Where's the Value?
Satoshi Nakamoto originally launched the original version of Bitcoin software on Sourceforge on 9 January 2009 after claiming to originally beginning work on it in 2007. He understood that his creation would support a wide range of transactions. Now in 2017 the name Bitcoin is becoming a household name after years in the shadows becoming used and invested in by thousands of people a day, though there are many people on the sidelines wondering 'where does the value in Bitcoin and other digital currency come from?'
While many have attempted to describe cryptocurrencies, there is abroad misunderstanding of how Bitcoin and other digital currencies have the value they've reached and continue to do so as mass adoption spreads. From a basic point of view, the value comes from the investors. The more money investors put into any given type of cryptocurrency, the coin value will inevitably climb higher, the same as can be seen in stocks. Supply and demand plays a large part in the overall value in every token. However just like stocks, some coins can draw money in only to leave people with an empty wallet and nothing to show for it.
Many detractors to digital currency often have the view point that if I hold it, they don't own it, While on its face this could be a somewhat accurate assumption, though once a look is taken deeper than the actual value of most cryptocurrencies the value can become more apparent. Like most owners of stocks, mutual funds and ETFS, these are also just numbers on a screen that people hold in opes of gaining value. You can't hold these numbers however they're assigned a dollar 'value' that fluctuates on the market, the parent company's actions and how well they do in their market. This is exactly the same concept brought to digital currency.
Cryptocoins have a transactional value based upon their on separate blockchains or programming. The real, tangible value is in the purposes that these different blockchains serve.. New companies like Uber, SpaceX, Air BnB are filling a niche and they're filling it well while making profits. Now think of this same concept applied to currency and think about how the internet was explained to you in 1987. What you didn't know back is now second nature. There are even Aid programs from the Red Cross in the third world (Africa) using blockchain technology.
Why Has Cryptocurrency Become Popular?
If you use the dollar as an example, which is a hard real world value object and universally agreed to having a real world value to it, it can be used to buy and sell goods and services. But even the dollar can be subjective, yet is universally agreed upon as having a real world -- if not fixed -- value associated with it though even the purchasing power of the dollar can change. Digital currencies are a way of storing all transactions between people without a 3rd party being involved. Technically, this could encompass any transactions between people or companies not just currency but land registry, shipping consignments, basically anything that would normally require a ledger. No needs for 3rd party Banks, accountants, lawyers for certain things.
It's also important to understand two things: the blockchain/tangle is immutable. It distributes equitable reality to all. Smart contracts allow individuals to conduct business with a vendor in South East Asia without the need for lawyers. The contract to conduct business is in the coding which allows quick payments in a specified currency at a current rate agreed upon by both parties. Also, digital currency miners collect transaction fees upon sending coins rather than an institution collecting everyone's fees. This allow new organizations to shine since their creation and use takes place organically along the chain without regard for profit;
Every cryptocurrency and blockchain provides a function. Whether it is settling cross border transactions, settling contracts or even functioning as data storage, digital currencies are created with a use in order to fill a niche in current markets. Each coin can be seen as its own data distribution network. The inherent value lies within the function the system was created and managed for by its developers and users in the coin community. Coins are created to be a decentralized monetization of online content whether it's to store information, making google ad-click middle men a thing of the past or managing the safety of food chains like AMBROSUS seeks to do . Which has been created by Nestle, IBM and Wal-mart. The end value of everything has everyone guessing but it can clearly be seen that the value in many coins is the increased functionality they provide in its given sector If companies were creating search engines, a simple way to store data or providing a way for the poor to pay for their electricity, wouldn't you place some value into the intention of that coin or alternatively, see it as a potential investment especially when the potential for serious good and/or profit them could be substantial?
Digital currencies are able to be bought, traded and then sold at exchanges for currency including dollars, yen and other 'real' world currencies. A 'currency' such as gold is a trusted means of holding a value, however you can only exchange gold at a small percentage of places compared to using gold. Gold has a known, fixed value that everyone agrees on, there may be a small variance from store to store, but the overall value is recognized. Now you couldn't go to a pawn shop to in hopes to exchange it for digital bits or anything else useful, but you get a recognized value from the transcation.
What You Have Vs. What Someone Wants
The coding from cryptocurrencies themselves have value in that it supposedly can't be hacked and user A says to User B, 'this uncrackable code says I have X amounts of money.' User B agrees and these codes can be limited to create a specific number of coins. Imagine them like bank bonds and only so many are produced. The fewer there are, thevaluable they become because theirs a finite number that will ever be produced though there are plenty of people who want to but, sell trade and transfer these coins. This leads to an increase in price due to people holding this asset and people become more interested in it,
The current benefits to digital currency
Digital currencies sustain themselves itself by providing incentives in the form of users mining/staking/running master nodes/spreading the word. These coins serve as vessels for video media, music, file transfers settling cross border transactions, there's a new use for coins being created everyday while not being in thei endless cycle of transaction fees dealt with on a day to day basis.
Everyone says 'blockchain technology' lbut how is it useful? To put it simply, it's a continous code of trainsactions in a chain of encryptions. This chain of transactions is unalterable without causing numerous warning signs that can be readily seen and able to immediate stop or fThe computer power alone to even do this is and the computing power alone to do this would not even be worth it to try and accomplish.
Blockchains are simply secure contracts. The reason that cryptocurrencies are disruptiong the monetary order is because it changes who gets money for transactions. Ripple for example is beginning to beused by banks to settle currency transactions in mere moments rather than using the sqift system which takes upwards of 3 days to accomplish. Digital currencies take away money from corporations like Paypal, who make their money solely in transaction costs. There is always a transaction fee when using Paypal that can be up to 3% of a transaction. The 'earn' this by merely providing a vector in which to buy, sell, or send money.
With digital currency miners make money and are backbone of the system who "get paid" for the computing of transactions using computing power. Investors get paid by the increase in "value" by users purchasing a currency and adding more money in the market. This is validated technology that is currently in the process of changing the world.Decentralized users are using computing power along with ownership makes the digital currency market everything the stock market is, and daresay better. Each person who mines or purchased coins can have a chance to own a share in the profits created through transaction costs.
The recent realization and overwhelming boost in value to Bitcoin and digital currency as a whole has seen ta rise in wealth unseen in the modern era, if ever. This is why governments are rushing to find a way to regulate, or tax them in some fashion. There;s no hope tin stopping the crypro revolution, however governments are rushing to get a piece of the action.With mass adoption of cryoto happening throughout the world, there's no way to stop it short of an EMP, which if that happens there will be more than just digital currency to worry about at that point and even then, a non-affected set of computers can still pick up where the chain was left off at ensuring its continuity.
June 15, 2019
David has a passion for cryptography, collectibles and helping people to form their own opinions.