If you don’t understand what Bitcoin is, Do a little bit of research online, and you will receive plenty… but the brief Story is that Bitcoin was created as a medium of exchange, with no central bank Or bank of difficulty being involved. Furthermore, Bitcoin transactions are supposed To be personal, anonymous. Most interestingly, Bitcoins Don’t Have Any actual World existence; they exist only in computer applications, as a kind of virtual reality.
The general idea is that Bitcoins Are ‘mined’… interesting term here… by solving a difficult mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; yet again interesting- to a computer. Once created, the new Bitcoin is set into a digital ‘wallet’. It is then possible to exchange actual goods or Fiat money for Bitcoins… and vice versa. Furthermore, as there is not any central issuer of Bitcoins, it is all highly dispersed, hence resistant to being ‘handled’ by jurisdiction.
Naturally proponents of Bitcoin, Those who benefit from the development of Bitcoin, insist rather loudly that ‘for sure, Bitcoin is cash’… and not just that, but ‘it is the best money ever, the cash of the future’, etc.. . The proponents of Fiat shout just as loudly that paper currency is cash… and most of us know that Fiat newspaper is not cash by any means, as it lacks the most important attributes of genuine money. The question then is does Bitcoin even be eligible as cash… not mind it being the money of their future, or the best money ever. We want to say a quick word about our conversation re bitcoin revolution richard branson. What I have found is it really just depends on your goals and needs as it relates to your particular situation. Just be sure you choose those items that will serve your needs the most. How each one will play out in your situation is largely unknown, but we each have to consider that. The latter half of our discussion will center on a few highly pertinent issues as they concern your possible situation.
Compared to Fiat, Bitcoin doesn’t Do too badly as a medium of exchange. Fiat is only accepted in the geographic domain of its own issuer. Dollars aren’t any good in Europe etc.. Bitcoin is approved internationally. On the other hand, very few retailers currently accept payment in Bitcoin. Unless the acceptance grows , Fiat wins… although at the cost of exchange between countries.
The primary condition is a lot Tougher; cash has to be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to about $1,000, in just a few years. This is about as far away from being a ‘stable store of value’; since you can buy! Truly, such gains are a perfect example of a speculative boom… like Dutch tulip bulbs, or junior mining companies, or Nortel stocks.
Of course, Fiat fails as well; As an instance, the US Dollar, the ‘primary’ Fiat, has lost over 95% of its worth in a few decades… neither fiat nor Bitcoin qualify at the most important measure of money; the capacity to store value and preserve value through time. Actual money, that is Gold, has shown the ability to maintain value not just for centuries, except for eons. Neither Fiat nor Bitcoin has this critical capacity… both fail as money.
Ultimately, we come 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 money, by looking closely at the question of the ‘numeraire’. Numeraire describes the use of money to not just store worth, but to in a sense step, or compare worth. In Austrian economics, it is considered impossible to actually measure value; after all, value resides just in human consciousness… and how can anything else in consciousness actually be measured? Nevertheless, through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if just briefly… and this market price is expressed in terms of the numeraire, the most marketable good, that’s money.
So how do we establish the value of Fiat… ? Through the concept of ‘buying power’… that is, the worth 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 appreciate flows from the value of their goods and services it may be traded for. Causality flows from the merchandise ‘bought’ into the Fiat number. After all, what difference is there between a 1 Dollar bill and a trillion Dollar bill, except that the amount printed on it… along with the buying power of this amount?
Gold, on the other hand, is not Measured by what it deals for; rather, uniquely, it’s quantified by a different physical standard; by its weight, or mass. A gram of Gold is a gram of gold, and an ounce of Gold is an oz of Gold… regardless of 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 inherent quality… maybe not by buying electricity. Now, have you any idea of the value of an ounce of Dollars? No anything. Fiat is just ‘quantified’ with an ephemeral quantity… the amount printed on it, ‘ the ‘face value’.