Bitcoin has a reduced 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 isn’t controlled by any government and is a digital currency available worldwide.
Bitcoin isn’t hard to carry. A billion Dollars in the Bitcoin can be stored in a memory stick and placed in one’s pocket. It is so easy to transport Bitcoins compared to paper cash.
The general idea is that Bitcoins ‘ are ‘mined’… intriguing expression here… by solving an increasingly hard mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; yet again intriguing- on a computer. Once created, the new Bitcoin is set into a digital ‘wallet’. It is then feasible to trade real goods or Fiat money for Bitcoins… and vice versa. Furthermore, since there is no central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘handled’ by jurisdiction.
Naturally proponents of Bitcoin, Those who profit from the growth of Bitcoin, insist fairly loudly that ‘for sure, Bitcoin is cash’… and not only that, but ‘it is the best money , the money of their future’, etc.. . The proponents of all Fiat shout just as loudly that paper money is cash… and most of us know that Fiat newspaper isn’t money by any means, as it lacks the most important attributes of real money. The issue then is does Bitcoin even be eligible as money… not mind that it being the cash of their future, or the best money .
Compared to Fiat, Bitcoin doesn’t 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 accepted internationally. On the other hand, not many retailers now accept payment in Bitcoin. Unless the approval grows geometrically, Fiat wins… although in the cost of trade between countries.
The first condition is that a great deal Tougher; cash must be a stable store of value… now Bitcoins have gone from a ‘value’ of $3.00 to about $1,000, in just a couple years. That is about as far from being a ‘stable store of value’; since you can get! Truly, such profits are a perfect illustration of a speculative boom… such as Dutch tulip bulbs, or real mining companies, or even Nortel stocks. The effects of bitcoin revolution software, not only on you but many others, is a fact that has to be recognized. Sometimes there is simply way too much to even try to cover in one go, and that is important for you to recognize and take home. That is really a lot when you think about it, so just the briefest instant to mention something. This is significant information that can help you, and there is no questioning that. The last remaining areas for discussion may be even more important.
Naturally, Fiat fails here as well; For instance, the US Dollar, the ‘primary’ Fiat, has dropped over 95 percent 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 conserve value through time. Actual money, that is Gold, has shown the capacity to maintain value not only for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as cash.
Ultimately, we return to the next Feature; that of being the numeraire. Now this is actually interesting, and we can see why the two Bitcoin and Fiat fail as cash, by looking closely at the question of the ‘numeraire’. Numeraire refers to the usage of money to not only store worth, but to in a way step, or compare value. In Austrian economics, it’s deemed impossible to really quantify value; after all, value resides just in human comprehension… and how can anything in consciousness really be measured? But through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if just momentarily… and this industry 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 ‘buying power’… that is, the worth of Fiat depends upon what it can be traded for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no significance of its own, but instead appreciate 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 1 Dollar bill and a hundred Dollar bill, except that the number printed on it… and the purchasing power of the amount?