Is Bitcoin money?

Bitcoin is a  digital currency  that circulates through its own network of computers connected in a decentralized way. Precisely because it is decentralized, it does not require any central or local authority to manage it. Hence the libertarian character of the currency.

But… let's stop here. A coin? Money? What is money by the way?

Traditionally, money is usually attributed at least three functions: store of value , which allows saving income from work to be able to acquire goods and services in the future; unit of account , which allows setting the prices of goods and services; and medium of exchange accepted by all.

While it is true that today Bitcoin, due to its volatility relative to FIAT currencies, is not a practical unit of account and faces difficulties in proving to be a widespread medium of exchange, it is proving to be a valid reserve of value . Attribute that FIAT money continues to lose because inflation is responsible for eroding it.

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The fact that it does not fulfill two of the functions of money now (unit of account and medium of exchange) does not mean that it will not fulfill them in the future as more and more people enter the Bitcoin system and volatility decreases.

In fact, we could argue that we are in the middle of a transition phase between FIAT money, which has already begun to lose its store of value function, and Bitcoin money, which has taken it away from it.

In the table below, we compare the characteristics of FIAT money (dollar, euro, etc.) with those of Bitcoin:

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Let's see these characteristics more in depth for the case of Bitcoin:

  1. Exchangeable – Bitcoin is easily exchangeable through its digital network, which is accessible to anyone.

  2. Portable :  We can transport large amounts of money with us using our mobile phones, laptops, or hardware wallets.

  3. Durable : Physical deterioration does not exist since Bitcoin is digital.

  4. Divisible – Bitcoin can be divided into SATs, or its smallest unit of account: 1 SAT = 0.00000001 bitcoin.

  5. Unforgeable : The validation system used in the Bitcoin network does not allow forgery.

  6. Fungible : Being fungible means being able to exchange two of the same things of the same value. The fungibility of bitcoin is guaranteed as 1bitcoin will always be 1 bitcoin.

  7. Scarce : There will only be 21 million bitcoin in the world.

  8. Decentralized : Frees us from needing to trust third parties. But above all, that there is a central authority that can change the rules of the game.

  9. Digital : Makes scalability and transactional efficiency possible.

Bitcoin complies with all the characteristics of money and also provides digitization and decentralization.

 

As if that were not enough, private property rights over FIAT money are ambiguous. We trust that the bank is not going to close our account or that the government is not going to confiscate our funds, but…

what if that happened?

Bitcoin is therefore superior money to its predecessor FIAT insofar as it also provides efficiency, sovereignty and privacy to the individual in his economy .

 

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The risk-reward ratio is extremely favorable for bitcoin. As investors, what we are looking for is to find assets that provide us with low risk compared to the potential benefit of growth.

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In a parallelism with the Internet, it is said that the penetration of Bitcoin in society is in a period equivalent to the 90s, when the network of networks began its gradual adoption. The process of adopting a new technology is widely studied. In addition, a series of medium and long-term models developed by macroeconomic investors of various kinds are available. 

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THE BITCOIN STORY!

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