Economics of Bitcoins Essays

1258 Words Jun 18th, 2015 6 Pages
Economics of Bitcoins
An Article Analysis

Money is a driving force that makes the world go round. From the purchases of homes, vehicles, and even to the way we make a living, we cannot escape the importance of currency. Without it every economy in this world may just fall apart. In this article analysis we will look at the various functions of money, the Federal Reserve and its role in the United States (U.S.) money supply, as well as the evolution of bitcoins and its future or nonexistent future in the U.S. Economy.
Money serves as three functions: medium of exchange, a store of value, and a unit of account. The most important function of money is a medium of exchange to facilitate transactions. Without money, transactions would
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The Fed sets a target value for the funds rate and then adjust the amount of funds ( reserves) in the banking system to cause the funds rate to move toward the target value. When the funds rate increases, longer-term interest rates tend to increase and the dollar tends t o appreciate . The increase in longer- term rates and reduces spending on interest-sensitive items such as houses and automobiles; the appreciation of the dollar reduces spending on net exports. As spending declines, employment, output, and inflation decline as well. Thus, when the Fed seeks to lower inflation, it raises the funds rate target, and when it seeks to lower unemployment, it decreases the rate target. [3]
Now, we will discuss Bitcoins and the functions of money that are served by it. The definition and functions of bitcoins is quite simple. It serves as a digital wallet, peer to peer system independent of any government. It is online cash with no fees, where the transactions remain anonymous. [4] Bitcoins only exist in the computer world and it is not something that is physically tangible. It is a payment system that was created by Satoshi Nakamoto, as an open source software in 2009. There is no computer that stores information for bitcoins, so it is not a traceable source so to speak. There are

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