Why Does Bitcoin Have Value?

We live in a digital age. As such, the ideal currency should be one that has three specific characteristics as a matter of course:

• The currency should be free from control by any central authority. In this way, the currency cannot be devalued or printed at will.
• The currency should know no borders. It should be able to be exchanged anywhere, at any time, with anyone.
• The currency should not favor any political bloc or group of people.

When you look at these characteristics, it is easy to see they are the characteristics of Bitcoin, an alternative to fiat-based currency as is currently being used throughout the world.

Bitcoin is the first decentralized currency. The value of Bitcoin comes from the fact that no one individual, or entity, has any control over it. Bitcoin is a safe haven for people who are subjected to oppression, dictatorial policies, or run-away inflation. There are only 21 million Bitcoins available, a number that will go no higher, or no lower. People know when Bitcoins are being released. They know what the rate is on the date, and approximately when the last coin will be created.

To better understand why Bitcoin is valuable, one must first recognize why conventional fiat money is unsound.

What Is the Problem with Fiat Money?

When the big picture is considered, money controlled by a central bank is unsound. Governments have built a monetary system that gives them the ability to manipulate the supply of, in the case of the U.S., the dollar. The assurance that is given is their word that the currency will always be worth something. There is, however, a problem. “Something” has become progressively worth less since the dollar was taken off gold as the standard.

This should come as no surprise. Governments always like to spend more than they receive from taxation and other forms of revenue. To make up the shortfall, the government prints more money. When more money is printed with no backing for its value, the value of dollars in circulation drops.

The beauty of bitcoin is its ability to impact people’s lives in countries that have an unstable economy. Countries such as Venezuela and Argentina are prime examples. The governments of countries such as these two have printed so much money that it cannot be spent before its value drops. There is an inevitable consequence. The monetary system collapses, and people have no viable alternative medium of exchange.

Why use Fiat Money?

Why does the U.S. use fiat money? The answer is quite simple, it is all that the country has, and it is the form of currency that has been used for as long as anyone can remember. People who are alive, spending the dollar are those who were born into an existing system, the system being, money was issued by the government. Society as a whole has learned to live with, and deal with, inflation in the prices of almost everything from what’s in the shopping cart to the cost of educating their children.

Just as prices have gone up over the years, there is no reason to believe they won’t continue doing just that; going up. By the middle of the 21^st century, a cup of coffee at Starbucks might cost $20, a long way away from the $2 that the same cup costs today, or a cup of coffee in the 1920s that cost no more than 15 cents. Increased prices are the natural result of inflationary pressures. The real reason for inflation is the manipulation by a central monetary authority.

Why is Bitcoin Valuable?

The flaws inherent in the fiat system do not exist in bitcoin. The supply cannot be manipulated, the supply is fixed, as is the distribution rate, and the date when the last bitcoin will be created. Bitcoin cannot be influenced by the direction the economy happens to be taking at any particular moment in time.