Why Bitcoin Continues to Dominate the Cryptocurrency Market?

By Ronak Shah
6 Min Read

Bitcoins have value for the very reason the US dollar($) does – it’s a functional form of money that people use to trade things. While the US dollar’s worth is supported by the government, which provides it legal status and uses…

Every discussion about Bitcoin sooner or later results in a battle over what gives Bitcoin value. Skeptics claim it has no value, while those who believe in it see it as digital gold with maximum potential. So who is accurate, and what makes a single Bitcoin valuable? There are several attributes to consider.

A brief history of money

A brief history of money revealed that as long as people agreed that a particular thing had value, then it had, value.

At first, people wanted to barter until it became too inconvenient. At that time, they began to buy and sell products for things, like shells and rocks, then stones and rare stuff. Recently, they were replaced by government-backed money, now the most widely recognized form of currency. As cash advanced, it always had the following attributes – fungibility, insufficiency, and un-counterfeit ability. In addition, people have observed that it’s more accessible to use easily transferable, stable, and divisible currencies.

The reason why bitcoin is valuable?

First and foremost, Bitcoin has value thanks to the same cause paper and digital currency do – it’s a handy form of commodity commonly accepted by people. It’s used to transfer value and trade things. Yet, unlike the US dollar, whose value and the government manipulates status, Bitcoin’s worth comes from its code, infrastructure, insufficiency, and adoption.

Although it’s not fungible, Bitcoin’s code gives it specifications of traditional fiat currency, including insufficiency, divisibility, portability, fungibility, and recognizability. Besides, Bitcoin is decentralized and may be used without intermediaries, provides some level of transparency, is often obtained and used by anyone with an internet connection, is unfeasible to counterfeit and confiscate, and has other specifications like programmability.

Most importantly, it is often used as a store of value like gold or other investments. Yet, unlike its physical counterparts, it is usually transferred from one end of the world to the other via transmission channels in minutes.

Bitcoin’s valuable properties

Bitcoin scarcity. 

Unlike traditional fiat currencies, which will be inflated without end, Bitcoin introduces digital scarcity. There are only 21 million BTC visitors. Unlike conventional fiat currencies, which undergo annual inflation and lose a part of their value, Bitcoin’s inflation is restricted and controlled.

Also, suppose we count Bitcoins that are lost permanently (sent to wrong, nonexisting addresses, or those in wallets whose passwords were lost, etc.). In that case, the availability is encountering deflation which means that there will be progressively lesser Bitcoins available.

1. Divisibility

One Bitcoin can be split into 100000000 Satoshis. One Satoshi equals 0.00000001 BTC, the tiniest unit of Bitcoin right now. This level of division is encoded in Bitcoin’s original code.

If there’s ever a requirement, the extent of division can be made into 16 or more decimal places, interpreting that Bitcoin offers an infinite degree of divisibility.

2. Portability

 Bitcoins are often transmitted through a transmitting channel like the internet, satellites, or maybe radio waves, which makes it the primary transferable currency that ever existed.

3. Fungibility

Every Bitcoin has an identical value to its counterpart, regardless of who owns it and its history. A bit like one ounce of pure gold will always be equal to another ounce of pure gold. So irrespective of what happens, one Bitcoin remains a logo of value interchangeable with another Bitcoin.

4. Recognizability

An increasing number of merchants and users recognize and accept Bitcoins. Although it’s still far away from the acceptance of fiat currencies, many of us differentiate Bitcoin from non-currencies or other substituted money. Therefore, we are inclined to accept it as a means of payment.

5. Decentralization

No single entity oversees Bitcoin. Unlike traditional money, nobody can censor, authorize, or change the network or its transactions so that no one can confiscate your money.

6. Accessibility

You don’t need an active bank account to own or accept Bitcoins. All you need is basic computer knowledge and a stable internet connection. Bitcoin’s accessibility makes it exceedingly convenient for underbanked areas of the planet.

7. Stability and storage are helpful

The sole specification which still needs to be improved is Bitcoin price steadiness. Due to volatility, Bitcoin is employed more like a commodity such as gold. However, that’s likely to change when Bitcoin acquires more adoption and there are lesser incentives to take a position in it. Until the widespread adoption of cryptocurrencies, Bitcoin is predicted to remain somewhat volatile.