Bitcoin Value – How Is The Value Of
Bitcoin Determined
Bitcoin has been getting a huge amount of hype recently. It’s one of the
many digital currencies in existence today which acts and functions like
regular money but exists entirely electronically—like data inside computers.
And that can be kind of confusing, because if there is no actual physical
bitcoin:
• How can it have value?
• How can you use digital currency in a physical world?
Well actually, the question of how bitcoin has any value at all isn’t so far off
from the question of how most real-world money has value.
First off, Bitcoin has no actual intrinsic value, which means that it has little
to no use to us outside of its economic context. But the same can be said
for most real-world currencies: money only has value because the
government that issues it says it does.
This is called ‘fiat currency,’ because its value is not tied to any physical
commodity and relies on the backing of a government.
But unlike fiat currency, Bitcoin does not have an issuing authority that
gives it value. Bitcoin is a decentralized currency, meaning there is no
governing body that regulates its production and transactions.
It doesn’t answer to any government or organization, so there isn’t really a
reason why it should have value, yet it does - and it can all be boiled down
to utility, scarcity, and supply and demand.
