Does cryptocurrency have value?

How does cryptocurrency gain value?

What is the price of a bitcoin-based one, and how does this cryptocurrency increase value? The cost of bitcoin oscillates according to an unregulated market on which investors buy and sell currencies: it is, therefore, subject to complex fluctuations, influenced by several factors ranging from the technical nature of Blockchain to prominent macroeconomic factors that affect stock markets as a whole.

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Bitcoin, A Decentralized cryptocurrency

The price of Bitcoin depends above all on supply and demand, that is, on the purchases and sales made by investors. In the world of cryptocurrencies, there is no central bank responsible for influencing or regulating prices: the value, therefore, naturally increases and decreases depending on the orders placed. Bitcoin is, therefore particularly volatile.

A specific factor is still likely to influence the price of Bitcoin upwards or downwards: it is the operation of the Blockchain, which assumes that all transactions are distributed along with the network, constituting its technical base. Unfortunately, this operation uses a computer resource that is not infinite and can suffer from disturbances.

Predict The Price Of Bitcoin

Cryptocurrency, sometimes considered a refused value, sees its price evolve according to the general economic situation since the latter directly influences the behavior of investors.

To support its value, the designers of Bitcoin understood from the start that it would be a resource available in infinite quantities. The maximum amount, set at 21 million Bitcoins in circulation, should thus be reached by 2040. Therefore, the currency will retain a form of scarcity that should theoretically promote its appreciation over time. The price of Bitcoin also has a good chance of increasing if the ecosystem of compatible goods and services progresses.

Bitcoin is valuable for precisely the same reason the US dollar is. It is a form of currency used by people to buy and sell goods or services.

While the value of the US dollar is supported by the government, which gives it legal status and uses it to collect taxes, the value of Bitcoin comes from its computer code.

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Even if it is not tangible, the computer code of Bitcoin gives it the same properties as traditional cryptocurrency: scarcity, divisibility, transferability, fungibility, and a recognizable character. In addition, being decentralized, Bitcoin can be used without an intermediary. It can provide a certain level of anonymity. It is impossible to tamper with, and it has several other advantages, such as its programmable aspect.

Do any cryptocurrencies have intrinsic value?

There are different types of cryptocurrencies, such as Blockchain and Bitcoin. These are increasingly popular terms in society, but their meanings are unknown. Therefore, before discovering how to create Bitcoin or other types of cryptocurrencies, it is important to explain what they are.

Cryptocurrencies are digital currencies designed to function as a medium of exchange. Therefore, they share this same function with typical or traditional currencies. And so, what is the use of creating a cryptocurrency? The answer lies in the differentiating elements it contains.

The traditional metric of the price-to-book ratio (the price of a stock divided by its book value) is frequently used to value a company. However, Kraken Intelligence points out that if it were applied to Facebook as the only valuation indicator, it would be missing the most valuable intangible asset of that social network , its base of almost 2 billion users.

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Similarly, the authors say there are intangible assets within Bitcoin that must be considered when assessing its intrinsic value. These include cryptography-based computational security, censorship resistance, and immutability and verifiability.

The traditional metric of the price-to-book ratio (the price of a stock divided by its book value) is frequently used to value a company. However, Kraken Intelligence points out that if it were applied to Facebook as the only valuation indicator, it would be missing the most valuable intangible asset of that social network, its base of almost 2 billion users.

Cryptocurrencies are a type of alternative currency linked to technological elements. Virtual currencies, also known as tokens, use cryptography that verifies and secures the transactions carried out and controls the creation of new units of these currencies. Unlike those considered as traditional currencies, cryptocurrencies make micro-transactions possible by dividing their units. For example, without going any further, Bitcoin is divided into 100 millionths; it can have a minimum unit equivalent to 0.00000001. This division of its units allows minimal transactions or transfers with cryptocurrencies, an option that traditional payment systems with money or more current systems such as credit cards and mobile payments, do not qualify.

The authors note that Bitcoin will not be successful just because of the value proposition and underlying technology but because people believe it will be successful. This is a virtuous cycle: participants believe that the adoption, or purchase/use of Bitcoin, will continue to accelerate, leading to further adoption. “This reasoning triggers a wave of adoption that leads others to the same conclusion and action.”

How does cryptocurrency work?

Each Bitcoin contains a code stored in a “digital wallet” or digital wallet, on a cell phone or a computer, with “private keys.”

People can send or receive Bitcoins (or parts of a Bitcoin) from other individuals or companies. In general, cryptocurrencies are based on a decentralized network of computers that has nodes spread worldwide with copies of all the transactions that have been carried out. A cryptocurrency can be created in the ‘Token Mint” online application to provide it with economic value. You must meet a series of parameters in a drop-down menu and pay a commission to the platform that will manage the process for you to have an exact address of authenticity to market it. For the new cryptocurrency to be distributed, it is important to create a payment platform. In it, users would buy tokens with other cryptocurrencies or with euros. Another possibility is to send the tokens generated to an exchange house or an exchange (platforms for exchanging digital currencies for other cryptocurrencies or money) to be distributed in the general market.

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This network is called a “blockchain” or chain of blocks. These blocks or nodes are linked and secured using cryptography. When you make a transaction, its data is recorded in a partnership and automatically replicated in the rest.

Bitcoin and each of the digital currencies work with their algorithm, which allows managing the number of new units issued each year. Cryptocurrencies have several differentiating characteristics compared to traditional systems: they are not regulated or controlled by any institution and do not require intermediaries in transactions. Instead, a decentralized database, Blockchain, or shared accounting record is used to control these transactions. Following regulation, cryptocurrencies are not considered a means of payment. They do not have the backing of a central bank or other public authorities. They are not covered by customer protection mechanisms such as the Deposit Guarantee Fund or the Fund Investor Guarantee.

Regarding the operation of these digital currencies, it is very important to remember that once the transaction with cryptocurrencies is carried out, that is, when the digital asset is bought or sold, it is not possible to cancel the operation because the Blockchain is a record that does not allow deleting data. Therefore, to”reverse” a transaction, it is necessary to execute the opposite. Since these coins are not physically available, you have to resort to a cryptocurrency digital wallet service, which is not regulated to store them. 

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How does Bitcoin work?

Bitcoin was initially created as a payment method, and in some cases, that is its clear function. However, its adoption is not yet ubiquitous. Moreover, it is currently too volatile an asset to be a natural alternative to traditional currencies: providers are forced to constantly review their prices due to the instability of their value. 

Its blockchain technology allows drastically reducing the number of intermediaries and transaction costs in processes. It is a headache for governments, as it threatens the current functioning of the world’s economies with the intervention of the Central Banks and their power to create money as we know it today.

The Bitcoin creation system is decentralized; nobody can control the issuance, which is already programmed by the Bitcoin protocol, whose code is open to everyone.

Those dedicated to creating Bitcoins and sustaining the system’s operation are called “miners,” and they are distributed throughout the world.

Bitcoin needs two underlying mechanisms to function: the Blockchain and the mining process. The Blockchain is a digital order book made up of all Bitcoin transactions that have taken place up to this point. These transactions are grouped into “blocks,” encoded during mining, and linked to each other. The Blockchain is available to everyone and can only be modified if there is consensus among the majority of the community. This means that it is almost impossible to edit retroactively, that it is not susceptible to human error, and that it avoids the possibility of failure. Mining Bitcoins is the process through which each of these blocks is encoded, and by doing, new units of cryptocurrency are released, a reward for miners. In the specific case of Bitcoin, the reward is equivalent to 12.5 Bitcoins, although this is reduced approximately every four years. The miner’s job is to develop this process by solving complex algorithms (a continuous task that varies in difficulty). As the complexity of the algorithms changes, they ensure that the processing time of the blocks is constant. Due to their crucial role within the network, miners exercise some control over cryptocurrency, especially considering mining has become a big business. Once these units are in circulation, they can be traded through a market and stored in a portfolio. By investing in Bitcoin with IG, you will never own the asset, so you will not need a wallet or a specific account. 

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How is a cryptocurrency created?

Creating a cryptocurrency from scratch requires several steps and a slow process so that its existence can be distributed and obtain a market value. These are the instructions to follow and with which you will discover how to create a cryptocurrency and earn money :

Creation of the cryptocurrency

Not sure how to generate a cryptocurrency? There are different online applications with which you can do it. One of them is ‘Token Mint,’ an application that allows you to give it an economic value. The term token refers to a unit of value issued by a private entity.

After creating the cryptocurrency, you must fill in some parameters found in the drop-down menu of said application. Then, all the steps are properly explained. Next, you must also pay the corresponding commission to the platform managing the process. Thus, an authentic direction of the new cryptocurrency is available; this is the last step for the commercialization of the cryptocurrency to be a reality.

Distribution of the cryptocurrency

For the new cryptocurrency to be distributed, it is essential to create a payment platform. In it, users would buy tokens with other cryptocurrencies or with euros. Another possibility is to send the tokens generated to an exchange house or an exchange (platforms for exchanging digital currencies for other cryptocurrencies or money) to be distributed in the general market.

Give an economic value to the cryptocurrency

The final step in creating a cryptocurrency is the value given to it. Once you endow it with a value, the market is responsible for assigning a specific price. Thus, you will justify whether a similar profit backs the payment of the value initially endowed to the cryptocurrency. The endowment of an economic value to the new cryptocurrency is not very complicated, so that anyone can do it. However, this apparent simplicity carries a risk of falling into fraud. Nevertheless, more and more users are willing to invest in crypto assets due to the fury they have caused, experiencing rises in the markets that may remind of the most disruptive companies on the stock exchanges or, on the contrary, bubbles that have ended up bursting. 

The debate is increasingly on the rise, but, first of all, many users are unaware of this space, and that is why they wonder what cryptocurrencies are and how they are created. 

Cryptocurrency has no value

The so-called cryptocurrencies are unregulated financial assets, which do not have legal tender status, nor are they backed by central banks. Likewise, they do not fully fulfill the functions of money as a medium of exchange, the unit of account, and the store of value. Various authorities worldwide are expressing concern about the risks and speculative factors that explain the high volatility of prices of criptomonedas, which affects those who acquire them.

Therefore, it is important to point out that people who invest in virtual currencies or cryptocurrencies are aware of risks such as the loss of the value of their investment (due to the high volatility in its price and the possibilities of fraud), as well as its possible use in illegal activities. Central banks issue money notes. For example, the European Central Bank (ECB) does this for the euro and the Federal Reserve for the US dollar. Most money these days is digital, like the money in your bank account. That money comes from commercial banks. But central banks are watching by supervising these banks. And if things go wrong, we have a deposit guarantee scheme (DGS) in the Netherlands. If a bank with a license with De Nederlandsche Bank (DNB) goes bankrupt, this system guarantees a maximum of €100,000 for every person with an account with this bank. The only other way to be sure of credit is to hold cash. But many people find this inconvenient these days. In addition, cash is used much less. Because of this, some people find crypto interesting.

The value of cryptos is not guaranteed in any way. Cryptos are independent of a commercial or central bank. As a result, you run a greater risk with cryptos. Because if crypto loses value and you lose a lot of money, you will not be helped by the central bank. A central bank digital currency (CBDC) or significant bank money can be a good solution because it is in the hands of a central bank. There is just no such CBDC yet. The ECB and DNB investigate whether such a digital currency from various central banks is possible. Companies that offer services for the exchange between virtual money (crypts) and ordinary money (fiduciary money) and companies that provide crypto custodian wallets are subject to the integrity supervision of De Nederlandsche Bank. Therefore, crypts are vulnerable to financial, economic crime.

Conclusion

How should crypto coins be qualified in property law? To answer that question, the specific characteristics of cryptocurrencies will have to be looked at. The similarities are that crypto coins (can) represent significant asset value that they are identifiable and can be (exclusively) controlled utilizing a private key. In my opinion, this will only suffice with an absolute property right that, in principle, rests on all crypto coins. In my view, the closed property law system leaves sufficient room for this recognition. After all, crypto coins fit within the legal description of property rights, and they are, in fact, transferable. This also seeks to connect as much as possible with the thinking of the legislator and the law system. 

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Finally, the agreement is reached with technical reality for several reasons, which will benefit practice. In the first place, it will be easier to enforce the lien when establishing the lien on the crypto coins themselves. Secondly, a specific qualification offers more legal certainty; with a separate capability of each crypto coin, it is just a question of which side the penny will fall. Thirdly, the private key will thus remain a means of control and not become a target for security rights, and, lastly, there will be no need to change the law.

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In short, an open interpretation of the closed system of property law will bring two worlds together: code as law and law as coded. From a technological point of view, Bitcoin is undoubtedly a real innovation. Indeed, creating monetary units by a mathematical algorithm limited to a number defined from its design is a new concept. Moreover, the decentralization of the management of this virtual currency is innovative. Bitcoin or other comparable virtual currencies bring many advantages to its users, especially in terms of simplicity and cost of administration.