Differences between Bitcoin and Monopoly Money
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 think they are valuable. 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.
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.
- Real value of Bitcoin compared to the USD (log scale!)
- List of online and real world businesses that currently accept Bitcoin
Bitcoins are goods means of exchange
Bitcoins are good in "storing value over time"
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!).