Why Does Bitcoin Have Value?

[witcher_sense]

I agree with a statement that bitcoin has value because of its monetary properties.

Bitcoin has everything we require from money. The main thing is of course bitcoin's scarcity so we always certain that our money won't debase due to inflation. This was one of the main reasons why gold became such a good asset, it surpassed all other types of money.

Gold has credible monetary properties, but it is not for digital era, which in need of transactions via internet. Bitcoin solved that issue, because it has both credible monetary properties and digital nature. That is why it has value. It is merely best money.

[1715120524]

1715120524

[Charles-Tim]

Why bitcoin has value is not hard to answer. Not that it is like price that we don't know what could happen but because of what has happened before.
Bitcoin has value because:

1. It was the first digital curecies that uses blockchain technology
2. The bitcoin halving that make the price to rise in 2012 make people to see it asva way to invest.
3. Later, some people are holding it because of long term process for fiat foreign transactions.
4. More people are getting to know it and embrace it as well because they see it as a way to make money.

This is how bitcoin become more adopted and popular and this makes bitcoin to rise from zero value to something and to what it is today.

[tungaqhd]

It is a simple yet not easy question to answer: why does bitcoin have value?

The answer, we believe is summarized in this video: https://www.youtube.com/watch?v=Vv2-6KDlZSE

Bitcoin has value because it has both scarcity and utility. It is a limited and useful resource. It is important to note that something must be BOTH in order to command a market value, NOT either.

Bitcoin is limited to the software-imposed hard limit of 21,000,000 bitcoin units ever in circulation. It is useful because it allows payment information to be secured by a decentralized computing network backed by magnitudes of raw hashing power. That raw hashing power is energy (electricity) converted into digital utility. Each transaction must compete (fee market) to be included in the next block of transactions which has a limited [block space] due to the block size limit (2MB) imposed on each ~10 minute block.

We can expect both the value to increase and the number of users to increase exponentially so long as the current technology maintains itself and remains both useful and in a limited abundance.

Bitcoin will always retain market value so long as miner nodes are actively contributing their hashing power to secure the network (proof of work).

Learn more about bitcoin at http://diginomics.com

Bitcoin has value because miners have to buy equipments, pay for energy to mine it.
Bitcoin supply is limited at 21M, people invest in Bitcoin because it has many features that fiat don't has and they hope the price woud increase.

[Artemis3]

It is a simple yet not easy question to answer: why does bitcoin have value?

Bitcoin has value because it has both scarcity and utility. It is a limited and useful resource. It is important to note that something must be BOTH in order to command a market value, NOT either.

Bitcoin is limited to the software-imposed hard limit of 21,000,000 bitcoin units ever in circulation. It is useful because it allows payment information to be secured by a decentralized computing network backed by magnitudes of raw hashing power. That raw hashing power is energy (electricity) converted into digital utility. Each transaction must compete (fee market) to be included in the next block of transactions which has a limited [block space] due to the block size limit (2MB) imposed on each ~10 minute block.

We can expect both the value to increase and the number of users to increase exponentially so long as the current technology maintains itself and remains both useful and in a limited abundance.

Bitcoin will always retain market value so long as miner nodes are actively contributing their hashing power to secure the network (proof of work).

No, bitcoin value retains its usability and scarcity as you correctly point, even in the inevitable diminishing of hashrate once mining stops becoming profitable, which is a point we are approaching with every passing day.

This doesn't make the network weak, because there are less miners because it has become too expensive for the benefit, so its still to expensive to attack, even with less miners. There will ALWAYS be miners, just not so many since the for profit ones will be gone. This moment is not too far away, sure the current price is temporary, but letter even with higher bitcoin price, the mining activity won't be able to pay for itself anymore. So the last miners will be those hobbysts, enthusiasts or people that somehow have "free" electricity (ie. renewable sources).

If you were expecting significant profits from transaction fees, LN came to get rid of that. Everyone can just stick to 1 sat/B txs and maybe use LN for anything else. The only reason you sometimes see fees spikes, its because people still blind trust their wallets to pick the "best" transaction fee. This is NOT Bitcoin doing it, its your stupid wallet. So don't let it, set it up manually and don't bother for insta-payments unless you want to do LN or an emergency makes you use a higher fee.

[johnyj]

In economy books, they tell you that "value" is decided by supply and demand together. That is a too abstract and flexible definition

I took a more scientific approach that using energy to measure the value of one object: One object has value, because of mainly 2 reasons:

1. It contains useful energy that can be burned (like food, electricity or petroleum)
2. It can reduce your energy loss (like cloth or house that protect you from excessive energy loss in cold weather,  or computer to reduce the physical paper work)

Since all living things burns energy through metabolism and other activities, anything that satisfy these two criteriea can be regarded as having demand from living things, thus have some value basis, no matter how large the supply is

This theory contradict with traditional economy books, but I have observed this theory is more close to reality in some cases: Even with almost unlimited supply of food, no one dares to say that food is of no value: Human has a tendency to value things based on its energy content

From this view, bitcoin does not contain useful energy that can be burned, so its value must come from the second demand, that it can reduce the energy loss

What kind of energy loss that is reduced by using bitcoin?
1. Energy loss due to inflation (fiat money can be regarded as a store of energy, but it is constantly losing energy content)
2. Energy loss due to friction in international value transfer (due to the high fee now, this only applies to countries that have capital control, for example if you want to get large amount of money out of China)
3. Energy loss due to inefficient and unstable financial infrastructure (confiscate your money, freeze your account, haircut etc...)

More can be added

[carlisle1]

Bitcoin has value because miners have to buy equipments, pay for energy to mine it.
Bitcoin supply is limited at 21M, people invest in Bitcoin because it has many features that fiat don't has and they hope the price woud increase.

well enough reason to say that Bitcoin really has a value mate,but remember that since this market is volatile the possibilities that price may fall is always there but also chance of going high is there because the 21 million bitcoin limit is now more even lower because of forgotten password /private keys that has Bitcoin inside their wallets and ledgers.so all in all there are many arguments but literally?yeah Bitcoin has a value.

[Wind_FURY]

I think it has a value because people understand it, we can see how the engine was made and since it is a fair deal for all then people decide it has a value. The value is variable because is based on a market, but what we know is the value will never be zero.

I don't think so. I'm pretty sure that people who actually understand Bitcoin is only a small minority. All they need to know is that Bitcoin is decentralized, trust-less, unconfiscatable, and has a hard limit. I think knowing those characteristics alone will be enough for the typical non tech-savvy person to know that it's worth something.

I believe the people who truly/deeply understands Bitcoin is closer to zero, than the "small minority". The clueless includes me. Haha.

Ask what Bitcoin is to different people, and they will give you multiple different answers.

[Meowth05]

I think the reason beside having bitcoin considered as currency is that bitcoin offers a unique way of making transactions. They use blockchain technology for that. Plus it has a hard cap which makes it a product thus giving its value.

[Assface16678]

Majority of Bitcoin's value comes from speculation rather than fundamentals (scarcity and utility), we can see it by how much the price moves without any change in fundamentals at all.

Bitcoin fundamentals are not just scarcity and utility but the evolved technology, community and the network, as well a the established methods of this evolution. It is nearly impossible to duplicate this evolution of miner infrastructure, community support AND decentralized decision-making. The fact that bitcoin is here is here to stay.

The next fundamental that all the "business" people cry about is "utility on blockchain". This is where success of LN becomes all the more important. If the LN infrastructure gets going, it'll mean that the tech has matured to a level where a layer-2 utility can use the security of base layer. The use there-on is limited only by the acceptance of bitcoin's advantages by the people and developers. Instead of hating on each other, people can just accept bitcoin as it is and work with it instead of against it.

It is the same why does the fiat currency has value because today most of the people are using the fiat currency for making transaction and by the creator of the bitcoin he wants to make it more digital currency so all of the transactions today are we can do by the help of the internet world or the cyberspace now this is the most use transaction and they are now supported the conversion of fiat currency into cryptocurrency that you can convert your money into the digital world that you can now pay a lot of things through online without using physical money it has a value because it is the same like the fiat currency today.

[johnyj]

It is the same why does the fiat currency has value because today most of the people are using the fiat currency for making transaction and by the creator of the bitcoin he wants to make it more digital currency so all of the transactions today are we can do by the help of the internet world or the cyberspace now this is the most use transaction and they are now supported the conversion of fiat currency into cryptocurrency that you can convert your money into the digital world that you can now pay a lot of things through online without using physical money it has a value because it is the same like the fiat currency today.

It is not the same, you can see that in panic, everything is dumped for fiat currency, because fiat money is considered as a standard unit of value, thus its value never changes. Although this is just an illusion ironed in everybody's mind, but it works quite well and almost everyone has become the slave of it

[AAXExchange]

Why does any currency has value? Whether it’s a fiat currency or crypto, it will be valuable as long as people buy and sell it, as long as it is interesting to them and they believe in and use it.

[johnyj]

Why does any currency has value? Whether it’s a fiat currency or crypto, it will be valuable as long as people buy and sell it, as long as it is interesting to them and they believe in and use it.

This is also a first mover advantage thing. People need something as a standard unit to measure value of anything, it used to be cattle, grain and gold, now fiat money has took that place. Once it took that place, its value become relatively stable automatically, since everything else's value is going to be counted by fiat money, this is pure psychological

[squatter]

In economy books, they tell you that "value" is decided by supply and demand together. That is a too abstract and flexible definition

I took a more scientific approach that using energy to measure the value of one object: One object has value, because of mainly 2 reasons:

1. It contains useful energy that can be burned (like food, electricity or petroleum)
2. It can reduce your energy loss (like cloth or house that protect you from excessive energy loss in cold weather,  or computer to reduce the physical paper work)

Since all living things burns energy through metabolism and other activities, anything that satisfy these two criteriea can be regarded as having demand from living things, thus have some value basis, no matter how large the supply is

Perhaps you could apply this to fungible commodities like electricity or petrol, to a degree.

How how non-fungible goods? For example, you have filet mignon and I have a can of beans. We both won't starve tonight, but surely you wouldn't be willing to trade yours for mine. That's the subjectivity of value, and why the idea of supply and demand is so crucial to determining it. If one food tastes better, has more nutritional value, has perceived superiority -- and is much scarcer -- then it must be more valuable.

[Nalbo]

Bitcoin has value because people trust it. They either trust it as a decentralized system that's transparent on numbers and transactions or they trust it as a solid investment option that's limited in supply. The value is not given by anyone but the users, people considered it as a buyable thing at $10K and considered a sellable thing at $5k just after a week. So, it's the market and sentiments that determine the value.

[pankaj1234]

Bitcoin has value because arround the world people accepted this.they are dealing in bitcoins.when you have limited supplied in the day by day growing community price will go higher.I am sure about bitcoin price that as many people comes in this field price will go boom high. One day bitcoin price will be very big then anybody thinks.
So bitcoin is money of future,money of internet,money of new generation,money of smartness that why bitcoin have value.

[Twentyonepaylots]

Bitcoin has value because miners have to buy equipments, pay for energy to mine it.
Bitcoin supply is limited at 21M, people invest in Bitcoin because it has many features that fiat don't has and they hope the price woud increase.

well enough reason to say that Bitcoin really has a value mate,but remember that since this market is volatile the possibilities that price may fall is always there but also chance of going high is there because the 21 million bitcoin limit is now more even lower because of forgotten password /private keys that has Bitcoin inside their wallets and ledgers.so all in all there are many arguments but literally?yeah Bitcoin has a value.

To pit everything jn a nutshell, bitcoin has a certain value we regard of because we implied a value for it. We implied and calculated using the amount of technology used to create and support it along with the equipments and manners as to how bitcoin is obtained. We have trusted bitcoin's value and bitcoin's credibility that why even if it doesn't exist in the physical world, we are still able to respect it's value. If we hadn't regarded of bitcoin's value as something of significance then it would not have any monetary value, regardless if they used ultra-powered equipment to mine it.

[johnyj]

In economy books, they tell you that "value" is decided by supply and demand together. That is a too abstract and flexible definition

I took a more scientific approach that using energy to measure the value of one object: One object has value, because of mainly 2 reasons:

1. It contains useful energy that can be burned (like food, electricity or petroleum)
2. It can reduce your energy loss (like cloth or house that protect you from excessive energy loss in cold weather,  or computer to reduce the physical paper work)

Since all living things burns energy through metabolism and other activities, anything that satisfy these two criteriea can be regarded as having demand from living things, thus have some value basis, no matter how large the supply is

Perhaps you could apply this to fungible commodities like electricity or petrol, to a degree.

How how non-fungible goods? For example, you have filet mignon and I have a can of beans. We both won't starve tonight, but surely you wouldn't be willing to trade yours for mine. That's the subjectivity of value, and why the idea of supply and demand is so crucial to determining it. If one food tastes better, has more nutritional value, has perceived superiority -- and is much scarcer -- then it must be more valuable.

In your example of beef vs bean, the beef's benefit falls into second category: It reduces your energy loss more than a can of bean do, it makes you feel fresh and have more nutrition, all makes you more energized. Of course that is also a personal thing, it would be opposite for vegetarian person, that feeling is subjective. So eventually the value will be decided by the production energy input: Beef takes much more energy to make, e.g. it contains more energy input, thus become more valuable

But if you take a supply and demand approach, then the price of beef and bean will be decided by who has more money: Meat eating person or vegetarian person. Then it get distorted

[squatter]

How how non-fungible goods? For example, you have filet mignon and I have a can of beans. We both won't starve tonight, but surely you wouldn't be willing to trade yours for mine. That's the subjectivity of value, and why the idea of supply and demand is so crucial to determining it. If one food tastes better, has more nutritional value, has perceived superiority -- and is much scarcer -- then it must be more valuable.

In your example of beef vs bean, the beef's benefit falls into second category: It reduces your energy loss more than a can of bean do, it makes you feel fresh and have more nutrition, all makes you more energized.

How do you quantify that, knowing that people can still survive off canned beans? If they can't afford steak, they'll buy beans. That's a function of demand, not a function of production inputs.

Of course that is also a personal thing, it would be opposite for vegetarian person, that feeling is subjective.

Yes, it's an oversimplified example, but your point only seems to reinforce that valuation is subjective -- based on supply and demand, not the cost of production.

But if you take a supply and demand approach, then the price of beef and bean will be decided by who has more money: Meat eating person or vegetarian person. Then it get distorted

Isn't that a more accurate description for value? It's the price that people actually pay.

If demand for meat falls, producers will follow suit and supply will fall until the market reaches a new equilibrium. It's just like gold -- when demand falls, so does price, which forces unprofitable mines out of business. This causes a decline in production.

[dnprock]

It is a simple yet not easy question to answer: why does bitcoin have value?

The answer, we believe is summarized in this video: https://www.youtube.com/watch?v=Vv2-6KDlZSE

Bitcoin has value because it has both scarcity and utility. It is a limited and useful resource. It is important to note that something must be BOTH in order to command a market value, NOT either.

Bitcoin is limited to the software-imposed hard limit of 21,000,000 bitcoin units ever in circulation. It is useful because it allows payment information to be secured by a decentralized computing network backed by magnitudes of raw hashing power. That raw hashing power is energy (electricity) converted into digital utility. Each transaction must compete (fee market) to be included in the next block of transactions which has a limited [block space] due to the block size limit (2MB) imposed on each ~10 minute block.

We can expect both the value to increase and the number of users to increase exponentially so long as the current technology maintains itself and remains both useful and in a limited abundance.

Bitcoin will always retain market value so long as miner nodes are actively contributing their hashing power to secure the network (proof of work).

Learn more about bitcoin at http://diginomics.com

I think Bitcoin has value because of its proven technology and narrative. It's mainly a Store of Value. It has a 21M supply cap, a small block size, minimal features. The technology is designed to be minimal to fulfill this narrative.

Bitcoin has minimal utility to be a Store of Value. It supports storing and transferring. If you believe or want Bitcoin to have more utility than that, you're going into Bitcoin maximalism. You'll go down the rabbit hole with people who think Bitcoin will eat all other currencies and assets.

I've written some posts on this.

https://bitflate.org/post/2020/03/17/bitcoin-is-a-store-of-value.html
https://bitflate.org/post/2019/11/24/bitcoin-will-not-be-a-medium-of-exchange.html

[johnyj]

Of course that is also a personal thing, it would be opposite for vegetarian person, that feeling is subjective.

Yes, it's an oversimplified example, but your point only seems to reinforce that valuation is subjective -- based on supply and demand, not the cost of production.

Yes, that's why using supply and demand model is too abstract and flexible, it does not give you any scientific measure about the value of the object.

If I'm a banker, and willing to pay 100 dollar for a can of bean, but only 10 dollar for the beef filet, that does not make the bean worth more than beef filet. You must also count the supply and demand of the money itself in the equation, but no economy book tell you that

So I think in this case, an objective measure will be the energy input (e.g. cost) required to make the food. Using energy as unit of account will make the valuation more objective, since no amount of fiat money printing can change the energy input of making a beef filet, thus its value (measured by energy content) is not affect by the supply and demand of fiat money