The general idea is that Bitcoins ‘ are ‘mined’… intriguing expression here… by solving a difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; yet again intriguing- on a computer. Once created, the new Bitcoin is put into an electronic ‘wallet’. It’s then feasible to trade actual goods or Fiat currency for Bitcoins… and vice versa. Furthermore, since there’s no central issuer of Bitcoins, it is all highly distributed, hence resistant to being ‘managed’ by jurisdiction.
Naturally proponents of Bitcoin, Those who profit from the growth of Bitcoin, insist rather loud that ‘for certain, Bitcoin is money’… and not just that, but ‘it’s the best money , the cash of the future’, etc.. . The proponents of all Fiat shout just as loudly that paper money 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 issue then is does Bitcoin even qualify as cash… not mind it being the money of their future, or the very best money ever.
Compared to Fiat, Bitcoin doesn’t Do too badly as a medium of trade. Fiat is only accepted in the geographical domain of its own issuer. Dollars aren’t any good in Europe etc.. Bitcoin is accepted internationally. On the flip side, not many retailers now accept payment in Bitcoin. Unless the acceptance grows , Fiat wins… although at the cost of trade between nations.
The primary condition is that a lot Tougher; money has to be a stable store of value… today Bitcoins have gone from a ‘value’ of $3.00 to about $1,000, in only a couple decades. That is about as far from being a ‘stable store of value’; since you can buy! Truly, such profits are a perfect example of a speculative boom… like Dutch tulip bulbs, or real mining companies, or even Nortel stocks. The relative effect of bitcoin revolution app on your situation can be dramatic and cause issues of all varieties. At times there is simply way too much to even attempt to cover in one go, and that is important for you to realize and take home. So we feel this is just an ideal time to take a break and examine what has just been covered. We are highly confident about the ability of what we offer, today, to make a difference. The last outstanding areas for discussion may be even more important.
Naturally, Fiat fails here as well; As an instance, the US Dollar, the ‘main’ 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. Actual money, that is Gold, has shown the ability to maintain value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this critical capacity… both fail as money.
Ultimately, we return to the next Attribute; that of being the numeraire. This is actually interesting, and we can see why both Bitcoin and Fiat fail as cash, by looking closely at the question of their ‘numeraire’. Numeraire refers to the use of money to not only save worth, but to in a sense measure, or compare worth. In Austrian economics, it is considered impossible to actually quantify value; after all, value resides only in human comprehension… and how can anything else in understanding actually be measured? But through the principle of Mengerian market action, that’s interaction between offer and bid, market prices can be established… if only momentarily… and this industry price is expressed concerning the numeraire, the most marketable good, that’s money.
So how do we set the worth of Fiat… ? Through the idea of ‘buying power’… which is, the value of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. However, his clearly suggests that Fiat has no value of its own, but instead 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 1 Dollar invoice and a trillion Dollar invoice, except that the amount printed on it… along with the buying power of this number?
Gold, on the other hand, is not Measured by what it trades for; rather, uniquely, it is measured by a different physical benchmark; by its own weight, or mass. A g of Gold is a gram of gold, and an ounce of Gold is an oz of Gold… regardless of what amount is engraved on its surface, ‘face value’ or otherwise. Causality is the opposite to that of Fiat; Gold is measured by weight, an intrinsic quality… not by buying electricity. Now, have you any notion of the worth of an ounce of Dollars? No such thing. Fiat is only ‘quantified’ with an ephemeral quantity… the amount printed on it, ‘ the ‘face value’.
Bitcoin is farther away from being The numeraire; not only can it be a number, much as Fiat… but its worth is measured in Fiat! Even though Bitcoin becomes internationally accepted as a medium of exchange, and even if it manages to replace the Dollar as the approved ‘numeraire’, it can not possess an intrinsic measure like Gold has. Gold is exceptional in being measured by a true, unchanging physical quantity. Gold is unique in preserving worth for centuries. Nothing else in reach of humankind has this exceptional combination of attributes.