While many have tried to use Bitcoin as a means of making money online, many skeptics still believe that the currency will fail and will be a fraud. While this does seem to be true, you should take a look at the way that Bitcoin operates, its value, and the Austrian principles that are behind it.
You see, there is a lot of volatility in the virtual world of the Internet. This means that, since you don’t actually see what is being traded for the currencies, the price can fluctuate very quickly. With this said, Bitcoin operates on the basis of a deflationary principle.
It basically does this by setting the money supply of the currency to a predetermined amount. This then causes the prices of the currencies to steadily decrease. The government keeps a small portion of the money supply for itself and then distributes it out among all the people. This prevents the total money supply from growing too large or out of control.
When a person receives their currency they are essentially purchasing something with their money. The currency that they are receiving is less than the value of what they are buying. This then forces the government to have to keep the money supply under control as well. This is one of the basic principles of the Austrian economics system.
In addition to this, there is a credit associated with any given currency. What this means is that, if the government decides to take over and manipulate the currency, then you could find yourself in a lot of debt for a product that you bought from another person. With this, you might even find yourself in debt for something that you didn’t purchase at all. If the government controls the currency, then they can create it out of thin air.
Inflation, as a result of this, would be rampant. This would cause the value of the currency to rapidly depreciateand you would be dealing with a lot of problems. With this said, you may be thinking that this is a bad thing.
The problem with Bitcoin is that it is a private currency. This means that you do not want a lot of people using it to control the economy and devalue the currency. With this, you will need to choose your markets wisely and only accept payment in money that is backed by gold or silver.
While the Bitcoin currency is just that – a way to send money to other people without using traditional methods, you can take advantage of the structure of the Austrian economics and help to maintain a system that is stable. Through understanding the fundamentals behind the Austrian economic system, you can use this method to create wealth for yourself and others.