Why are cryptocurrencies like Bitcoin valuable?
I have written this article earlier for my website BitcoinWiki.nl.
What makes currencies like the Euro and the Dollar valuable? Because isn’t a note of 100 Euro in fact just a piece of paper printed on both sides? Scroll down for the rest of this article.
According to Aristotle, something can only be considered money if it has four properties: Divisibility, portability, durability and intrinsic value.
Divisibility
Each Bitcoin can be divided into 100 million Satoshi’s, so Bitcoin can be divided up to 0.00000001 BTC. At the time of writing this is about € 0.00005. This means that Bitcoin makes so-called micro transactions possible, and is divisible beyond the Euro and the Dollar.
Portability
Bitcoin is a digital currency and can be used on any smartphone, provided it is connected to the internet. Even though Bitcoins are not tangible, they are definitely portable.
Sustainability
Bitcoin is decentralized, so all computers running the Bitcoin Core software collectively maintain the network. As long as all these computers are connected to the internet, it is impossible to stop Bitcoin. And to destroy Bitcoin as a whole, all computers running the Bitcoin Core software have to be hacked or destroyed at once. This is practically impossible. Or the entire internet should suddenly break down. Bitcoin is absolutely sustainable.
Intrinsic value
Currencies like the Euro and the Dollar are valuable because almost all people agree that these are the currencies we use to buy and sell goods and services. A note of 100 Euro is in fact not worth more than a piece of paper with the same size and print. And yet I can buy things that are worth much more than a piece of paper. This is due to two things: common trust in the currency, and scarcity. Scarcity simply means a limited stock, in this case a limited production of Euros and Dollars.
The only intrinsic value Bitcoin has is the limited edition of 21 million Bitcoins. As long as confidence in Bitcoin continues to increase, Bitcoin’s value will increase. Simple as that. And this while Bitcoins are actually figures in an internet network. The reliable network just becomes very valuable. And a gigantic example for the future.
Bitcoin is the first of its kind
Bitcoin is the first of its kind, and will long be the best known digital currency. We will also encounter blockchains more often, the development of which is still in its infancy. Bitcoin is only the first application of blockchain technology. Similar to e-mail and the internet. E-mail is only one application of the internet.
Bitcoin is decentralized and collective
Bitcoin uses a blockchain to make a third party such as a bank or a credit card company redundant. This allows transactions to be made directly from person to person. Moreover, anyone who has installed the Bitcoin Core software has the original version of the database of all transactions ever made. No one owns Bitcoin and the network is collectively maintained by the users.
Bitcoin is direct and fast
Bitcoin uses a blockchain to make a third party such as a bank or a credit card company redundant. This allows transactions to be made directly from person to person. This is also called peer-to-peer. This results in extremely fast and cheap transactions. The only limit of Bitcoin is the maximum number of transactions per time period that can be processed by the Bitcoin miners.
Bitcoin is revolutionary
Bitcoin is one of the (digital) currencies of the future. This technology is brilliant, and we simply cannot ignore it. New generations will take Bitcoin (and other digital currencies) for granted, and they will be amazed when we tell them how we still do it today.
Bitcoin knows no borders
Bitcoin knows no borders and can be used internationally. All you need is an internet connection. Governments are unfortunately starting to impose more and more rules, but well, every disadvantage has its advantage. The era of billions of scams of which BitConnect (BCC) is a perfect example, that comes to an end. By the end of 2019 most countries in the world will have passed strict laws on the use of cryptocurrencies. Until 2017 this was not so much an issue.
Store Bitcoin offline
Besides Bitcoin, more and more altcoins can be stored offline on a hardware wallet like the Ledger Nano X. This is the safest way to store cryptocurrencies.
Thanks a lot for your time and we hope to see you at BitcoinWiki.nl!
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Disclaimer: I am not a financial expert and through this disclaimer I do not hold myself liable in any way for your possible losses. Investing in cryptocurrencies can be risky. Always act based on your own intuition and use articles like these as a reference. This is my opinion, so I do not offer any guaranteed profits. Subject to spelling and language errors.