Bitcoin

Why is Bitcoin Valuable? Here are 5 main reasons!

The first-ever cryptocurrency, Bitcoin has survived a rollercoaster of fluctuating fortunes. From being valued equivalent to two large Papa John’s pizzas on the 22nd of May, 2010, to one Bitcoin being valued at $8,528 as of the 17th of November, 2019 – Bitcoin has survived the tryst of time. Blockchain technology finds its application in several sectors of business, including the medical industry, veganism, NGOs and travel, among others – Bitcoin being its biggest exponent. As of today, there are 18,052,725 Bitcoins in supply.

     While there are several cryptocurrencies which have unlimited supply, Bitcoin is one of the many cryptocurrencies which has a fixed supply. This essentially means that its demand drives its price up or down. Higher is the demand for Bitcoin, higher is its price, and vice versa. Some people try to make profit from these price fluctuations and trade with popular forex platforms which feature Bitcoin. Most of them, however, unfortunately lose money because of the nature of Bitcoin and its extreme volatility. There is only a small portion of people who understand Bitcoin, how it works and why it has any value. Today, we are going to answer the latter question. So, what makes Bitcoin valuable? 

Why Bitcoins Have Value

     As is the case with paper and digital cash, Bitcoin too has value because it is a handy form of currency, which is commonly accepted among the masses. It is used by a large amount of people to buy and sell products, as well and trade amongst each other, and other cryptocurrencies, to earn profits (or lose money in some cases!). While paper currencies are backed by a Government, and come with a value and legal status, as is enforced by the Government in question, Bitcoin’s value comes from its adoption, scarcity, infrastructure and code. While Bitcoin is volatile, it is indeed a legit form of currency, and come with its own set of noteworthy features.  

     As is the case with all cryptocurrencies, Bitcoin is not tangible, yet its code gives it features of traditional fiat currencies, which include – Recognisability, Fungibility, Portability, Divisibility and Scarcity. Bitcoin provides for a level of transparency, is decentralized in nature, and can be used between two transacting parties without the interference of a middleman. All the more, Bitcoins can be accessed without the need for an internet connection. It is impossible to counterfeit Bitcoins. Bitcoin is a store of value, as is the case with worldly commodities like Gold and Silver. Unlike these ‘worldly’ commodities though, Bitcoin need not be dependent on a physical need of dependence – Bitcoins can be transferred from one end of the world to the other, in a matter of mere minutes.  

Bitcoin’s Properties 

1) Scarcity

     Bitcoin introduced the concept of digital scarcity – there is a fixed supply of Bitcoins in the market, with about 1,800 Bitcoins added to its supply chain every day. Unlike traditional fiat currencies that can be inflated, Bitcoin cannot. While Bitcoin is volatile in nature, it does not lose value like fiat currencies that undergo inflation, and lose a part of its value. In fact, if we take into consideration the number of Bitcoins lost due to sending them to incorrect addresses, or wallets whose keys were lost, the number of Bitcoins actually decrease – experiencing a sort of deflation.  

2) Divisibility 

     Another staple when it comes to fiat currencies, Bitcoin can be further subdivided into Satoshis. In fact, one Bitcoin is equal to 100000000 Satoshis, meaning that one Satoshi is equivalent to 0.00000001 Bitcoin. This is embedded into Bitcoin’s original code, with an infinite degree of divisibility to incorporate a level of division which can be changed into 16 or more decimal places – quite impressive. 

3) Portability

     If there was ever a more portable form of currency created at the point initiation before Bitcoin’s inception, Bitcoin’s Founder (who is unknown even today!) would be disappointed. Bitcoins can be transferred from one part of the world, to the other in a matter of minutes. They are transferred through a communication channel, which makes it the most transferable currency, in terms of ease, that ever existed!  

4) Fungibility

     No two Bitcoins have different values – each Bitcoin has the exact same value as its counterpart. As is the case with an ounce of pure gold, the value of one Bitcoin remains the same, regardless of its owner, or region of use. 

5) Recognisability 

     An ever-growing number of investors, merchants and users are accepting and using Bitcoins. Although its level of acceptance is far from that of fiat currencies, the number of people using Bitcoins is increasing, and several people distinguish Bitcoin from counterfeit money or non-currencies, and are willing to accept it in the form of a payment. 

Conclusion on why Bitcoin is valuable

     Bitcoin’s application is ever-increasing, and it remains a valuable commodity. It is valued as are fiat currencies, and it’s bound to diversify over time. The most important thing to keep in mind, is that Bitcoins value is influenced by an increasing demand, and acceptance among people and merchants, who store their money in the form of Bitcoins, or merely speculate. The more the number of people using the cryptocurrency, the higher is its price expected to rise. You can expect advancements in its technology, and security as well, over time. 

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