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Why Does Cryptocurrency Have Value? (Magic Internet Money)

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@whatageek
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Good old magic internet money. If you are new to crypto, or even if you have been here for a while, you might be wondering why is this stuff worth anything? And not only is it worth something it is worth a lot depending on the coin. It might seem odd, especially if you are not into tech, but there are solid reasons why cryptocurrency can have a lot of value. Yes there is also a lot of speculation here that drives prices to crazy highs but under the hood are fundamentals that prove blockchain tech is the future and crypto is more than just magical internet money.

Digital Has Value

The digital world is worth more than a lot of people think. If you have a popular account it can be worth millions. Web domains, which are literally digital real estate, can and have sold for hundreds of thousands of dollars. If you own a .com site that is a four or five letter word you could probably retire. Think about owning pet.com. That would make a fortune. The reason these sites are worth so much comes down to one thing, traffic. Your domain is easy to remember and could generate a lot of views without you even having to do anything. It is like having a billboard set-up at Times Square. To some charging the same for a web address as you would a house might seem insane, but being able to stand out in the digital landscape gives you or your company a huge leg up. We live in the digital world and with some many of us on the net each day, it leads to "real estate" and digital goods being worth something. If there was only 10 people on the net then it would be a different story, but with the majority of the human race using the web, you can see why value arises.

Cryptocurrency Is Scarcity

A web domain is worth something because there is only one site with that name. The principal applies to crypto too. There has been digital coins in video games for years but as we all know they have no real world value. This is due to the fact that these coins have zero scarcity. They are created and given out and have no limit to how many can flow through the economy. Without scarcity you cannot have value. Imagine gold grew in everyone's backyard. At that point no one would pay anything for it as you could go outside and pick your own. But cryptocurrency has a finite number of each coin. Bitcoin for example will only ever have 21 million coins out there. There will never be anymore. That means when you own a coin you know you own something that cannot be duplicated and no more will be created. Having something is limited gives it value and the more limited it is (plus the more people want it) the higher the value of the coin can grow.

Deflation Is The Key

The strongest part of a lot of cryptocurrencies is they are deflationary assets. This means that not only do they have a limit to how many will enter the market but because of things like burning, there will be less of them on the market as time goes by. Burning is a term used to get "rid" of a cryptocurrency. It is when a coin is sent to a wallet that has no way of being retrieved and thus is gone from circulation. The coin cannot be deleted but this is the same thing as no one can ever access it. When you have less and less of a currency each year this will, in theory, lead to an increase in price as you have the same demand but less of the coin to go around. This is the opposite of inflation, where money is being added to the economy each year and demand stays the same, which leads to the money having less buying power. If you can make a coin with a good burn rate that is popular and has a low max number of coins that value could skyrocket in the years to come.

No Fees To Send

Money is expensive. Trying sending gold to a friend overseas and see what the shipping costs are. Or do a big transfer and see what your fees are. I have used coins that cost me literally nothing to send to people around the world and they are sent in seconds. This is a big value that crypto has that will give it staying power in the future. Crypto is very efficient as a currnecy and being able to send it securely will save a lot of money for a lot of people. Think of all the money that a company can save.

The Utility Of Daily Dividends

There are a lot of utilities that crpyto can have over other assets and money. One for example is that some coins offer daily dividends. Do you know how valuable that is to an investor? Getting paid daily for your investment instead of quarterly means you can compound a lot faster and you will be so much farther ahead than those who invest in stocks that only paid out 4 times a year.

People Are Willing To Buy Them

At the end of the day, as silly as this sound, crypto is worth something because people are willing to pay something for it. Take any asset out there from a stock, to a baseball card, you need people to accept it has value and want to hold it or use it. Any one can make a coin but without people buying it the coin has no value. This is why user base is very important for a dapp. With a high number of people holding a coin and using it daily the coin has a lot of volume and liquidity. But with only a small number trading coins to each other the currency isn't accepted and thus has little to no value. This takes time to happen. It took years before anyone took bitcoin seriously and it is still trying to make its way to the mainstream. People need to see something has longevity and that they are not being sold fool's gold. But when a coin holds for a long time and people can see that it is accepted as a valuable they start to see it as valuable themselves.

Crypto might seem strange to those who are used to buying tangible goods in the real world but we are shifting as a society into the digital space. This means that we need a digital economy to go with it and blockchain technology is the tool that will get us there. It is still early in the game but you can see the kind of money that is starting to enter the crypto space and with the tech as useful as it is there in no doubt why this is more than magical internet money.

Posted Using LeoFinance