Why Does Bitcoin Have Value?
The reasons why Bitcoin has value are the same as why gold or stocks have value: the laws of supply and demand and the fact that there is someone willing to sell them, and someone else willing to buy them.
When these two forces find a balance, the market price of Bitcoin is formed.
However, there is something very different about BTC compared to other assets.
In the rest of the article, we will precisely explore the properties for which Bitcoin has value.
Why does Bitcoin have value? The 7 main properties
Before discussing why Bitcoin has value, we should focus on who guarantees it.
The answer is none.
Bitcoin is a unique asset without an underlying, meaning it lacks any tangible asset as collateral to guarantee its value. Instead, its value is secured by the inherent properties of the asset itself.
Gold, oil, wheat, and many others are similar assets.
And what are these properties? Let's explore them.
1. Bitcoin has value because only 21 million will exist
Can you tell me precisely how much gold has been mined to date?
Probably not because no one can say.
On the other hand, Bitcoin is the only asset in the world whose total quantity is known, calculable at any time, and verifiable by anyone.
Only 21 million bitcoins will exist, making them real assets.
Real assets are goods that cannot be easily produced or inflated. For example, real estate in prestigious areas, precious metals, or gas.
Many individuals convert or invest their savings in these assets because, compared to government fiat currencies, they retain their value well.
Consequently, bitcoins have value because each unit is part of a finite and unalterable quantity.
The asset closest to bitcoin from this point of view is gold. However, gold is difficult to store individually and does not travel over the internet—aspects that Bitcoin solves natively.
It is worth specifying that the 21 million Bitcoins are divisible into smaller units. One Bitcoin is represented by 100 million satoshis.
Currently, 19 million units have been produced, and the remaining two million will be created at decreasing rates over the next 119 years.
2. Open technology with possibilities
Just like the internet, Bitcoin is an open and evolving technology. Anyone can choose to build services and other innovations on top of it because there is no agency that distributes permissions.
Having bitcoins is, therefore, akin to having a stake in the development of an emerging technology.
3. Transportability and sovereignty
Among the most significant properties for why Bitcoin has value is the possibility of being able to transport it easily, quickly, and autonomously.
Bitcoin is transferred over the internet, opening up unique possibilities for individuals and businesses.
On one hand, BTC can be used for flawless cross-border payments (from one country to another). Furthermore, the costs of these transactions are extremely lower than any other competing monetary infrastructure.
On the other hand, bitcoins are so-called Bearer Instruments, i.e., assets over which only the owner has control. Bitcoins cannot be confiscated or frozen if stored in your wallet where the private keys are kept.
Bitcoins are perfect for keeping your wealth outside of a banking system or country and taking it with you wherever you go.
4. Network Effect
Amazon, Facebook, YouTube, etc., are all networks with specific purposes.
Consequently, anyone wanting to use a network with similar purposes will prefer the most widespread and used one, fueling a virtuous circle in which the network grows, attracts more individuals, and consequently increases in value.
Bitcoin is establishing itself as a global money transfer network. Its reference unit, BTC, reflects its value.
5. Incensurability and neutrality
This is one of the most significant properties of Bitcoin, distinguishing it from any other payment network.
As is known, every modern monetary infrastructure places requirements and conditions on anyone who wants to use it. Additionally, the monetary infrastructures of different countries often cannot interact with each other.
From this configuration, financial exclusion arises; one of the reasons why around 2 billion people in the world do not have a bank account.
On the contrary, Bitcoin is a global infrastructure for the transfer of value, accessible and usable by anyone.
The Bitcoin protocol is developed to be neutral and blameless. The network will always carry out any transaction by anyone and without requiring any prerequisites.
6. Immutability, decentralization, leaderlessness
Bitcoin has value because it is not governed by a single individual or entity but by the set of actors who spontaneously join the network (the nodes).
However, each actor in the network will always respond to their own interests. There is no common good or the good of all. There are only individual incentives.
Any modification that jeopardizes the very existence of Bitcoin will be rejected by the network because it would destroy it, and every actor would lose everything they have.
As a result, the distinctive properties of the Bitcoin protocol can only change with the will of the majority of nodes and not through laws.
Additionally, Bitcoin is the only cryptocurrency without a charismatic leader to guide its development.
The anonymous inventor of Bitcoin disappeared into thin air after launching the protocol in 2009. Nothing more is known about them.
Today, Bitcoin is based entirely on open-source software and a set of rules that every individual on the network voluntarily decides to follow.
In other words, the Bitcoin network is not controlled by anyone, and its growth is organic and spontaneous—like mushrooms.
7. Relative anonymity
The Bitcoin protocol executes individuals' transactions without requiring documents or personal information. Within the transactions recorded in the blockchain, there is no reference to the person sending or receiving money.
For this reason, if used consciously, Bitcoin provides an interesting degree of privacy for those who want to protect their financial situation.
Conclusions: Bitcoin has value because there is a need for it.
While the price of Bitcoin is influenced by a multitude of factors, the real reason why Bitcoin has value is because there is a need for it.
Depending on the circumstances in which an individual, a company, or a state finds itself, bitcoin presents properties that can solve problems. Therefore, those interested in leveraging these properties will buy bitcoin. This will ultimately determine its value.
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