Bitcoins, the most popular form of cryptocurrency have recently seen a massive rise in value. As of today, Bitcoins are worth just under $380000. This massive gain in value is why many people keep asking the question: Why are Bitcoins so valuable?
The answer to this question is very complex because it involves an explanation of all cryptocurrencies and why they are currencies at all. However, we will try our best to explain the basics of Bitcoins and how more than one factor makes them valuable; some tangible factors like supply and demand while some less visible factors that affect their value more.
We will go over these reasons in order from least important to most important while still trying to maintain simplicity for our non-technical readers. To read up on the latest news you can check out cryptonews.com!
1. Bitcoins are valuable because they are the most popular cryptocurrency
The first reason for bitcoins being valued highly is that it is simply the most popular cryptocurrency right now. Although this may seem silly, there is some truth to it. More people using a currency naturally adds value to it because more demand creates supply. This is why an item or service that has more buyers will have higher prices than one with fewer buyers would have. Of course, this doesn’t work if everyone in the world has one of these items already but coins/currency are different because they don’t necessarily have a limit on how many can exist unlike other forms of money like gold or paper bills. Thus, since Bitcoin is by far the most well-known, most popular cryptocurrency it is considered to be the best one for now.
2. Bitcoins are valuable because they are scarce
Many forms of currency, including fiat money like US Dollars or Euros, can be printed at will by their respective governments. The total supply is almost always increasing which means that its value decreases relative to other things people can buy with it. This is why poor countries with unstable currencies often have inflation rates above 20% and richer countries usually under 5%; there’s too much money being used so the prices on goods increase accordingly. There are two characteristics of Bitcoin that make it different from these types of currencies: there are only 21 million Bitcoins created in total and no more will ever exist after this amount has been reached (not counting lost coins). Even if all of these Bitcoins were made available for use, they would never lose their value because there will always be 21 million Bitcoins and this total is fixed. Nobody can change that fact.
3. Bitcoins are valuable because they aren’t directly controlled by any one person or organization
By design, Bitcoin is meant to be decentralized and free from control by governments and large organizations like banks. No single entity has the ability to take away or print as many Bitcoins as they want whenever they want so its supply cannot be subjected to inflation or other shenanigans that could render a currency far less valuable than it should be relative to other items. This freedom from control also means that no government can shut down the Bitcoin network either which adds an additional layer of security for its users.
4. Bitcoins are valuable because they are relatively safe to store and transport compared to other forms of money
Although it is technically possible that someone might hack into an individual’s Bitcoin wallet and steal their coins, the chances of success are very low unless your computer is extremely vulnerable or you aren’t following proper safety procedures (i.e. not keeping your wallet encrypted, using a computer with others who can see your files, etc). Using offline wallets like hardware wallets or paper wallets further reduces this risk by keeping your wallet locked on an airgapped system that isn’t connected to the internet at all times until it needs an update or accesses funds. Know more about Cryptocurrency storage at Coinformant. Also if you have access to large amounts of Bitcoin, using multi-signature wallets or keeping your coins in a cold storage wallet, which means they aren’t being used online for long periods of time, can reduce the chance of theft even further.
5. Bitcoins are valuable because it is possible to use them anonymously
Although there may be ways to track transactions made with Bitcoins and other cryptocurrencies if a person knows what they’re doing, you don’t have to give any personal information to someone else when using Bitcoin. This adds extra security by allowing people to not only make purchases without fear of identity theft but also buy illicit substances or conduct business that could potentially get them into trouble by the government (including whistleblowers who want their sources/documents from Wikileaks released without worrying about their address being discovered). Also many people believe that governments will eventually outlaw cryptocurrencies but if a person doesn’t give their identity to a government, they won’t ever be able to track you down for tax evasion or other offenses.
6. Bitcoins are valuable because they can be used anonymously
As mentioned above, although there may be ways to track transactions made with Bitcoins it is possible to obtain them in an anonymous fashion if needed. This means that no matter how much someone complains about the lack of privacy with Bitcoin, it is entirely possible for people who want this level of security to obtain it (at least up to a certain limit). Also unlike traditional currencies like the US Dollar, you don’t need any personal information when dealing with Bitcoins which adds another layer of anonymity and security; nobody knows who holds the coins simply by looking them up on a ledger. This can be especially useful for whistleblowers who want to reveal their identity but need to do transactions with sources/documents without sending them through the mail or revealing their location.
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