Why the value of bitcoin plays by its own rules

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Bit­coin, a mys­te­ri­ous and bril­liant cryp­tocur­ren­cy, has been mak­ing waves in the world of finance and tech­nol­o­gy. And while it might seem com­pli­cat­ed at first glance, it actu­al­ly makes a lot of sense. Bit­coin is a dig­i­tal cur­ren­cy where pay­ment is made anony­mous­ly through cryp­tog­ra­phy. The point of bit­coin was to make trans­ac­tions out­side the con­trol of any cen­tral bank or gov­ern­ment. In oth­er words, peo­ple could make deals with­out hav­ing to wor­ry about what their finan­cial insti­tu­tion might think about their deci­sion or how many tax­es they avoid­ed on some shady deal.

Although the news of bit­coins being hacked is almost dai­ly, it has nev­er been safer than it is now. The net­work con­sists of thou­sands of inde­pen­dent min­ers who ver­i­fy trans­ac­tions and guar­an­tee secu­ri­ty. It’s near­ly impos­si­ble to hack into, even for the most sophis­ti­cat­ed cyber­crim­i­nals. And because it isn’t con­nect­ed to any bank or gov­ern­ment, hack­ers can’t crash the mar­ket by gen­er­at­ing an ice age of fake trans­ac­tions and debas­ing the val­ue of bit­coins. This brings me back to my ear­li­er point: bit­coin is essen­tial­ly free-mar­ket eco­nom­ics at work.

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Free From Interference:

But this does not mean that bit­coin is unreg­u­lat­ed. It’s just that the pow­er of reg­u­la­tion lies in the hands of mar­ket par­tic­i­pants, who can lim­it their own expo­sure to risks and costs by select­ing exchanges, wal­lets, and pay­ment providers that best suit their needs. This lev­el of free­dom also leaves room for spec­u­la­tion, which some con­sid­er a bad thing. But it’s impor­tant to note that with­out spec­u­la­tion, there would be no invest­ments at all. No one would be invest­ing in the stock mar­ket or any oth­er form of investment.

With­out spec­u­la­tion, a gov­ern­ment could just print or cre­ate what­ev­er amount of cur­ren­cy they want and give it to peo­ple who don’t have it. This would lead to a cur­ren­cy that is not backed by any­thing or any­one, which is an opti­mum sit­u­a­tion for infla­tion and run­away infla­tion. The only way to stop run­away infla­tion is to lim­it the amount of mon­ey that can be print­ed, which would lead to hyper­in­fla­tion and val­ue destruc­tion. Bit­coin solved this issue by giv­ing the pow­er to reg­u­late a cur­ren­cy to its users.

A Declining Value:

In addi­tion to this, Bit­coin acts as a defla­tion­ary cur­ren­cy, mean­ing that over time, the val­ue of bit­coins will rise. This may not be the most appro­pri­ate argu­ment for those who are against infla­tion and want their mon­ey to be sta­ble in val­ue. But it is also impor­tant to con­sid­er that defla­tion can actu­al­ly be a good thing. In 2008 we expe­ri­enced a cat­a­stroph­ic eco­nom­ic cri­sis due to eco­nom­ic bub­bles. Once these are popped, the econ­o­my may suf­fer from infla­tion and depres­sion as a result.

Defla­tion can be a pow­er­ful tool that can bring pros­per­i­ty and sta­bil­i­ty to the econ­o­my because it means peo­ple aren’t spend­ing mon­ey they don’t have. They aren’t gam­bling all their mon­ey away on some invest­ment or asset that they don’t need. And if bit­coin were able to suc­ceed in its mis­sion of bring­ing the free­dom of pay­ment options and com­pe­ti­tion to banks and the bank­ing indus­try, we might see defla­tion as a pos­i­tive thing.

The Future Is Yet To Be Mined:

There are many spec­u­la­tions about how the val­ue of bit­coin may change in the future. It is true that Bit­coin has no intrin­sic val­ue, which means that it is impos­si­ble to find out what its real val­ue will be. But this also means that we can’t know how use­ful it might be to peo­ple in the future. The more peo­ple who start using bit­coin, the more valu­able it becomes. This can be one of the rea­sons why we are yet to see a mas­sive crash in its price.

The next few years are going to be cru­cial to the via­bil­i­ty of bit­coin. If it is dis­cov­ered that bit­coin is being used for ille­gal pur­pos­es, we might see a sud­den down­ward spi­ral in its val­ue. But if more and more com­pa­nies start accept­ing bit­coins for pay­ments, it could become a very com­pet­i­tive alter­na­tive pay­ment option. After all, if more peo­ple start adopt­ing it, it becomes the least bad choice for mer­chants who want to expand their busi­ness and make trans­ac­tions with­out hav­ing to pay bank fees. But the future is yet to be mined.

Conclusion:

It’s impor­tant to remem­ber that bit­coin is still in its infan­cy. And while it seems to be very secure, it’s also impor­tant to remem­ber that there is room for improve­ment. Sev­er­al oth­er cryp­tocur­ren­cies are con­stant­ly being devel­oped, and some of them offer more options and fea­tures than Bit­coin does. While this might seem like a big advan­tage now, we have yet to see what the future has in store for this bril­liant dig­i­tal currency.

It offers a lot of advan­tages and fea­tures that reg­u­lar bank pay­ment meth­ods don’t have. How­ev­er, this does not mean that it is com­plete­ly secure. There are sev­er­al issues that need to be addressed in order for peo­ple to start using it on a more reg­u­lar basis. If Bit­coin wants to suc­ceed, it needs to become as reli­able as reg­u­lar bank transfers.

 

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