Bitcoin has a low risk of collapse Unlike traditional currencies that rely on governments. When currencies fall, it leads to hyperinflation or the wipeout of one’s savings in an instant. Bitcoin exchange rate is not controlled by any government and is an electronic currency available worldwide.
Bitcoin isn’t hard to carry. A billion Bucks in the Bitcoin can be saved in a memory stick and placed in one’s pocket. It is so easy to transport Bitcoins compared to paper money.
The general idea is that Bitcoins ‘ are ‘mined’… interesting expression here… by solving an increasingly hard mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; yet again interesting- on a computer. Once established, the new Bitcoin is set into an electronic ‘wallet’. It’s then possible to exchange actual goods or Fiat currency for Bitcoins… and vice versa. Furthermore, since there’s not any central issuer of Bitcoins, it is all highly dispersed, thus resistant to being ‘managed’ by authority.
Naturally proponents of Bitcoin, Those who profit from the development of Bitcoin, insist fairly loudly that ‘for certain, Bitcoin is money’… and not only that, but ‘it’s the best money ever, the money of the future’, etc.. . Well, the proponents of all Fiat shout just as loudly that paper currency is money… and most of us know that Fiat newspaper isn’t cash by any means, as it lacks the most important attributes of genuine money. The issue then is does Bitcoin even be eligible as cash… never mind it being the money of their near future, or the best money ever.
Compared to Fiat, Bitcoin does not Do too badly as a medium of exchange. Fiat is only accepted in the geographical domain of its issuer. Dollars aren’t any great in Europe etc.. Bitcoin is approved internationally. On the flip side, not many retailers currently accept payment in Bitcoin. Unless the approval grows geometrically, Fiat wins… although in the cost of trade between nations.
The first condition is a lot Tougher; money has to be a stable store of value… today Bitcoins have gone from a ‘value’ of $3.00 to around $1,000, in just a couple decades. That is about as far from being a ‘stable store of value’; since you can buy! Indeed, such gains are an ideal illustration of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or Nortel stocks. All right, we have reviewed the first couple of points concerning bitcoin revolution, of course you recognize they play an important role. Of course we strongly suggest you learn more about them. We believe you will find them to be beneficial in a lot of ways. However, we always stress that anyone takes a closer examination at the general big picture as it relates to this subject. Keep reading because you do not want to miss these crucial knowledge items.
Naturally, Fiat fails here as well; As an example, the US Dollar, the ‘primary’ Fiat, has dropped over 95% of its worth in a few decades… neither fiat nor Bitcoin qualify in the most crucial measure of cash; the capacity to store value and conserve value through time. Actual money, which is Gold, has shown the capacity to hold value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as cash.
Ultimately, we come to the next Feature; this of being the numeraire. Now this is actually intriguing, and we can see why both Bitcoin and Fiat neglect as cash, by looking closely at the question of the ‘numeraire’. Numeraire describes the usage of cash to not just store value, but to at a sense step, or compare worth. In Austrian economics, it’s deemed impossible to actually measure value; after all, significance resides just in human comprehension… and how can anything else in consciousness actually be measured? Nevertheless, through the principle of Mengerian market action, that’s interaction between bid and offer, market prices can be established… if just briefly… and this industry price is expressed concerning the numeraire, the most marketable good, that is money.
So how do we establish the worth of Fiat… ? Through the idea of ‘buying power’… which is, the value of Fiat is determined by what it can be exchanged for… a so called ‘basket of goods’. But his clearly implies that Fiat has no significance of its own, but rather appreciate flows from the value of their goods and services it might be traded for. Causality flows from the goods ‘purchased’ to the Fiat number. After all, what difference is there between a one Dollar invoice and a trillion Dollar bill, except that the number printed on it… along with the buying power of the number?