Bitcoin is an example of a currency specifically designed to function as a store of value and unit of exchange without the need for central regulation. Although websites like Quantum Code provides you with the best trading bots, tools and strategies, here you will learn how to analyze the bitcoin market without professional help.The below-listed portion discusses how bitcoin’s design makes it difficult, but not impossible, to manipulate its value and explore the ten attributes that make it unique and valuable.
Unique features that make bitcoin valuable:
The fact that you can remain anonymous while paying bitcoin means that your use of the currency cannot be tracked or monitored. It is no coincidence; that anonymity was one of the critical design features of bitcoin.
The government’s ability to track every time you use it (i.e., why banks must keep records of your transactions) is a significant overhead for all transactions. Moreover, it would create many additional problems if authorities implemented a tracking system for every transaction in the world economy – something that most people don’t want.
Bitcoin is not the most straightforward monetary system and requires far less infrastructure than a government-backed system. However, the process of mining, offering new coins for sale, and tracking transactions is straightforward.
There are many ways to acquire bitcoins, from simply buying them in exchange to “mining” for them with your computer. Accepting bitcoins as payment also requires little overhead; a merchant can sign up with a service such as a Bit Pay or Coin base that handles all the details of receiving bitcoins and converting them into local currency.
Since information related to bitcoin transactions is encrypted and distributed across many computers worldwide, hacking attempts are unlikely to be successful. Moreover, because bitcoin’s history is well-documented, it cannot be created without the use of the blockchain – a public record of all transactions. Finally, the fact that people can trade bitcoin for traditional currency enables it to function as a medium of exchange.
Since bitcoin is completely decentralized and no central authorities control its supply, its sustainability depends on the community adopting it and maintaining it long enough for infrastructure to be built. Because these factors are highly unpredictable, bitcoin will eventually take on a similar role to gold, allowing store of value and medium of exchange.
Bitcoin is so divisible that it can support micro-transactions – smaller bitcoin purchases. Due to its ability to be subdivided into smaller and smaller portions, bitcoin is more divisible than gold.
Since no government is behind the currency, and it hasn’t been around long enough for countries to start manipulating it, the longevity of bitcoin’s value is determined by whether people find it useful. If a community adopts bitcoin, they will likely use it for many years before transitioning onto another system if necessary.
Bitcoin has many advantages over current financial systems, but it has failed so far because serious economies aren’t making a concerted effort to adopt it. Suppose the community behind bitcoin understands this fact and acts on it. In that case, the adoption of bitcoin will be rapid – perhaps along the lines of how all major industries have adopted digital music over the last decade.
If a community wants to adopt bitcoin, they must use it in daily transactions. Therefore, it will create a strong incentive to use the currency to create a long-term price appreciation.
There currently isn’t any accurate regulation surrounding bitcoin. Because of the way it is designed, no central authority can regulate it without threatening the privacy aspect that makes its value.
Bitcoin was designed with a hard cap of 21 million bitcoins, so it will never pose inflationary problems like traditional currencies. Due to the difficulty and other costs involved with mining for bitcoins, it is unlikely that more than 21 million will ever be in circulation. However, it makes sure there will always be enough bitcoins to make it function as a medium of exchange, store of value, and unit of account.
When the supply of bitcoin rises to 21 million, no more can be created by miners without regenerating its demand. The fact that its value goes up as the supply decreases mean that its price per unit would go down if it were a standard currency (as opposed to having accelerated demand).
When considering how currency is created and used, it is essential to consider many complex factors such as inflation, interest rates, and the legal reserve requirements. However, those are not all of bitcoin’s attributes, as others make it unique and possibly more important than any other currency, such as its energy efficiency or system for bootstrapping.