Why do Bitcoins have value?
Bitcoin was launched in 2009 as the world's first decentralized, private digital currency. Because it has no physical denominations, Bitcoin only exists inside of an interlinked computer network system.
Bitcoins are generated, or "mined," through a sequence of complex mathematical formulas run through computers. The anonymous creator of Bitcoins set a cap on total Bitcoin volume. Once that number hits 21 million, no more Bitcoins can be generated. These digital coins can then be bought or sold with other currencies and used as an investment or money to buy goods from any sellers who accept them.
Bitcoin has desirable properties. It is fast, borderless and decentralised with the potential to change the financial world for better. Not only does it currently have value as a payment system, but also as an asset class (a store of wealth). It is also useful because it is built on open protocols, meaning, anyone can innovate on top of it and make the system better.
Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognisability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies).
In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin's value comes only and directly from people willing to accept them as payment.
Today, there are already thousands of merchants around the world accepting Bitcoin as a means of payment, thus proving the growing usefulness of it.
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