Money could move the world, but only if we allow it. Beyond bright coins and bank notes, the concept of money and its value is simply based on a common belief system.
Imagine going to a store and trying to pay for $100 products with the $10, you will probably be directed to the nearest police station. We all agree that a $100 note is worth $10 because the central bank says it: it’s our collective consciousness that helps us to perceive the value of certain coins or notes.
Crypto-currencies differ slightly: there are no fixed physical formats that indicate the value. In the UK, only 4% of the money is in physical form, the rest is managed electronically, existing as only numbers on the screen.
In this context, crypto-currencies such as Bitcoin, like other currencies or commodities, gain in value through supply and demand; How much effort is needed to get them? Its use and perception.
Supply and Demand
Supply and demand: it is the basis of economics and any good salesman knows that having too much can be a good thing. On the other hand, having something limited will make everyone fight to get it.
This principle explain the structure to understand the importance of crypto-currencies, such as Bitcoin. For example, there are only 21 million Bitcoin units. That seems a lot, besides, in February 2017, £382 million of £5 was in distribution. The limited number of bitcoins means that inflation is not a problem and, as availability decreases, the value increases.
Value determined by Effort
The more difficult a task is, the more value we give it and the acquisition of bitcoins (for example) can consume the same amount of energy required to power a whole country.
Although the mining effort of bitcoins is done by hardware and processors, the running cost of this hardware is high. As arithmetic computation tasks become more and more difficult to solve, the energy consumption (and therefore the cost) continues to increase, making the search for Bitcoin even more difficult.
Use of cryptocurrency – Growing acceptance
Bitcoin is probably the most famous of all crypto-currencies and its growing popularity means it can be spent in real stores to buy the real things we want. For example, retailers of the Shopify e-commerce platform have the option of accepting bitcoin as a payment method. You can also use your bitcoins with a hard coating on Lush.com cosmetics; on games, movies and applications at Microsoft; And if you want to travel outer space, you’re in luck as Virgin Galactic now accepts Bitcoin.
But it’s not just shops or interstellar travel, Bitcoin ATMs have popped up all over the US: there are now over 100 bitcoin holes in the wall where you can buy or sell cryptocurrency.
Even governments are open-minded and some recognize crypto-currencies, especially Bitcoins, as legal tender. In the end, adopting the “Buy and Dump” approach has drastically declined among adopters and has helped cryptocurrency grow over the past year.
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