Question

Bitcoin is a rather new (2008) and very controversial digital currency. Check out the Nov 2017 interview on NPR’s Fresh Air that explains Bitcoin in some detail. Our textbooks lists three functions of money: 1) Store of Value 2) Medium of Exchange and 3) Standard of Value (read more in Chapter 9 in your textbook) Money must perform ALL THREE of these functions – anything that doesn’t perform all three functions (like your credit card) is not money. Which of these functions does Bitcoin perform? How so? Does Bitcoin meet the definition of money? How safe is the Bitcoin market? Could Bitcoin eventually replace the US dollar? Would you use Bitcoin?

Answer 1

Bitcoin is a virtual money used by people to buy and sell goods online. It is also a cryptocurrency meaning that it is encrypted in a way that prevents it from being copied.

Out of the three functions of money, Bitcoin mostly serves one of them that is it is a medium of exchange. Bitcoin are highly used by the people to do online payments.

Basically a bitcoin doesn't meet the definition of money, moreover it is only considered as a medium of exchange like gold, silver etc..

Bitcoin is a decentralized digital currency which doesn't need a bank to work. In many ways, bitcoin is highly safe than usual money invested in banks. There are a lot of bank crisis occured in our society. Bitcoins are highly better when compared to those situations. Every bitcoin payments are digitally recorder. Thus no one can create it further or it is not possible to steal one's bit coin.

If the digital currency had made some changes or modified in specific areas, bitcoin can replace the US dollar potentially and can be considered as the reserve currency of our world.

I will definitely use bitcoin, because it is highly secure and most of the companies now accepts bitcoin for doing payments.

Thanks!..