This article follows the conventional practice of using the upper case Bitcoin to refer to the program or network and the lower case bitcoin to refer to the currency.
You crunch the numbers on your Bitcoin Profit Calculator , working out just how much that bitcoin is worth in the national currency in which you find yourself operating. How easy though it is for the creeping doubt to sneak into your thoughts: is actually real money? It would be strange if the thought didn't cross your mind.
We all know that numerous veterans from each side of the ongoing pitched battles among defenders of fiat currency and promoters of precious metals have condemned bitcoin as not being real money. The reasons they give are different, even if the final verdict is often the same.
For the defenders of fiat currency the point is generally that in this day and age any currency not backed by a government simply can't be taken seriously as money. And, no doubt, the more sophisticated could legitimately make network-effect claims.
Notwithstanding a certain practical merit, though, such arguments are the death rattle of a dying currency. History shows us, time and again, fiat currency is a recipe for monetary decrepitude, not to mention systemic theft, through inflation.
On the matter of fiat currency, bitcoin enthusiasts doubtlessly side with precious metal fans. Fiat decreed value is the last-call of a currency. As I explained in an article at the Fiat Currency Review site, real money originates in and maintains strength only via market processes privileging it as a demanded commodity. Only such commodity backing has any hope of withstanding government's inflationary corruption.
Going back to the dawn of our species, right up to the recent agricultural revolution, sea shells, cattle, tobacco, salt and gold, among others, have arisen as money initially because it was a commodity demanded by enough people that it could be relied upon as a general medium of exchange or store of value. However, if we concede this point against the fiat currency crowd, is bitcoin thereby self-condemned by the same argument, as many precious metal promoters allege?
Gold bugs are perfectly correct in their insistence that money must be backed by a real commodity. Where they go wrong is presuming that bitcoin lacks just such a backing.
Bitcoin, in fact, is no less a commodity-money than gold or silver. This widespread confusion that it is just abstract, pixilated numbers rather misses what's really going on.
The bitcoin currency exists because of the Bitcoin technology and that technology, including both the software and the hardware, is driven by the networked work of what are called the miners. It is they who audit and secure the system, through advanced mathematical calculations. The system is effectively their math work.
Once this is understood, the major, salient fact about mining is the extraordinary amount of electricity consumed in the process. The great economist, Julian Simon, explained long ago that when prices of any resource are high incentives are generated for people to innovate less expressive solutions.
In the long run, the costs of Bitcoin mining will likely come down. It seems difficult to imagine though bitcoin existing in the absence of electricity. The electrical system is Bitcoin's condition of possibility.
Indeed, as we look off into the future, it seems likely that electricity will be, if it isn't already, our single most important commodity. The only real rival today is oil. Unlike electricity, though, there surely is a finite amount of oil on the planet. Hundreds of years from now, when oil is too expensive for its current uses - whether generated by windmills, nuclear or hydro power plants, or means not yet invented or conceived - electricity will still be buzzing along.
Put in that light, then, we can see that the excavating, smelting and molding of aurous compounds into the coins and bars that constitute the commodity-backed money called gold is not any more money than the generating, conducting and programming of electricity into the mathematical calculations that produce B/bitcoin. Bitcoin no less than gold is backed by mining a natural resource from the world. That is, and always has been, real money.
You crunch the numbers on your Bitcoin Profit Calculator , working out just how much that bitcoin is worth in the national currency in which you find yourself operating. How easy though it is for the creeping doubt to sneak into your thoughts: is actually real money? It would be strange if the thought didn't cross your mind.
We all know that numerous veterans from each side of the ongoing pitched battles among defenders of fiat currency and promoters of precious metals have condemned bitcoin as not being real money. The reasons they give are different, even if the final verdict is often the same.
For the defenders of fiat currency the point is generally that in this day and age any currency not backed by a government simply can't be taken seriously as money. And, no doubt, the more sophisticated could legitimately make network-effect claims.
Notwithstanding a certain practical merit, though, such arguments are the death rattle of a dying currency. History shows us, time and again, fiat currency is a recipe for monetary decrepitude, not to mention systemic theft, through inflation.
On the matter of fiat currency, bitcoin enthusiasts doubtlessly side with precious metal fans. Fiat decreed value is the last-call of a currency. As I explained in an article at the Fiat Currency Review site, real money originates in and maintains strength only via market processes privileging it as a demanded commodity. Only such commodity backing has any hope of withstanding government's inflationary corruption.
Going back to the dawn of our species, right up to the recent agricultural revolution, sea shells, cattle, tobacco, salt and gold, among others, have arisen as money initially because it was a commodity demanded by enough people that it could be relied upon as a general medium of exchange or store of value. However, if we concede this point against the fiat currency crowd, is bitcoin thereby self-condemned by the same argument, as many precious metal promoters allege?
Gold bugs are perfectly correct in their insistence that money must be backed by a real commodity. Where they go wrong is presuming that bitcoin lacks just such a backing.
Bitcoin, in fact, is no less a commodity-money than gold or silver. This widespread confusion that it is just abstract, pixilated numbers rather misses what's really going on.
The bitcoin currency exists because of the Bitcoin technology and that technology, including both the software and the hardware, is driven by the networked work of what are called the miners. It is they who audit and secure the system, through advanced mathematical calculations. The system is effectively their math work.
Once this is understood, the major, salient fact about mining is the extraordinary amount of electricity consumed in the process. The great economist, Julian Simon, explained long ago that when prices of any resource are high incentives are generated for people to innovate less expressive solutions.
In the long run, the costs of Bitcoin mining will likely come down. It seems difficult to imagine though bitcoin existing in the absence of electricity. The electrical system is Bitcoin's condition of possibility.
Indeed, as we look off into the future, it seems likely that electricity will be, if it isn't already, our single most important commodity. The only real rival today is oil. Unlike electricity, though, there surely is a finite amount of oil on the planet. Hundreds of years from now, when oil is too expensive for its current uses - whether generated by windmills, nuclear or hydro power plants, or means not yet invented or conceived - electricity will still be buzzing along.
Put in that light, then, we can see that the excavating, smelting and molding of aurous compounds into the coins and bars that constitute the commodity-backed money called gold is not any more money than the generating, conducting and programming of electricity into the mathematical calculations that produce B/bitcoin. Bitcoin no less than gold is backed by mining a natural resource from the world. That is, and always has been, real money.
About the Author:
When you need to know the top information on all the best insights into Bitcoin and cryptocurrencies, check us out at the Bitcoin Profit Calculator site. If you're interested in currency issues, Wallace Eddington's recent article on the Pros and Cons (and Con Jobs) of fractional reserve banking is must-reading.
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