Bitcoin Vs Goldcoin

Bitcoin … Monetary 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 an exchange, without a central bank or an issuing bank. being involved. In addition, Bitcoin transactions must 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 ‘extracted’ … an interesting term here … by solving an increasingly difficult mathematical formula — it’s harder as more Bitcoins are ‘extracted’; again interesting- on the computer. Once created, the new Bitcoin is included in an electronic “wallet”. Then it is possible to exchange real goods or Fiat currency Bitcoins … and vice versa. Moreover, since there is no central issuer of Bitcoins, everything is highly distributed, so it is resistant to being “managed” by the authorities.

Naturally, proponents of Bitcoin, who benefit from Bitcoin’s growth, loudly stress that “sure, Bitcoin is money” … and not only that, it is “the best money ever, the money of the future”. etc … Well, they shout as loud as Fiat’s supporters that paper money is money … and we all know that Fiat’s paper is not money at all, because it lacks the most important features of real money. The question, then, is whether Bitcoin also fulfills 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 let’s see if Bitcoin meets that. The three key characteristics of money are;

1) money is a stable store of value; the most essential feature is that numerical functions or units of measure of value fail without value stability.

2) money is cash, a unit of account.

3) money is a means of exchange … but other things can also fulfill this function, that is, direct exchange, the ‘networks’ of exchanged goods. Also ‘commercial goods’ (chicks) of temporary value; and, finally, the exchange of mutual credits; that is, clearing the value of promises fulfilled by exchanging 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 issuer. Dollars are not good in Europe, etc. Bitcoin is internationally supported. On the other hand, very few merchants support the payment of Bitcoin. Unless acceptance grows geometrically, Fiat wins … albeit at the cost of exchange between countries.

The first condition is much harder; money needs to be a stable store of value … now Bitcoins have gone from a $ 3.00 ‘value’ to about $ 1,000 in just a few short years. This is as far from being a “stable store of value”; as you can get! In fact, such gains are a perfect example of a speculative boom … like Dutch tulip bulbs, or like mining companies or Nortel shares.

Of course, Fiat fails here too; for example, the U.S. dollar, the “main” Fiat, has lost more than 95% of its value in just a few decades … neither fiat nor Bitcoin meet the most significant monetary measure; the ability to store value and store value over time. Real money, that is, Gold, has shown the ability to hold value not only for centuries, but for centuries. Neither Fiat nor Bitcoin have that crucial capability … they both fail as money.

Finally, we come to the second attribute; of being numerary. Now this is really interesting, and we can see why Bitcoin and Fiat are failing as money, by looking carefully at the ‘cash’ question. Numeraire refers to the use of money not only to store value, but also to measure or compare value in a sense. In the Austrian economy, it is considered impossible to really measure value; after all, value lies only in human consciousness … and how can anything really be measured in consciousness? However, through the principle of Menger’s market action, i.e. the interaction between supply and supply, market prices can be set … if only temporarily … and this market price is expressed in cash, which is the most marketable commodity. it is money.

So how do we set the value of Fiat …? Through the concept of ‘purchasing power’ … that is, the value of Fiat is determined by what it can be traded for … what is called the ‘basket of goods’. But it clearly states that Fiat has no intrinsic value, but rather that values ​​arise from the value of goods and services for which it can be sold. The causality goes from the “purchased” goods to the Fiat number. After all, what’s the difference between a dollar and a hundred dollars, except for the number printed on it … and the purchasing power of the number?

Gold, on the other hand, is not measured for what it is in trade; but only one, measured by another physical standard; because of 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. Causality is the opposite of Fiat; Gold is measured by weight, its own quality … by its purchasing power. Now, do you have any idea of ​​the value of an ounce of dollars? No such thing. Fiat is only “measured” with a transient quantity … the number printed on it, the “face value”.

Bitcoin is far from being cash; not just a number, as much as Fiat … but its value is measured in Fiat! Even though Bitcoin has been internationally accepted as a means of exchange, and manages to replace the dollar as an accepted ‘numeraire’, it can never have an intrinsic measure like Gold. Gold is unique in that its true immutable physical quantity is measured. Gold is unique in preserving value for thousands of years. Nothing else available to mankind has this unique combination of characteristics.

To conclude, although Bitcoin has some advantages over Fiat, namely anonymity and decentralization, it fails in its claim to be money. Its advantages are also doubtful; The intention is to limit Bitcoins ’‘ mining ’to 26,000,000 units; that is, the ‘mining’ algorithm is becoming more and more difficult to solve, then impossible after extracting 26 million Bitcoins. Unfortunately, this prediction could very well be the death of Bitcoin; already, central banks have announced that Bitcoins could become a “bookable” currency.

Wow, it seems like an important step in Bitcoin, right? After all, ‘big banks’ seem to support the true value of Bitcoin, right? What this really means is that banks recognize that they can exchange Fiat Bitcoins in exchange … and actually planning to buy 26 million Bitcoins would cost just under 26 million Fiat dollars. Twenty-six billion dollars is no small change for Fiat printers; it takes a week to print only by the US Fed. And, once you buy Bitcoins and lock them in the Fed’s “wallet” … what good can they do?

There would be no Bitcoin left in circulation; perfect corner. If there is no Bitcoin in circulation, how the hell could it be used as a means of exchange? And, what can Bitcoin issuers do to defend against such a fate? Change the algorithm and increase it to 26 million … to 52 million? 104 million? Enter 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 come to the key issue; Why look for ‘new money’ when we already have the best money, Gold? Fear of gold confiscation? Lack of anonymity of an intrusive government? Wild tax? Fiat’s money laws? All of the above. The answer is not in a new form of money, but in a new social structure, without Fiat, without government espionage, without drones and swat teams … without the IRS, border guards, TSA straws … and so on. The world of freedom is not tyranny. Once that is achieved, Gold will regain its former and vital role as honest money … and not a moment before.