Fiat money, which is defined as a currency that is not backed by material goods and which derives its value from trust in the issuer, the word comes from Latin fides meaning faith. Hence, this is how all known currencies have worked since 1971, that is, from the moment when the dollar ceased to be convertible to gold.

So where do cryptocurrencies get their value from? How much is Bitcoin worth and are skeptics of this market really right? I invite you to the next episode of the Best Course on Cryptocurrencies, in which we will look at the value of Bitcoin.

The value of Bitcoin

The saying “The price is what you pay. Value is what you get” is a famous quote from one of the world's greatest investors, Warren Buffett. So what do we get when we buy Bitcoin ? Unlike traditional fiat currencies, Bitcoin does not have a central bank and its structure is decentralized. Bitcoin is based on blockchain technology, which in short offers a high level of security, usability, but also copes with the transfer of value on a global scale.

What is value?

Why does money have value? As mentioned previously, value is based on trust, and the monetary system itself is based on a fractional reserve system. Which means that purely theoretically, currencies can be printed without restrictions, this is happening basically before our eyes. Discussions have been going on for a long time about whether the monetary system in which we operate will actually stand the test of time.

In the world of cryptocurrencies , individual cryptocurrencies derive their value from different aspects. For example, when we find a cryptocurrency that is linked to gold, we have utility tokens whose value results from a specific service or project. We will look at the value of the most famous cryptocurrency, Bitcoin. However, we absolutely should not throw about assessing the value of individual cryptocurrencies only through the prism of the most famous one at the moment.

Usability, decentralization, distribution, trust, scarcity and security are the features of Bitcoin that we will look at in more detail. The usefulness in terms of the function of money boils down to the ability to quickly transfer large amounts of value around the world, and in the case of Bitcoin (BTC), this is done without intermediaries. When it comes to BTC, the larger the amount we send, the more favorable the transaction costs will be for us. Bitcoin, of course, is not the only network that will enable such transactions, but it is still the largest, safest and most popular of the options.

The value of Bitcoin lies in decentralization and the power of the network is all about the users, additionally basically anyone can help improve the network. No single node in the network can make decisions on behalf of everyone; transaction validation and protocol updates must include a group consensus. Hence, this factor protects Bitcoin from mismanagement and abuse. In general, however, the most important aspect is the lack of a single issuer who would have control over the entire network, as is the case with fiat currencies.

Bitcoins size and distribution

Features of Bitcoin that give it value is the distribution and size of the network, the more users, the greater the value and the greater the stability. Through distributing the transaction ledger among different users, there is no need to rely on a single source, and the security of a distributed database compared to a centralized one is indisputable.

Bitcoins rarity

Finally, we come to the next important point, which is rarity and precisely limited supply, there will only be 21,000,000 BTC tokens in Bitcoin and the last BTC will be mined in the year 2140. After the last coin is mined, this cryptocurrency will become even more deflationary. It is also worth referring to Bitcoins security, if you follow the best practices, your funds are extremely safe. Malicious attacks on the Bitcoin network require more than 51% of the current mining capacity, which is almost impossible and the probability of a successful attack on Bitcoin is extremely low, and even if it does happen, it will not last long. The only real threats are fraud and phishing attacks, loss of private key or keeping your funds in the wrong wallets.

All these factors mean that we can confidently approach Bitcoin as a type of currency, the rest of the current currencies are primarily digital records, and the world will continue to move in this direction. Often, the argument against Bitcoin is the energy consumption that the network consumes. The truth is, however, that this data does not say anything at all, because we do not know and there is no official data on how much energy the current monetary system consumes, in addition we will have to wait for the resolution of this dispute, of course for official data.

Of course, the features that affect the value of Bitcoin does not explain such rapid increases in the price of this cryptocurrency. The rest is similar with other assets, and in the case of the price of a given asset, what matters most is the forces of supply and demand. Bitcoin is a solid alternative to the monetary world we know. And we should not forget this.