Is Bitcoin Money?

Exactly what is money? Cash is a measurement device for the purpose of exchange. Money can be used for valuation of goods, deciding debts, accounting for work performed, and standardizing the measurement of production. Cash must be divisible, portable, secure in value, easy to obtain, durable as time passes and must be trusted by all parties using it. Imagine money that is too large to separate into pieces, heavy to carry, spoils after 2 days, gets damaged easily or can be enjoyed by animals? If these are the characteristics of the currency, it would not be that useful and many business discounts would not happen.

The most important factor of money is trust. In the event that you work for someone and you are not sure if you will definitely get paid, would you do the work? If you performed the work, and you simply received paid in something that was not accepted in many places, is it a legitimate payment? The economy and money system is built on trust, and it can be broken with an absence of trust by many people. A run on a bank is a typical example of folks losing trust in a bank and it going bankrupt quickly thereafter. Trust is also the pinnacle of company and business deals. That you don’t believe the person whom you are doing an exchange with is trustworthy, the offer may not be initiated. Privateness is an factor of trust. If every offer you made was showed in the public world, a portion of trust would be lost. An individual may undercut (steal) your business deal or deceive you of the profits after the deal is carried out. The best security is achieved through privacy. In the event someone knows you have made a lot of money, they are going to find a way to steal it a person if that is their intention.

In the case of bitcoin, would it function as money? It is portable, easily divisible, can be used to value assets and settle debts. Is the value stable? Considering that the price of Bitcoin moves around a lot versus other currencies, the answer is likely number If you are trying to buy a basket of oatmeal and are paying for them in Bitcoin, those apples can double in price in weekly, then go down 30% another week and then multiply in price shortly after that. If every transaction was this volatile, you would not be able to buy many goods and recognize how much you can spend. The same thing would happen with business deals. The price of all of the components would fluctuate wildly and create a lot of issues in making bargains because the cost and earnings would vary too much.

Is Bitcoin trustworthy? Reliability can be viewed in several ways. In the traditional money systems, the value of a currency will be worn away by inflation. Can make them unstable over the permanent because they are dropping purchasing power over time. Who is controlling this inflation? One school of thought blames it on higher labour, material and overhead costs with time – production inputs for people who do buiness. One other school of thought says that inflation is a monetary phenomenon, which means that whoever issues the money is issuing more income than the goods being produced. Is inflation a legitimate characteristic of money or is it a slow theft over time?

If you trust how the money system works, you may place more trust in Bitcoin since it is decentralized. The problem with decentralized systems is: That will cover for fraud, scams or bad behaviour? The regulator or central authority will work as the referee to keep your game clean. In the event that the referee is bribed or is biased however, suddenly the trust is lost and the game might as well be played without a referee if players themselves are honest. If your bitcoin wallet is lost or your passwords lost, you are not able to access your bitcoins either.

Other ways trust can be questioned include having limited access to money (capital controls or system malfunction if digital currency), needing to give much of your money away to a third party (taxation, organized crime or perhaps coin miners and exchange operators), counterfeit money (physical or digital), identity thievery or loss in a self confidence in an issuer (bankruptcy).