Dollars, Pounds, Euros, Renminbi… So what about Bitcoin joining the list?
What Is A Bitcoin?
First things first, let’s get back to the basics of what money is. Let’s accept the following;
- Money is simply a medium of exchange, something given in exchange for a product or service
- All currencies are fiduciary. They are not commodity backed like gold or precious materials
- Money has no intrinsic value. It’s value is gained from the belief that it will carry a value by being accepted by someone else in return for a product or service
- The value of money is uncertain. It is only as reliable as the issuing government and it’s monetary policies
Essentially a Bitcoin is a digital form of hard cash. Bitcoins can be transferred digitally from one person to another. Being digital the owner is identified and the Bitcoin passed through an exchange, therefore proving ownership (you can also watch a video here).
For everything else, think of the above facts about money and you start to see how it can work.
The weakness to the viability of Bitcoins are that like any currency, they only have a value for as long as it is accepted as a medium of exchange. But, balance that against this;
- Zimbabwe Dollar
- South African Rand
- Botswana Pula
A Zimbabwe Dollar is worth 0.2 of a US Cent, not dollar, cent..
So if you had to change that £20 in your pocket into Bitcoins or Zimbabwe Dollars then which would you choose?
All of a sudden you start to see how Bitcoins could have a future.
Our Future View Of Bitcoins
The use of bitcoins appears limited, there is no hard cash version and the system remains open to miss-use. The appeal to users is many, one of which is that it is free of government control, however is use grows then it is hard to see it remaining this way.
The future remains an interesting one for the Bitcoin. For accountants, how long before the Bitcoin becomes part of your Balance Sheet Assets?
Never has the financial world been so interesting…
By David Farmer
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– For those with a critical eye, I am aware that the Zim Dollar is no longer, it was simply an example…