Cryptocurrency is software code written in a distributed registry. Bitcoin is not backed by any tangible asset and is not tied to fiat currencies. At the same time, it has a price: you can buy it for other coins, dollars, euros or rubles. Bitcoin is worth real money, and that’s a fact. In November 2021, the rate of BTC was around $60 thousand, and the maximum in this period was fixed at $69 thousand. People, who know about the cryptocurrency from the news, can’t accept this fact. They don’t understand the reason for bitcoin’s high exchange rate.
How bitcoin differs from currency
Fiat money is printed by the government. It is not backed by tangible assets and its value depends on the authority of the country and the level of gross domestic product (GDP). Currency used to be backed by gold reserves. In 1971 the heads of state of the world abandoned the binding of money to precious metals. A complex system of exchange rates has developed, influenced by economic crises, military conflicts, and other political factors.
Bitcoin is different from fiat money. It is not controlled by anyone; it is issued by mining. Users solve a mathematical problem invented by the developer of the first cryptocurrency, Satoshi Nakamoto. Miners create another block with transactions and write them into the blockchain. This is the difference between coins and fiat currencies. The data is stored in a distributed, decentralized network. Users’ computers connected to the system provide the functionality. Transactions are stored in complete nodes, so information cannot be deleted or erased. The principle of irreversibility applies.
Benefits of BTC
Coins serve any settlements, they are the instrument of payment on a level with fiat currencies. In some countries they are prohibited, in others digital assets are legalized, but considered a commodity. In Japan, Belarus, Germany and a number of other countries, cryptocurrency is allowed as a means of payment.
Why Bitcoin is worth the money
Compared to fiat currencies, coins win on all fronts. Bitcoin is worth real money, and its value is increasing. Analysts predict further growth of the rate. They name different figures, but the essence is the same – the value of coin, expressed in fiat currency, increases. Sometimes the rate falls, correction is performed, but in general the upward dynamic is kept. With currencies, it’s the opposite: inflation is fixed, and money depreciates.
Useful properties
Cryptocurrency is perceived as a means of payment. However, bitcoin has other useful uses that add to its value. Among them is investing in the coin to preserve capital.
Bitcoin is not subject to inflation. On the contrary, its exchange rate rises, limited issuance ensures deflation. Coins gain more value over time. It is possible to store your money conveniently, and it is more profitable to use cryptocurrency than deposits from traditional banks. Decentralized finance is developing in parallel. This is a whole world of blockchain-based applications, including deposits and lending systems. Not only can you invest in coins and keep them in your wallet, but you can also buy coins profitably and deposit them at interest.
Bitcoin is a tool for trading. There are cryptocurrency exchanges that offer income on its purchase and sale. There are different options: arbitrage, trading strategies and others. Modern exchanges have turned into cryptocurrency centers with their own token, exchangers, DeFi services.
A whole industry is being created around bitcoin. Methods of buying and selling are simplifying: in addition to traditional exchange services and cryptocurrency exchanges, there are crypto-machines, bots in Telegram. Commercial banks are creating coin-enabled payment card variants.
Different states are adopting legislation loyal to cryptocurrency. Official financial institutions have seen digital assets and taken their usefulness seriously.