Bitcoin … Money nirvana?
If you don’t know what bitcoin is, do a little research online and you’ll get a lot … but the short story is that bitcoin was created as a medium of exchange, without a central bank and an issuing bank. be involved. In addition, transactions with bitcoins must be private, that is, anonymous. The most interesting thing is that bitcoins do not exist in the real world; they exist only in computer software as a kind of virtual reality.
The general idea is that bitcoins are “mined” … here’s an interesting term … by solving an increasingly complex mathematical formula – more complex because more and more bitcoins are “mined”; again interesting- on the computer. Once created, the new bitcoin is placed in an e-wallet. Then you can trade real goods or Fiat currency for bitcoin … and vice versa. In addition, since there is no central issuer of bitcoins, it is becoming more widespread and thus resistant to “governing” bodies.
Naturally, proponents of bitcoin, those who benefit from the growth of bitcoins, quite loudly insist that “probably bitcoin is money” … and not only that, but “it’s the best money in the world, the money of the future”. etc … Well, Fiat fans are just as loudly shouting that paper currency is money … and we all know that Fiat paper is by no means money, because it lacks the most important attributes of real money. Then the question is whether bitcoin can even qualify as money … it doesn’t matter if it’s the money of the future or the best money.
To learn about this, let’s look at the attributes that define money and see if Bitcoin qualifies. Three main attributes of money:
1) money is a stable stock of value; the most important attribute, because without value stability the number function or unit of measure does not work.
2) money is a figure, a unit of account.
3) money is a means of exchange … but other things can also perform this function, that is, direct barter, “networking” of exchange goods. Also “merchandise” (cheats) that temporarily contain a price; and finally the exchange of mutual credit; ie, compensation for the value of promises made by exchanging notes or the Ministry of Emergencies.
Compared to Fiat, bitcoin doesn’t work very badly as a medium of exchange. Fiat is accepted only in the geographical domain of its issuer. In Europe, dollars are not needed, etc. Bitcoins are accepted internationally. On the other hand, very few retailers currently accept payment in bitcoins. If recognition does not grow geometrically, Fiat will win … albeit at the cost of exchanges between countries.
The first condition is much stricter; money should be a stable storehouse of value … now in just a few years bitcoin has moved from a “value” of $ 3.00 to $ 1,000. It’s about like a “stable stock of value”; how can you get! Indeed, such gains are a great example of a speculative boom … like Dutch tulip bulbs, or junior mining companies, or Nortel stocks.
Of course, and here Fiat does not work; for example, the US dollar, the “main” Fiat, has lost its value in 95 years over several decades … neither fiat nor bitcoin has been among the most important money; the ability to store value and store value over time. Real money, that is, gold, has demonstrated the ability to maintain value not only for centuries but for centuries. Neither Fiat nor Bitcoin has such an important ability … both don’t turn out like money.
Finally, we approached the second attribute; what to be a figure. Now that’s really interesting, and we can understand why both Bitcoin and Fiat have failed as money by carefully considering the “number”. Numbering involves the use of money not only to save value but also to measure or compare value. In the Austrian economy it is considered impossible to actually measure value; after all, value is only in a person’s mind … and how can you really measure anything in your mind? However, thanks to the principle of Mengerian market action, that is, the interaction between supply and demand, market prices can be set … if only instantaneously … and this market price is expressed in numbers, the most commodity goods that are money.
So how do we set a Fiat price …? Through the notion of “purchasing power” … that is, Fiat’s value is determined by what can be traded for … the so-called “basket of goods”. But it clearly implies that Fiat has no value of its own, and the value derives from the value of the goods and services for which it can trade. Causality goes from “purchased” to a Fiat number. After all, what’s the difference between a one-dollar bill and a hundred-dollar bill other than the number printed on it … and the number’s purchasing power?
On the other hand, gold is not measured by what it trades for; rather, unequivocally, it is measured by other physical standards; 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. Causality is the opposite of that which exists in Fiat; Gold is measured by weight, property … not purchasing power. Now do you have any idea about the value of an ounce of dollars? There is no such thing. Fiat is “measured” only by an ephemeral quantity … by the number put on it, “face value”.
Bitcoin is far from being a figure; not only is it just a number as much as Fiat … but its value is measured in Fiat! Even if bitcoin becomes an internationally recognized medium of exchange, and even if it manages to replace the dollar as an accepted “number,” it can never have its own measure similar to gold. Gold is uniquely measured by a true, unchanging physical quantity. Gold uniquely retains its value for thousands of years. Nothing else that has been achieved by humanity has this unique combination of qualities.
In conclusion, although bitcoin has some advantages over Fiat, namely anonymity and decentralization, it cannot claim that it is money. Its pros are also questionable; the intention is to limit the “mining” of bitcoins to 26,000,000 units; that is, the “mining” algorithm becomes harder and harder to solve, and then becomes impossible after mining 26 million bitcoins. Unfortunately, this message could well be the death of bitcoin; already some central banks have announced that bitcoins could become a “reserved” currency.
Wow, that sounds like an important step for bitcoin, right? After all, “big banks” seem to accept the true value of bitcoin, right? This actually means that banks recognize that they could trade Fiat for bitcoin … and to actually buy back the planned 26 million bitcoins, it will cost a paltry $ 26 billion. Twenty-six billion dollars is not a small change for Fiat printers; it was printed in about a week only by the US Federal Reserve. And once bitcoins are bought up and locked in the Fed’s “wallet” … what useful purpose can they serve?
There would be no bitcoins left in circulation; perfect corner. If there are no bitcoins in circulation, how on Earth can they be used as a medium of exchange? And what could bitcoin issuers do to protect themselves from such a share? Change the algorithm and increase 26 million to … 52 million? Up to 104 million? Join the Fiat printing parade? But then, according to the quantitative theory of money, bitcoin begins to lose value, just as Fiat allegedly loses value due to “overprinting” …
We have approached a key issue; why look for “new money” when we already have the best money, gold? Fear of gold confiscation? Lack of anonymity on the part of an intrusive government? Tough taxation? Fiat Payment Legislation Legislation All of the above. The answer is not in a new form of money, but in a new social structure, in which there is no “Fiat”, without government espionage, without unmanned aerial vehicles and special forces … without the tax service, border guards, TSA bandits … and so on. A world of freedom, not tyranny. Once this is achieved, Gold will restore its ancient and vital role of honest money … and not a minute earlier.