Determining the value of bitcoin

The value of bitcoin comes as a result of its innovation in different fields that will be explored in this article. We’ll discuss the important factors of bitcoin that lead the community to consider it a very valuable asset.

Scientific value

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To the field of science, bitcoin is considered of value because it solved the Byzantine Generals’ problem, also known as the Two Generals problem. The way Satoshi Nakamoto solved the dilemma of digital double-spending was through the blockchain, a shared public ledger, which is maintained by the P2P nodes in the Bitcoin network.

Technological value

Because the protocol works through a distributed P2P network, there is no dependence on a third party for it to exist, meaning the currency is completely decentralized and therefore, resistant to any kind of censorship. This is one of the most vital aspects of the Bitcoin protocol, because it allows it to work without falling subject to the approval of an external authority. Because of this exact reason, Bitcoin is considered an irreversible disruptive technology.

It’s a token of value

Because of the public ledger (the blockchain) you can copy a bitcoin plenty of times, but the spend transaction will only go through once, meaning that the network recognizes an attempt to double-spend and rejects it. This is an innovation that sets bitcoin apart from previous attempts at creating a functional digital currency.

The value in its design

While its foundation is the solution of the double-spending problem, other features in its design offer additional value to users:

  • Payment method
  • Storage of wealth
  • A public, decentralized transaction ledger (the blockchain)
  • Distributed contracts

The first three of these applications often overlap in day-to-day usage of the cryptocurrency.

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Secured value

In order to secure every transaction, Bitcoin has a system of public and private key pairs. The way this works is that a public key (also known as a bitcoin address) is generated from a private key that is held in the wallet of a user. Because of this, transactions destined to an address generated by a wallet are signed with that address’s public key, and the only way to “unlock” the amount received is with the matching private key. To put it briefly, bitcoin transactions are secure against any kind of theft, and the same mechanism that prevents double-spending also prevents forgery.

Value in development

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The Bitcoin protocol is available as free and open source software, meaning that anyone can contribute to its maintenance and development. This is a great way to encourage the community to collaborate in a project they’re passionate and interested about.

Due to its open source nature, the community is more open to following the active development of the software, and maybe help with it too. Additional to this, because many people are constantly helping with the project, bugs and security flaws are identified and dealt with in a timely manner.

It’s also worth noting that Bitcoin core developers are for the most part unpaid volunteers that maintain and manage the source code of Bitcoin. They represent some of the hardest working developers in the field, devoting thousands of hours to code writing following Satoshi’s design to bring his vision to reality.

Network value

By design, the Bitcoin network P2P nodes are widely distributed, making the network even more decentralized. The more diverse these nodes are, the broader the representation on the network, making it even more resilient and secure. The way the protocol works, it seeks consensus amongst other nodes, meaning greater decentralization and a healthier network. These factors contribute to an even more valuable blockchain.

 

Mines are really valuable

Miners are the most valuable users that the Bitcoin protocol has, since they represent the backbone of the network. They process transactions, build the blockchain and host the peer-to-peer nodes that maintain network consensus. Basically, miners are responsible for keeping the network functional at all times and also maintaining the previous blockchain.

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