Bitcoins – Global Effect of Virtual Currencies

Bitcoin has a low risk of collapse Unlike traditional monies that rely on authorities. When currencies collapse, it contributes to hyperinflation or the wipeout of one’s savings in an instant. Bitcoin exchange rate is not regulated by any government and is an electronic money available globally.

Bitcoin is easy to carry. A billion Dollars in the Bitcoin can be saved on a memory stick and placed in one’s pocket. It’s that simple to transport Bitcoins compared to paper money.

The general Notion is that Bitcoins Are ‘mined’… intriguing term here… by solving an increasingly hard mathematical formula -harder as more Bitcoins are ‘mined’ into existence; again interesting- on a computer. Once established, the new Bitcoin is set into an electronic ‘wallet’. It’s then feasible to trade actual goods or Fiat money for Bitcoins… and vice versa. Additionally, since there is no central issuer of Bitcoins, it’s all highly dispersed, thus resistant to being ‘handled’ by authority.

Naturally proponents of Bitcoin, Those who profit from the growth of Bitcoin, insist rather loud that ‘for certain, Bitcoin is cash’… and not only that, but ‘it’s the best money , the money of their future’, etc.. . Well, the proponents of Fiat shout just as loudly that paper money is money… and we all know that Fiat paper is not cash by any means, as it lacks the most important attributes of genuine money. The issue then is does Bitcoin even be eligible as cash… never mind that 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 issuer. Dollars are no good in Europe etc.. Bitcoin is approved internationally. On the other hand, very few retailers now accept payment in Bitcoin. Until the acceptance grows , Fiat wins… although at the cost of trade between nations.

The first condition is 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 just a few decades. This is about as far from being a ‘stable store of value’; as you can buy! Truly, such gains are a perfect illustration of a speculative boom… like Dutch tulip bulbs, or real mining companies, or even Nortel stocks. We have covered a few basic things about bitcoin revolution, and they are essential to consider in your research. But is that all there is? Not by a long shot – you really can broaden your knowledge greatly, and we can help you. We believe they are terrific and will aid you in your quest for solutions. It really should not need to be said that you must conduct closer examination of all relevant points. But we have kept the best for last, and you will know what we mean as soon as you have read through.

Of course, Fiat fails here as well; For example, the US Dollar, the ‘main’ Fiat, has dropped over 95% of its worth in a couple of decades… neither fiat nor Bitcoin qualify at the most crucial measure of money; the capacity to store value and conserve value through time. Real money, that is Gold, has shown the capacity to hold value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as money.

Ultimately, we come to the second Feature; that of being the numeraire. Now this is really interesting, and we can see why both Bitcoin and Fiat neglect as cash, by looking closely at the question of their ‘numeraire’. Numeraire describes the usage of money to not only save worth, but to at a sense step, or compare worth. In Austrian economics, it’s considered impossible to actually quantify value; after all, value resides only in human comprehension… and how can anything else in consciousness really be quantified? But through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… if just briefly… and this market price is expressed concerning the numeraire, the most marketable good, that’s money.

So how do we set the value of Fiat… ? Through the concept of ‘buying power’… which is, the worth of Fiat is determined by what it can be traded for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no value of its own, but rather value flows from the worth of the 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 hundred Dollar invoice, except that the amount printed on it… along with the purchasing power of this number?

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