WHAT MAKES BITCOIN VALUABLE?
(What You Need To Know About The Bitcoin Value Story)
With the growing buzz of blockchain technology and the rampant surge of the bitcoin price and the value of bitcoin. A lot of people have the same question on their minds… What makes bitcoin so valuable ?
Lets cut to the chase… All value is made up by two things lining up… Perception and Consensus.
So let’s talk about how both of them work out the value of anything. Perception of value is stated. For example lets look at gold. Gold is in short supply and hard to come by. Hence it is a LIMITED resource, which makes it more valuable. Now gold is literally just a metal. Looking at it realistically It’s UTILITY is rather limited… really.
The fact that it is valuable is simply because we PERCEIVE it to be “rare” which makes it more exclusive. Psychologically speaking people want more of the things there are less of. Human behaviour says the masses then usually want gold as a result of the fear of missing out kicks in.
” …the individual investor should act consistently as an investor and not as a speculator.” – Ben Graham
Bitcoin has similar properties to gold in this context. When it was founded there was a hard limit built in of 21,000,000 bitcoins that would ever be created.
“Rare” = Limited supply. When there is a greater demand than there is supply… Markets go bananas.
Now Lets address the second part of value, CONSENSUS.
Gold may have be rare though without consensus it wouldn’t of have a high value… at all ! There needs to be a community that agrees something has value.
So when everyone stands around any object in agreement of its value that’s when a new market is birthed.
Consensus is the heartbeat of any economy…
Consensus is what gives rise to the ebb and flow of supply and demand.
Selling and buying are both actions of consensus and agreement. If people don’t agree that something has any value, suddenly it loses any value it may have had before.
“Financial peace is not the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can not win until you do this” – Dave Ramsey
Bitcoin creates consensus is in two parts:
1) Firstly through the Blockchain Technology.
Blockchain is essentially an algorithm that hides a ledger of assets inside of cryptography. It’s the latest wave of innovation in decentralised technology that is set to transform how the world comes to agreement.
In simple terms it’s a ninja way of transferring information without it being able to be broken or stolen.
2) Secondly it has a financial trading market.
This means there are cryptocurrency exchanges similar to any currency. Furthermore, given these exchanges are moving around hundreds of billions of dollars per week. With a rapidly increasing market capitalisation and with Multi-Billion dollar organisations like Microsoft, IBM, Google, Goldman Sachs. These markets aren’t going away quickly.
So to sum up why bitcoin has value… Its simple
It has perceived value from its limited supply and consensus, in addition to having a growing ecosystem of exchanges and third party businesses thriving around it.