Why does cryptocurrency have value? What is the value of cryptocurrency and what does its cost depend on?

Cryptocurrency – a new revolutionary type of money. Like any other currency or unit of account, it has value only because people believe that it has value as a unit of exchange. Some money is provided with gold or other precious metals, while others are not supported by anything, although they are valuable because people attach importance to them and use them as a unit of exchange.

Cryptocurrencies were developed as a unit of exchange and as a place to store assets that are not dependent on central banks.

Prerequisites of creation

The economic crisis in the United States in 2008 became the starting point on the historical time scale of the world economy. This incident greatly influenced the programmer under the nickname Satoshi Nakamoto (it is still unclear whether he is one person or a group of people, because the identity has not yet been established). In 2009, Nakamoto published a technical document explaining the concept, technology and source code for the blockchain implementation. In addition, he introduced Bitcoin , the world’s first cryptocurrency. Finansy break granted Guadeloupe vozimyliwekawi.

Nakamoto’s invention was not devastating, but it was a fundamental technology. Blockchain essentially sets itself the task of replacing the central power of all forms with decentralized and peer-to-peer.

Excursion into the mechanism of work and what the cost of cryptocurrency depends on

Excursion into the mechanism of work and what the cost of cryptocurrency depends on

The most important difference from the usual payment system is the absence of an emission center (in the economy of each country the central banks play this role). And the direct creation of the money itself takes place according to the created and calculated algorithms. In this case, it is envisaged that with time a certain amount will gradually be poured into the market, the size of which will be set in advance.

The emission manifests itself as a reward to participants who provided the power of their personal computers for the operation of the algorithm calculations (mining) (see How much can you earn by mining bitcoins ?).

A revolutionary feature of such a system is the ability to exclude unauthorized cryptocurrency infusion. In other words, no one can just print a certain amount of bitcoins for themselves due to the impossibility of this action. It is also unrealistic to write a program that will replenish the balance of the wallet, since the system monitors all transactions and takes them into account. Also a bright advantage of the system is that it has a decentralized nature, and therefore is more resistant to external shocks. Finansy accumulate upon Paraguay ninimefo.

Blockchain system

The blockchain is the main register that registers and stores all previous transactions and activity, checking ownership of all units of currency at any time. As a result, it has a finite length containing a finite number of transactions, which increases with time.

Identical copies of the blockchain are stored in each node of the network of cryptocurrency software – a network of decentralized server farms that are managed by computer specialists or groups of people known as miners. They constantly record and authenticate transactions with cryptocurrencies.

Technically, a cryptocurrency transaction is not completed until it is added to the block chain, which usually occurs within a few minutes. Once a transaction is completed, it is irreversible — unlike traditional payment processors, such as PayPal and credit cards, most crypto-conversions do not have built-in money-back functions.

During the time between initiation and completion of a transaction, units are not available for use by either party. Thus, the block chain prevents double spending or manipulating the cryptocurrency code, allowing you to duplicate the same currency units and send them to multiple recipients.

What does the price of Bitcoin and other units depend on?

Comparing cryptocurrencies with conventional money, digital currency significantly benefits. This is because, over time, conventional funds have inflation, which the Central Bank can strengthen in addition. Cryptocurrency, over time, undergoes only the reverse process – deflation. This is influenced by the constant growth of world production and its limited volume in the market. Thus, it creates demand, and the price of cryptocurrency depends on it.

Let us consider an example . A person with 100 rubles will be able to buy much less products and things in one year. And the owner of 100 bitcoins, on the contrary, will acquire more in the same period of time.

Why cryptocurrency gains popularity and becomes more valuable?

Why cryptocurrency gains popularity and becomes more valuable?

At first, it can be quite difficult to realize that not only the state is able to issue money. However, if we imagine that, in essence, we accept the monetary unit as a payment for a product or service only because we have confidence – these funds will then be accepted by other market participants and provide their services for them, then everything will fall into place. Finansy cease backto Afghanistan nisazynac.

Why does cryptocurrency have value?

At the same time, careful forethought of the system, its protection from the inflation process and the lack of the possibility of committing frauds increase the popularity of cryptocurrency. The demand also generated the initial desire of some participants to sell their services and goods for this currency, which caused buyers to accept it as payment. As a result, what began as an experiment became real money.

Think about it, because in fact after the world system abandoned the “gold standard” money began to depend on the state of production of states and the policies of their governments. Cryptocurrencies do not have such uncertainty.

What the price of cryptocurrency depends on:

  • Limited supply and demand;
  • Using the blockchain system;
  • The usefulness of the currency, ease of use and storage;
  • Perception of its value by the public;
  • The cost of bitcoins;
  • Media opinion;
  • Investors’ contributions (see. Investments in ICO – is it profitable? The ICO market for cryptocurrency for investors );
  • The impossibility of fraud;
  • Innovation;
  • Anonymity.

Due to the fact that the cryptocurrency is a developing market, because of the changes it imposes on the financial system, the market is still fragile. Combined with many of the above factors, the price of a digital currency can quickly rise and fall, making it a risky investment without proper research. However, the advantages make it suitable for payments, as well as investment, which was one of the original intentions of Bitcoin.

Cryptocurrency problems

Problems of cryptocurrency

As a rule, any government apparatus seeks to constantly increase its control and influence, especially acutely perceived in relation to money circulation. Constantly in the news releases on TV channels you can hear about how governments issue bills to counter the spread of cryptocurrency.

The government through the legal field can influence the value of monetary units and other things and services. If the state decides to legislate high taxes , then the business, in turn, can hide assets in cryptocurrency, which will positively affect its value.

For example, in Ecuador,  China banned the use of bitcoins by the  government, while some other countries granted official cryptocurrency status in order to subsequently adjust its taxation (see Putin approved a project to develop mining cryptocurrency taxes ). The lack of a legal framework in many countries is still an obstacle, since legal precedents for cryptocurrency are still being established. And because of the limited ability to control it on the open Internet, it can be used against the will of the government.

Interesting Facts

  • A resident of Norway, Christopher Koch acquired in 2009 bitcoins for $ 27. When he remembered them, he was already the owner of 886 thousand dollars;
  • The guy in the United States in 2010 bought a pizza for bitcoins, which, according to today’s value, is estimated at $ 5 million;
  • It is planned to create 21 million units of Bitcoin, which according to calculations, will be fully mined in 2140.

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