Bitcoin has a low risk of collapse Unlike traditional monies that rely on authorities. When currencies collapse, it leads to hyperinflation or the wipeout of someone’s savings in a minute. Bitcoin exchange rate isn’t controlled by any government and is a digital currency available globally.
Bitcoin is easy to carry. A billion Bucks in the Bitcoin can be stored in a memory stick and placed in one’s pocket. It’s so easy to transfer Bitcoins compared to paper cash.
The general idea is that Bitcoins Are ‘mined’… interesting term here… by solving an increasingly hard mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again interesting- on a computer. Once created, the new Bitcoin is put into an electronic ‘wallet’. It’s then possible to exchange real goods or Fiat currency for Bitcoins… and vice versa. Furthermore, since there is no central issuer of Bitcoins, it’s all highly distributed, thus resistant to being ‘handled’ by jurisdiction.
Naturally proponents of Bitcoin, Those who profit from the development of Bitcoin, insist rather loud that ‘for certain, Bitcoin is cash’… and not only that, but ‘it is the best money , the money of their future’, etc.. . The proponents of Fiat shout just as loudly that paper currency is cash… and most of us know that Fiat newspaper is not cash by any means, as it lacks the most important attributes of real money. The issue then is does Bitcoin even qualify as money… not mind that it being the money of the 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 accepted internationally. On the other hand, not many retailers currently accept payment in Bitcoin. Unless the acceptance grows geometrically, Fiat wins… although at the cost of trade between countries.
The first condition is a great deal Tougher; money must 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 years. That is about as far away from being a ‘stable store of value’; since you can get! Indeed, such gains are a perfect illustration of a speculative boom… such as Dutch tulip bulbs, or junior mining companies, or Nortel stocks. Now that you have read through this far, has that stirred your views in any way? You may already have guessed that bitcoin revolution software is a large field with much to find out. We have found other folks think these points are valuable in their search. You should be careful about making too many presumptions until the big picture is more clear. If you are unsure about what is required for you, then just take a closer look at your specific situation. We will tie everything together plus give you a hint of other important information.
Naturally, Fiat fails here as well; For example, the US Dollar, the ‘main’ Fiat, has lost over 95 percent of its value in a couple of 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, which is Gold, has shown the capacity to maintain value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this critical capacity… both fail as cash.
Finally, we return to the second Attribute; that of being the numeraire. This is really interesting, 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 money to not only store value, but to in a way measure, or compare worth. In Austrian economics, it is deemed impossible to actually quantify value; after all, value resides just in human comprehension… and how can anything else in consciousness really be measured? But through the principle of Mengerian market action, that is interaction between offer and bid, market prices can be established… if just momentarily… and this industry price is expressed in terms of the numeraire, the most marketable good, that is money.
So how do we establish the value of Fiat… ? Through the concept of ‘purchasing power’… that is, the worth of Fiat is determined by what it can be traded for… a so called ‘basket of goods’. However, his clearly implies that Fiat has no significance of its own, but rather value flows from the worth of the goods and services it might be exchanged for. Causality flows from the merchandise ‘bought’ into the Fiat number. After all, what difference is there between a 1 Dollar invoice and a trillion Dollar invoice, except the number printed on it… and the purchasing power of the number?