Bitcoin … Money Nirvana?
If you do not know what bitcoin is, do a little research on the internet և you will get a lot … but the short story is that bitcoin was created as a medium of exchange without a central bank or issuing bank. being involved. Moreover, Bitcoin transactions are presumably private, it is anonymous. The most interesting thing is that bitcoins do not exist in the real world. they exist only in computer programs as a kind of virtual reality.
The general idea is that bitcoins are “mined” … an interesting term here … solving an increasingly complex mathematical formula. again interesting- computer. Once created, the new bitcoin is put in an electronic “wallet”. Then it is possible to trade in real goods or in Fiat currency with bitcoins … և vice versa. Moreover, since there is no central issuer of bitcoins, all of them are highly distributed, so it is resistant to being “managed” by the government.
Naturally, the supporters of bitcoin, those who benefit from the growth of bitcoin, quite loudly claim that “of course, bitcoin is money” … not only that, but “it’s the best money ever, the money of the future”, etc. .. Well, Fiat supporters are shouting so loudly that paper currency is money … և We all know that Fiat paper is not money at all, because it does not have the strongest attributes of real money. The question is whether bitcoin even qualifies as money … do not mind it being the money of the future or the best money ever.
To find out, let’s look at the attributes that define money,: see if Bitcoin fits. The three main features of money are:
1) Money is a stable store of value. the most essential attribute, because without value stability, the numeraire function or unit of value fails.
2) money is the number plate, the unit of account;
3) money is a means of exchange … but this function can be performed by other things as well, that is, direct exchange, “net exit” of the exchanged goods. Also “commercial goods” (cheat), which have a temporary value. և finally mutual credit exchange; that is, by zeroing the value of the promises made through the exchange of bills or IOUs.
Compared to Fiat, Bitcoin is not so bad as a medium of exchange. Fiat is accepted only in the geographical area of its issuer. Dollars are not good in Europe, are they? Bitcoin is internationally accepted. On the other hand, very few retailers currently accept bitcoin payments. If the reception does not increase geometrically, Fiat wins … or at the cost of exchange between countries.
The first condition is much tougher. Money should be a stable store of value … now bitcoins have risen from the “value” of $ 3.00 to about $ 1,000 in just a few years. This is almost so far from being a “stable store of value”. how can you get it! Indeed, such achievements are a perfect example of a speculative boom … like Dutch tulip bulbs, small mining companies or Nortel shares.
Of course, Fiat is failing here as well; For example, the US dollar, the “main” Fiat, has lost more than 95% of its value in a few decades … neither fiat nor Bitcoin correspond to the most powerful measure of money. Ability to store value over time պահպան to maintain value. Real money, that is, gold, has shown its ability to hold value not only for centuries but for centuries. Neither Fiat nor Bitcoin have this potential … both fail as money.
Finally, we come to the second feature. that being a digit. Now this is really interesting և we can see why և Bitcoin և Fiat’s fail as money by looking closely at the issue of ‘numbers’. Numeraire refers to the use of money not only to maintain value but also to measure or compare value in a certain sense. In Austrian economics it is impossible to measure value in reality. After all, value is only in the human consciousness … և how can one actually measure something in the consciousness? However, through the Mengerian principle of market action, that is, the interaction of supply and demand, market prices can be set … if only for a moment … և This market price is expressed in numbers, in the best-selling commodity, which is money.
So how do we determine the value of Fiat … through the concept of “purchasing power”, that is, the value of Fiat is determined by what can be sold – the so-called “basket of goods”. But he clearly assumes that Fiat has no value of its own, rather the value derives from the value of the goods and services with which it can be sold. The causal link flows from the “purchased” product to the Fiat number. After all, what is the difference between a “hundred dollar bill” of one dollar and the number printed on it?
Gold, on the other hand, is not measured by what it trades. rather, uniquely, it is measured by another physical standard. by its weight or mass. A gram of gold is a gram of gold, and an ounce of gold is an ounce of gold … no matter what number is engraved on its surface, “face value” or otherwise. Reason is the opposite of Fiat. Gold is measured by weight, by internal quality … not by purchasing power. Do you know the value of a dollar ounce now? Nothing like that. Fiat is “measured” only in passing quantity … the number printed on it, the “nominal value”.
Bitcoin is far from being a digit. not only is it just a number as much as Fiat … but its value is measured in Fiat. Even if bitcoin becomes internationally accepted as a medium of exchange, even if it succeeds in replacing the dollar as an accepted “number”, it can never have the internal size of gold. Gold is unique in that it is measured in real, unchanging physical quantity. Gold has been unique in its value for thousands of years. Nothing else available to mankind has this unique combination of qualities.
In conclusion, while Bitcoin has some advantages over Fiat, in particular anonymity and decentralization, it fails to claim to be money. Its advantages are also questionable. The goal is to limit bitcoin mining to ,000 26,000,000; that is, the “mining” algorithm becomes more and more difficult to solve, then impossible after extracting 26 million bitcoins. Unfortunately, this announcement could very well be the death of bitcoin. Some central banks have already announced that bitcoins can become a “reserve” currency.
Wow, that sounds like a big step for Bitcoin, doesn’t it? After all, the “big banks” seem to accept the real value of bitcoin, right? This actually means that the banks are realizing that they can exchange Fiat for bitcoins … և In fact, buying the planned 26 million bitcoins will cost a small $ 26 billion Fiat. Twenty-six billion dollars is not even a small change for Fiat printers. it costs about a week to be published by the US Fed alone. And when the bitcoins were bought and locked in the “wallet” of the Federation … what useful purpose could they serve?
There will be no bitcoins left in circulation. perfect angle. If there are no bitcoins in circulation, how can they be used as a medium of exchange? And what could Bitcoin issuers do to protect themselves from such a fate? Change the algorithm to increase it to և 26 million … to 52 million? To 104 million Join the Fiat Print Parade! But then, according to the quantitative theory of money, bitcoin will start to lose value, just as Fiat supposedly loses value through “overprinting” …
We come to the key question. Why look for “new money” when we already have the best money – Gold? Fear of gold confiscation. Lack of anonymity from the invading government. Severe taxation? Fiat Money Bargaining Laws. All the above. The answer is not in the new horse of money, but in the new social structure, without Fiat, without government espionage, without drones, without swat teams … without the IRS, border guards, TSA thugs, the world of freedom, not tyranny. : Once that is done, Gold will resume its ancient և vital role as honest money … և not a minute ago.