If you do not know what Bitcoin is, Do a bit of research on the internet, and you will receive lots… but the short Story is that Bitcoin was made as a medium of trade, without a central bank Or bank of issue being included. Moreover, Bitcoin transactions are assumed To be personal, that is anonymous. Most interestingly, Bitcoins have no actual World existence; they exist only in computer applications, as a sort of virtual reality.
The general idea is that Bitcoins ‘ are ‘mined’… interesting expression here… by solving an increasingly hard mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again intriguing- to a computer. Once created, the new Bitcoin is put into a digital ‘wallet’. It is then feasible to exchange real goods or Fiat money for Bitcoins… and vice versa. Furthermore, as there is no central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist rather loud that ‘for sure, Bitcoin is cash’… and not only that, but ‘it is the best money ever, the cash of their future’, etc.. . The proponents of all Fiat shout as loudly that paper currency is money… and we all know that Fiat newspaper is not money by any means, as it lacks the main attributes of genuine money. The issue then is does Bitcoin even qualify as cash… never mind it being the money of their near 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 difficult to cover all possible examples simply because there is so much concerned. That is really a good deal when you think about it, so just the briefest moment to mention something. We are highly certain about the ability of what we offer, today, to create a difference. The balance of this article is not to be overlooked since it can make a huge difference.
Compared to Fiat, Bitcoin doesn’t Do too badly as a medium of exchange. Fiat is only accepted in the geographical domain of its own 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. Until the approval grows , Fiat wins… although at the cost of trade between nations.
The first condition is a lot Tougher; money has to be a stable store of value… now 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 buy! Indeed, such gains are a perfect illustration of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or even Nortel stocks.
Naturally, Fiat fails here as well; As an example, the US Dollar, the ‘primary’ Fiat, has dropped over 95% of its value in a few decades… neither fiat nor Bitcoin qualify at the most crucial measure of cash; the capacity to store value and conserve value through time. Real money, which is Gold, has shown the capacity to maintain value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this critical capacity… both fail as money.
Ultimately, we return to the second Attribute; that of being the numeraire. Now this is really intriguing, and we can see why both Bitcoin and Fiat neglect as cash, by looking closely at the question of their ‘numeraire’. Numeraire describes the use of cash to not only store worth, but to in a way measure, or compare worth. In Austrian economics, it is considered impossible to really quantify value; after all, significance resides only in human comprehension… and how can anything in consciousness actually be measured? But through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if only briefly… and this market price is expressed in terms of the numeraire, the most marketable good, that is money.
So how do we set the value of Fiat… ? Through the concept of ‘purchasing power’… which is, the worth of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. However, his clearly suggests that Fiat has no value of its own, but instead value flows from the worth of their goods and services it may be exchanged for. Causality flows from the merchandise ‘bought’ into the Fiat number. After all, what difference is there between a 1 Dollar bill and a hundred Dollar bill, except that the number printed on it… along with the buying power of the number?
Gold, on the other hand, isn’t Quantified by what it trades for; instead, uniquely, it is measured by a different physical benchmark; from its weight, or mass. A g of Gold is a gram of gold, and an ounce of Gold is an oz of Gold… no matter what number is engraved on its surface, ‘face value’ or otherwise. 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 worth of an oz of Dollars? No anything. Fiat is only ‘measured’ by an ephemeral quantity… the number printed on it, ‘ the ‘face value’.