If you do not understand what Bitcoin is, then Do a bit of research online, and you’ll receive lots… but the brief 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 supposed To be personal, that is anonymous. Most interestingly, Bitcoins Don’t Have Any real World presence; they exist only in computer software, as a sort of virtual reality.
The general idea is that Bitcoins Are ‘mined’… interesting expression here… by solving a hard mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again intriguing- on a computer. Once established, the new Bitcoin is set into an electronic ‘wallet’. It’s then feasible to trade real goods or Fiat money for Bitcoins… and vice versa. Furthermore, as there is no central issuer of Bitcoins, it’s all highly dispersed, thus resistant to being ‘handled’ by jurisdiction.
Naturally proponents of Bitcoin, Those who benefit from the development of Bitcoin, insist fairly loudly that ‘for certain, Bitcoin is cash’… and not only that, but ‘it is the best money ever, the money of their future’, etc.. . The proponents of Fiat shout just as loudly that paper money is cash… and most of us know that Fiat paper is not money by any means, as it lacks the main attributes of real money. The question then is does Bitcoin even qualify as money… never mind it being the cash of their near future, or the very 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 issuer. Dollars are no great in Europe etc.. Bitcoin is approved internationally. On the flip side, not many retailers now accept payment in Bitcoin. Until the approval grows geometrically, Fiat wins… although in the cost of exchange between nations.
The first condition is 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 about $1,000, in only a couple decades. That is about as far away from being a ‘stable store of value’; as you can get! Indeed, such profits are an ideal illustration of a speculative boom… such as Dutch tulip bulbs, or real mining companies, or even Nortel stocks. The relative effect of Bitcoins Wealth Review on your situation can be dramatic and cause issues of all varieties. There are so many scenarios and variations – twists and turns, that hopefully you see how difficult it can be to cover all bases. But I wanted to pause for a moment so you can reflect on the value of what you have just read. This is the type of content that people need to know about, and we have no problems saying that. Our last few items can really prove to be highly effective considering the overall.
Of course, Fiat fails as well; For example, the US Dollar, the ‘main’ Fiat, has lost over 95% of its value in a couple of decades… neither fiat nor Bitcoin qualify in the most crucial measure of money; the capacity to store value and preserve value through time. Actual money, that is Gold, has shown the ability to hold value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this critical capacity… both neglect as money.
Ultimately, we come to the next Feature; that of being the numeraire. This is actually interesting, and we can see why both Bitcoin and Fiat neglect as cash, by looking closely at the question of their ‘numeraire’. Numeraire refers to the use of cash to not just store worth, but to at a way step, or compare value. In Austrian economics, it is deemed impossible to really quantify value; after all, significance resides only in human consciousness… and how can anything else in consciousness really be measured? But through the principle of Mengerian market action, that’s interaction between bid and offer, market prices can be established… if only momentarily… 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 idea of ‘purchasing power’… that is, the value of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. But his clearly implies that Fiat has no significance of its own, instead value flows from the value of the 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 one Dollar invoice and a hundred Dollar bill, except that the number printed on it… along with the purchasing power of the amount?
Gold, on the other hand, isn’t Measured by what it trades for; rather, uniquely, it is quantified 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 ounce of Gold… regardless of 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 intrinsic quality… maybe not by buying electricity. Now, have you any idea of the value of an ounce of Dollars? No anything. Fiat is only ‘quantified’ by an ephemeral quantity… the number printed on it, ‘ the ‘face value’.
Bitcoin is farther away from being The numeraire; not only can it be a number, much as Fiat… but its value is measured in Fiat! Even though Bitcoin becomes internationally accepted as a medium of exchange, and even if it succeeds to replace the Dollar as the approved ‘numeraire’, it can never possess an intrinsic measure like Gold has. Gold is unique in being measured by a true, unchanging physical quantity. Gold is unique in storing worth for thousands of years. Nothing else in touch of humanity has this exceptional combination of qualities.