With bitcoins now being bid back up to around $200 per coin It’s a good time to analyze some of the underlying reasons why bitcoins have value (aside from speculative trading). Anything that has value has value because people agree it has value, but when talking about bitcoins let’s be specific. As many people often wonder, what intrinsic, physical, or otherwise unique properties do bitcoins have that give them any value at all?
Bitcoins are often referred to as a digital currency, but their value may be derived more so from other unique properties. Bitcoins are actually four things in one. Bitcoin is an open source protocol (a set of conventions governing the treatment and especially the formatting of data in an electronic communications system) similar to protocols that provide structure for the Internet and E-mail (HTTP, TCP/IP, SMTP). Ironically, many people don’t actually know how these technologies work, but they are extremely valuable– used by billions of people around the world! Bitcoin is not only a currency, but it serves as a cryptographically secured payment network and public accounting ledger (the block chain) as well. Since the protocol will limit the supply of bitcoins to 21 million units and demand for their use continues to grow, bitcoins serve as a store of value. If you’re new to bitcoins watch these intro videos to learn more!
So, even though bitcoins are most widely known for their attributes as a currency, its important to recognize the value of bitcoin as payment network, public ledger, secure and liquid store of value. How valuable is something so unique and innovative? Ultimately the free market will decide and since bitcoins are 100% decentralized and open source, they remain free from political influence or centralized control. Never before in history has anything existed with these 4 attributes while remaining secure and able to send around the world in minutes with little or no fees. Bitcoins are what I like to call “super currency”– a currency made for the Internet and made to match the demands of our digital societies!
Based on this perspective it’s easy to see why so many people are excited about out bitcoins. Bitcoin is a technological improvement over currency and a natural evolution of money. Although you might not think of currency as a technology, that’s exactly what it is. Currency is a tool humans invented that offers vast improvements and efficiencies over bartering and makes possible complex economies. So as traditional currencies once served as a technological improvement over bartering, bitcoin is a technological improvement over traditional currencies. Bitcoins are secure, finite, politically agnostic, and can be sent around the world in minutes with little or no fees, and without the risk of fraud, chargebacks or government intrusion. The disruptive nature of bitcoins represents a paradigm shift in money and what future generations will consider currency! How do you value that? Some would say they’re priceless, but only time will tell!
Cheers to the future of money! This is why bitcoins have value.