The general Notion is that Bitcoins ‘ are ‘mined’… intriguing term here… by solving a hard mathematical formula -more difficult 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 money for Bitcoins… and vice versa. Additionally, since there’s not any central issuer of Bitcoins, it’s all highly dispersed, thus resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who benefit from the development of Bitcoin, insist fairly loudly that ‘for sure, Bitcoin is money’… and not just that, but ‘it’s the best money ever, the money of the future’, etc.. . The proponents of Fiat shout just as loudly that paper money is cash… and we all know that Fiat paper isn’t 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 it being the money of the near future, or the best money .
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 aren’t any good in Europe etc.. Bitcoin is accepted internationally. On the other hand, very few retailers now accept payment in Bitcoin. Unless the approval grows , Fiat wins… although in the cost of exchange between nations.
The primary condition is a lot Tougher; money has to 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 decades. This is about as far away from being a ‘stable store of value’; as you can get! Indeed, such profits are an ideal example of a speculative boom… like Dutch tulip bulbs, or real mining companies, or even Nortel stocks. bitcoin revolution is such a wide field of study, and you do have to determine which of the overall parts of the puzzle are more relevant to you. Do take a close look at what you require, and then make a determination regarding how much different things apply to you. Of course there is rather a lot more to be learned. Continue reading to discover even more, and what we will do is add a few more critical topics and recommendations for you to consider. Even after what is next, we will not quit there because the best is yet to come.
Naturally, Fiat fails as well; As an example, the US Dollar, the ‘primary’ Fiat, has dropped over 95% of its worth in a couple of decades… neither fiat nor Bitcoin qualify at the most crucial measure of money; the capacity to store value and conserve value through time. Real money, which is Gold, has shown the ability to maintain value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as cash.
Finally, we come to the second Attribute; this of being the numeraire. This is really interesting, and we can see why both Bitcoin and Fiat neglect as money, by looking closely at the question of the ‘numeraire’. Numeraire refers to the usage of money to not only store value, but to at a sense measure, or compare worth. In Austrian economics, it’s deemed impossible to really quantify value; after all, value resides only in human comprehension… and how can anything else in consciousness actually be measured? Nevertheless, 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 is money.
So how do we establish the value of Fiat… ? Through the concept of ‘buying power’… that is, the value of Fiat is determined by what it can be traded for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no value of its own, rather value flows from the value of their goods and services it may be traded for. Causality flows from the merchandise ‘bought’ to the Fiat number. After all, what difference is there between a 1 Dollar bill and a trillion Dollar bill, except the number printed on it… along with the purchasing power of the number?
Gold, on the other hand, is not Measured by what it deals for; rather, uniquely, it is measured 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… regardless of what amount is engraved on its surface, ‘face value’ or differently. Causality is the opposite to that of Fiat; Gold is measured by weight, an intrinsic quality… maybe not by purchasing power. Now, have you any idea of the worth of an ounce of Dollars? No such thing. Fiat is just ‘quantified’ by an ephemeral quantity… the amount printed on it, ‘ the ‘face value’.
Bitcoin is farther away from being The numeraire; not only can it be simply a number, much as Fiat… but its worth is measured in Fiat! Even if Bitcoin becomes internationally accepted as a medium of trade, and even if it succeeds to replace the Dollar as the accepted ‘numeraire’, it can not have an intrinsic measure like Gold has. Gold is exceptional in being measured by a real, unchanging physical quantity. Gold is exceptional in storing value for thousands of years. Nothing else in reach of humankind has this exceptional blend of qualities.