Bitcoin has a low risk of collapse Unlike traditional monies that rely on governments. When currencies fall, it contributes to hyperinflation or the wipeout of someone’s savings in an instant. Bitcoin exchange rate is not controlled by any government and is a digital money available worldwide.
Bitcoin is easy to carry. A billion Dollars in the Bitcoin can be saved on a memory stick and placed in one’s pocket. It’s so easy to transport Bitcoins compared to paper cash.
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; again intriguing- to a computer. Once created, the new Bitcoin is set into a digital ‘wallet’. It’s then possible to exchange actual goods or Fiat currency for Bitcoins… and vice versa. Additionally, as there’s not any central issuer of Bitcoins, it’s all highly distributed, hence resistant to being ‘managed’ by jurisdiction.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist rather loud that ‘for sure, Bitcoin is money’… and not only that, but ‘it is the best money , the money of the future’, etc.. . Well, the proponents of Fiat shout as loudly that paper currency is cash… and most of us know that Fiat paper isn’t money by any means, as it lacks the most important attributes of genuine cash. The issue then is does Bitcoin even be eligible as cash… never mind it being the money of their future, or the best money .
Compared to Fiat, Bitcoin does not Do too badly as a medium of exchange. Fiat is only accepted in the geographic domain of its own issuer. Dollars are no great in Europe etc.. Bitcoin is accepted internationally. On the other hand, not many retailers now accept payment in Bitcoin. Until the approval grows , Fiat wins… although at the cost of exchange between countries.
The primary condition is that a lot Tougher; cash has to be a stable store of value… now Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in only a couple years. This is about as far away from being a ‘stable store of value’; since you can get! Indeed, such profits are an ideal illustration of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or 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. But in the final analysis you are the only person who can accurately make that call. But we are not done, yet, and there is usually much more to be uncovered. Yet have more big pieces of the total picture to offer to you, though. Even after what is next, we will not quit there because the very best is but to come.
Of course, Fiat fails here as well; For example, the US Dollar, the ‘main’ Fiat, has dropped over 95 percent of its value in a couple of decades… neither fiat nor Bitcoin qualify in the most important measure of cash; the capacity to store value and preserve value through time. Actual money, which is Gold, has shown the ability to hold value not just for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as cash.
Ultimately, we come to the next Attribute; this of being the numeraire. This is actually 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 use of money to not just save worth, but to in a sense step, or compare value. In Austrian economics, it’s considered impossible to actually measure value; after all, significance resides only in human consciousness… and how can anything else in understanding actually be measured? But through the principle of Mengerian market action, that is interaction between offer and bid, market prices can be established… if just briefly… and this industry price is expressed concerning the numeraire, the most marketable good, that’s money.
So how do we set the value of Fiat… ? Through the concept of ‘purchasing 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, but instead value flows from the value of their 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 invoice and a hundred Dollar invoice, except that the number printed on it… and the purchasing power of this amount?