Is Bitcoin Money?
Money has value when it"s based on a system of confidence.
What is money?
It"s not the bills in your wallet.
Those bills do not have any value — they"re just bits of paper. Why do you buy goods and services? For cash to have value, there has to be a shared agreement on its use as a medium of exchange.
In money"s earliest days, gold or silver was utilized to make coins.
These coins were different from our bills, because silver and gold have value. There was only 1 reason the people using them agreed they could be used to buy things, and appreciated silver and gold.
Your coins were worthless if you exchanged with a culture that didn"t value silver or gold. The very same things aren"t always valued by cultures.
The Micronesian island of Yap, for instance, had a peculiar currency system that puzzled visitors. They used stone wheels that were huge known as fei . These stones were so heavy that they often remained after a market with the previous owner.
The system worked because the Yapese agreed that the ownership (or partial ownership) of fei could be used to settle debts.
A society needs some type of trust in its own money to have a source of money. If anyone could create new money, money would lose its value.
There has to be a limited amount of it for the system. From the 1920s, the Weimar Republic discovered the hard way.
Germany had tremendous debt following the Versailles Treaty and attempted to cover it by more and more bills. The value of these bills became so low that people started using them as wallpaper because it was cheaper than buying wallpaper.
This hyperinflation caused the economy to collapse, and people lost their faith.
Why Cryptocurrencies? Why Bitcoin?
Bitcoin is money because people agree it can be used as a unit of exchange.
The number of Bitcoin supporters is growing daily, but lots of individuals still have a hard time viewing it as “real" because you can not see or touch person Bitcoins. Bitcoin has already proved itself to be a currency.
Bitcoin functions as cash because people trust that it has value — just like “normal" money.
Trust increased when people began to find that real things could be purchased using it.
This trust is reflected by the rising price of Bitcoin.
In the first few weeks of 2013, a Bitcoin"s value climbed 800 percent, from $129 to $1,165. Also, Bitcoin does not have a bank like other currencies.
Bitcoins are mined, which prevents them. We"ll find out more about this.
We can know that Bitcoin is money because people accept Bitcoins . Consider the story of Lazlo Hanyecz. On 21 May 2010, he made an unusual purchase.
His purchase wasn"t unusual because of what he purchased, but rather how he did it. For a year, Bitcoin had only existed at the time but Hanyecz was an early adopter.
He owned about half of all Bitcoin from the world.
No one accepted Bitcoin then and Hanyecz didn"t know what to do with his “money." He decided to cover 10,000 Bitcoins (worth roughly $41 at the time) for 2 Papa John pizzas.
He found a fellow Bitcoiner through the Bitcoin Forum and had him buy two pizzas.
He was then paid by Hanyecz for the pizza Bitcoin.
Bitcoin was approved as a unit of exchange. From August 2014, the value of the 10,000 Bitcoin Hanyecz spent on the pizza had climbed to about $5 million.