If you do not understand what Bitcoin is, Do a little bit of research on the internet, and you will receive lots… but the short Story is that Bitcoin was made as a medium of trade, with no central bank Or bank of issue being involved. Furthermore, Bitcoin transactions are assumed To be personal, that is anonymous. Most significantly, Bitcoins have no actual World existence; they exist only in computer applications, as a kind of virtual reality.
The general Notion is that Bitcoins ‘ are ‘mined’… intriguing term here… by solving a difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; yet again interesting- to a computer. Once created, the new Bitcoin is put into an electronic ‘wallet’. It is then feasible to exchange actual goods or Fiat money for Bitcoins… and vice versa. Furthermore, as there’s not any central issuer of Bitcoins, it is all highly distributed, hence 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 only that, but ‘it is the best money ever, 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 isn’t cash by any means, as it lacks the main attributes of real money. The issue then is does Bitcoin even qualify as cash… not mind 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 exchange. Fiat is only accepted in the geographic domain of its own issuer. Dollars are no good in Europe etc.. Bitcoin is accepted internationally. On the flip side, very few retailers currently accept payment in Bitcoin. Until the acceptance grows , Fiat wins… although in the cost of exchange between countries.
The primary condition is a great deal Tougher; money must be a stable store of value… now Bitcoins have gone from a ‘value’ of $3.00 to around $1,000, in only a few years. This is about as far 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 junior mining companies, or even Nortel stocks. While this is all appropriate to your discovery, a few items about Bitcoins Wealth hold more weight than others. What is more important for you may be less so for others, so you have to think about your unique circumstances. As you realize, there is even more to the story than what is available here. Keep reading to discover even more, and what we will do is add a few more critical topics and recommendations for you to consider. We think you will find them highly pertinent to your overall goals, plus there is even more.
Of course, Fiat fails as well; As an example, the US Dollar, the ‘main’ Fiat, has lost 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 conserve value through time. Real money, that is Gold, has shown the capacity to hold value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as cash.
Ultimately, we come to the second Feature; that of being the numeraire. This is really intriguing, and we can see why the two Bitcoin and Fiat neglect as money, by looking closely at the question of their ‘numeraire’. Numeraire refers to the usage of cash to not just store value, but to in a sense measure, or compare worth. In Austrian economics, it is considered impossible to actually quantify value; after all, value resides only in human comprehension… and how can anything in consciousness really be quantified? But 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 concerning the numeraire, the most marketable good, that’s money.
So how do we set the value of Fiat… ? Through the idea of ‘buying power’… that is, the value of Fiat depends upon what it can be traded for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no significance of its own, rather value flows from the worth of their goods and services it may be traded for. Causality flows from the merchandise ‘purchased’ into the Fiat number. After all, what difference is there between a 1 Dollar invoice and a hundred Dollar invoice, except the number printed on it… along with the buying power of the number?
Gold, on the other hand, isn’t Quantified by what it deals for; rather, uniquely, it’s measured by another physical standard; from its weight, or mass. A gram of Gold is a gram of gold, and an ounce of Gold is an ounce 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 inherent quality… maybe not by purchasing electricity. Now, have you any notion of the value of an oz of Dollars? No such thing. Fiat is just ‘measured’ with an ephemeral quantity… the amount printed on it, the ‘face value’.
Bitcoin is farther away from being The numeraire; not only is it simply a few, much as Fiat… but its value is measured in Fiat! Even though Bitcoin becomes internationally recognized as a medium of exchange, and even though it succeeds 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 value for centuries. Nothing else in reach of humanity has this exceptional combination of qualities.