Bitcoin, along with the rest of the crypto space, has been under scrutiny since the very beginning, this is not uncommon for new highly innovative technologies. The criticism aimed at digital currencies’ fundamentals isn’t coming from nobodies either, with Warren Buffet and Peter Schiff among the many outspoken Bitcoin skeptics. They believe Bitcoin has no real value… but what dictates ‘real value’?
Defining Value of a Currency
There are six crucial characteristics that define the value of a currency. These are durability, portability, divisibility, uniformity, limited supply, and acceptability. To be of value, every currency must exhibit some of these traits; the more the better. So how does Bitcoin compare with these six characteristics?
Durability – Bitcoin checks off this box, as it is digital and therefore is not subject to wear and tear or damage over time.
Portability – Bitcoin is a digital currency, and so it is accessible from anywhere around the globe provided there is a device connected to the internet.
Divisibility – Each Bitcoin is divisible by a satoshi. A satoshi is worth 100millionth of a Bitcoin – it is divisible by 100 million.
Uniformity – The decentralized nature of the blockchain – its high level coding and math paired with cryptography and the shared data across a network of computers – make it impenetrable. Information cannot be faked nor copied. These are the capabilities of decentralization.
Limited Supply – There is a limited supply of 21 million BTCs. After all 21 million Bitcoins are mined, they can never be anymore created. This finite number is coded into the blockchain, and cannot be erased or tampered with. This is a crucial aspect of Bitcoin as it is a deflationary asset.
Acceptability – Acceptability is up for debate, but it is becoming accepted as legal tender by more and more countries. Bitcoin has around 81 million unique users as of right now.
Having established that Bitcoin clearly has value as a currency, what other value measurements does it also contain?
Store of Value (digital asset)
The inability for Bitcoin’s supply to increase and its resistance to censorship/seizure as well as it being a deflationary asset make it a perfect store of value. Despite people claiming it’s too volatile, the digital asset of Bitcoin has performed better over the past ten years than ANY other asset.
Bitcoin additionally serves as a peer-to-peer payment system making it a Medium of Exchange. It is also used as a Measurement of price against all other cryptocurrencies, on trading platforms, exchanges, and analytic websites. Furthermore, it has advantages other currencies and assets do not. Its Proof-of-Work algorithm, direct ownership, private keys security access, and peer-to-peer interaction are some of its benefits that separate it from many other assets.
Bitcoin is the Future
By nature, currency is reinvented over time. A new form comes around and changes the way the world works. It’s taken some time to go from trading goods, to using precious metals, creating physical monetary currency, and then transferring that online. Now, we have the rise of Bitcoin and cryptocurrency.