Bitcoin has a low risk of collapse Unlike traditional monies that rely on governments. When currencies collapse, it leads to hyperinflation or the wipeout of one’s savings in an instant. Bitcoin exchange rate is not regulated 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 on a memory stick and placed in one’s pocket. It’s that easy to transport Bitcoins compared to paper money.
The general idea is that Bitcoins Are ‘mined’… interesting term here… by solving a hard mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again interesting- to a computer. Once created, the new Bitcoin is set into a digital ‘wallet’. It is then feasible to trade actual goods or Fiat currency for Bitcoins… and vice versa. Furthermore, as there is no central issuer of Bitcoins, it’s all highly dispersed, thus resistant to being ‘managed’ by jurisdiction.
Naturally proponents of Bitcoin, Those who profit from the development of Bitcoin, insist fairly loud that ‘for certain, Bitcoin is cash’… and not only that, but ‘it’s the best money ever, the money of their future’, etc.. . Well, the proponents of Fiat shout just as loudly that paper money is money… and we all know that Fiat newspaper is not money 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 very best money ever.
Compared to Fiat, Bitcoin does not Do too badly as a medium of trade. Fiat is only accepted in the geographic domain of its own issuer. Dollars aren’t any great in Europe etc.. Bitcoin is accepted internationally. On the flip side, very few retailers currently accept payment in Bitcoin. Unless 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… 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 from being a ‘stable store of value’; since you can get! Indeed, such gains are a perfect example of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or Nortel stocks. There simply is no denying about the ability of bitcoin revolution software to dramatically alter some situations is incredible. We do recognize very well that your situation is really important and matters a great deal. There is a lot, we know, and that is why we are taking a very short break to say a few words about this. We are highly certain about the ability of what we offer, today, to create a difference. Our last few items can really prove to be highly effective considering the overall.
Naturally, Fiat fails here as well; As an example, the US Dollar, the ‘primary’ Fiat, has dropped over 95% of its worth in a couple of decades… neither fiat nor Bitcoin qualify at the most important measure of money; the capacity to store value and preserve value through time. Real money, that is Gold, has shown the ability to maintain value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this critical capacity… both neglect as cash.
Ultimately, we come to the second Attribute; that of being the numeraire. Now this is really intriguing, 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 cash to not just save worth, but to in a way measure, or compare worth. In Austrian economics, it is considered impossible to actually quantify value; after all, significance resides only in human comprehension… and how can anything in understanding really be quantified? But through the principle of Mengerian market action, that’s interaction between offer and bid, market prices can be established… if only 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 ‘purchasing power’… that is, the value of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. However, his clearly implies that Fiat has no significance of its own, rather value flows from the worth of the goods and services it might be exchanged for. Causality flows from the merchandise ‘bought’ into the Fiat number. After all, what difference is there between a one Dollar invoice and a trillion Dollar invoice, except that the amount printed on it… and the purchasing power of the number?