Bitcoin has a reduced risk of collapse Unlike traditional currencies that rely on authorities. When currencies fall, it contributes to hyperinflation or the wipeout of someone’s savings in a minute. Bitcoin exchange rate isn’t controlled by any government and is an electronic currency available worldwide.
Bitcoin isn’t hard to carry. A billion Dollars in the Bitcoin can be saved in a memory stick and placed in one’s pocket. It is so simple to transport Bitcoins compared to paper money.
The general Notion is that Bitcoins ‘ are ‘mined’… intriguing 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 exchange real goods or Fiat money for Bitcoins… and vice versa. Additionally, as there’s no central issuer of Bitcoins, it is all highly distributed, hence resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who profit 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 money of the future’, etc.. . Well, the proponents of Fiat shout as loudly that paper currency is cash… and we all know that Fiat paper isn’t cash by any means, as it lacks the most important attributes of real cash. The issue then is does Bitcoin even qualify as cash… not mind it being the money of their near future, or the best money .
Compared to Fiat, Bitcoin does not Do too badly as a medium of trade. Fiat is only accepted in the geographic domain of its issuer. Dollars are no good in Europe etc.. Bitcoin is approved internationally. On the flip side, not many retailers currently accept payment in Bitcoin. Unless the approval grows , Fiat wins… although in the cost of trade between nations.
The primary condition is a great deal Tougher; money has to be a stable store of value… today Bitcoins have gone from a ‘value’ of $3.00 to about $1,000, in only a couple years. That is about as far from being a ‘stable store of value’; as you can get! Indeed, such gains are a perfect illustration of a speculative boom… like Dutch tulip bulbs, or real mining companies, or Nortel stocks. We believe the above thoughts and suggestions must be taken into account in any discussion on bitcoin revolution. But there is so much more that you would do well to study. We believe you will find them to be beneficial in a lot of ways. However, we always stress that anyone takes a closer look at the general big picture as it applies to this subject. But we have kept the best for last, and you will understand what we mean as soon as you have read through.
Naturally, Fiat fails here as well; For example, the US Dollar, the ‘primary’ Fiat, has dropped over 95% of its value in a couple of decades… neither fiat nor Bitcoin qualify at 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, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as money.
Finally, we return to the next Attribute; this of being the numeraire. Now this is actually intriguing, 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 use of money to not just store value, but to at a sense step, or compare worth. In Austrian economics, it’s considered impossible to actually measure value; after all, significance resides only in human consciousness… and how can anything in consciousness actually be measured? Nevertheless, through the principle of Mengerian market action, that is interaction between offer and bid, market prices can be established… if just momentarily… and this industry price is expressed in terms of the numeraire, the most marketable good, that is money.
So how do we establish the worth 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’. However, his clearly suggests that Fiat has no value of its own, instead value flows from the worth of their goods and services it may 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 invoice, except that the number printed on it… along with the buying power of the number?