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Why do Bitcoins Have Value?

By August 21, 2020May 9th, 20234 minute read

Recently, former CEO of the insurance giant Prudential, George Ball in an interview with Reuters, said that bitcoin is an attractive long-term investment bet. He thinks that BTC is a safe haven for traders and investors.

It is important to know that Mr. Ball was previously a hater of bitcoin, cryptocurrencies and blockchain technology.

But then what made him change his heart? Why did a company like MicroStrategy buy $250 million worth of bitcoins last week?

Because these mainstream financial market bigwigs now believe that BTC has ‘concrete’ intrinsic value as opposed to traditional assets and markets.

And why’s that?

Because bitcoin is decentralized, durable, portable, fungible, scarce, divisible, and recognizable. And most importantly, the cryptocurrency’s design is based on the standard principles of mathematics.

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Decentralized

Probably the most unique trait that imparts bitcoin its value is decentralization. By the very design of its protocol, Bitcoin operates over a public network of computers – blockchain.

This network of participants keeps Bitcoin running by ensuring that every member has access to the latest version of the blockchain i.e the longest chain.

No central authority, or a third party organization controls Bitcoin. And recent data suggests that over the last 5 years, bitcoin’s ownership has become much more decentralized.

This means that the concentration of entities holding large number of BTC has reduced and those holding small quantities has significantly increased. One of the reason why bitcoin’s value is increasing.

Percentage of Bitcoin Supply by Entities That Own ≤ 10 BTC
Percentage of Bitcoin Supply by Entities That Own ≤ 10 BTC, Source: Glassnode
Bitcoin Addresses Holding More Than $10 Worth BTC
Bitcoin Addresses Holding More Than $10 Worth BTC, Source: Coin Metrics

Durability

Bitcoins are inherently lines of code that exist as ledger entries on a public and distributed network. For the last 11 years, this network has been running 24X7X365 with 99.98 percent uptime.

Cryptography secures BTC transactions. It also makes them remarkably efficient. Also, Bitcoin’s code is available in a public repository on GitHub, which in turn is stored in the Arctic Code Vault. From what it looks, bitcoin is a pretty durable asset and can stand the tests of time.

Portability

There are a number of wallet options available where you can transfer your BTC holdings and move around freely, travel anywhere you like.

You can access your bitcoins from anywhere across the world. Because the money that you spend on investing in BTC actually gets you ownership of a section on the Bitcoin blockchain.

This means that BTC is free from a physical form or a place of storage.

Bitcoin is so portable that now it is not necessary to connect to the internet for conducting a BTC transaction.

State-of-the-art advancements by Bitcoin development companies like Blockstream have made it possible to make BTC transfers without the web. So much so, that transactions can happen from outer space as well!

Scarcity

Scarcity is the most characteristic attribute of bitcoin that makes it a valuable asset. There will only ever be 21 million bitcoins.

This is a feature that pre-programmed in the Bitcoin right from the start when the first block was mined. Mining or the process of producing new BTC requires proof-of-work.

Miners have to prove that their hardware is capable of verifying transactions on the bitcoin protocol amid rising mining difficulty. This is how they win BTC rewards for successfully verifying transactions and circulating them in the market.

Also, a technical feature even known as halving which reduces the bitcoin block reward every four years, ensures that powerful miners don’t empty the entire remaining supply.

Divisibility

Divisibility is another aspect that makes bitcoin a valuable asset. 1 BTC is divisible into 10 million small entities. Each entity is a satoshi.

This means that bitcoin’s limited supply cannot hinder its adoption. The world’s topmost cryptocurrency can find usage even in fractional quantities, up to the eighth decimal place!

With regards to investment too, it is not necessary to buy 1 whole BTC. You can buy a few satoshis or just a small portion of the entire bitcoin.

Fungibility

Similar to all other legitimate assets like gold, and state-backed currencies like the INR, every bitcoin can be exchanged for another.

Bitcoins irrespective of their history of ownership and usage still continue to hold value up until the individual satoshi.

Bitcoins/Satoshis emerging from one source are completely interchangeable with an equivalent number of bitcoins/satoshis emerging from some other source.

Recognizable

As of date bitcoin has garnered a lot of respect and credibility as an investable asset. Despite being criticized as a scam, and a Ponzi scheme, BTC has made a lot of money for investors especially the early entrants.

Also, it has accrued quite some support from conventional financial market and technology influencers like Federal Reserve chairman Jerome Powell, billionaire macro investor Paul Tudor Jones, Twitter founder, and CEO Jack Dorsey, etc.

These are some of the attributes that explain why bitcoins have value. Know any other feature, that imparts value to BTC? Share them with us in the comments below!

Frequently Asked Questions

Is Bitcoin Cash A Good Investment?

Bitcoin Cash is a hard fork of Bitcoin formed in 2017 to address Bitcoin's scalability and challenges. Bitcoin Cash seeks to make global transactions faster, cheaper, and more secure. Bitcoin Cash is now accepted by thousands of online and offline businesses all over the world. Studied correctly, Bitcoin Cash may be an investment worthy of consideration.

What Is Meant By Bitcoin?

Bitcoin is a digital currency that was initially released in January 2009. It is based on ideas offered by Satoshi Nakamoto, a mysterious and pseudonymous figure, in a whitepaper. The name of the person or individuals who invented technology has not been revealed. Bitcoin promises lower transaction fees than other online payment systems, and unlike government-issued currencies, it is decentralized.

How Many Bitcoins Are There?

There are 18,730,931.25 Bitcoins in circulation as of June 2021. The total number of Bitcoins that would ever be there is just 21 million. On average, 144 blocks are mined every day, with 6.25 Bitcoins per block. The average number of new Bitcoins mined every day is 900, calculated by multiplying 144 by 6.25.

How Does Bitcoin Technology Work?

The blockchain is the foundation of Bitcoin. It is a decentralized, distributed ledger that tracks the provenance of digital assets. The data on a blockchain can't be changed by design, making it a real disruptor in industries like payments, cybersecurity, and healthcare.

Can Bitcoin Be Converted To Real Money?

Crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, and Peer Peer Transactions are all options for converting Bitcoin to cash. This can be accomplished by using Bitcoin exchanges such as WazirX. A Bitcoin ATM is a real place where you may purchase and sell Bitcoins with cash, unlike standard ATMs that allow you to withdraw money from your bank account. Many websites provide the option of purchasing Bitcoin in return for a prepaid debit card that works similarly to a standard debit card. Through a peer-to-peer marketplace, you may sell Bitcoin for cash faster and more privately.

What Is Bitcoin Used For?

Bitcoin was created as a means of sending money over the internet. The digital currency was designed to be a non-centralized alternative payment system that could be used in the same way as traditional currencies. Bitcoin is being used by an increasing number of businesses and individuals. This includes establishments such as restaurants, apartments, and law firms.

How Bitcoin Mining Works?

Bitcoin mining is a crucial element of the blockchain ledger's upkeep and development and the act of bringing new Bitcoins into circulation. It's done with the help of cutting-edge computers that solve exceedingly challenging computational arithmetic problems. Auditor miners are rewarded for their work. They're in charge of ensuring that Bitcoin transactions go through smoothly and legitimately. This standard was established by Satoshi Nakamoto, the founder of Bitcoin, to keep Bitcoin users ethical. By confirming transactions, miners assist in avoiding the "double-spending issue."

How To Invest In Bitcoin?

Bitcoin may be invested in two ways: through mining or exchanges. Bitcoin mining is carried out by high-powered computers that solve challenging computational arithmetic problems that are too difficult to complete by hand and complex enough to tax even the most powerful computers. WazirX, a Bitcoin exchange, is another alternative.

How Can I Get Bitcoin?

To begin, go to the WazirX website and register. After that, you will receive a verification email. The link received by verification mail will only be available for a few seconds, so make sure you click it as quickly as possible. This will successfully verify your email address. The following step is to set up security, so choose the best solution for you. After you've set up the security, you'll be given the option of continuing with or without completing the KYC process. Following that, you'll be sent to the Funds & Transfers section, where you can begin depositing Bitcoins into your wallet. You may also use INR to fund your WazirX Bitcoin wallet and then use it to purchase Bitcoin.

How Many Bitcoins Will Ever Be Created?

The source code of Bitcoin stipulates that it must have a restricted and finite quantity. As a result, only 21 million Bitcoins will ever be generated. These Bitcoins are added to the Bitcoin supply at a predetermined rate of one block every ten minutes on average. The supply of Bitcoins will be depleted once miners have unlocked this number of Bitcoins. It's possible, however, that the protocol for Bitcoin will be altered to allow for a higher supply.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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