Bitcoin and Digital vs Virtual Currency

The funny thing is, “real money”, the dollars or euros we use every day are┬ánot very real at all. They are to real hard cash what virtual reality is to … reality. They don’t really exist, but you can pretend they do… up to a point.

People keep calling Bitcoin virtual but it’s not. Bitcoin is digital money, it is defined by software. Transactions and balances are represented on computers in digital form. But with bitcoin, money is very real.

Bitcoin has a defined schedule for minting new currency which cannot be altered, not even if it seems like a good idea to policy makers and economists. Bitcoin cannot be created by banks as they do with fiat currency when you make a deposit and they lend the same money out.

It doesn’t really matter that people call Bitcoin “virtual” when it’s not, but it’s so ironic that the more familiar fiat currencies are the true virtual currencies when they can be counted┬ámultiple times.

I’m not saying that fractional reserve banking or monetary policy is evil, I’m not a dyed-in-the-wool Austrian economist. I’m just saying that these things are what make money into a chimera, a hallucination or a dream and we can have a sudden rude awakening if suddenly people lose faith or too many debts get called in.

Virtual memory in a computer is not real memory, but it can be treated as if it were. Same with virtual disks, virtual machines, etc. Banks turn debt into money but it is only virtual money. You find the difference important during a bank run. What is a run on the bank but a direct effect of overzealous double dealing?

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