The general Notion is that Bitcoins Are ‘mined’… interesting expression here… by solving an increasingly hard mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; yet again interesting- to a computer. Once established, the new Bitcoin is put into an electronic ‘wallet’. It is then possible to trade actual goods or Fiat currency for Bitcoins… and vice versa. Furthermore, since there’s not any central issuer of Bitcoins, it is all highly distributed, hence resistant to being ‘handled’ by authority.
Naturally proponents of Bitcoin, Those who profit from the development of Bitcoin, insist rather loudly that ‘for certain, Bitcoin is money’… and not just that, but ‘it is the best money , the cash of their future’, etc.. . Well, the proponents of all Fiat shout as loudly that paper money is cash… and most of us know that Fiat newspaper is not money by any means, as it lacks the main attributes of real money. The question then is does Bitcoin even be eligible as money… never mind it being the money of their future, or the best money .
Compared to Fiat, Bitcoin doesn’t Do too badly as a medium of exchange. Fiat is only accepted in the geographical domain of its issuer. Dollars aren’t any great in Europe etc.. Bitcoin is approved internationally. On the other hand, not many retailers now accept payment in Bitcoin. Unless the acceptance grows , Fiat wins… although in the cost of exchange between nations.
The first condition is that a lot Tougher; money must be a stable store of value… now Bitcoins have gone from a ‘value’ of $3.00 to around $1,000, in only a few years. That is about as far away from being a ‘stable store of value’; as you can get! Indeed, such profits are an ideal example of a speculative boom… such as Dutch tulip bulbs, or real mining companies, or Nortel stocks. As we have just stated, bitcoin revolution software is something that cannot be ignored – or at least should never be ignored. No one really can effectively address all the different circumstances that could arise with this particular topic. We will commence the rest of our conversation right away, but sometimes you have to stop and let issues sink in a little bit. In light of all that is offered, and there is a lot, then this is a perfect time to be reading this. The balance of this document is not to be overlooked since it can make a huge difference.
Naturally, Fiat fails as well; As an example, the US Dollar, the ‘primary’ Fiat, has lost over 95% of its value in a few 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, that is Gold, has shown the ability to maintain value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as cash.
Finally, we come to the next Attribute; this of being the numeraire. Now this is really interesting, and we can see why the two Bitcoin and Fiat neglect as cash, by looking closely at the question of their ‘numeraire’. Numeraire describes the usage of cash to not only save worth, but to at a sense step, or compare value. In Austrian economics, it is considered impossible to really measure value; after all, significance resides just in human comprehension… and how can anything in understanding actually be measured? But through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if just momentarily… and this market price is expressed concerning the numeraire, the most marketable good, that’s money.
So how do we establish the value 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, rather appreciate flows from the worth of their goods and services it may be exchanged for. Causality flows from the merchandise ‘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 the amount?
Gold, on the other hand, is not Measured by what it deals for; instead, uniquely, it is measured by another physical standard; from its 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 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 purchasing electricity. Now, have you really any notion of the value of an oz of Dollars? No such thing. Fiat is just ‘measured’ by an ephemeral quantity… the amount printed on it, ‘ the ‘face value’.
Bitcoin is farther away from being The numeraire; not only can it be simply a few, much as Fiat… but its value is measured in Fiat! Even if Bitcoin becomes internationally recognized as a medium of exchange, and even though it succeeds to replace the Dollar as the approved ‘numeraire’, it can never possess an intrinsic measure like Gold has. Gold is exceptional in being measured by a true, unchanging physical quantity. Gold is exceptional in storing value for centuries. Nothing else in reach of humanity has this unique blend of qualities.