Given your friend\'s major he/she understands the technical/engineering basics u

Question

Given your friend's major he/she understands the technical/engineering basics underlying bitcoin but is very interested in understanding the basic economics of bitcoin and has asked you to write a brief paper explaining the economics of bitcoin. At a minimum your paper should address the following issues.

Is bitcoin money? To answer this question you will need to explain/identify the distinguishing characteristics of money and explain/identify whatever characteristics a phenomenon such as bitcoin must satisfy if it is to be considered money. Apply these criteria to bitcoin and render a judgment on whether bitcoin qualifies as money. If you conclude that bitcoin is money, what kind of money is it? Is it commodity money? Is it fiat money? Is it some other kind of money? Explain the basis for whatever classification you choose.

If you conclude that bitcoin is money, thoroughly evaluate how effective is it as a as a store of value. To answer this question properly, your paper should include at least one table, chart, or graph based on real world data on the behavior of bitcoin’s price over time and should use this data to form an opinion about bitcoin’s efficacy as a store of value. Given your conclusion about bitcoin’s efficacy as a store of value explain how this affects it effectiveness as a medium of exchange.

please give me an in depth analysis to help me out. Do not just copy and paste something off the internet.....Thank you!

Explanation / Answer

Bitcoin is a currency which is internet based i.e. it is stored or spent on internet only.

To be qualified as money, there are some characterstics to be fulfilled like

Now we will see that if bitcoin satisfies all the characterstics or not. Bitcoin being a virtual entity is durable. Bitcoin is portable also as one can buy anything on the internet at anyplace in the world so being a medium of exchange bitcoin is portable. Bitcoin is amongst the most divisible currency as it can be divided into 10000 parts. Bitcoin is uniform as being a virtual entity every 2 bitcoins are considered same. As it is been decided that only 21 million bitcoins will be supplied till 2040 so we see that supply is limited. As on March 2016 15,285,225 bitcoins were been distributed which proves the characterstic of acceptability of bitcoin as money. So as it is satisfying all the characterstics of money so we can consider bitcoin as money.  

Bitcoin basically satisfies the criterias of fiat money which are store of value, medium of exchange, no intrinsic value and unit of account. It is not commodity money as bitcoin in itself has no value and some people classify it as digital money but this classification is not accepted widely.

There have been difference in opinions of experts around the world regarding the bitcoin's function of store of value because owners of the currency should be able to hold the currency for a long period of time which people are able to do so initially exchange rates of bitcoin were highly unstable which is stabilizing now may help in ending this confusion as help is establishing worldwide acceptance of bitcoin's function of store of value. The function of medium of exchange is fully fullfilled by bitcoin as it has characterstics of uniformity, acceptability, portability and divisibility.

Time Bitcoin Price USD 01 Dec 2010 0.2275 01 Dec 2011 3.06 01 Dec 2012 12.562 01 Dec 2013 946.9237 01 Dec 2014 378.6444 01 Dec 2015 362.729

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