Q1. The main function of money is to serve as a medium of exchange. It also serves as a unit of account and as a store of value. Explain the problems hyper-deflation causes for Bitcoin in its functions as money.
Hyper-deflation occurs when the general price level of goods or services in an economy falls drastically in a short period of time, this causes people to horde their currency instead of spending it in the hope that they will get more for their money in the following days, weeks or years. The value of Bitcoin has soared and is continuing to grow; as people horde the currency the value is pushed up even further. Hyper-deflation is causing Bitcoin users to refrain from buying goods and services through bitcoins, this leads the economy …show more content…
Currency is also supposed to be a measuring stick for the economy and the worth of things should be able to be easily measured by how much they’re worth in a certain currency. Bitcoin’s value expands and contracts at an alarming rate and there is also no limit as to how high or low the value can go, this causes a major problem for Bitcoin’s use as a form of money
Q2. Give two reasons for why people might prefer Bitcoin over national currencies such as USD or Euro.
1. Bitcoins don’t have a government behind them and therefore are seen as a universal, virtual currency; this means that people who don’t place their trust in governments or large institutions such as central banks have another option. Bitcoin users place their trust in one another as there must be a majority agreement of users before any changes can be made in the way that bitcoins are exchanged. The Bitcoin system is also very transparent to those who can read and understand the code involved as this code is available for anyone to …show more content…
The U.S. Treasury Department came out with guidelines about the bitcoin exchanges used to buy bitcoins. Bitcoin is seen by some people as a sketchy form of currency as it is often associated with illegal behaviour such as internet drug dealing and many people also questioned whether it was even legal to create a currency. When these guidelines were released many people took it to mean that the U.S. government were okaying the use of bitcoins.
3. The Cyprus Crisis caused many people to fear currencies backed by governments. Cyprus planned to take money from people’s saving accounts and this led to lots of people all around the world distrusting banks and questioning the safety of their money in these accounts. Bitcoins seemed the perfect alternative to many people as they aren’t associated with any government and therefore cannot be interfered with in this way.
Q4. The current value of Bitcoin against USD is 381 USD per Bitcoin. At the current exchange rate, if a computer costs 900 USD, how much does it cost in Bitcoin?
2.3622 bitcoins
Q5. Go to http://www.bitcoinstore.com/ and pick two items you would consider buying and list them as your answer to this question.
Apple iPhone 6 16GB http://www.overstock.com/Electronics/Apple-iPhone-6-16GB-Unlocked-GSM-4G-LTE-Cell-Phone/9447380/product.html?refccid=KDRC2YQNET4JQISAKLV4TT4NMY&searchidx=0 Canon Telephoto Zoom
Hyper-deflation occurs when the general price level of goods or services in an economy falls drastically in a short period of time, this causes people to horde their currency instead of spending it in the hope that they will get more for their money in the following days, weeks or years. The value of Bitcoin has soared and is continuing to grow; as people horde the currency the value is pushed up even further. Hyper-deflation is causing Bitcoin users to refrain from buying goods and services through bitcoins, this leads the economy …show more content…
Currency is also supposed to be a measuring stick for the economy and the worth of things should be able to be easily measured by how much they’re worth in a certain currency. Bitcoin’s value expands and contracts at an alarming rate and there is also no limit as to how high or low the value can go, this causes a major problem for Bitcoin’s use as a form of money
Q2. Give two reasons for why people might prefer Bitcoin over national currencies such as USD or Euro.
1. Bitcoins don’t have a government behind them and therefore are seen as a universal, virtual currency; this means that people who don’t place their trust in governments or large institutions such as central banks have another option. Bitcoin users place their trust in one another as there must be a majority agreement of users before any changes can be made in the way that bitcoins are exchanged. The Bitcoin system is also very transparent to those who can read and understand the code involved as this code is available for anyone to …show more content…
The U.S. Treasury Department came out with guidelines about the bitcoin exchanges used to buy bitcoins. Bitcoin is seen by some people as a sketchy form of currency as it is often associated with illegal behaviour such as internet drug dealing and many people also questioned whether it was even legal to create a currency. When these guidelines were released many people took it to mean that the U.S. government were okaying the use of bitcoins.
3. The Cyprus Crisis caused many people to fear currencies backed by governments. Cyprus planned to take money from people’s saving accounts and this led to lots of people all around the world distrusting banks and questioning the safety of their money in these accounts. Bitcoins seemed the perfect alternative to many people as they aren’t associated with any government and therefore cannot be interfered with in this way.
Q4. The current value of Bitcoin against USD is 381 USD per Bitcoin. At the current exchange rate, if a computer costs 900 USD, how much does it cost in Bitcoin?
2.3622 bitcoins
Q5. Go to http://www.bitcoinstore.com/ and pick two items you would consider buying and list them as your answer to this question.
Apple iPhone 6 16GB http://www.overstock.com/Electronics/Apple-iPhone-6-16GB-Unlocked-GSM-4G-LTE-Cell-Phone/9447380/product.html?refccid=KDRC2YQNET4JQISAKLV4TT4NMY&searchidx=0 Canon Telephoto Zoom