Hard and soft money both point to various currency types in the current economics, the former being commonly used to depict cold, hard cash. Generally, hard money is backed up by a commodity or valuable item such as gold, diamond, silver, and so on, offering a dependable and secure store of value. Regarding its steadiness in financial markets, this works as both a unit of account and a medium of exchange, explaining its crucial monetary function. Hard money is characterized by stability, scarcity, and durability, preserving purchasing power in time and promoting financial discipline that limits inflationary pressure and excessive money expansion, as well as offering reduced risks and lower transaction costs.
On the flip side, soft money denotes currency that derives its value from government laws or regulations; thus it’s not backed by a tactile commodity. Unlike the former, soft money is usually characterized by fiat currencies like digital currency or paper bills, which are governmentally issued and controlled. While it works as a unit of account and medium of exchange, like hard money, its value is more susceptible to inflation, market fluctuations, and government policy modifications. Soft money is associated with liquidity and flexibility, enabling easier modifications in money supply, possibly stimulating economic development, and facilitating transactions. Nevertheless, this resilience may as well generate harsher inflation risks, decreased buying power in the long run, and possible volatility in financial markets if handled recklessly.
Now that we’ve reviewed the primary features of hard and soft money, it’s time to discover the main traits endorsing Bitcoin as a viable hard money option. Notably, these go beyond the well-performing Bitcoin price and into more technical characteristics of the asset. Bitcoin is being purchased for various reasons, including its capped supply of 21 million coins, which suggests potential for long-term growth, and its high divisibility, allowing newcomers to invest in fractions starting at just $5 on certain exchanges.
Scarcity – the main and most important feat
Fiat money’s scarcity is low since they’re easy to come across and obtain, which isn’t the case with Bitcoin. BTC coins are not that quickly obtainable since the asset has a limited supply of 21MN coins, of which 19MN have already been mined and are in circulation. At the same time, it’s important to note that many Bitcoins have been lost over time, thrown away on hard disks, misused, or sent to the wrong addresses where they can’t be recovered.
Bitcoin is harder than traditional money and even gold, the latter of which is often associated with crypto thanks to its hard cap. The maximum limit offers a financial guarantee and signaling apparatus in the complex assortment of blockchain projects and cryptos.
Comparison to gold
Gold is fungible, resilient, and, most notably, somewhat limited. It works for some payments, but the fact that it’s hardly divisible prevents it from being accepted as a payment on a daily basis for basic transfers. A thousand dollars in gold will weigh around 1.7 kg.
At the same time, fiat money, like the dollar, is taken far and wide, portable, fungible, and somewhat durable. One million dollars offered in bills of a hundred greenbacks may weigh around 10kg. Nevertheless, the fact that the government has the freedom to print continuously, with trillions of them having already been launched and in circulation, takes a toll on fiat money’s quality of serving investors well in the long term. Bitcoin is scarcer than every asset, including gold, since it has a maximum and unshakeable supply of 21MN, with a supply that climbs incredibly slowly.
The asset is infinitely portable, durable, and easily dividable and fungible. Its key challenge is limited acceptability, as it’s yet to be embraced by all industries. Yet, Bitcoin remains the world’s most valuable asset since it is rapidly divisible and accessible by everyone, fairly, regardless of location.
6 other innovative traits of BTC
More and more people, focusing on businesses and organizations, are looking to learn about Bitcoin so they will not be taken aback when and if it ever becomes an evenly accepted store of value. Due to the flagship crypto’s design, it presents a range of newfound, breakthrough features that have yet to be witnessed in other types of money. These extra feats are what particularize Bitcoin fundamentally.
Decentralization
Every transaction with Bitcoin is saved on a database – professionally speaking, the blockchain that you may hear so often being muttered. Numberless computers, known as “nodes”, store copies of this chain all over the globe. With boundless duplicates spread all over, Bitcoin’s network remains one of the most decentralized and distributed ones to date.
Peer-to-peer
Bitcoin has revolutionized the financial world by removing a long-standing party, namely the banks or governmental agencies. These go-betweens take up massive chunks of money when transactions are conducted, which is no longer the case when you transfer value through Bitcoin (or other cryptos. The transfer links two persons directly and without needing supervision and scrutiny from outer agencies, decreasing counterparty risks, transaction times, and fees.
Consensus
Bitcoin is not run or owned by anyone. Instead, its ecosystem is modified using consensus, namely the bottom-up agreement. From node operators to miners to developers, all parties involved have the freedom to accept or refuse emerging proposals.
Verifiability
While many traditional money types, like gold nuggets or $10 bills, can be difficult to validate without expert involvement, verifying BTC isn’t much of a tall order. Using a low-cost or free Bitcoin Full Node allows people to access an easily conducted process that verifies a Bitcoin’s genuineness. The procedure is entirely automatic and gratis, meaning that it can be set as the standard in every transaction.
Permissionless
Bitcoin can be employed without anyone’s admission or knowledge. You don’t have to announce a bank or company when you want to open up an account on an online crypto exchange platform. What you’ll have to do, however, is get familiar with your country’s or state’s rules regarding crypto possessions. You may need to pay taxes on your crypto-based income or profits, which are things you’ll learn when you check out how your jurisdiction treats cryptocurrency.
Availability
Whereas banks and conventional traditional markets have open hours, Bitcoin never sleeps. It allows you to purchase, send, sell, and receive money with a simple internet connection anywhere in the world and regardless of the hour. This distributed profile makes it virtually impossible for the network to close and collapse. Since 2013, five years after Bitcoin’s emergence, the network has boasted 100% uptime.
Bitcoin is rising in acceptance as it meets the conditions of hard money and benefits people who purchase from overseas or travel internationally, among others.
