What do you know about Bitcoin? It is a digital cryptocurrency that is often called “digital gold”. The main reason is brought to you here is that both bitcoin and gold have a limited-supply and cannot be simply reprinted. Bitcoin stores value within their ecosystems, but these are not the only things that make Bitcoin valuable.
Bitcoin was introduced as a solution to the centralized economy of the banking system. This means the fund is transferable from one digital wallet to another without any “central authority”. With a central authority transferring money, one account to someone else’s account is pretty simple.
History of Bitcoin
In 2008 a solution was offered by a mysterious programmer named Satoshi Nakamoto. He left a paper on a popular cryptography blog that proposed a currency system that solves all of these fiddly problems.
This system creates virtual money that easily solves the inter-country transaction problem without a “central authority”. So, the core fundament of bitcoin is that it can perform transparent ledger transactions without any “central authority” involved. The proposal was simple; instead of any credit card company or bank, people will record every transaction in one central ledger.
All users would record all of the transactions simultaneously; thus, any attempt to fool the community would be noticed, and the payment was rejected. Nor the government, bank, or authority person can enforce a fee on a payment or control its flow; as a result bitcoin transaction is cheaper, faster, and easiest way to transact money even across national borders and it has already started impacting people’s lives.
So, why do Bitcoins have value?
Cryptocurrency offers different businesses a perfect path to arrange funds for launching their product. This market will keep on growing, and Bitcoin is the foot-in-the-door for all of them. It is an internet currency that has taken place in the “Fourth Industrial Revolution”. The Internet is the medium that is connecting all the regions and creating one and only “world community” what humans used to dream of. So what gives gold and Bitcoin value? This can vary considering the requirements, availability, and the exchangeability as well.
The value is not often the same, people who know how to actually use it as a valuable resource grow in the market. This is a much different story for Bitcoin, here scientists, metallurgists, cryptographers and programmers who use bitcoins’ “underlying protocol” to generate amazing cryptocurrencies. Bitcoin is costlier than all other cryptocurrencies.
Factors that affect the value of Bitcoin
Here you’ll find some factors that affect the Bitcoin price and these are the “whys” behind the price change
- Supply and demand
Bitcoin’s supply and demand play a big factor in the prices currently; there is supposed to be an account of 21 million bitcoins; when that cap is reached, “Bitcoin mining” won’t create new bitcoins any longer.
The supply of Bitcoin has reached about 80% of Bitcoin’s total amount that has already been mined and made available to the public. As we all know, in general economics, the brass goes up when the demand cannot keep up with the supplier number.
- Availability on Exchanges
Apps such as Coinbase will allow investors to trade Bitcoin through connecting traders in their in-house marketplace. As the exchanges become more popular, these types of networks are created through marketplaces
This is because It is easier to get more participants through these network marketplaces. The price is affected by this, as it has a direct effect on the popularity of bitcoins as more people buy and sell. As the popularity of Bitcoin increases, the demand becomes higher, and as we said earlier, there is a fixed amount of Bitcoin. So the supply of Bitcoin will stick at the level while the demand will keep growing higher.
- Competition to Cryptocurrency
Although it is believed that bitcoin is one most popular Cryptocurrency but, more than two thousand cryptocurrencies are in circulation. Examples of other cryptocurrencies are Ethereal, Ripple, Litecoin, etc.
However, more cryptocurrencies are being created, which is becoming a challenge, and bitcoin competitors that impact its prices.
The presence of competition keeps the value investment in check. For example, the US dollar value would have been different if stronger currencies didn’t exist, such as the Pound, Euro, and Kuwait dinar.
- InternalGovernance
Since a single authority does not regulate bitcoin, miners are put on the spot of the process transactions and secure the blockchain. If at any point, they want to do some change or tweak the software, it has to be the consensus’s decision. Sometimes solving critical fundamental issues takes longer, and because of this, the members of the Bitcoin society feel the issue of scalability.
Currently, the Bitcoin software processes up to 30 transactions /sec, which is incredibly slow for how popular it is. The community is trying to find ways to see the number of transactions; sometimes, when these changes are applied, they turn into a whole other cryptocurrency. Examples are Bitcoin cash and bitcoin gold. In the best terms that sometimes decide that the new currency isn’t as valuable, resulting in the new currencies not happening enough value.
How Bitcoin-Mining Works And Affects the Value?
Once the miner computer guesses the right solution, the computer program finds and picks out the current pending transactions. Then they are grouped into the next transaction block. Hence, the moment of glory is represented by compiling these blocks.
The block you’ve created and your solution is transmitted to the whole network. Then other computers start validating it. Each time a computer validates someone’s solution, they update the copy of the Bitcoin-transaction-ledger also with the transactions which are chosen by the user to put into the next transaction block.
Since mining is basically the scope of guessing, for every block, a miner will get the chance to guess the solution and once the guess is correct, it gets the access to update the blockchain, and if the miners have more computing power, the success rate will increase dramatically.
Once the whole process is completed, the system produces a fixed-amount of Bitcoin which is basically rewarded to the miner for their time, effort and energy to solve the math problem.
Conclusion
So, bitcoin’s exact value can vary on several factors, such as the velocity of currency, transportability, durability, scarcity, etc. The price of bitcoin is unstabilized since it started to rise in the year of 2017. Many investors become millionaires overnight by investing in bitcoins and suggested that it is the future of digital currency.
It still remains a good project for the investors to invest in. However, understanding is important because the factors contributing to its price changes are quite different from other centralized currencies. In fact, any investor that considers investing in bitcoins needs to have a basic understanding clear of the actual value of the cryptocurrency (bitcoin); otherwise, he may end up losing money. However, a sudden rise has been seen in recent years. So think first, and then act.