The general idea is that Bitcoins Are ‘mined’… interesting term here… by solving a difficult mathematical formula -more difficult 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 is then possible to exchange actual goods or Fiat money for Bitcoins… and vice versa. Furthermore, as there is no central issuer of Bitcoins, it’s all highly distributed, hence resistant to being ‘managed’ by jurisdiction.
Naturally proponents of Bitcoin, Those who benefit from the development of Bitcoin, insist rather loudly that ‘for certain, Bitcoin is cash’… and not just that, but ‘it’s the best money ever, the money of the future’, etc.. . Well, the proponents of Fiat shout as loudly that paper currency is money… and most of us know that Fiat newspaper isn’t cash by any means, as it lacks the most important attributes of genuine cash. The question then is does Bitcoin even be eligible as money… not mind it being the money of the 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 geographic domain of its own issuer. Dollars aren’t any good in Europe etc.. Bitcoin is accepted internationally. On the flip side, very few retailers currently accept payment in Bitcoin. Until the acceptance grows geometrically, Fiat wins… although at the cost of exchange between countries.
The first condition is that a lot Tougher; cash has to be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in only a few years. This 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 Nortel stocks. What have just discussed is crucial for your understanding about bitcoin revolution software, but there is much more to think about. There is a remarkable amount you truly should take the time to know about. It is difficult to determine all the various means by which they can serve you. Gaining a high altitude snapshot will be of immense value to you. Keep reading because you do not want to miss these crucial knowledge items.
Of course, Fiat fails here as well; As an example, the US Dollar, the ‘main’ Fiat, has lost over 95 percent of its value in a couple of decades… neither fiat nor Bitcoin qualify at the most important measure of cash; the capacity to store value and preserve value through time. Actual money, that is Gold, has shown the capacity to maintain value not only for centuries, except for eons. Neither Fiat nor Bitcoin has this critical capacity… both fail as money.
Ultimately, we return to the next Feature; this of being the numeraire. This is actually interesting, 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 only save value, but to in a sense step, or compare worth. In Austrian economics, it’s considered impossible to actually quantify value; after all, value resides only in human consciousness… and how can anything in understanding actually be measured? Nevertheless, through the principle of Mengerian market action, that’s 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 establish the worth of Fiat… ? Through the idea of ‘purchasing 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 significance of its own, instead value flows from the worth of their goods and services it may be traded for. Causality flows from the merchandise ‘purchased’ to the Fiat number. After all, what difference is there between a one Dollar invoice and a hundred Dollar bill, except that the amount printed on it… along with the purchasing power of the amount?
Gold, on the other hand, is not Quantified by what it deals for; instead, uniquely, it’s measured by a different physical benchmark; from its own weight, or mass. A gram of Gold is a gram of gold, and an ounce of Gold is an ounce of Gold… no matter what number is engraved on its surface, ‘face value’ or otherwise. Causality is the contrary to that of Fiat; Gold is measured by weight, an inherent quality… not by buying power. Now, have you any idea of the value of an oz of Dollars? No such thing. Fiat is only ‘measured’ with an ephemeral quantity… the number 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 value is quantified in Fiat! Even though Bitcoin becomes internationally recognized as a medium of trade, 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 unique in being measured by a true, unchanging physical quantity. Gold is unique in storing worth for centuries. Nothing else in reach of humankind has this unique combination of attributes.