First of all, bitcoin has value for the same reason that paper and digital money do – it is a convenient form of money that people usually accept. It is used to buy and sell things. However, unlike U.S. dollars, whose value and legal status is provided by the government, bitcoin’s value lies in its code, infrastructure, and scarcity.
You may not have thought about it, but bitcoin’s code gives it the features of traditional paper currency, including scarcity, divisibility, portability, interchangeability, and recognizability. In addition, bitcoin is decentralized and can be used without intermediaries, provides some level of transparency, can be accessed and used by anyone with an Internet connection, cannot be counterfeited or confiscated, and has other features such as programmability. Most importantly, it can be used as a means of savings like gold, but unlike its physical counterpart, bitcoin can be transported from one end of the world to the other over communication channels in minutes.
Bitcoin’s valuable properties
Bitcoin’s scarcity. Unlike traditional paper currencies, which can be printed indefinitely, bitcoin has introduced a digital deficit. Only 21 million BTC can exist. Whereas paper currencies are subject to annual inflation and lose some of their value, bitcoin inflation is limited and controlled. In addition, you have to consider that some bitcoins have been lost forever (sent to wrong, non-existent addresses or to wallets whose keys have been lost, etc.), which means that there will be fewer and fewer bitcoins.
Divisibility. One bitcoin can be divided into 100000000 satoshis. One Satoshi equals 0.00000001 BTK, the smallest bitcoin unit at the moment. This level of division is built into the original bitcoin code. The division level can be changed to 16 decimal places or more if necessary, meaning that bitcoin offers infinite divisibility.
Mobility. Bitcoin can be transferred via the Internet, satellites, or even radio waves, making it the most transferable currency ever.
Bitcoin is the most “moveable” asset ever created.
Equality. Every bitcoin has the same value no matter who owns it or what its history is. Just like one ounce of pure gold is always equal to another ounce of pure gold.
Longevity. Any bitcoin or satoshi is reusable.
Recognizability. A growing number of merchants and users recognize and accept bitcoins. Although it is still far from the level of acceptance of paper currencies, many people distinguish bitcoin from non-currencies or other counterfeit money and are willing to accept it as a means of payment.
Decentralization. No one controls bitcoin. Unlike traditional money, the binkoin network and its transactions are not censored, controlled, or altered.
Accessibility. You don’t need to have a verified bank account to own or receive bitcoins. All you need is basic computer knowledge and an internet connection. Bitcoin’s accessibility makes it extremely convenient for regions with not enough banks.
Impossibility of counterfeiting. Every bitcoin transaction is recorded in a distributed ledger. The system was designed to prevent the problem of double spending. As a result, all transactions on the bitcoin network are uncontrolled and irrevocable.
Programmability. This means that in the future bitcoin will be able to receive updates and have even more convenient features such as smart contracts, multi-valued transactions and others.
Stability and value retention. The one parameter that bitcoin still lacks is price stability. Because of volatility, bitcoin is used more like a commodity (like gold, for example). However, this may change when bitcoin becomes widespread and there is less incentive to speculate. Bitcoin is expected to remain volatile until cryptocurrencies become widespread.
Features of bitcoin compared to other currencies.
The most important reason for bitcoin’s current value is that people want to use it to pay for goods and services, store money, or even speculate. The more the network of bitcoin users and sellers grows, and the more secure and advanced the system becomes, the greater the dollar value of bitcoin may be.