Why Bitcoin has value.
Cha-ching! With cryptocurrency growing in popularity many investors wonder, why does Bitcoin have value and what makes it more than just a digit on a screen. Many people speculate that Bitcoin is worthless and will eventually go to zero. This is simply not true and here is why.
In order to understand what gives Bitcoin value we must first understand how Bitcoin is created. In order to be awarded Bitcoin, people called “miners” must validate transactions on the Bitcoin network. This is what makes the network secure. In order to validate transactions these “miners” must purchase specialized equipment called ASIC Mining Hardware. ASIC Mining Hardware is very expensive computer chips that solve algorithms in order to validate transactions. The “miners” will also need a computer to plug their hardware into, internet connection, and lots of wiring. As well as a way to cool their hardware. Running the hardware 24/7 creates tons of heat.
Not only is the hardware very expensive and takes a lot of time to set up. But mining hardware uses tons of electricity. In fact, much of the modern mining hardware in use today requires hundreds to thousands of watts of electricity per month. The people running the mining hardware must pay their electricity costs every month when they get their power bill from their utilities provider. This means it actually costs a lot of fiat money to create Bitcoin.
Because so much is required to create the Bitcoin this is part of what you are paying for when you buy Bitcoin. But this is not the only reason Bitcoin has value. The other part of what makes Bitcoin valuable is the network itself. Every time you send Bitcoin, you are charged a small fee. The fee is what is awarded to the “miner” that validates your transaction. Think about when you spend your VISA or Mastercard credit/debit card. Every time you purchase something, the merchant you are purchasing from must pay a small fee to VISA or Mastercard to validate the transaction. Essentially the same thing is happening with Bitcoin but it is decentralized instead of relying on one company. A secure network is valuable to anyone spending or receiving money.
One good comparison is to think about what gives gold or other precious metals value. The reason those metals have value is it costs mining companies money to retrieve the gold from the ground. If you’ve ever watched the show Gold Rush on TV, you’d understand that mining companies must pay their employees, pay for their claim to mine in their region, pay for expensive specialized construction equipment, and pay taxes when they sell their gold. Bitcoin compares to this because of all the costs associated with creating Bitcoin. Bitcoin operators must pay employees to maintain the hardware, they must rent or buy an area to run the equipment, they must pay for cooling solutions, they must pay their electricity costs, they must pay for the computer chips and computers, and they must pay for their internet connection.
In conclusion, Bitcoin is valuable because of the networks ability to verify and secure transactions and the costs associated with doing so. In this world nothing is created for free and that includes Bitcoin. As long as the network continues to run Bitcoin will continue to have value. A secure decentralized network is valuable to those using it. Not to mention all the additional valuable benefits Bitcoin has such as increased anonymity, no tariffs, and low fees when sending large amounts of money. All of these combined create a valuable decentralized digital currency that anyone can use.