Why Does Bitcoin Have Value?

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howlermunkey
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Why Does Bitcoin Have Value?

Post by howlermunkey » Fri Nov 02, 2018 6:41 am

To understand how bitcoin can have value, we need to delve into what gives money value.

The idea behind money can be found in the Latin origins of the word credit – meaning to trust or to believe.

Faith is the hidden mechanism that makes money work. A faith instilled in the minds of men over thousands of years – right back from prehistoric times when primitive huntsmen started swapping seashells for mammoth meat instead of relying on a bartering system.

Over the centuries, shells fell out of favor, to be replaced with rocks, gems, and rare metals – items that might have had no inherent use, but were given value by the collective belief of a society.

This collective belief made the items symbols of value, which was then reinforced by their continued use.

The Network Effect
So long as everyone agreed that the chosen item had value, then it did. And this was reinforced when governments eventually sanctioned the currencies of their territories.

This same shared faith is what makes telephones and Twitter accounts useful, as money theorist Hal Varian suggests:

Just as a fax machine is valuable to you only if lots of other people you correspond with also have fax machines, a currency is valuable to you only if a lot of people you transact with are willing to accept it as payment.

The more people use a currency, the more value it has, and conversely, the fewer people that use it, the less value it has –just like fax machines lost their appeal when everyone moved over to the internet.

This has happened to currencies when economic policies in places like Venezuela and Zimbabwe have created hyperinflation, causing populations to lose faith in their money collectively.

This line of thinking is what leads Andreas Antonopoulos to believe that it will only take the currency of one nation-state to fall, and their citizens to turn to bitcoin, to precipitate the most significant wave of adoption yet.


https://dailyhodl.com/2018/10/30/why-do ... ave-value/

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