These days it’s hard to go a day without hearing something about bitcoin or some other cryptocurrency. Their soaring prices has created both FOMO and curiosity around the tech for many. But as a society we’ve become trained to be skeptical of anything that sounds too good to be true (insert Nigerian royal family emails) and have seen many fads come and go.

So if bitcoin is real, where does bitcoin (I’m talking about the currency not the application currently), get its value from? There are three primary and legitimate reasons why bitcoin has value to millions of people around the globe currently, and perhaps billions in the future.

Blockchain mechanics
Whether you believe in Bitcoin or not, imagine for a second that 50 people are trying to send bitcoin to a friend. For those transfers to occur and be validated, a very small amount of bitcoin is required as a fee. This fee is part of what incentivizes Bitcoin “miners” to validate the transactions that occur within Bitcoin the application. So as long as Bitcoin is around and people are transacting within it, there will be some value for bitcoin, the token, no matter what. These mechanics are also true for other cryptocurrencies.

A method of transferring money and making payments
Though bitcoin isn’t widely accepted, various online and offline companies accept bitcoin for payment and services. Some states are even accepting Bitcoin for the payment of taxes. This is happening because these organizations believe in the currency and want to support the ecosystem. Its very low (at times) transaction fees versus credit card fees makes it even more attractive, especially for large purchases.

In addition, Bitcoin provides the fastest, cheapest way to send large amounts of money across the globe for remittances. And for the unbanked, Bitcoin provides a way to accept money digitally which wasn’t possible before. This may not seem important to some, but it should be noted that Western Union alone does over $50 billion in cross border transfers annually! The use case is real.

Store of value
Lastly but perhaps most importantly, for bitcoin, because of its limited supply, its cryptographic (methodology of keeping information private/secure) and open source nature, and liquidity profile, it’s an interesting asset as a store of value. Comparing it to US dollars (or any fiat currency) or even gold, bitcoin has a clear limit in supply (21 million tokens). Because of the regular printing of new bills, fiat currencies are generally inflationary which makes them a depreciating asset. Additionally, bitcoins’ cryptographic properties make them extremely secure and nearly impossible to counterfeit. Plus, because it’s open source, all the mechanics of how Bitcoin works is completely transparent. And finally, because of the countless exchanges that accept Bitcoin for fiat currencies, Bitcoin is extremely liquid. Together these properties make Bitcoin a solid option as a store of value.

In summary
It’s far from certain whether bitcoin will one day become the global currency for millions (if not billions) of individuals to transact in. That said, currently there are some very good reasons why bitcoin is valuable and will continue to be in the foreseeable future.

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