Find The Domain Of The Function Expressed By The Formula Bitcoin Vs Goldcoin

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Bitcoin Vs Goldcoin

Bitcoin… Monetary Nirvana?

If you don’t know what Bitcoin is, do a little research on the internet, and you’ll find plenty… But the short story is that Bitcoin was created as a medium of exchange without a central bank or bank of issue. to be involved. Furthermore, Bitcoin transactions 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 general idea is that bitcoins are ‘mined’… interesting word here… by solving an increasingly difficult mathematical formula – more difficult as more bitcoins are ‘mined’ into existence; Again interesting – on the computer. Once created, new bitcoins are held in an electronic ‘wallet’. It is then possible to trade real goods or fiat currency for Bitcoins… and vice versa. Furthermore, since there is no central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘managed’ by an authority.

Bitcoin proponents, those who benefit from Bitcoin’s growth, insist rather loudly that ‘of course, Bitcoin is money’… and not just that, ‘it’s the best money ever, the money of the future’, etc… Well, Proponents of fiat shout loudly that paper money is money… and we all know that fiat paper is not money in any way, because it lacks the most important characteristics of real money. So the question is whether Bitcoin even qualifies as money…never mind that it is the money of the future, or the best money ever.

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

1) Money is a stable store of value; A function of a number without the most essential characteristic, constancy of value, or unit of measurement of value, fails.

2) Money is the letter of the numeral, the unit of account.

3) Money is a medium of exchange … but other things can also fulfill this function such as direct barter, ‘net out’ barter. Also ‘trade goods’ (chits) which hold value temporarily; and finally the exchange of mutual loans; i.e. determining the value of promises fulfilled by the exchange of bills or IOUs.

Compared to fiat, Bitcoin doesn’t do too badly as a medium of exchange. Fiat is accepted only in the geographic domain of its issuer. Dollar is not good in Europe etc. Bitcoin is accepted internationally. On the other hand, very few retailers currently accept payment in Bitcoin. Unless acceptance increases geometrically, Fiat wins…albeit at the cost of exchange between countries.

The first condition is very difficult; Money should be a stable store of value… Now bitcoins have gone from a ‘value’ of $3.00 to $1,000 in a few years. It is far from being a ‘static store of value’; You can get it! Indeed, such gains are classic examples of speculative booms, like Dutch tulip bulbs, or junior mining companies, or Nortel stocks.

Of course, Fiat fails here too; For example, the US dollar, the ‘main’ fiat, has lost more than 95% of its value in a few decades… Neither fiat nor Bitcoin qualify as the most important measure of money; The ability to store value and preserve value through time. Real money, which is gold, has shown its ability to hold value not just for centuries, but for eons. Neither Fiat nor Bitcoin has this significant potential… both fail as money.

Finally, we come to the second feature; That is to be numerate. Now this is really interesting, and we can see why both Bitcoin and Fiat fail as money by looking closely at the question of ‘numbers’. Numeracy refers to the use of money not only to store value, but in a sense to measure or compare value. In Austrian economics, it is considered impossible to actually measure value; After all, value resides only in human consciousness…and how can anything be measured in consciousness? However, through the theory of Mengerian market action, which is the interaction between bid and offer, market prices can be established … if only momentarily … and this market price is expressed in terms of numbers, the most marketable good, that is. have money

So how do we establish the value of Fiat…? Through the concept of ‘purchasing power’… ie, the value of fiat is determined by what it can be traded for… the so called ‘basket of commodities’. But he clearly means that fiat has no value of its own, but instead flows from the value of the goods and services that can be traded for it. Causation flows from ‘bought’ goods to fiat numbers. 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 purchasing power of the number?

Gold, on the other hand, is not measured by its trade; 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 … whatever number is engraved on its surface, ‘face value’ or otherwise. Causation is the opposite of fiat; Gold is measured by weight, intrinsic quality…not purchasing power. Now, do you have any idea about the dollar value of an ounce? There is nothing like that. Fiat is measured only by short-term quantities…the number printed on it, the ‘face value’.

Bitcoin is far from being digital; It’s not just a number, more fiat… but its value is measured in fiat! Even if bitcoin is accepted internationally as a medium of exchange, and even if it manages to replace the dollar as the accepted ‘unit’, it will never have the same internal scale as gold. Gold is unique in being measured by a true, unaltered physical quantity. Gold is unique in its storage value for thousands of years. No other combination of qualities is within humanity’s reach.

In conclusion, while Bitcoin has some advantages over fiat, anonymity and decentralization, it fails in its claim to being money. Its benefits are also questionable; The aim is to limit the ‘mining’ of Bitcoins to 26,000,000 units; That is, the ‘mining’ algorithm becomes harder and harder to solve, then impossible after 26 million bitcoins have been mined. Unfortunately, this announcement could be the death knell for Bitcoin; Already, some central banks have announced that Bitcoins could become a ‘reservable’ currency.

Wow, sounds like a major step for Bitcoin, right? After all, the ‘big banks’ seem to be accepting the true value of Bitcoin, no? What this really means is that banks realize they can trade Fiat for Bitcoins… and it will actually cost 26 billion fiat dollars to buy the planned 26 million Bitcoins. Twenty-six billion dollars in fiat printers is not small change; This is the one-week price that the US Fed only prints. And, once bitcoins are bought and locked away in the Fed’s ‘wallet’… what useful purpose can they serve?

There will be no bitcoins left in circulation; A perfect corner. If there are no bitcoins in circulation, how on earth can they be used as a medium of exchange? And, what can Bitcoin issuers do to protect against such a fate? Change the algorithm and increase the 26 million to… 52 million? 104 million? Join the fiat printing parade? But then, by the quantity theory of money, Bitcoin begins to lose value, just as fiat loses value through ‘over-printing’.

We come to the main issue; Why look for ‘new money’ when we already have the best money, right? Fear of confiscation of gold? Lack of anonymity from an intrusive government? Cruel tax? Fiat Money Legal Tender Law? All of the above. The answer is not in a new form of money, but in a new social structure, without fiat, without government spying, without drones and SWAT teams…without the IRS, border guards, TSA thugs…on and on. A world of freedom, not dictatorship. When this is done, gold will resume its old and important role as honest money… and not a moment before.

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