 The truth about Bitcoin and alternative currencies. The U.S. dollar has been the world's most popular currency for over half a century. But that's starting to change. Our central bank's been meddling with the value of the dollar and people are looking to replace it with something better. One currency has been making news lately. Bitcoin, a new digital currency. Lots of things have been used as currency throughout history. Gold and silver. Wheat. Seashells. Tobacco. Salt. Paper. And numerous other things. Some currencies have stuck around. Lots have died off. But why? What makes some currencies better than others? It's not any government to create. It's their properties. Certain properties are essential to a healthy currency. And if we keep score, the U.S. dollar doesn't look so great. Especially in comparison to historical favorites like gold and silver or to Bitcoin. A sound currency stays valuable over time, has a limited supply, and is easily divisible and portable. If we want to compare currencies head to head, we need to understand the importance of these qualities. Imagine that a currency doesn't stay valuable over time. For example, let's say we use bananas as a currency. Well, bananas have a lifespan. They eventually rot. A large store of savings in bananas would eventually turn to mush, and nobody wants to trade rotten fruit with each other. The U.S. dollar doesn't rot. But thanks to the central bank, it's lost about 95% of its purchasing power in the last 100 years. Gold and silver don't rot either. They're durable and have a long history of being valuable. Bitcoin also doesn't degrade over time. The ones and zeros will be the exact same 50 years from now. It's a decentralized currency, not issued by any one institution, which means its value is independent of a government or central bank. As long as people find it valuable, it will stick around. Next, imagine a currency without a limited supply. Let's say we use wooden nickels as a currency. What happens when people start carving their own? If people can easily create more currency for themselves, economic prices become meaningless. Since the 1970s, the U.S. dollar has had anything but a limited supply. The central bank has created trillions of dollars out of thin air, devaluing everybody else's dollars in the process. In contrast, the supply of gold and silver has been relatively constant for the last few millennia. Bitcoin also has a stable supply. In fact, at any given time, we know almost exactly how many exist and at what rate they will be produced in the future. No more than 21 million Bitcoins will ever be created. It's written straight into the code. Counterfeiting might also increase the supply of currency by defrauding people. The only difference between money printing and counterfeiting is who's behind it. The result is the same. Fortunately, it's difficult for citizens to counterfeit U.S. dollars, gold or silver. But what about something digital, like Bitcoin? It uses mathematical cryptography and a public ledger called the blockchain to make it impossible to counterfeit. Picture a currency which does not divide easily. What if cows were used as a currency? How would you pay for something like a loaf of bread? A cow is worth much more than one loaf of bread and it would be very difficult to divide a cow into small enough units to make a fair trade. The dollar divides very easily down to the penny. Gold and silver are a little bit more difficult to divide into small quantities. Bitcoins easily divide down to 100 millionth of a Bitcoin. The sound currency must also be portable. Imagine the difficulty of using cinder blocks as currency. The dollar is easily portable. Gold and silver are less portable. Though on a gold standard, people usually carry around paper which is redeemable in the metals. Bitcoins can be sent anywhere in the world with internet access instantly regardless of the size of the transaction and at almost no cost. So how do these currencies match up against each other? You decide for yourself. We can't know what the best currency is. We discover it over time. But if central banks keep inflating the money supply and people are free to choose, the U.S. dollar likely can't stand toe to toe with its competition. To learn more about sound economics, visit fee.org. And to donate Bitcoin, scan this QR code.