HAMSON BITCOIN / BEGINNER PATH / 07

WHY DOES BITCOIN HAVE VALUE?

Bitcoin does not have a guaranteed price and no authority promises that it will increase in value. People assign value to it because they are willing to acquire, hold or accept it for its monetary and network properties.

A useful way to separate the ideas is: value is why people may want Bitcoin; price is what buyers and sellers agree to exchange it for at a particular moment.

HAMSON BITCOIN / MONETARY PROPERTIES / 08

WHY PEOPLE MAY CHOOSE TO HOLD OR USE IT.

Bitcoin can be examined through properties commonly associated with money: durability, portability, fungibility, scarcity, divisibility and recognizability. Bitcoin expresses these through software, cryptography and network rules rather than through a physical commodity.
SCARCITY

PREDICTABLE SUPPLY

Bitcoin's issuance follows protocol rules and approaches a maximum of 21 million bitcoin. No company can simply decide to create an unlimited additional supply under the existing rules.

UNDERSTAND THE SUPPLY →
PORTABILITY

DIGITAL TRANSFER

Bitcoin can be transferred over its peer-to-peer network and does not require moving a physical token between people.

HOW A PAYMENT WORKS →
DIVISIBILITY

100 MILLION SATOSHIS

One bitcoin is divisible into 100,000,000 satoshis, so a person does not need to acquire a whole bitcoin to use or own some.

UNDERSTAND SATOSHIS →
VERIFIABILITY

RULES CAN BE CHECKED

Bitcoin nodes independently validate blocks and transactions against consensus rules rather than relying on one central database operator to declare the ledger valid.

UNDERSTAND THE BLOCKCHAIN →
NETWORK

USE DEPENDS ON ADOPTION

A monetary network becomes more useful when people, businesses and services are willing to use it. Adoption can grow or contract and should never be treated as guaranteed.

MARKET

PRICE CAN MOVE SHARPLY

A scarce asset can still fall in price. Market demand, confidence, liquidity, competition and wider economic conditions can all affect what people are willing to pay.

UNDERSTAND THE RISKS →
Important distinction: scarcity alone does not guarantee value. Something also needs people who find it useful or desirable. Bitcoin's market value ultimately depends on people continuing to choose to use, hold or accept it.