a different physical standard; by its weight, or mass. A g of Gold is a gram of gold, and an ounce of Gold is an oz of Gold… no matter what amount is engraved on its surface, ‘face value’ or otherwise. Causality is the opposite to that of Fiat; Gold is measured by weight, an inherent quality… not by buying power. Now, have you really any idea of the worth of an ounce of Dollars? No such thing. Fiat is only ‘quantified’ with an ephemeral quantity… the number printed on it, ‘ the ‘face value’.
Bitcoin is further away from being The numeraire; not only can it be simply a few, much as Fiat… but its worth is measured in Fiat! Even though Bitcoin becomes internationally accepted as a medium of trade, and even though it succeeds to replace the Dollar as the accepted ‘numeraire’, it can not possess an intrinsic measure like Gold has. Gold is exceptional in being measured by a true, unchanging physical quantity. Gold is exceptional in storing value for centuries. Nothing else in reach of humanity has this unique blend of qualities.