Why Does Bitcoin Have Value As Digital Gold — BTC Worth | DecentralBuzz
From a variety of different attributes, Bitcoin derives its value. Unlike fiat currency, Bitcoin has no central bank. Its decentralized structure is allowed to create a unique financial system.
Now Bitcoin gains much importance in digital trade. People around the world take an interest in investing their funds in Bitcoin.
Blockchain technology offers a massive array of utility, security, and other benefits. It also provided a revolutionary way to deal with global price movements. In many ways, Bitcoin can also act as a reserve for the value of gold.
In a sense, mining creates new Bitcoins. In practice, successful mining requires costly investments. But the question is, how can all this make BTC valuable?
Think about the money we all use every day. Our banknotes will no longer back up our assets or gold. Governments such as the Federal Reserve and the central bank can generate new money and increase its supply through economic means.
Although there are significant differences, BTC, as a digital form of money, shares some similarities with tie money. We are all accustomed to using it, so before we dive into the Cryptocurrency ecosystem, let’s first discuss the importance of fiat money.
What Is Fiat Money?
Fiat money is authorized and issued by the government. Today our society exchanges value in our bank accounts using paper notes, coins, and digital numbers.
People could go to the bank to exchange their paper money for gold or other precious metals. This method ensured that fiat currencies such as the US dollar were valued at the same price as gold.
Must Read: Best Cryptocurrencies to Invest in 2021
However, the golden standard was abandoned by the majority of nations and is no longer the basis of our financial system.
After eliminating currency ties from gold, we now use Fiat Money without a hitch. This deregulation gave central banks and governments more freedom to adopt monetary policies and influence money flow.
Here are some key features of Fiat money:
- A central authority or government issues it.
- It has no hereditary value. Fiat money is not supported by gold or anything else.
- It has unlimited potential.
What are the Valuable Properties of Bitcoins?
Unlike traditional futures currencies that may expire, Bitcoin introduces digital scarcity. There are only 21 million Bitcoins. Unlike fiat currencies that go through annual inflation and lose a portion of their value, Bitcoin inflation is controlled and limited.
If we count Bitcoins that have been lost for good (immovable addresses, sent incorrectly, or lost keys in the wallet, etc.), there is a supply decline. It means there are very few Bitcoins available.
A single Bitcoin can divide into 1,000,000 Satoshis. One Satoshi is equal to 0.00000001 BTC, which is currently the smallest unit of Bitcoin. This level distribution is embedded in the original Bitcoin code.
If never needed, the distribution level can change to 16 or more decimal places. It means that Bitcoin offers an unlimited distribution.
Bitcoins can transmit through communication channels such as the Internet, satellites, or even radio waves. These channels make it the most widely circulated currency ever.
Each Bitcoin has the same value as its counterpart, regardless of who owns it or its history. No matter what happens, a Bitcoin is a symbol of value exchanged with other Bitcoins.
Bitcoin can be used countless times. But the BTC transaction can’t be reversed. No one is able to edit or delete the block because of secure blockchain ecosystem.
An increasing number of merchants and users recognize and accept Bitcoins. However, it is still far from the level of acceptance of fiat currencies. Many people distinguish Bitcoin from counterfeit money and are willing to accept it as a means of payment.
No institution monitors Bitcoin. Unlike traditional money, in decentralized finance, no one can censor, control, or alter a network or its transactions so that no one can seize your money.
You do not need to have a verified bank account to own or accept Bitcoins. You only need basic knowledge of computers and an internet connection. Access to Bitcoin makes it extremely easy for the affected areas of the world.
Each Bitcoin transaction is recorded on a distributed ledger and is obtained by counting the nodes. The system was designed to avoid the hassle of double-spending, which prevented the removal of previous digital currencies. As a result, all transactions on the Bitcoin network are irresistible and uncompetitive.
Unlike regular money, Bitcoin also introduces a programming aspect. It means that Bitcoin may receive updates and even more helpful features such as multi-sag transactions, smart contracts, and others in the future.
Stability and store of value:
The only feature that is still somewhat lacking is the Bitcoin price stability. Due to fluctuations, Bitcoin is used more like gold.
However, this is likely to change when Bitcoin has more power and a minor concession to speculate. Unless large-scale Cryptocurrencies are adopted, Bitcoin is expected to remain relatively volatile.
The main reason for the current Bitcoin value is that people want to use it to pay for services and goods, save their money, or speculate. As the network of Bitcoin users and merchants grows, the system becomes more secure and up-to-date. The more excellent value of Bitcoin can find in the USD and other currencies.
Originally published at https://decentralbuzz.com on July 15, 2021.