Bitcoin … Say Nirvana?
If you don’t know what Bitcoin is, do a little research on the internet, and you’ll get a lot … but the short story is that Bitcoin was created as a medium of exchange, without a central bank or an issuing bank. to be involved. In addition, Bitcoin transactions are said to be private, which is anonymous. Oddly enough, Bitcoin has no real existence; they are only in computer software, as a kind of virtual reality.
The general idea is that Bitcoins are “ripped out” … an interesting term here … when solving an increasingly difficult mathematical formula – it’s harder as more Bitcoins exist; again interesting- on the computer. Once created, the new Bitcoin enters the electronic “wallet”. Then it’s possible to exchange real goods or Fiat currency with Bitcoins … and vice versa. Moreover, since there is no central issuer of Bitcoins, everything is very fragmented, so it is a resistance that is “managed” by the authorities.
Proponents of Bitcoin, who take advantage of the growth of Bitcoin, themselves, loudly emphasize “sure, Bitcoin is money” … and not only that, “it’s the best money ever, the money of the future,” and so on … Well, Fiat the proponents loudly shout that paper money is money … and we all know that Fiat paper is not money at all because it lacks the most important real attributes of money. So the question is whether Bitcoin is also classified as money … it doesn’t matter if it’s 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 meets it. There are three key attributes of money;
1) money is a stable store of value; the most essential attribute, because without the stability of the value the function of the number or the unit of measure of value fails.
2) money is the number, the unit of account.
3) money is a medium of exchange … but other things can also fulfill this function, which is direct exchange, the “compensation” of the goods exchanged. Also ‘commercial goods’ (pieces) of temporary value; and, finally, the exchange of mutual credits; that is, resolving the value of promises that are fulfilled in exchange for invoices or IOUs.
Compared to fiat, Bitcoin does not do badly as a means of exchange. Fiat is only supported in the geographical domain of its emitter. Dollars in Europe are worthless. Bitcoin is internationally supported. On the other hand, very few stores support Bitcoin payments. If acceptance doesn’t grow geometrically, Fiat wins … even at the expense of cross-country exchanges.
The first condition is much harder; money needs to be a stable store of value … now Bitcoins have gone from a value of $ 3.00 to about $ 1,000 in just a few short years. This is far from being a “stable store of value”; as you can get it! In fact, profits like this are a perfect example of speculative growth … like Dutch tulip bulbs, or junior mining companies or Nortel shares.
Of course, Fiat fails here too; for example, the US dollar, the ‘main’ Fiat, has lost more than 95% of its value in decades … neither fiat nor Bitcoin are ranked in the most important way money; the ability to store value over time and store value. Real money, that is, Gold, has shown value not only over the centuries, but also for eons. Neither Fiat nor Bitcoin have that crucial capability … they both fail to make money.
Finally, we come to the second attribute; of being numereraire. Now it’s very interesting, and we can see why Bitcoin and Fiat are failing as money, looking closely at the “numeraire” question. In addition to using money, Numeraire is used not only to store value, but also to measure or compare value in a sense. It is considered impossible in the Austrian economy to really measure value; after all, value lies only in human consciousness … and how can something in consciousness be measured? However, through the principle of market action, that is, the interaction between supply and supply, market prices can be set … even for a moment … and this market price is expressed in numbers, the best commodity marketed. it is money.
So how do you set the value of Fiat …? Through the concept of ‘purchasing power’ … that is, it determines how the value of Fiat can be exchanged … the so-called ‘basket of goods’. But it clearly means that Fiat has no intrinsic value, but flows of the value of exchangeable goods and services. Causality flows from ‘purchased’ goods to Fiat numbers. After all, what’s the difference between a one-dollar and a hundred-dollar bill, except for the number printed on it … and the purchasing power of the number?
Gold, on the other hand, is not measured by what it trades; rather, it is measured in a unique way by another physical standard; depending on its weight or mass. One gram of gold is one gram of gold, and one ounce of gold is one ounce of gold … whatever number is engraved on the surface, “face value” or otherwise. Causality is the opposite of Fiat; Gold is measured by its weight, its inherent quality … by its purchasing power. Now, do you have any idea what an ounce of a dollar is worth? No such thing. Fiat is only “measured” with a transient quantity … the number printed on it, “face value”.
Bitcoin is far from a number; not just a number, as much as Fiat … but its value is measured in Fiat! Although Bitcoin is internationally accepted as an exchange medium, and even if it manages to replace the Dollar as an accepted “number,” it can never have an inherent measure like Gold. Gold is unique in measuring a true and immutable physical quantity. Gold is unique in preserving value for thousands of years. Nothing else in the hands of humanity has this unique combination of characteristics.
Finally, although Bitcoin has some advantages over Fiat, such as anonymity and decentralization, it fails in its claim to make money. Its advantages are also doubtful; intends to limit Bitcoins ’“ mining ”to 26,000,000 units; that is, the “mining” algorithm is becoming more and more difficult to fix, when it is impossible to extract 26 million Bitcoins. Unfortunately, this announcement could very well have been the death knell for Bitcoin; already, some central banks have announced that Bitcoins can be converted into a “reserve” currency.
Wow, that sounds like an important step in Bitcoin, right? After all, the “big banks” seem to be accepting the real value of Bitcoin, right? What it really means is that banks recognize that they can market Fiat in exchange for Bitcoins … and the planned 26 million Bitcoins would cost just under $ 26 billion Fiat. Twenty-six billion dollars is not a small change in Fiat printers; The U.S. Fed only has one week’s worth of printing. And, once Bitcoin enters and closes the Fed’s “portfolio” … what useful purpose could it have?
There would be no Bitcoin left in circulation; perfect corner. If there is no Bitcoin in circulation, how could it be used as a means of exchange on Earth? And what can Bitcoin issuers do to defend against such a fate? Change the algorithm and increase it by 26 million … to 52 million? 104 million? Join the Fiat print parade? But then, according to the theory of the amount of money, Bitcoin would start to lose value, just as Fiat supposedly loses value through “over-printing” …
We have approached the key issue; why look for “new money” when we already have the best money, Gold? Fear of confiscating gold? Lack of anonymity of an intrusive government? Gross tax? Fiat money legal license laws? All of the above. The answer is not in a new way of money, but in a new social structure, without Fia, without spying on the Government, without drones and swat teams … without the IRS, border guards, TSA rebels … back and forth. The world of freedom is not tyranny. Once that is achieved, Gold will regain its old and essential role as honest money … and not a moment before.