If you don’t know what Bitcoin is, then Do a bit of research online, and you will get lots… but the brief Story is that Bitcoin was created as a medium of exchange, with no central bank Or bank of difficulty being included. Moreover, Bitcoin transactions are supposed To be personal, anonymous. Most interestingly, Bitcoins Don’t Have Any real World existence; they exist only in computer software, as a kind of virtual reality.
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 intriguing- to a computer. Once established, the new Bitcoin is set into an electronic ‘wallet’. It’s then feasible to exchange real goods or Fiat currency for Bitcoins… and vice versa. Furthermore, since there’s no central issuer of Bitcoins, it is all highly dispersed, hence resistant to being ‘managed’ by authority.
Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist fairly loudly that ‘for certain, Bitcoin is cash’… and not just that, but ‘it’s the best money ever, the cash of the future’, etc.. . The proponents of Fiat shout just as loudly that paper money is money… and we all know that Fiat newspaper isn’t cash by any means, as it lacks the main attributes of genuine money. The issue then is does Bitcoin even be eligible as money… not mind that it being the money of their near future, or the best money ever. We believe the above thoughts and suggestions must be taken into account in any conversation on bitcoin revolution richard branson. But is that all there is? Not by a long shot – you really can broaden your knowledge greatly, and we will help you. However, you will discover them to be of great utility in your search for information. Once your knowledge is more complete, then you will feel more self-confident about the subject. Keep reading because you do not want to miss these critical knowledge items.
Compared to Fiat, Bitcoin does not Do too badly as a medium of trade. Fiat is only accepted in the geographical domain of its issuer. Dollars aren’t any great in Europe etc.. Bitcoin is accepted internationally. On the flip side, not many retailers currently accept payment in Bitcoin. Unless the acceptance grows , Fiat wins… although in the cost of trade between countries.
The first condition is a lot 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 decades. This is about as far from being a ‘stable store of value’; as you can buy! Indeed, such profits are a perfect illustration of a speculative boom… like Dutch tulip bulbs, or real mining companies, or even Nortel stocks.
Of course, Fiat fails as well; For example, the US Dollar, the ‘primary’ Fiat, has dropped over 95% of its worth in a few decades… neither fiat nor Bitcoin qualify in the most important measure of money; the capacity to store value and preserve value through time. Real money, which is Gold, has shown the capacity to maintain value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this critical capacity… both fail as cash.
Ultimately, we return to the next Attribute; that of being the numeraire. This is actually intriguing, and we can see why both Bitcoin and Fiat fail as cash, by looking closely at the question of the ‘numeraire’. Numeraire describes the use of money to not just store value, but to in a sense step, or compare value. In Austrian economics, it is deemed impossible to really measure value; after all, significance resides only in human consciousness… and how can anything in understanding really be measured? But through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if only momentarily… and this market price is expressed concerning the numeraire, the most marketable good, that is money.
So how do we set the worth of Fiat… ? Through the idea of ‘purchasing power’… that is, the worth of Fiat is determined by what it can be traded for… a so called ‘basket of goods’. However, his clearly implies that Fiat has no value of its own, but instead appreciate flows from the worth of the goods and services it might 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 bill, except the number printed on it… along with the buying power of this number?
Gold, on the other hand, is not Quantified by what it trades for; instead, uniquely, it is quantified by a different physical benchmark; by 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 amount is engraved on its surface, ‘face value’ or differently. Causality is the opposite to that of Fiat; Gold is measured by weight, an intrinsic quality… maybe not by buying electricity. Now, have you really any notion of the worth of an oz of Dollars? No such thing. Fiat is just ‘quantified’ by an ephemeral quantity… the amount printed on it, ‘ the ‘face value’.