Though daily transactions done digitally are swift, the same cannot be said about large transactions or overseas transactions. Network effect in economics suggests that the value of a good increases with more number of people utilizing it. Cashless mode of payment is one example for The Network Effect. With the introduction of Payment apps or wallet apps like Paytm, Google Pay, PhonePe etc, cashless mode of transaction has caught massive traction. We have witnessed a sudden shift to electronic method of payment in recent years due to its ease, transparency and accuracy. The understanding of the shift the culture of electronic mode of payments and digital currencies are bringing is pivotal for a user to understand this entire ecosystem.Įlectronic mode of payment is simply lesser use of traditional currency and direct exchange of value between two parties through a digital medium. Millions of miners and traders are altogether considered the participants of the Bitcoin network who trust the world’s largest cryptocurrency and are deciding its price on the sole principle of its demand and supply. The trust which millions of people have imparted on a cryptocurrency in a completely trustless environment decides the value of the cryptocurrency. This is exactly where Bitcoin is gaining its value. Hence, for any money to be established as an exchange of value within a network, it is important for the network to trust it regardless of who (or what) is backing it. The value of any currency comes from the backing of the state and the trust that people have over the government. Similar to Fiat currency, Bitcoin (or most of the cryptocurrencies) is also not backed by any gold or silver hence does not have any intrinsic value. Fiat currency or money establishes the exchange of value with the help of the government’s backing Here is the Value! The store-keeper, takes the $100 note and buys his meal with the same or invests it to create more value. For example, within a network, I trade a $100 note for a mobile phone, I am essentially exchanging value worth $100 for the phone. It is important to understand here that this demand and supply is decided by the participants of the network who are bringing a fiat currency into use. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government.

What is a Fiat Currency?įiat money is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.

Add to that, if the commodity in place is limited in supply then its value increases over time with demand. The commodity also must be able to hold or store this value so as to be traded in the future. A commodity to be valuable hence needs to be exchangeable for a similar value. But, today most of the global currencies are Fiat Currencies. Well, certain currencies that are backed by precious metals like gold and silver have an intrinsic value. Today, we accept any fiat currency in exchange for goods or services as we understand that in turn, the fiat currency can be traded again to obtain other goods or services. Every commodity earns its value if there is a price that people would pay to obtain it. Eg: Sweetness is an intrinsic value of sugar. It does not require an additional source to provide it with a value. Read more: Increasing Your Profits with Bitcoin Affiliate Programs What Is an Intrinsic Value?Īn intrinsic value of a commodity is a value that a product possesses in itself. As the popularity around Bitcoin and other cryptocurrencies rises and there is a rise and fall in their pricing, many have this question: From where does Bitcoin get its value? This also comes from the fact that people don’t understand the value behind a FIAT currency. The value behind Bitcoin or any cryptocurrency is often less understood by the larger audience. We are looking at a time where the mode of payments are changing in a short span of time.įrom e-wallets to payment applications, the ways one can trade have multiplied but for trading commodities, the number of innovations can be counted on fingertips. This piece tries to address this query and help us understand the value behind Bitcoin or any Cryptocurrency. What drives its value and why does a significant market still invests heavily in it is a question non-believers often ponder. Then we saw a deep fall in 2018 and stability in 2019. 2017 alone saw massive gains, starting the year at under $1,000 and, at its peak, breaking $19,000, according to industry site CoinDesk. Bitcoin’s price has been on a wild ride since its inception.

No cash value coin meaning