What is the value of bitcoin in simple words

Blockchain technology

Satoshi Nakamoto created a system in which bitcoin is a tool for accounting, assigning property and providing funds for transactions. In the traditional world, this function is performed by money. Bitcoin, on the other hand, brings financial transactions into the digital space, where you only need to have access to the internet to get data.

Blockchain is an unbreakable chain of elements in which information is recorded. The data on the system is stored on a multitude of devices that belong to the participants of the network – miners. They provide the computing power that is used to search, merge, add and validate transactions.

Each action on the blockchain creates a new cell with transaction data. This sequence is due to the irreversibility of transactions. The information recorded in the blockchain is stored forever. It is impossible to undo or change a BTC transaction.

Application of Bitcoin

Unlike conventional money, cryptocurrency is completely anonymized, but absolutely transparent. Digital coins can be used as:

• An alternative means of payment.
• A debit card.
• A permanent record of transactions.

Ways to use Bitcoin Satoshi Nakamoto suggested back in 2008. Modern developers only improve the author’s ideas, coming up with new variants of their realization.

Alternative means of payment

For a long time it was practically impossible to buy something for BTC. The first transaction with digital coins took place on May 22, 2010. Then American Laszlo Heinitz spent 10,000 bitcoins, buying 2 pizzas with them. With the development of the industry, cryptocurrency began to be used more often to pay for goods and services. Buyers transferred money directly to sellers or suppliers. Such transactions were considered illegal and were blocked by providers.

In 2024, BTC can already be transferred through services that operate in the legal field. Large companies (Microsoft, NewEgg and others) accept cryptocurrency payments on par with fiat payments.

An alternative to a debit card

Bitcoin has long equaled banks in terms of services. It is used for a variety of purposes:

• Purchases.
• Transfers.
• Issuing loans and credits.
• Exchanging currency online and at ATMs.

Some exchanges offer BTC debit cards with various options. Today, blockchain can fully meet the demands of bank customers. Cryptocurrency transactions are faster and cheaper than traditional transactions.

Permanent register of transactions

“The Times 03/Jan/2009: Chancellor on brink of second bailout for banks” – this is the message left by Satoshi Nakamoto in the first bitcoin item generated. The blockchain records absolutely all user actions, with additional information being able to be entered into the cell. Although others have implemented this idea better, BTC has shown the possibility of such a coin application.

What is the value of bitcoin

Investors, companies and funds are actively buying cryptocurrency. The value of BTC is based on 2 components: the ability to save and turnover. The consequence of supply and demand is the value of the asset. Theoretically, the coin’s rate will always grow due to limited supply. In practice, it is subject to the influence of the market and public opinion.

Decentralization

The uniqueness of digital currency is the absence of a governing structure. The decentralization of the network is at the heart of its protocol. Blockchain exists only at the expense of the participants in the system. Transactions are available for everyone to view.

The rapid growth of the bitcoin network increases decentralization. Users began to actively distribute cryptocurrency among themselves. This reduced the potential number of coins in one owner. Now they are used by dozens and hundreds of people.

Portability

Transactions with BTC can be made from a smartphone or computer from anywhere in the world. There is no physical location of the assets. The user only owns the keys to the digital wallet, which confirms ownership of a specific sector in the blockchain. Recent developments have improved the network to the point where you don’t even need internet access to make a transaction.

Longevity

As of September 2021, the blockchain has a 99.9% uptime over 12 years. Digital keys are protected by cryptographic encryption. Bitcoin code can be found on GitHub. Openness has been one of the factors that allow the blockchain to perform consistently and demonstrates the network’s willingness to stand the test of time.

Scarcity

The number of bitcoin coins is limited to 21 million. Scarcity is one of the factors that form the value of BTC. The issue is predetermined and embedded in the code of the tokens. They cannot be printed as fiat money, but can be bought or received as a reward if computing power is provided to validate transactions. The hashrate of the network is constantly growing, and the tasks performed by miners become more complex in inverse proportion to the number of coins available for mining.

Interchangeability

The method of obtaining BTC (buying or mining at different stages of complication) does not affect the value of the token. The history of ownership or use cannot change the quality of the cryptocurrency. Therefore, Bitcoin coins retain their interchangeability.

Popularity

In 2024, bitcoin is of interest to large companies, influencers around the world. According to theblockcrypto.com, in August 2021, the monthly trading volume of BTC amounted to 1,100,000,000,000,000,000,000 dollars. In the same period of 2020, sales of the asset did not exceed 190,000,000,000,000,000. Popularity has been one of the catalysts for the coin’s price growth. In September 2021 Bitcoin was worth $41,100 compared to $10,800 in the fall of 2020.

Divisibility

Bitcoin is made up of satoshis. One coin can be divided into 100,000,000,000 parts. Everyone is able to buy 0.000000001 of its parts. Therefore, the adopting of bitcoin will not stop even if it becomes scarce.

What affects the price

BTC is a set of numbers that has no physical form. Skeptics call it a collective self-deception (V. Posner in an article for State). But cryptocurrency is an asset that is traded on a par with stocks. Its value is determined by the interest of buyers. The law of supply and demand operates in the market of digital assets. The price of a token will be directly proportional to the interest in buying it.

In 2024, the demand for cryptocurrency is growing, but it is impossible to increase supply. The shortage of coins allows the rate to rise steadily. The opposite situation is observed for tokens with an unlimited maximum supply. It is more difficult for them to increase in value.

What secures BTC

Behind the digital currency is not a company or a state structure. The token is based on the principle of decentralization and is not secured by traditional assets. Its value is influenced by a number of other factors:

• Scarcity.
• Longevity.
• Divisibility.
• Independence.

Bitcoin’s problems

The first cryptocurrency is the prototype of all digital coins. In 2021, the development of Satoshi Nakamoto turned 12 years old. During this time, many other projects with better characteristics appeared. Developers eliminated the main problems of BTC:

• Low speed. The network architecture allows processing 7 transactions per second. This figure is lower than that of traditional payment systems (for example, Visa performs 24,000 transactions in the same time). New cryptographic solutions allow 480,000 transactions per second (Kadena).
• High fees. As the complexity of mining increases, the reward for miners for opening a new block grows. This is reflected in the fees paid by network users for each transaction. The commission has a fixed amount and does not depend on the amount of transfer.
• Volatility. Despite the decentralized nature of the system, the bitcoin rate depends on external events. The introduction of new bans on mining in China, statements of influencers and others are noticeably reflected on the BTC price chart.
• Uncertain legal status. While Switzerland and Germany have legalized cryptocurrency, Ecuador and China have completely banned its use. It takes time to form a legal framework that can be applied globally.

Bitcoin has other disadvantages, but they are not so critical. Some of them can be solved by conducting a hardfork. Others take time for society to accept the digital asset.

The future of cryptocurrency

Bitcoin has experienced ups and downs in 12 years. Each event has been a catalyst for new projects to emerge on the blockchain. Since digital currency is part of the network, it is changing. Developers have turned their attention back to BTC and have started to release updates that will allow it to fight its competitors.

The status of the first cryptocurrency will always accompany Bitcoin. Even if it begins to lose out to other tokens in terms of performance, the amount of capitalization and market demand will continue to shape Bitcoin’s value as the premier digital coin.

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