Today I want to show you how the value of cryptocurrencies arises and what reasons are responsible for it.
With the invention of cryptocurrencies, we must get used to a fundamental change in the value of a means of payment. We need to become familiar with the fact that we no longer measure the value of a means of payment by who issues it, but who uses it and what benefits it offers to these users.
How is the value of cryptocurrencies like the Bitcoin created?
The value of our current means of payment, that is Fiat currencies, is determined by a central organization, ie a network of a state and a central bank. This central organization has the cash monopoly and if necessary can determine by force which means of payment is generally used.
With cryptocurrencies these former state-owned monopolies of payment are shaken to its foundations. It makes it suddenly possible to choose from a wide range of different cryptographic and digital means of payment. Even better, it's suddenly possible to create your own currency and to spread it. On the current payment market, which is characterized by state monopolies, is now suddenly pushing a large number of new payment providers.
Of course, the existing monopolistic structures have no interest in these new means of payment, because they could possibly make things different and better and thus become a competitor in the payment market.
In order to prevent exactly this competition there are numerous laws and regulations, which are to prevent exactly this process of the competing currencies and to receive the state cash monopoly.
The problem for the state-owned monopoly on payments is now that these regulations and laws are no longer enforceable for cryptocurrencies, because their decentralized structure no longer offers a clear target. While there are ways to make it harder to use cryptocurrencies, such as regulating the various crypto-exchanges, one thing to do to shut down a cryptocurrency would be to shut down the entire network of subscribers, and that would be something like trying to switch off the internet.
The question of how to decide in this new payment market, without state monopoly and with a larger supply which means of payment asserts itself, ie which has a value for the user, is the question of which product prevails in a free and unregulated market. The answer ist quite easy:
The product that is most in demand also has the most success and therefore the greatest value.
Also this is no different in the field of cryptocurrencies . The more a particular cryptocurrency is demanded, the more people use it, the higher its price / value. Whether or not a cryptocurrency is used depends on whether it is recognized by businesses as a means of payment or what unique benefits it offers its users over other forms of payment.
The value of Bitcoin over our established fiat currencies is enormous, and not just for those who are wealthy, but also for the approximately 2 billion people who have not benefited from the benefits of a bank account due to poverty or geographical location.
With the help of cryptocurrencies this is now possible. With an internet connection, an app and a smartphone, you'll always have your own personal bank in your pocket. So, the more people see the benefits and benefits of Bitcoin, the more bitcoins are in demand and the higher their price goes up.
The value of Bitcoin is solely dependent on the market forces of supply and demand.
What can we now record as the most important findings of this article?
- Our current means of payment obtain their value through central instances, which hold the cash monopoly and therefore determine which means of payment has a value and which we may use.
Cryptocurrencies break up this monopoly of payment because they can't be easily banned or stopped. The result is that our fiat currencies suddenly get into competition for the first time in a long history.
This competition makes it possible to choose a form of payment that makes things better and offers greater benefits.
The self-regulating forces of a free market have thus now arrived in the field of cash and the market participants are free to decide which currency they want to use.
The value of a cryptocurrency is created by the demand of the users, and this in turn results from the benefits, the innovations and the advantages offered by the respective cryptocurrency.
I hope my article was able to give you some insight on how the value of cryptocurrencies comes from. If you have questions then write me in the comments
Your mikeCee
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