Who decides the value of bitcoins?

The answer to this question is quite simple and is based on the basic economic principles: scarcity, utility, supply and demand. By definition, if something is both rare (scarcity) and useful (utility), it must have value and ask for a specific price, all other things being equal. Like gold, Bitcoin is also rare: its offer is limited. The supply of bitcoin is impacted in two different ways. First, the Bitcoin protocol allows you to create new bitcoins at a fixed rate. New bitcoins are introduced to the market when miners process blocks of transactions and the pace of new coin introductions is designed to slow down over time: growth has slowed from 9.8% (2015) to 6.9% (2016) at 4.3% (2017). ). This can create a scenario in which demand for bitcoins increases faster than supply, which can drive up the price. The number of bitcoins that the system allows to exist is the second impact on the offer. This number is capped at 21 million, which means that once this number is reached, mining activities will no longer create new bitcoins. At this point, mining activities are likely to be supported by transaction costs. However, to be valuable, Bitcoin must also be useful. Bitcoin creates a utility in several ways. Like gold, bitcoin is perfectly fungible (one bitcoin is similar to another), it is divisible (you can pay someone a small fraction of bitcoin, if you wish) and easily verifiable (via the blockchain).

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