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 a minute. Bitcoin exchange rate is not regulated by any government and is a digital currency available worldwide.
Bitcoin is easy to carry. A billion Dollars in the Bitcoin can be saved on a memory stick and placed in one’s pocket. It is so simple to transport Bitcoins compared to paper cash.
The general idea is that Bitcoins Are ‘mined’… interesting term here… by solving a difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; yet again interesting- on a computer. Once established, the new Bitcoin is put into a digital ‘wallet’. It is then feasible to trade real goods or Fiat money for Bitcoins… and vice versa. Additionally, as there is not any central issuer of Bitcoins, it’s all highly distributed, hence resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who benefit from the development of Bitcoin, insist fairly loudly that ‘for sure, Bitcoin is cash’… and not only that, but ‘it’s the best money , the money of the future’, etc.. . The proponents of Fiat shout as loudly that paper currency is cash… and we all know that Fiat newspaper is not cash by any means, as it lacks the main attributes of genuine money. The question then is does Bitcoin even qualify as cash… not mind it being the cash of their future, or the very best money .
Compared to Fiat, Bitcoin does not Do too badly as a medium of trade. Fiat is only accepted in the geographical domain of its own issuer. Dollars are no good in Europe etc.. Bitcoin is approved internationally. On the other hand, not many retailers currently accept payment in Bitcoin. Until the acceptance grows , Fiat wins… although at the cost of trade between countries.
The primary condition is a lot Tougher; cash must be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to around $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 profits are a perfect example of a speculative boom… such as Dutch tulip bulbs, or real mining companies, or Nortel stocks. We believe the above thoughts and tips must be taken into account in any conversation on bitcoin revolution. But there is a great deal more that you would do well to learn. It is difficult to ascertain all the different means by which they can serve you. Getting a high altitude snapshot will be of immense value to you. The rest of the document will provide you with a few more essential points to bear in mind.
Naturally, Fiat fails as well; As an instance, the US Dollar, the ‘main’ Fiat, has lost over 95 percent of its worth in a couple of decades… neither fiat nor Bitcoin qualify at the most important measure of cash; the capacity to store value and conserve value through time. Real money, that is Gold, has shown the ability to hold value not only for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as money.
Finally, we return to the second Attribute; this of being the numeraire. Now this is really interesting, and we can see why the two Bitcoin and Fiat fail as cash, by looking closely at the question of their ‘numeraire’. Numeraire describes the usage of cash to not just store worth, but to at a way measure, or compare value. In Austrian economics, it is deemed impossible to really quantify value; after all, significance resides only in human comprehension… and how can anything in consciousness actually be measured? But through the principle of Mengerian market action, that is interaction between offer and bid, market prices can be established… if only briefly… and this industry price is expressed concerning the numeraire, the most marketable good, that’s money.
So how do we set the value of Fiat… ? Through the idea of ‘purchasing power’… that is, the worth of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no value of its own, instead value flows from the value of their goods and services it may be traded for. Causality flows from the goods ‘purchased’ into the Fiat number. After all, what difference is there between a one Dollar invoice and a hundred Dollar invoice, except the number printed on it… along with the purchasing power of this number?