How is cryptocurrency worth anything? How does cryptocurrency have value?
I need to start off by saying this is not financial advice so if you are looking for that this show isn’t for you. The questions, “how is cryptocurrency worth anything?”, or “what actual value does cryptocurrency have?” come up all the time. I am not here to convince anyone what has value but I am here to explain the thought process and idea of how it gets its value. Like any currency, cryptocurrencies gain their value based on the scale of community involvement (like the user demand, scarcity or coin’s utility).
Successful currencies have six key attributes—scarcity, divisibility, utility, transportability, durability, and their ability to not be counterfeited. An example of a good store of value commodity would be precious metals like gold or silver because their shelf lives are essentially perpetual or never ending. An example of something with a bad store of value would be milk because it will decay and become worthless.
Knowing those key attributes let's use the cryptocurrency bitcoin as an example. It has value because it holds up very well when it comes to these six characteristics. Let’s breakdown bitcoin into those 6 key attributes a little further.