Bitcoin Vs Goldcoin

Bitcoin… Monetary Nirvana?

If you don’t know what Bitcoin is, do a bit of research on the web, and you will get plenty… but the short story is that Bitcoin was created as a medium of exchange, without a main bank or bank of concern being involved. Furthermore, Bitcoin dealings are supposed to be private, that is anonymous. Most interestingly, Bitcoins have no real world existence; they exist only in computer software, as a kind of virtual reality.

The overall 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 interesting- on the computer. Once created, the new Bitcoin is put into an electronic ‘wallet’. It really is then possible to trade genuine goods or Fiat currency regarding Bitcoins… and vice versa. Moreover, as there is no central issuer associated with Bitcoins, it is all highly dispersed, thus resistant to being ‘managed’ simply by authority.

Naturally proponents of Bitcoin, those who benefit from the growth of Bitcoin, insist rather loudly that ‘for sure, Bitcoin is money’… rather than only that, but ‘it is the best money ever, the money of the future’, etc … Well, the proponents of Fiat shout just as loudly that will paper currency is money… and we all know that Fiat paper is just not money by any means, as it lacks the most crucial attributes of real money. If you’re ready to check out more in regards to litecoin to bitcoin take a look at our own internet site.
The question then is does Bitcoin even be eligible as money… never mind this being the money of the future, or the best money ever.

To find out, let’s look at the attributes that define money, and see if Bitcoin qualifies. The three essential qualities of money are;

1) money is really a stable store of value; one of the most essential attribute, as without balance of value the function associated with numeraire, or unit of measure of value, fails.

2) money could be the numeraire, the unit of account.

3) money is a medium of trade… but other things can also fulfill this function ie direct barter, the ‘netting out’ of goods exchanged. Also ‘trade goods’ (chits) that keep value temporarily; and finally exchange of mutual credit; ie netting out the value of promises fulfilled by swapping bills or IOU’s.

Compared to Fiat, Bitcoin does not do too terribly as a medium of exchange. Fiat is only accepted in the geographic area of its issuer. Dollars are no good in Europe etc . Bitcoin is definitely accepted internationally. On the other hand, very few merchants currently accept payment in Bitcoin. Unless the acceptance grows geometrically, Fiat wins… although at the cost of exchange between countries.

The first problem is a lot tougher; money must be a stable store of value… now Bitcoins have gone from a ‘value’ associated with $3. 00 to around $1, 500, in just a few years. This is about as far from being a ‘stable store of value’; as you can get! Indeed, this kind of gains are a perfect example of a speculative boom… like Dutch tulip bulbs, or junior mining businesses, or Nortel stocks.

Of course , Fiat fails here as well; for example , the united states Dollar, the ‘main’ Fiat, offers lost over 95% of its value in a few decades… neither fiat neither Bitcoin qualify in the most important measure of money; the capacity to store value and preserve value through time. Real money, that is Gold, has shown the ability to hold value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as money.

Finally, we all come to the second attribute; that of getting the numeraire. Now this is really fascinating, and we can see why both Bitcoin and Fiat fail as cash, by looking closely at the question from the ‘numeraire’. Numeraire refers to the use of cash to not only store value, but to in a sense measure, or evaluate value. In Austrian economics, it is considered impossible to actually measure worth; after all, value resides only within human consciousness… and how can anything in consciousness actually be measured? However, through the principle of Mengerian market action, that is interaction between bet and offer, market prices can be established… if only momentarily… and this market price is usually expressed in terms of the numeraire, the most valuable good, that is money.

So how perform we establish the value of Fiat…? Through the concept of ‘purchasing power’… that is, the cost of Fiat is determined by what it can be exchanged for… a so called ‘basket associated with goods’. But his clearly means that Fiat has no value of its own, instead value flows from the value of the goods and services it may be traded with regard to. Causality flows from the goods ‘bought’ to the Fiat number. After all, what difference is there between an one Money bill and a hundred Dollar costs, except the number printed on it… and the purchasing power of the number?

Gold, on the other hand, is not measured by what it trades for; rather, uniquely, it really is measured by another physical regular; by its weight, or mass. A gram of Gold is a gram of gold, and a good ounce of Gold is an oz of Gold… no matter what number is definitely engraved on its surface, ‘face value’ or otherwise. Causality is the reverse to that of Fiat; Gold can be measured by weight, an inbuilt quality… not by purchasing power. Today, have you any idea of the value of an ounce of Dollars? No such thing. Fiat is only ‘measured’ by an ephemeral quantity… the number imprinted on it, the ‘face value’.

Bitcoin is farther away from being the particular numeraire; not only is it simply a number, much as Fiat… but its value is measured in Fiat! Even if Bitcoin becomes internationally accepted as a moderate of exchange, and even if it manages to replace the Dollar as the accepted ‘numeraire’, it can never have an intrinsic measure like Gold has. Precious metal is unique in being measured with a true, unchanging physical quantity. Gold is unique in storing value for hundreds of years. Nothing else in reach of humanity has this unique combination of qualities.

In summary, while Bitcoin has some advantages over Fiat, namely anonymity and decentralization, it fails in its claim to becoming money. Its advantages are also questionable; the intent is to limit the particular ‘mining’ of Bitcoins to twenty six, 000, 000 units; that is, the ‘mining’ algorithm gets harder and harder to resolve, then impossible after the 26 mil Bitcoins are mined. Unfortunately, this particular announcement could very well be the death knell of Bitcoin; already, some central banks have announced that Bitcoins can become a ‘reservable’ currency.

Wow, sounds like a major step for Bitcoin, does it not? After all, the ‘big banks’ seem to be accepting the true value of the particular Bitcoin, no? What this really means is banks recognize that they could trade Fiat for Bitcoins… and to actually buy up the 26 million Bitcoins planned would cost a meagre twenty six Billion Fiat Dollars. Twenty six billion dollars Dollars is not even small modify to the Fiat printers; it is about a week’s worth of printing from the US Fed alone. And, after the Bitcoins bought up and secured up in the Fed’s ‘wallet’… what useful purpose could they assist?

There would be no Bitcoins left in circulation; a perfect corner. If you can find no Bitcoins in circulation, how on Earth could they be used as being a medium of exchange? And, what could the issuers of Bitcoin possibly do to defend against this type of fate? Change the algorithm and increase the 26 million to… 52 million? To 104 million? Join the Fiat printing parade? But then, by quantity theory of money, Bitcoin might start to lose value, just as Fiat supposedly loses value through ‘over-printing’…

We come to the key issue; precisely why search for a ‘new money’ when we already have the very best money, Gold? Fear of Gold confiscation? Lack of anonymity from an intrusive government? Brutal taxation? Fiat money legal tender laws? All of the above. The answer is not in a new form of money, but in a new social structure, one without Fiat, without Government spying, without drones and swat teams… without IRS, border guards, TSA thugs… on and on. A world of liberty not tyranny. Once this is accomplished, Gold will resume its ancient and vital role as honest money… rather than a moment before.

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