Differences between Bitcoin and Fiat Currencies concerning the Three Functions of Money (Unit of Account, Medium of Exchange, Store of Value)

Okay, let's talk about this in plain language.

Imagine money as a tool in our economic lives. This tool needs to have three basic functions. Let's look at how Bitcoin and the money we usually use (like RMB, USD, which are fiat currencies) differ in these three aspects.

1. As a "Ruler" (Unit of Account)

Fiat Currency: This "ruler" is very standard. When you go to the market to buy vegetables or to a store to buy clothes, everything is priced in "Yuan" or "Dollars." Everyone has a general idea of how much a pound of apples costs or how much a T-shirt costs. This ruler is very stable, so we can use it to measure the value of all goods.
Bitcoin: This "ruler" is constantly changing length, very unstable. Today one Bitcoin might be worth $30,000, tomorrow it might be $40,000, and the day after it might drop back to $25,000. If you used it for pricing, the price of goods would have to change daily, or even hourly. For example, a cup of coffee might be priced at 0.0001 Bitcoin today, but tomorrow it might need to be changed to 0.00008. Both merchants and customers would be confused. Therefore, Bitcoin cannot serve as an everyday "ruler."

2. As a "Bridge for Transactions" (Medium of Exchange)

Fiat Currency: This "bridge" is well-connected and very convenient. You can use cash, cards, WeChat Pay, Alipay, and complete transactions almost anywhere, anytime, quickly. Buying a bottle of water or having a meal, payment is instantaneous.
Bitcoin: This "bridge" is a bit difficult to cross.
- Narrow Path: Very few merchants accept Bitcoin payments, so it's hard to use it directly for everyday purchases.
- Slow and Costly Toll: When you transfer Bitcoin to someone, it's not instant. It can take anywhere from ten minutes to several hours, depending on network congestion. And each transaction incurs a "toll fee" (transaction fee), which can sometimes be more expensive than the item you're buying.
- Complex Operation: You need a digital wallet, and when transferring, you have to enter a long, jumbled address. If you make a mistake, the money is gone forever, with no recourse.

So, using Bitcoin to buy things currently offers a very poor experience.

3. As a "Safe Deposit Box" (Store of Value)

This is where the biggest difference lies, and also where Bitcoin is most interesting.

Fiat Currency: Putting it in a "safe deposit box" seems safe and stable in the short term. But in the long run, it slowly "rusts." Because governments can continuously print money (inflation), the purchasing power of money decreases year by year. The 100 yuan your grandfather saved back then and the 100 yuan in your hand today can buy vastly different things. So, fiat currency is not a good long-term store of value.
Bitcoin: It's more like gold or antiques in a "safe deposit box."
- Pros: Its total supply is fixed at 21 million, and no one can change that. By design, it won't be "over-issued" like fiat currency, so it has the potential to resist inflation. Many people buy Bitcoin precisely because of its scarcity, hoping its value will increase over the long term, much like gold.
- Cons: Its price fluctuates wildly, carrying very high risk. The money you put in today might double next month, or it might be cut in half. This "rollercoaster" experience is a huge test for the average person's heart.

In simple summary:

Fiat Currency: It's the absolute king for everyday purchases (exchange) and pricing (unit of account), but for long-term savings (store of value), it shrinks due to inflation.
Bitcoin: It's largely "crippled" for everyday use, but for long-term savings (store of value), it offers a potential hedge against inflation, provided you can withstand its extremely high price risk.