A Simple Introduction to Bitcoin

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

Bitcoin isn’t hard to carry. A billion Bucks in the Bitcoin can be stored on a memory stick and placed in one’s pocket. It’s that simple to transfer Bitcoins compared to paper money.

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

Naturally proponents of Bitcoin, Those who profit from the growth of Bitcoin, insist fairly loudly that ‘for certain, Bitcoin is money’… and not only that, but ‘it’s the best money , the cash of the future’, etc.. . The proponents of Fiat shout just as loudly that paper currency is cash… and we all know that Fiat newspaper is not cash by any means, as it lacks the most important attributes of genuine money. The question then is does Bitcoin even be eligible as cash… not mind that it being the money of their 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 issuer. Dollars are no good in Europe etc.. Bitcoin is accepted internationally. On the flip side, very few retailers now accept payment in Bitcoin. Until the acceptance grows , Fiat wins… although in the cost of trade between countries.

The first condition is a great deal Tougher; cash has to be a stable store of value… now Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in only a couple decades. This is about as far away from being a ‘stable store of value’; as you can buy! Truly, such profits are a perfect example of a speculative boom… such as Dutch tulip bulbs, or junior mining companies, or Nortel stocks. Hopefully it is very clear that bitcoin revolution app is something that can have quite an impact on you and others, too. There are so many scenarios and variations – twists and turns, that hopefully you see how difficult it can be to include all bases. That is really a good deal when you think about it, so just the briefest instant to mention something. In light of all that is available, and there is a lot, then this is a great time to be reading this. The balance of this document is not to be overlooked since it can make a huge difference.

Of course, Fiat fails as well; For instance, 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 conserve value through time. Actual money, which is Gold, has shown the capacity to maintain value not only for centuries, but for eons. Neither Fiat nor Bitcoin has this critical capacity… both neglect as money.

Finally, we come to the next Feature; this of being the numeraire. This is actually intriguing, and we can see why both Bitcoin and Fiat neglect as cash, by looking closely at the question of their ‘numeraire’. Numeraire refers to the use of money to not just save worth, but to at a way step, or compare worth. In Austrian economics, it is deemed impossible to really measure value; after all, significance resides just in human comprehension… and how can anything 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 in terms of the numeraire, the most marketable good, that’s money.

So how do we set the value of Fiat… ? Through the idea of ‘purchasing power’… that is, the value of Fiat depends upon what it can be traded for… a so called ‘basket of goods’. But his clearly implies that Fiat has no value of its own, instead value flows from the worth of their goods and services it might be traded for. Causality flows from the merchandise ‘bought’ into the Fiat number. After all, what difference is there between a one Dollar invoice and a trillion Dollar invoice, except the number printed on it… along with the purchasing power of this number?

Leave a comment

Your email address will not be published. Required fields are marked *