I like Bitcoin. As you can see I even have a little bitcoin ticker here on my blog. I think some people are confused by what Bitcoin is exactly. Some think it’s maybe just something else based off of the dollar but this is not true. Bitcoin is a peer to peer currency totally independent of the U.S. Dollar and completely incapable of being centrally controlled. This is a good thing too. Ultimately I am an advocate for Gold and Silver, but Bitcoin may be the future, and I’m alright with that.
But what is money? Money is a medium of exchange that holds value and is widely accepted. This makes trade easier because when we want or need something, we don’t have to find someone who has exactly what we want but also exactly what we have. For instance, I wish to have an apple and only have oranges. I can trade my oranges for apples, but I must find someone who both has apples and wants oranges. This decreases the amount of trades possible for everyone. With money, it doesn’t matter. I can give the apples guy a currency in exchange for his apple which he can then use to exchange for exactly what he wants. It’s sort of like when you get a gift card to a store you absolutely hate and you wish they had just given you cash instead.
This short video explains Bitcoins very well:
Aristotle had something to say about what makes sound money. It’s as follows:
1) Whatever is used as money must be durable. It must last the elements and time and must not change.
2) It must be portable. It must carry a relatively high value compared to it’s weight.
3) It must be divisible. It must be easily separated and combined without losing what makes it valuable.
4) It must be valuable. It must not be dependent on anything else. The value of the currency must be inherent in the money itself.
Lets look at how the current dollar compares to this definition of money.
1) The Dollar is not durable. It is made of paper meaning that it cannot last the elements very well. It will degrade and change over time.
2) The dollar is portable and has the appearance of having high value compared to it’s weight (more on that soon).
3) The Dollar is easy to separate and combine without losing it’s perceived “value.”
4) The Dollar is not actually valuable. It is not based on anything and since it is made of paper, the amount of value inherent in the currency itself is practically zero. The only reason it has the appearance of value is because the Federal Government forces us to use this currency in almost all of our transactions. They also keep inflating the currency with a printing press in the Federal Reserve in order give the appearance that the dollar is still alive.
Let us look at a known solid currency. Gold.
1) Gold is very durable and can outlast us, meaning the value of it can as well.
2) Gold can be portable and carries a high value compared to its weight (at this time gold is at about $1,300 an ounce).
3) Gold is easy to divide and it retains its value after it has been divided.
4) Gold is inherently valuable. It has been used as currency for over 3,000 years. It’s value is derived from nothing other than itself.
Now let us look at Bitcoin:
1) Bitcoin is durable. The internet is not really going anywhere. So long as it stays, we will always have Bitcoin. It can’t wither away and degrade like paper money since it is digital.
2) Being that it is a digital currency, it is highly portable. It takes up nearly zero space and holds a high value compared to it’s weight (Bitcoin at this time is at $629.56 a coin).
3) It is easy to separate and combine without losing value since it is digital.
4) This is a tricky one, it has it’s value based off of nothing else but itself but it has no real physical representation of it. So it’s sort of a yes and no here.
As you can see Bitcoin actually fits this definition of sound money better than the Dollar. This is why I like Bitcoin. It is actually more portable than gold but still carries a high value. It cannot be inflated like paper money nor can it be centrally monopolized like the dollar. It’s a much better place to store you wealth than the continually depreciated dollar.
It’s nice to have options.
If you are interested in getting into Bitcoin (I encourage you too, especially Californians since California just legalized the currency), than may I recommend coinbase as your wallet? Use my personal link too to throw some Bitcoins my way at no cost to you simply because I referred you.