Why is Bitcoin Valuable
Why is bitcoin valuable? This is a complex question, but the bulk of the answer resides in the cost to produce another one.
Author: Calvin Weight
Date: 07/05/2019

Why is Bitcoin Valuable?

There are so many ways to approach this, but the most basic response to the question is that it is simple economics. The price of something is usually pretty close to the cost of making another one. Bitcoin is not just a number in a spreadsheet where you can just make the number bigger whenever you want. Mining a bitcoin requires expensive computers, equipment, electricity, and cooling costs.

The more precise answer, but much less informative, is that a bitcoin is worth what someone is willing to trade for it. In other words the value is held by the lowest price a seller is willing to take. The nice thing about bitcoin is that it trades on a global marketplace so the world’s cumulative opinion on the value and expectation of value of a bitcoin is always priced every day, 24 hours per day.

Bitcoin is rare

For someone not familiar with bitcoin, it helps to know that bitcoin is rare. It is not obvious to newcomers how a bitcoin can be rare when it is digital. Almost everything digital can be copied and reproduced to infinity right? The reason why dirt or ocean water isn’t very expensive is because the supply is enormous. Bitcoin is a software that programmatically limits the supply to 21 million. To basically explain how that’s possible, bitcoin runs on a blockchain which is really just a database of the historical movements of each coin in circulation. Everyone that runs a wallet (node) has a copy of the database. The software validates that each person has the most current and correct version of the database so any “copy and pasting” is declined and blocked.

World's first decentralized currency

At this point you might think, “OK great, it’s just a land grab then.” The hype and excitement about mining these and collecting them is just a greater fool’s errand? That would be the case if bitcoin wasn’t solving real problems and adding value to the economy. Due to the fact that everyone has a copy of the database, no one can take it down from a single point of failure. The management of the funds is done by everyone, not a single entity like a government or bank.

So this is the world’s first currency that is not produced by a government or central bank! Why does that lend to bitcoin’s value? Well, the money supply can’t be manipulated, the economy can’t be seized, and nothing can stop the free transfer of value globally. This a product that the world needs desperately. This is where some of the value of bitcoin is derived.

A better banking alternative

Another place where bitcoin has value is in circumventing the old fashioned banking system. The bulk of the problems that are caused by banks are the predatory practices of being the middle man in every transaction. The perfect example of this is when a migrant worker who is struggling already wants to send money home, the banks charge $10-$45 which can be a great deal in relation to the amount being sent. Bitcoin and other cryptocurrencies can reduce this significantly for any dollar amount.

Get started on Coinbook

Bitcoin represents freedom. It is a currency that isn’t dictated by a leader. Since it goes from person to person, nothing can hinder the benefits of free trade. It is revolutionary and a benefit to society. To get your first $10 of bitcoin for free, go to coinbook.com and open an account.

Go Back to Blogs

Contact Us