In recent years the world has seen the advent of a new form of money that is fast becoming the rage – Bitcoin. If you are not familiar with this emerging form of currency, it is simple to explain.
Essentially, Bitcoin is a new form of currency that is being used around the world right now. You can find it online easily and buy it from any number of different sources. There are a number of merchants that accept it as payment, meaning that you are able to exchange it for cash or other currencies. So how do economists view Bitcoin?
Economists have found that there are a number of benefits to Bitcoin, including its low capital gains tax. The reason that this occurs is that there is no traditional fiat currency involved, which means that Bitcoin has no effects on the stability of the dollar.
Even though Bitcoins are often viewed as being a sort of virtual “cash”, they actually have a long history. As we all know, in many countries people use a government issued paper currency instead of actual cash, primarily because of inflation. People with enough cash can put it into their bank accounts, allowing them to spend the money, or to “save” it.
However, since the government to issue paper money, it is usually hard to use in physical transactions. For example, you cannot purchase a cup of coffee in a shop with real money in most countries, as the only form of payment would be in cash. Unfortunately, these are not real reasons for people to use cash as a form of currency – rather they prefer to keep their money locked up in their bank accounts.
Now imagine if there was a means to save money, such as the Internet, where you could exchange your cash into Bitcoin and then spend it. You could store the bitcoins that you had created and transfer them to someone who wants to buy something with them. This means that you could hold bitcoins in your bank account and spend them through any of the existing methods available, such as converting your cash into Bitcoins.
It will take time for the value of Bitcoins to rise to the levels of cash. However, their main advantage is that it is easy to transfer them between users. The ease of trading will in turn increase demand for the currency, leading to greater adoption.
Free markets work best when people are happy. If you are not happy with your economic situation, you need to look for alternatives. For example, with the acceptance of Bitcoin, you are no longer bound by the limitations of traditional fiat currencies.