Guellord MbusaIt's a legitimate question that makes perfect sense to anyone who wants to buy bitcoin. Long accustomed to central bank currencies issued by States, it is normal to wonder how bitcoin, anonymous, has a monetary value. For early economists, the answer is simple. Bitcoin has monetary value for the same reason that the US dollar has monetary value. In other words, bitcoin is a currency because it is used as a medium of exchange.
This is what deeply gives bitcoin the characteristic of a currency. Although this answer is simplistic, it contains some truth. However, there are other factors that explain the monetary value of bitcoin.
In this article, discover in detail why bitcoin has become a currency like any other central bank currency.
How was bitcoin able to acquire monetary value?
The debate on the monetary value of bitcoin is less complex today. A few years ago, discussions about bitcoin led to endless debates about the basis of its monetary value.
For the more skeptical, bitcoin is a virtual coin of a " casino " and has no value other than speculative. This is also why, for a long time, detractors have spoken of the tulipomania to explain the rise in the price of bitcoin. This parallel is totally inappropriate and has been denied for a long time.
As for the supporters of bitcoin and for maximalists, bitcoin is a reference as such. They will repeat to you that 1=1 bitcoin to mean that bitcoin is the new standard of the monetary system. Better yet, for them, bitcoin is not only a currency, but the best currency that has ever been created by man. From this angle, it is accepted that bitcoin is a " sound money » ultimate, that is, a stable and lasting currency.
Let's see why more and more people are giving reasons to bitcoiners.
A little return to the origins of money: trust
Looking at the scale and importance of money in our everyday lives, we may be tempted to believe that it is the element at the origin of civilization. But this is not the case. Men have long lived and exchanged value without money (as we know it today). Far from wanting to examine the whole story on the evolution of money here, it is important to know that money is a result of collective trust.
Indeed, it was enough for people to agree that a specific thing was valuable for it to be the case. Everything depended on the common trust that we placed in something. More precisely, it was a common and tacit agreement to decree that this or that thing had value.
If we go back in time, the first monetary exchanges were facilitated by products such as shells and rocks. Then, very quickly, this was replaced by precious stones and rare metals. It was later around the 17th century that currencies issued by governments were established. These have become the most widely accepted form of currency. It is good to remember, however, that as money evolved, it always had the attributes.
These are for example fungibility, rarity and non-infringement. Additionally, people have found that it is more convenient to use currencies that are easily portable, stable, and divisible.
Is bitcoin a currency?
If we follow the criteria mentioned above, the answer to this question is yes.
Indeed, bitcoin has value in the same way as fiat currencies and digital money. In addition to being accepted by people, it is used to transfer value, buy or sell products.
However, unlike US dollars, whose value and legal status are imposed by the government, bitcoin's value comes from its code. But also from its infrastructure, its scarcity, and most importantly, its adoption. Bitcoin being mined through the process of mining, which is a difficult activity, makes bitcoin a "scarce" good.
What are the properties that give bitcoin “value”?
➡️ Bitcoin is rare
“Whatever is scarce is valuable,” right? Unlike traditional fiat currencies that can be inflated endlessly, Bitcoin introduces digital scarcity. There will only be 21 million BTC. Unlike fiat currencies which experience annual inflation and lose part of their value, Bitcoin inflation is limited and controlled. Moreover, if we count the bitcoins that are permanently lost (sending to incorrect, non-existent addresses, or those in wallets with lost keys, etc.), the supply experiences deflation, meaning there will be fewer and fewer bitcoins available.
➡️ Bitcoin is divisible
Many may believe that bitcoin is unity, but it is not at all. Only one bitcoin can be split in 100 Satoshis. One Satoshi is equal to 000 BTC, the smallest unit of bitcoin at the moment. This level of division is built into the original Bitcoin code. If necessary, the level of division can be changed to 000 decimal places or more, meaning that Bitcoin offers an infinite degree of divisibility.
➡️ Bitcoin is easy to carry (Portability)
If this feature seems insignificant to you, then you are wrong. The portability of a currency is a crucial element. This is exactly because of the difficulty of transporting considerable quantities ofor, that it is difficult to use it as common currency. This is even why the tickets had to be used. Gold was not practical for large-value transactions. It is difficult to transport it and in terms of security, it is easy to understand the risk of having gold on you (theft, etc.).
Bitcoins can be transferred via a communication channel such as the Internet or satellites, making it the most transferable currency that has ever existed and simple to carry in any quantity. Bitcoin is the internet currency par excellence.
➡️ Bitcoin is fungible (fungibility)
Fungibility implies that each bitcoin has the same value as its counterpart, regardless of its owner and its history. Just like one ounce of pure gold is always equal to another ounce of pure gold. No matter what happens, a bitcoin remains a symbol of value interchangeable with another bitcoin.
➡️ Sustainability
Any Bitcoin or Satoshi can be reused countless times without degrading. You should know that gold has long been the monetary value par excellence due to the profoundly durable nature of gold.
➡️ Acceptance in exchanges
A growing number of merchants and users recognize and accept bitcoins. Although it is still far from the level of acceptance of fiat currencies, many people distinguish bitcoin from non-currencies or other counterfeit currencies and are willing to accept it as payment. Moreover, we can see that more and more stores accept bitcoin payments.
What other advantages does Bitcoin have over other currencies?
For the criteria defined above, fiat currencies share these same characteristics. However, here is where bitcoin stands out as a currency.
➡️ Decentralization
No entity supervises Bitcoin. There is no government or state that can control Bitcoin. Unlike traditional money, no one can censor, control or modify the network or its transactions, so no one can confiscate your money. Unlike fiat currencies, bitcoin is resistant to censorshipe, thanks in particular to the decentralized network.
➡️ Accessibility
You do not need to have a verified bank account to own or accept Bitcoins. All you need is basic computer skills and an internet connection. The accessibility of Bitcoin makes it extremely convenient for underbanked parts of the world. Indeed, everyone, without restrictions of age, gender, or geography can send and receive bitcoins. It's everyone's currency.
➡️ Impossible to counterfeit
Each Bitcoin transaction is recorded on a distributed ledger and is secured by the computational work of the nodes. The system was designed to avoid the problem of double spending which prevented previous digital currencies from taking off. As a result, all transactions on the Bitcoin network are tamper-proof and irrevocable. Anyone can verify the transactions made, without any possible censorship.
➡️ Scalability
Unlike regular money, Bitcoin also introduces a dimension of programmability. This means that, Bitcoin could receive updates and have even more convenient features such as smart contracts, multi-signature transactions and others. As can be observed in the increasing use of bitcoin in decentralized finance or the introduction of ordinals, there will necessarily be changes to the network.
What about stability and store of value?
It is true that bitcoin has all the characteristics to be a reliable and ideal currency for human society, in the age of the internet. It is a fact.
However, it must be recognized that only one characteristic is still missing. This is the stability of the course of bitcoin. Due to volatility, bitcoin can scare away certain investors or even certain entities in commercial transactions for example. Indeed, the price of bitcoin is strongly determined by the law of supply and demand.
However, this is likely to change as Bitcoin becomes more widely adopted, and there is less incentive to speculate on it. In fact, many investors are “ hodl " and keeps it as a safe haven just as he would keep it'gold. This is why many populations invest in bitcoin to protect themselves from inflation. Also, until the widespread adoption of cryptocurrencies, bitcoin should always be less volatile.
???? Read the article : According to global data, the hyperbitcoinization of the world is inevitable…
Conclusion on the monetary value of Bitcoin
To close, due to its legitimacy, bitcoin has acquired an undeniable monetary characteristic. It is even considered a future currency for the world. Today it is used as a medium of exchange throughout the world. The most important reason for bitcoin's current value is that people are rushing to use it to pay for goods and services, store their money, or simply speculate. This is progressing in view of everything you can buy with bitcoin today.
—>Read the article: What can you buy with bitcoins?
The more the network of bitcoin users and merchants grows, the more secure and advanced the system becomes, and the more the value of bitcoin in USD and other currencies increases.
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Please note: : No financial advice is given in this or any other article on zonebitcoin. This is information of which you are the sole judge and master. Be responsible with your investments and only invest as much as you are willing to lose.
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