How Bitcoin has value

Bitcoin’s value is made up of multiple factors. It offers the ability to have digital currency routed via networks that are within a decentralised, fully autonomous blockchain. This blockchain is not only transparent but can’t be hacked or duplicated and transactions are final.  This eliminates the need for a centralised trustee, elaborate fees, middle men, physical storage, banks and much more. Bitcoin can not be ‘printed’ but instead require nodes or users of the network to run mathematical algorithms in order to ‘mine’ bitcoins which is essentially solving a mathematical equation before any other node.  This solving of a mathematical equation is not only rewarded in Bitcoin by the blockchain which delivers the reward for solving the puzzle first, but it’s main function is actually encrypting the transactions on the network. So while these computers are mining for Bitcoin rewards they are actually acknowledging the user transactions on the blockchain which keeps security at a extremely high level.  This of course adds value to Bitcoin. Technically solving the mathematical algorithm in Bitcoin requires what is known as Proof of Work. Proof of Work takes time and resources, hence giving Bitcoin value.

Bitcoin also derives value from its ability to be a borderless medium of exchange and its use as a store of value. For example if the currency of a particular country is going down or there is some fear of it crashing, Bitcoin can be an alternate storage to park spare capital. Furthermore, no Government can manipulate it, or print more of it.

Scarcity is our next reason Bitcoin has value.  There will be exactly 21 million Bitcoin available to mine.  There is currently 17 million BTC already mined. Bitcoin reward rates decrease by around half every four years.  This means Bitcoin will become harder and harder to obtain potentially giving Bitcoin unprecedented value should all go to plan.

Like any commodity, Bitcoin is only given value if people are willing to assign value to it. The need for an alternative financial instrument with all the above mentioned features is what created Bitcoin’s value. This has only consolidated as time has passed and it becomes more mainstream.

To sum this particular section up, we would note that the value of Bitcoin is directly proportional to the users on the network.  The more adoption that is undertaken the more percentage of the worlds trillion dollar financial market it will obtain.

Next: How Bitcoin Started