If you want to understand the source of Bitcoin’s value, you need to start from the concept you’re familiar with, which is paper money. Before any form of money can be considered valuable, it needs to imbibe certain qualities. It must be durable, relatively portable, difficult to duplicate, and scarce.
Once a form of money has these features, not just anyone would be able to get their hands on it and thus, the hyper-inflation rate would be restricted. The beginning of the first economy thousands of years ago began with the barter system. This system primarily utilized the exchange of goods.
After the barter system, money changed form to shells and precious metals like gold and silver. Today, we purchase goods and services with paper money and credit cards.
When you consider the leap of the financial system from physical cash to electronic money, you get closer to understanding the value of Bitcoin. Electronic cash solves the hassle of physically carrying money for services like playing casino games, online shopping, and hiring remote freelancers. Websites such as casinoutansvensklicens.one also utilize electronic payment.
Imagine carrying millions of dollars around and the stress associated with lifting that load. Compare it to a person who, in theory, holds a billion dollars in a credit card.
The Idea Behind Bitcoin’s Price Rise
Paper money and electronic cash in credit cards are backed by the central banks of the country from which the currency originates. Bitcoin has no monetary authority, which is why some individuals can’t figure out why Bitcoin increases in price occasionally.
As the Central Bank of a nation backs paper money, so is Bitcoin is backed by the computer nodes of everyone around the globe. These computer nodes approve transactions that are made on the network. The network is constructed so that the cryptocurrency imbibes all the features of fiat currency and even bests it in certain aspects.
Features of Bitcoin
Here are some features of bitcoin in respect to fiat currency:
- Bitcoin is Difficult to Duplicate
If everyone has access to a form of money, it drastically reduces its value. Inflation would increase very quickly, and people would need to find another form of money.
Bitcoin relies on the computing power of computers on its network. Thus, it is almost impossible for anyone to duplicate Bitcoin. Double-spending is what Bitcoin enthusiasts refer to as cryptocurrency duplication. For anyone to duplicate a digital currency and send it to a bitcoin wallet, more than 50% control of the network needs to be gained.
The amount of resources needed to perform this on Bitcoin runs into billions of dollars and, thus, is unfeasible.
- Bitcoin is Scarce
Bitcoin’s scarcity is one of the explanations for its meteoric rise in recent years. The premier digital currency has drawn comparisons to gold because of its restricted supply.
The total amount of Bitcoin that’ll ever exist is 21 million. At least 2 million of these coins have been lost forever by developers who lost access to their Bitcoin in its early years after the network’s launch. This drives up Bitcoin’s price because getting the cryptocurrency becomes even more difficult.
- Bitcoin is Easily Divisible
Although this is more of an issue in developing countries, getting balance for everyday transactions can prove difficult. Using Bitcoin for transactions like these can ensure that this issue gets solved.
A single Bitcoin can be divided into eight decimal places called satoshis. Credit card money can only be divided into cents, which is two decimal places. Hence, if Bitcoin gets to the probable $1 million value several analysts have predicted, it could still be used in everyday transactions.
Many individuals have remained surprised about Bitcoin’s swift rise in the finance world. The premier digital currency takes on the features of money like scarcity, portability, divisibility and durability. These characteristics have made it possible for an alternate rise in the cryptocurrency industry.