Bitcoin has a low risk of collapse Unlike traditional monies that rely on authorities. When currencies fall, it contributes to hyperinflation or the wipeout of someone’s savings in an instant. 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 transfer Bitcoins compared to paper money.
The general Notion is that Bitcoins ‘ are ‘mined’… interesting term here… by solving an increasingly hard mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again intriguing- to a computer. Once established, the new Bitcoin is set into an electronic ‘wallet’. It is then feasible to exchange actual goods or Fiat money for Bitcoins… and vice versa. Additionally, since there’s no central issuer of Bitcoins, it is all highly dispersed, thus resistant to being ‘managed’ by authority.
Naturally proponents of Bitcoin, Those who profit from the growth of Bitcoin, insist rather loud that ‘for certain, Bitcoin is cash’… and not only that, but ‘it is the best money , the cash of the future’, etc.. . Well, the proponents of Fiat shout as loudly that paper currency is money… and we all know that Fiat paper isn’t cash by any means, as it lacks the most important attributes of real cash. The issue then is does Bitcoin even qualify as money… not mind that it being the money of the 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 are no good in Europe etc.. Bitcoin is approved internationally. On the flip side, very few retailers currently accept payment in Bitcoin. Unless the acceptance grows geometrically, Fiat wins… although at the cost of exchange between nations.
The primary condition is a great deal Tougher; money must be a stable store of value… now Bitcoins have gone from a ‘value’ of $3.00 to about $1,000, in just a few years. That is about as far from being a ‘stable store of value’; as you can get! Truly, such gains are a perfect example of a speculative boom… like Dutch tulip bulbs, or real mining companies, or Nortel stocks. The above really only just begins to scratch the surface of what is offered concerning bitcoin revolution. What I have realized is it really just depends on your goals and needs as it relates to your particular situation. Just be sure you pick those items that will serve your needs the most. The best approach is to try to imagine the effects each point could have on you. The latter half of our discussion will center on a few highly relevant issues as they concern your possible situation.
Naturally, Fiat fails here as well; As an instance, the US Dollar, the ‘main’ Fiat, has dropped over 95% of its value in a couple of decades… neither fiat nor Bitcoin qualify in the most important measure of cash; the capacity to store value and conserve value through time. Real money, which is Gold, has shown the ability to maintain value not only for centuries, except for eons. Neither Fiat nor Bitcoin has this critical capacity… both neglect as cash.
Ultimately, we come to the next Attribute; that of being the numeraire. This is actually intriguing, and we can see why both Bitcoin and Fiat neglect as money, by looking closely at the question of their ‘numeraire’. Numeraire describes the usage of money to not just save value, but to in a sense measure, or compare worth. In Austrian economics, it is considered impossible to actually measure value; after all, significance resides just in human comprehension… and how can anything else in consciousness really be quantified? But through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if only briefly… and this market price is expressed concerning the numeraire, the most marketable good, that is 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’. However, his clearly implies that Fiat has no significance of its own, rather appreciate flows from the worth 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 bill and a hundred Dollar bill, except that the amount printed on it… along with the buying power of the number?