Difference between revisions of "Differences between Bitcoin and Monopoly Money"

From Bitcoin Wiki
Jump to: navigation, search
(Empirical Evidence)
(removing old broken link mtgoxUSD doesn't exist anymore, and there's no such thing as a market cap of bitcoin)
 
(7 intermediate revisions by 4 users not shown)
Line 3: Line 3:
 
This article is meant to explain the differences in a newb-friendly manner.
 
This article is meant to explain the differences in a newb-friendly manner.
  
TL;DR - Bitcoins are valuable because people think they are valuable. This does not mean they are a "monopoly currency", any more than other currencies.  
+
TL;DR - Bitcoins are valuable because people can use them in ways they deem valuable, and they are scarce. This does not mean they are a "monopoly currency", any more than other currencies.  
  
 
== There is a finite (rather small) amount of Bitcoins ==
 
== There is a finite (rather small) amount of Bitcoins ==
Line 16: Line 16:
  
 
'''Some links:'''
 
'''Some links:'''
* [http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25zvzl Real value of Bitcoin compared to the USD] (log scale!)
 
 
* [https://en.bitcoin.it/wiki/Trade List of online and real world businesses that currently accept Bitcoin]
 
* [https://en.bitcoin.it/wiki/Trade List of online and real world businesses that currently accept Bitcoin]
 +
* [http://www.forbes.com/sites/jonmatonis/2012/07/31/top-10-bitcoin-statistics/ Top 10 Bitcoin statistics (2012)]. In particular:
 +
** [http://blockchain.info/charts/n-transactions Number of transactions]
 +
** [http://bitcoin.sipa.be/ Total Network Hash Rate]
 +
** [http://blockchain.info/charts/estimated-transaction-volume-usd Daily Transaction Volume in USD]
  
== Bitcoins are goods means of exchange ==
+
== Bitcoins are good as a means of exchange ==
 
http://bitcoin.stackexchange.com/questions/305/what-are-the-perceived-advantages-of-bitcoin-as-a-means-of-exchange
 
http://bitcoin.stackexchange.com/questions/305/what-are-the-perceived-advantages-of-bitcoin-as-a-means-of-exchange
  
Line 27: Line 30:
 
Empirical evidence, in the time period 2009-2012 at least,  have shown them to be excellent store of value. This is not yet concrete proof that this trend will remain, but it's a start.
 
Empirical evidence, in the time period 2009-2012 at least,  have shown them to be excellent store of value. This is not yet concrete proof that this trend will remain, but it's a start.
  
== Bitcoins are like Fiat currencies ==
+
== Bitcoins are like fiat currencies ==
 
Fiat currencies (USD, Euro, ...) only have value because people believe they have value, and '''for no other reason'''. If everybody in the world suddenly thought the US was going to go into a major economic breakdown, then the value of USD would plummet, because it is only based on this belief (this process might be happening right now).
 
Fiat currencies (USD, Euro, ...) only have value because people believe they have value, and '''for no other reason'''. If everybody in the world suddenly thought the US was going to go into a major economic breakdown, then the value of USD would plummet, because it is only based on this belief (this process might be happening right now).
  
USD doesn't have value because "the US government backs it". There is no backing. It is not backed by bars of gold. It is not backed by other currencies (the US government does not promise they hold in their vaults 0.5 euro per every USD out there). '''This "backing" is a myth'''. The thing backing the US Dollar is the state of the US economy, and the thing backing Bitcoin is the state of the Bitcoin economy ('''speculation included!''').
+
USD doesn't have value because "the US government backs it". There is no backing. It is not backed by bars of gold. It is not backed by other currencies (the US government does not promise they hold in their vaults 0.5 euro per every USD out there). '''This "backing" is a myth'''. The thing backing the US Dollar is the state of the US economy, and the thing backing Bitcoin is the state of the Bitcoin economy ('''speculation included!'''). However the US government does support the USD by requiring tax payments be made in USD. Also OPEC and other global trade organizations supports the USD by requiring payment for oil and other commodities in USD, thus giving the USD the status of the world reserve currency.
 +
http://www.nypost.com/p/news/opinion/opedcolumnists/how_us_debt_risks_dollar_doomsday_j8dxHSYWUa22QpSN7ttOIL
  
  
 
[[Category:Introduction]]
 
[[Category:Introduction]]

Latest revision as of 19:04, 7 June 2017

New people encountering Bitcoin often think that it is rather similar to Monopoly Money. It is just some meaningless tokens exchanged between people with no "real" value.

This article is meant to explain the differences in a newb-friendly manner.

TL;DR - Bitcoins are valuable because people can use them in ways they deem valuable, and they are scarce. This does not mean they are a "monopoly currency", any more than other currencies.

There is a finite (rather small) amount of Bitcoins

There will never be more than 21,000,000 Bitcoins, while there is a lot of MM, and the company selling Monopoly can always print more.

Empirical Evidence

It is an empiric fact that Bitcoins are valuable (if you think otherwise, please sell me some for 0.1$ each .. you'll be "ripping me off" since you know they're worthless, right?)

Bitcoins are exchanged today for goods, services and other currencies. It is foolish not to accept the truth - the statement "Today, Bitcoins have value" is a true one, while nobody can say the same for MM.

It is a bit of a self-sustaining prophecy ... but that doesn't make it false.

Some links:

Bitcoins are good as a means of exchange

http://bitcoin.stackexchange.com/questions/305/what-are-the-perceived-advantages-of-bitcoin-as-a-means-of-exchange

Bitcoins are good in "storing value over time"

http://bitcoin.stackexchange.com/questions/2834/what-are-the-perceived-advantages-of-bitcoin-as-a-store-of-value

Empirical evidence, in the time period 2009-2012 at least, have shown them to be excellent store of value. This is not yet concrete proof that this trend will remain, but it's a start.

Bitcoins are like fiat currencies

Fiat currencies (USD, Euro, ...) only have value because people believe they have value, and for no other reason. If everybody in the world suddenly thought the US was going to go into a major economic breakdown, then the value of USD would plummet, because it is only based on this belief (this process might be happening right now).

USD doesn't have value because "the US government backs it". There is no backing. It is not backed by bars of gold. It is not backed by other currencies (the US government does not promise they hold in their vaults 0.5 euro per every USD out there). This "backing" is a myth. The thing backing the US Dollar is the state of the US economy, and the thing backing Bitcoin is the state of the Bitcoin economy (speculation included!). However the US government does support the USD by requiring tax payments be made in USD. Also OPEC and other global trade organizations supports the USD by requiring payment for oil and other commodities in USD, thus giving the USD the status of the world reserve currency. http://www.nypost.com/p/news/opinion/opedcolumnists/how_us_debt_risks_dollar_doomsday_j8dxHSYWUa22QpSN7ttOIL