Bitcoin is a digital currency without any central bank and a store of wealth. Satoshi Nakamoto, a pseudonymous entity developed it as a solution to dwindling fiat currencies following the stock market crash and economic crisis of 2008 in the US. Bitcoin was born out of the failings of traditional financial markets and fiat currencies. With the current economic conditions and inflation, many investors believe Bitcoin is more valuable than fiat currencies.
Why Do We Have Money?
Before the time of money, people would barter in exchange for goods from other people. The transaction would happen by offering whatever goods they themselves could provide in return. For example, I will give you 12 eggs in exchange for 20 bananas.
However, this became difficult to get a fair exchange as others may not wish to own what you are offering. A farmer may not be able to find a good transaction for his livestock.
This is how currency was introduced, as a way of valuing goods and a fair medium of exchange between parties. Initially, currency were often things like shells and fur. People chose shells for their beauty and rarity while fur provided proof of work, as it required catching an animal.
Salt was at one point a highly-valued commodity that funded wars and the building of cities. It is long lasting, easy to carry, weighable as a unit of account, and used as a preservative and seasoning for food. Kings and farmers both valued salt with high regard. This was until technological improvements increased production. Now, the supply out weights the demand, reducing its value.
There is a list of properties that have historically given value to currencies. Gold is the only currency to withstand the ages. Its unique elemental properties that make the metal valuable has helped it to rule the financial market.
Most people confuse or believe that money and currency are the same things. It is incredibly important to learn the difference.
There are some intrinsic properties that currencies and money hold. They are both durable, divisible, portable, fungible and a medium of exchange. What makes money different is its store of wealth over a sustained period of time.
Advantages of Bitcoin over Fiat:
The value of Fiat becomes irrelevant when it moves out of its sovereign authority, but bitcoin remains the same in every geographical position around the world.
One of the main properties which make Bitcoin valuable is its scarcity. Unlike fiat money, there is a finite amount of Bitcoin that can ever be produced. The protocol is written to mine 21 million coins and no more. There is value in scarcity, and Satoshi Nakomoto realized from the 2008 financial crash that quantitative easing is only devaluing the fiat money.
Unlike the FED printing an unlimited amount of paper. Bitcoin’s supply halves every 4 years. This makes it an increasingly scarce asset. So while fiat currency is losing purchasing power with monetary and fiscal stimulus. Bitcoins purchasing power increases every year.
Medium of Exchange:
The Office of the Comptroller of the Currency confirmed in their reports to banks that “fiat money refers to instruments that do not have intrinsic value but that individuals and institutions are willing to use for purposes of purchase and investment because they are issued by a government.”
In the case of Bitcoin, it needs to be used and spent, so that more people can purchase, gain, and spend, allowing the crypto-economy to keep moving and growing.
Store of wealth
Historically people have flocked to gold and other commodities to preserve their wealth. However, the digital generation prefers to invest in Bitcoin and cryptocurrencies. They see more value in the technology than they do in a shiny piece of metal or a piece of paper with a promise on it.
What makes Bitcoin More Valuable Than Fiat
Bitcoin opened a new market free for everyone, where pure supply and demand drives the value of an asset. Assets value depends on the market Sentiment and not on issuing authority or some moderators.
Government can easily manipulate the stock market system. The value of the stock markets no longer reflects the real economic situation. Human greed has overly inflated the valuations of companies. It is also vulnerable to human errors.
Bitcoin solved this issue by replacing the monetary policy with a deflationary protocol. It is incredibly difficult to manipulate bitcoin. It serves as a globally recognized store of wealth.
All of these fundamentals and properties are what makes Bitcoin valuable than Fiat.