Chronic deflation may keep Bitcoin from displacing its fiat rivals
This article examines the bitcoin, its growth (from $490 million to $7.9 billion) over the last year, and its status as a "real" form of money. It views the success and allure of the bitcoin by looking at its capability to be: a unit of account, a medium of exchange, and a store of value--the three characteristics that define "money."
The article argues it is best used as a medium of exchange, as it can be quickly and cheaply transferred across the globe in exchange for goods, services, or other currencies. The author questions its stability as a store of value, considering a major recent heist of nearly 6% of outstanding bitcoins from the Mt. Gox exchange. Also, the author doubts the bitcoin's chances at being a unit of account, based on volatile values and people's tendencies to view bitcoins in terms of dollars or euros, instead of having its own intrinsic value. In conclusion, the article views the eventual capping at 21 million units as a method to deter constant central bank meddling with the currency. It also discusses that natural inflation is good for money and that the future of the bitcoin will undoubtedly be very interesting.
3 comments:
Now that the bitcoin is starting to remain stable, it will surely gain interest for those to actually use it as a form of effective currency. While it has online uses, more phones now have digital wallet apps. It would be interesting to see bitcoins be used in grocery stores and other local shops.
I find this progressive currency unit to be fascinating. I think it is truly revolutionizing and gaining interest amongst those who use it. While it has been picking up electronically and for online purposes, there could be a huge leap for the currency if made efficient enough for people to utilize. I cannot imagine seeing bitcoins being used in person, but then again, I never thought cars would run on energy batteries and be plugged in to charge.
I think the bitcoin is characterized as more of a medium exchange than a store of value. Since the creation of the bitcoin, many transactions have occurred via bitcoin values for goods and services but the literal form of bitcoin has continued to be vague. The recent Mt Gox incident where peoples bitcoin currency went M.I.A. makes it a risky store of value.
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