Bitcoin Vs Goldcoin
Bitcoin… Monetary Nirvana?
If you don’t really know what Bitcoin is, do somewhat of research on the internet, and you will get a great deal… but the short account is the fact Bitcoin was created as a medium of exchange, with no central bank or standard bank of issue being included. Furthermore, Bitcoin transactions are meant to be private, that is anonymous. Just about all interestingly, Bitcoins have no real world existence; they exist only in computer programs, as a kind of virtual reality. bitcoin paper wallet generator
The typical idea is that Bitcoins are ‘mined’… interesting term here… by solving an progressively difficult mathematical formula -more difficult as more Bitcoins are ‘mined’ into lifestyle; again interesting- on a computer. Once created, the new Bitcoin is put into an electronic ‘wallet’. It is then possible to trade real goods or Fiat currency for Bitcoins… and vice versa. Furthermore, as there is no central issuer of Bitcoins, it is all highly distributed, thus immune to being ‘managed’ by authority.
Naturally proponents of Bitcoin, those who advantage from the growth of Bitcoin, insist rather fully that ‘for sure, Bitcoin is money’… and not only that, but ‘it is the best money ever, the money of the future’, etc… Very well, the proponents of Fusca shout in the same way loudly that paper currency is money… and we are very mindful that Fiat newspaper is not money by any means, as it lacks the main advantages of real money. The question then is does Bitcoin even qualify as money… never mind it being the money of the future, and also the best money ever.
To learn, let’s look at the attributes comprise money, and see if Bitcoin qualifies. The 3 essential advantages of money are;
1) money is a stable store valuable; the most essential characteristic, as without stability valuable the function of numeraire, or unit of way of measuring value, does not work out.
2) money is the numeraire, the system of bank account.
3) money is a medium of exchange… but other things can also fulfill this function for example direct barter, the ‘netting out’ of goods changed. Also ‘trade goods’ (chits) that hold value quickly; and then exchange of common credit; ie netting away the value of pledges fulfilled by exchanging charges or IOU’s.
Compared to Fiat, Bitcoin will not do too badly as a medium of exchange. Fedex is merely accepted in the geographic domain of the issuer. Dollars are not any good in Europe etc. Bitcoin is accepted internationally. Alternatively, very few retailers at the moment accept payment in Bitcoin. Unless the acceptance increases geometrically, Fiat wins… although at the price tag on exchange between countries.
The first condition is tougher; money must certainly be a stable store of value… now Bitcoins have gone from a ‘value’ of $3. 00 to around $1, 000, in simply a few years. This kind of is about as significantly from being a ‘stable store of value’; since you can get! Indeed, such profits are a perfect kind of a speculative rate of growth… like Dutch tulip lights, or junior mining companies, or Nortel stocks.
Of course, Fiat fails here as well; for example, the US Dollar, the ‘main’ Fiat, has lost over 95% of their value in a few decades… neither fiat or Bitcoin get certified in the main measure of money; the capability to store value and preserve value through time. Actual money, that is Gold, shows the ability to hold value not merely for centuries, but for eons. Neither Fedex nor Bitcoin has this crucial capacity… both are unsuccessful as money.
Finally, we come to the second attribute; those of being the numeraire. This is very interesting, and we can easily see why both Bitcoin and Fedex fail as money, by looking closely at problem of the ‘numeraire’. Numeraire refers to the use of money to never only store value, but for in a sense check, or compare value. In Austrian economics, it is considered impossible to truly assess value; after all, value resides only in individuals consciousness… and how can anything in consciousness actually be measured? Nevertheless, through the principle of Mengerian market action, that is interaction between bid and offer, market prices can be established… only if briefly… and this market price is expressed in conditions of the numeraire, the most marketable good, that is money.