http://www.businessweek.com/articles/2013-12-24/the-dollar-will-never-fall-to-bitcoin
The Dollar Will Never Fall to Bitcoin
I loved this article. In our class, we learned about the uses of money and characteristic of good money. This article describes Bitcoin in comparison to the dollar based on the uses of money. My opinions on Bitcoin have now changed dramatically. I like it a lot more after reading this article and understanding how it protects against inflation. In my research I learned how Bitcoin was "inflation-proof" and how it may be the best currency we have seen to date. The latter piece of the the last sentence is not something I agree with, but I do think the Bitcoin has merit, and I support it more now than I did before. I think this article is particularly interesting due to the fact that it relates directly to what we did in class over the past few days and hits on money, inflation, and money supply.
The article was kind of eye opening in the fact that my reasons for supporting Bitcoin were contrasting with this author's reasons. In class we all tended to agree that the Bitcoin was an absolutely awful store of value due to its tendencies to rise and fall violently. We also agreed that it was a fairly decent unit of account if it would be more widely known. It isn't that hard to say a television is worth one Bitcoin. I did agree with the author in the fact that Bitcoin is a great medium of exchange. The author compares the Bitcoin to awesome gold. Basically, the Bitcoin is inflation proof because the "Bitcoin supply" in the global economy will only ever be 21 million BTC. Ever. It will never exceed that. For this reason, Bitcoin is deemed as an excellent store of value by the author. BTC is a solid medium of exchange due to its instantaneous nature and its security. Now, for the deal breaker for many economists: BTC is not a unit of account. You can't easily value a carton of eggs in terms of Bitcoin. For this reason the author believes that the Bitcoin will never beat the dollar. I'm not sure I agree with everything the author says, but I would love to hear what you think.
- David Gerhart
I took some time to read this article, very eye opening indeed. Clearly, our class was very biased and erroneous. I'm sure we aren't the only individuals that are negatively biased towards bitcoin either. I believe it's just the lack of knowledge on bitcoin. Considering there will only be 21 million BTC; with no further creation of BTC, this is a perfect inflation proof currency which I'm sure people dont quite understand why that's so substantial.
ReplyDeleteI agree that it has the merits of being "inflation proof" and of being a great store of value. However, I don't think that it will ever become a widespread currency due to its very limited supply. 21 million sounds like a lot even considering how valuable it is, however it is less than 1% of the worlds population. That in and of itself dooms it to be a sideshow as opposed to being a true power currency.
ReplyDeleteI really do find Bitcoin truly fascinating. The fact that it's "mined" from piles of data amazes me, and I think it will continue to grow as an online currency. However, Bitcoin faces big challenges if its advocates wish to make the jump from the internet to the real world. The fact that there will never be more than 21 million BTC could be a major problem. It will be interesting to see what happens when all 21 million bitcoins are "mined," but my guess is that their value will spike and they'll be hoarded by people seeking to use them as an investment instead of a medium of exchange.
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