The general idea is that Bitcoins Are ‘mined’… interesting term here… by solving an increasingly difficult mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again intriguing- on a computer. Once established, the new Bitcoin is put into a digital ‘wallet’. It is then feasible to exchange actual goods or Fiat currency for Bitcoins… and vice versa. Additionally, since there is no central issuer of Bitcoins, it’s all highly distributed, thus resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who profit from the development of Bitcoin, insist rather loudly that ‘for sure, Bitcoin is money’… and not only that, but ‘it is the best money , the money of their future’, etc.. . The proponents of all Fiat shout just as loudly that paper currency is money… and we all know that Fiat newspaper isn’t cash by any means, as it lacks the most important attributes of real cash. The question then is does Bitcoin even qualify as money… not mind it being the cash of the near future, or the best money ever.
Compared to Fiat, Bitcoin does not Do too badly as a medium of exchange. 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 other hand, very few retailers now accept payment in Bitcoin. Until the acceptance grows geometrically, Fiat wins… although at the cost of exchange between nations.
The first condition is a lot Tougher; money must be a stable store of value… now Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in only a few decades. This is about as far away from being a ‘stable store of value’; since you can get! Indeed, such gains are a perfect illustration of a speculative boom… like Dutch tulip bulbs, or real mining companies, or even Nortel stocks. What have just discussed is crucial for your understanding about bitcoin revolution app, but there is much more to think about. They are by no means all there is to know as you will easily discover. We feel you will find them to be very helpful in a lot of ways. Gaining a high altitude overview will be of immense value to you. So we will provide you with a few more important points to think about.
Naturally, Fiat fails here as well; For example, the US Dollar, the ‘primary’ Fiat, has lost over 95% of its value in a couple of decades… neither fiat nor Bitcoin qualify in the most crucial measure of money; the capacity to store value and preserve value through time. Actual money, which is Gold, has shown the ability to hold value not just 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 the two Bitcoin and Fiat neglect as cash, by looking closely at the question of the ‘numeraire’. Numeraire refers to the usage of money to not just save value, but to in a way measure, or compare value. In Austrian economics, it is considered impossible to really quantify value; after all, significance resides just in human consciousness… and how can anything in understanding really be measured? Nevertheless, through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if only momentarily… and this market price is expressed in terms of the numeraire, the most marketable good, that’s money.
So how do we establish the value of Fiat… ? Through the concept of ‘buying power’… which is, the value of Fiat depends upon what it can be traded for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no significance of its own, but rather value flows from the worth of their goods and services it might be traded for. Causality flows from the merchandise ‘purchased’ into the Fiat number. After all, what difference is there between a 1 Dollar invoice and a hundred Dollar invoice, except the amount printed on it… along with the buying power of this amount?
Gold, on the other hand, isn’t Measured by what it deals for; instead, uniquely, it is quantified by another physical standard; from 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 contrary to that of Fiat; Gold is measured by weight, an inherent quality… not by purchasing power. Now, have you any notion of the value of an ounce of Dollars? No such thing. Fiat is just ‘quantified’ by an ephemeral quantity… the number printed on it, ‘ the ‘face value’.
Bitcoin is further away from being The numeraire; not just is it simply a number, much as Fiat… but its value is measured in Fiat! Even though Bitcoin becomes internationally accepted as a medium of exchange, and even though it manages to replace the Dollar as the approved ‘numeraire’, it can not have an intrinsic measure like Gold has. Gold is exceptional in being measured by a real, unchanging physical quantity. Gold is unique in preserving value for thousands of years. Nothing else in reach of humanity has this exceptional blend of attributes.