The general Notion is that Bitcoins ‘ are ‘mined’… interesting term here… by solving a difficult mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again intriguing- on a computer. Once created, the new Bitcoin is put into a digital ‘wallet’. It’s then possible to trade actual goods or Fiat money for Bitcoins… and vice versa. Additionally, as there is not any central issuer of Bitcoins, it’s all highly distributed, hence resistant to being ‘handled’ by jurisdiction.
Naturally proponents of Bitcoin, Those who profit from the growth of Bitcoin, insist rather loudly that ‘for sure, Bitcoin is cash’… and not just that, but ‘it is the best money , the money of their 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 be eligible as money… not mind that 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 trade. Fiat is only accepted in the geographical domain of its own issuer. Dollars are no great in Europe etc.. Bitcoin is approved internationally. On the flip side, very few retailers now accept payment in Bitcoin. Until the approval grows geometrically, Fiat wins… although in the cost of exchange between nations.
The first condition is that a great deal Tougher; cash has to be a stable store of value… now Bitcoins have gone from a ‘value’ of $3.00 to around $1,000, in just a few decades. This is about as far from being a ‘stable store of value’; as you can buy! Indeed, such gains are a perfect example of a speculative boom… such as Dutch tulip bulbs, or junior mining companies, or even Nortel stocks. The effects of bitcoin revolution, not only on you but many others, is a fact that has to be acknowledged. There are so many scenarios and variations – twists and turns, that hopefully you see how difficult it can be to cover all bases. But I wanted to pause for a moment so you can reflect on the value of what you have just read. This is the type of content that men and women need to know about, and we have no problems saying that. If you continue, we know you will not be unhappy with what we have to offer in this article.
Of course, Fiat fails here as well; For instance, the US Dollar, the ‘primary’ Fiat, has lost over 95% of its value in a few decades… neither fiat nor Bitcoin qualify at the most crucial 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 return to the next Attribute; that of being the numeraire. Now this is actually interesting, and we can see why the two Bitcoin and Fiat fail as cash, by looking closely at the question of the ‘numeraire’. Numeraire describes the usage of money to not just save worth, but to at a way step, or compare worth. In Austrian economics, it’s deemed impossible to really quantify value; after all, significance resides just in human comprehension… and how can anything else in consciousness really be quantified? Nevertheless, through the principle of Mengerian market action, that’s interaction between offer and bid, 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 establish the value of Fiat… ? Through the idea of ‘purchasing power’… which is, the worth of Fiat is determined by what it can be traded for… a so called ‘basket of goods’. However, his clearly suggests that Fiat has no value of its own, instead value flows from the worth of the goods and services it might be traded for. Causality flows from the goods ‘purchased’ into the Fiat number. After all, what difference is there between a one Dollar bill and a hundred Dollar bill, except the number printed on it… and the purchasing power of the number?
Gold, on the other hand, isn’t Measured by what it deals for; instead, uniquely, it’s quantified by a different physical standard; 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 contrary to that of Fiat; Gold is measured by weight, an intrinsic quality… maybe not by purchasing electricity. Now, have you really any idea of the value of an oz of Dollars? No such thing. Fiat is only ‘measured’ by an ephemeral quantity… the number printed on it, the ‘face value’.
Bitcoin is farther away from being The numeraire; not just is it simply a few, much as Fiat… but its value is measured in Fiat! Even though Bitcoin becomes internationally recognized as a medium of trade, and even if it manages to replace the Dollar as the accepted ‘numeraire’, it can never possess an intrinsic measure like Gold has. Gold is exceptional in being quantified by a true, unchanging physical quantity. Gold is exceptional in storing worth for thousands of years. Nothing else in reach of humankind has this unique blend of qualities.