If you don’t know what Bitcoin is, Do a little bit of research on the internet, and you’ll receive plenty… but the brief Narrative is that Bitcoin was made as a medium of exchange, without a central bank Or bank of issue being involved. Furthermore, Bitcoin transactions are assumed To be personal, 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’… interesting expression here… by solving a difficult mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again intriguing- on a computer. Once created, the new Bitcoin is put into a digital ‘wallet’. It is then feasible to trade real goods or Fiat money for Bitcoins… and vice versa. Additionally, as there’s not any central issuer of Bitcoins, it’s all highly dispersed, thus resistant to being ‘managed’ 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 is the best money ever, the cash of the future’, etc.. . Well, the proponents of all Fiat shout just as loudly that paper currency is cash… and most of us know that Fiat newspaper isn’t money by any means, as it lacks the main attributes of real cash. The question then is does Bitcoin even qualify as cash… not mind it being the money of the future, or the best money . The effects of Bitcoin Revolution app, not only on you but a lot of others, is a fact that has to be acknowledged. It can be challenging to cover all possible examples simply because there is so much involved. But I wanted to stop for a moment so you can reflect on the value of what you have just read. This is the sort of content that men and women need to know about, and we have no problems saying that. The last outstanding areas for discussion may be even more important.
Compared to Fiat, Bitcoin doesn’t Do too badly as a medium of exchange. Fiat is only accepted in the geographical domain of its issuer. Dollars are no good in Europe etc.. Bitcoin is approved internationally. On the flip side, very few retailers now accept payment in Bitcoin. Until the acceptance grows geometrically, Fiat wins… although at the cost of exchange between countries.
The first condition is that a great deal Tougher; money has to 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 from being a ‘stable store of value’; since you can get! Indeed, such profits are an ideal example of a speculative boom… like Dutch tulip bulbs, or real mining companies, or Nortel stocks.
Naturally, Fiat fails here as well; For instance, the US Dollar, the ‘main’ Fiat, has dropped over 95 percent of its worth in a couple of decades… neither fiat nor Bitcoin qualify in the most important measure of cash; the capacity to store value and conserve value through time. Real money, which is Gold, has shown the ability to hold value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this critical capacity… both fail as cash.
Finally, we come to the next Attribute; that of being the numeraire. Now this is really interesting, and we can see why the two Bitcoin and Fiat fail as money, by looking closely at the question of their ‘numeraire’. Numeraire describes the usage of money to not just store worth, but to at a way step, or compare value. In Austrian economics, it’s considered impossible to really measure value; after all, significance resides only in human comprehension… and how can anything in consciousness actually 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 industry price is expressed in terms of the numeraire, the most marketable good, that’s money.
So how do we establish the worth 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’. However, his clearly suggests that Fiat has no significance of its own, instead value flows from the value of the goods and services it might be traded for. Causality flows from the merchandise ‘bought’ to the Fiat number. After all, what difference is there between a one Dollar invoice and a hundred Dollar invoice, except the amount printed on it… and the purchasing power of this number?
Gold, on the other hand, is not Measured by what it deals for; rather, uniquely, it is quantified by another physical benchmark; from its own weight, or mass. A gram of Gold is a gram of gold, and an ounce of Gold is an oz of Gold… regardless of what number is engraved on its surface, ‘face value’ or otherwise. Causality is the contrary to that of Fiat; Gold is measured by weight, an intrinsic quality… not by purchasing power. Now, have you really any notion of the value of an oz of Dollars? No such thing. Fiat is only ‘measured’ by an ephemeral quantity… the amount printed on it, the ‘face value’.