If you don’t understand what Bitcoin is, then Do a bit of research online, and you’ll get plenty… but the short Narrative is that Bitcoin was made as a medium of trade, with no central bank Or bank of difficulty being involved. Furthermore, Bitcoin transactions are assumed To be private, that is anonymous. Most interestingly, Bitcoins Don’t Have Any actual World presence; they exist only in computer applications, as a sort of virtual reality.
The general idea is that Bitcoins Are ‘mined’… intriguing term here… by solving a difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; yet again interesting- to a computer. Once created, the new Bitcoin is put into a digital ‘wallet’. It’s then possible to exchange real goods or Fiat currency for Bitcoins… and vice versa. Furthermore, as there is not any central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who profit from the growth of Bitcoin, insist fairly loudly that ‘for certain, Bitcoin is cash’… and not only that, but ‘it’s the best money , the cash of the future’, etc.. . Well, the proponents of all Fiat shout as loudly that paper money is cash… and most of us know that Fiat paper isn’t cash by any means, as it lacks the main attributes of real money. The issue then is does Bitcoin even qualify as cash… never mind it being the money of their 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 geographical domain of its own issuer. Dollars are no great in Europe etc.. Bitcoin is accepted internationally. On the flip side, not many retailers now accept payment in Bitcoin. Unless the approval grows geometrically, Fiat wins… although at the cost of trade between countries.
The first condition is a lot Tougher; money must be a stable store of value… today Bitcoins have gone from a ‘value’ of $3.00 to around $1,000, in just a couple years. That is about as far from being a ‘stable store of value’; since you can buy! Indeed, such profits are a perfect example of a speculative boom… like Dutch tulip bulbs, or real mining companies, or even Nortel stocks. Do you have any ideas at this stage? There is a great deal in the body of knowledge surrounding Bitcoins Wealth Review. You can find there’s much in common with topical areas directly resembling this one. A lot of things can have an impact, and you should expand your scope of knowledge. If you are unsure about what is required for you, then just take a better look at your specific situation. The rest of our talk will add more to what we have mentioned so far.
Naturally, Fiat fails here as well; For instance, the US Dollar, the ‘main’ Fiat, has lost 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. Actual money, which is Gold, has shown the capacity to hold value not just for centuries, except for eons. Neither Fiat nor Bitcoin has this critical capacity… both fail as cash.
Finally, we come to the next Feature; that of being the numeraire. This is really intriguing, and we can see why the two Bitcoin and Fiat neglect as money, by looking closely at the question of the ‘numeraire’. Numeraire describes the use of money to not only store worth, but to at a sense measure, or compare value. In Austrian economics, it is deemed impossible to really measure value; after all, value resides just in human consciousness… and how can anything in consciousness actually be quantified? Nevertheless, through the principle of Mengerian market action, that’s interaction between offer and bid, 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 establish the worth of Fiat… ? Through the idea of ‘buying 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, but rather appreciate flows from the value of their goods and services it might be traded for. Causality flows from the goods ‘bought’ into 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 purchasing power of the amount?
Gold, on the other hand, isn’t Measured by what it deals for; rather, uniquely, it is quantified by another physical benchmark; from its own weight, or mass. A g of Gold is a gram of gold, and an ounce of Gold is an ounce of Gold… regardless of what amount is engraved on its surface, ‘face value’ or differently. Causality is the contrary to that of Fiat; Gold is measured by weight, an intrinsic quality… maybe not by buying power. Now, have you any idea of the value of an ounce of Dollars? No anything. Fiat is only ‘measured’ by an ephemeral quantity… the amount printed on it, ‘ the ‘face value’.
Bitcoin is further away from being The numeraire; not only can it be a few, much as Fiat… but its worth is quantified in Fiat! Even if Bitcoin becomes internationally recognized as a medium of exchange, and even though it succeeds to replace the Dollar as the accepted ‘numeraire’, it can not have an intrinsic measure like Gold has. Gold is unique in being measured by a real, unchanging physical quantity. Gold is exceptional in storing value for thousands of years. Nothing else in reach of humanity has this exceptional blend of qualities.