Since its first appearance in 2008, the bitcoin has been a topic of controversy in the digital world and in the non-digital world. Bitcoin has been created as a result of a research article by a scholar under the name of Satushi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. Nobody is sure whether this is a real name or a fake one, an individual or a group, but what everybody is sure of is that no one knows who Nakamoto really is. Nakamoto created the bitcoin cryptocurrency to be some sort of digital money to replace the real world hard and liquid money. There are a total of 21 million bitcoins, and Nakamoto, whoever that is, owns 5% of it, which is more than 1 million bitcoins.
The value of a bitcoin has been on the rise since its inception, jumping from under 1000 dollars to reach now more than 17000 dollars for the single bitcoin. So whoever of you out there having a biotin, you are actually having a fortune. The bitcoin is even beating gold, in its value and its rate of value increase. It is also gaining an increasing base of users, reaching about 6 million users by the end of 2017, as per the University of Cambridge.
A question however becomes an urging one, which is how can such a digital and invisible currency earn all that value and acceptance? It is all about 2 economic concepts which are scarcity and utility.
The bitcoin has been a topic of controversy in the digital world. We tackled in part 1 of this article the inception of the bitcoin. In this article, we will shed light on valuing the bitcoin.
The value of the bitcoin comes from its scarcity and utility. The bitcoin is scarce since there are only 21 million bitcoins in the world. This scarcity makes the bitcoin more wanted than any other currency or than even gold. This is why the value of a single bitcoin is on the rise. What adds to its value is its utility, or how people see it as a useful and efficient currency. It is a free currency that is not controlled by a government or bank. No single person have full grips over it, which makes it less prone to corruption. This lack of control is what makes many countries and entities see it, however, as a menace that needs to be fighted.
The value of the bitcoin is calculated by comparing it to gold, through dividing the amount of the gold estimated in the world by 21 million, which is the amount of bitcoins existing. It can be also calculated through comparing its value with the number of its users. The more its users are, the more its value becomes. Although many people see bitcoin as scam and something with no real value since it is invisible and intangible, the bitcoin has reached a peak value of about 19000 dollars. Its value is facing rise and fall from time to time though.