Why Does Bitcoin Have Value? From Fiat Currency and Gold to Digital Scarcity
Before discussing Bitcoin’s value, we must first understand what “money” really is. It's not just paper currency—it’s a medium of exchange that fulfills three core functions: means of payment, unit of account, and store of value.
The Definition of Money
Before discussing Bitcoin’s value, we must first understand what “money” really is. It's not just paper currency—it’s a medium of exchange that fulfills three core functions: means of payment, unit of account, and store of value.
From an economic perspective, money is not tied to a specific object. It refers to anything that is widely accepted in an economy and can reliably perform four major functions:
1. Medium of Exchange: Money eliminates the “double coincidence of wants” required in barter systems. For example, if you want to trade bread for shoes, you need to find a shoemaker who also wants bread.
2. Unit of Account: Money provides a common measure of value, allowing goods and services to be priced, compared, and calculated.
3. Store of Value: Money allows people to store purchasing power for future use.
4. Standard of Deferred Payment: Money serves as a standard for future payment in debt contracts. When we sign a loan agreement, the amount is defined in monetary units.
The Essence of Money
The essence of money lies in social consensus—a collective imagination and social contract based on trust.
1. Trust: We accept a piece of paper (like the New Taiwan Dollar) or a string of digital code not because it inherently has value, but because we believe others will accept it as well, and we trust the issuing institution to maintain its value. Without trust, any monetary system collapses.
2. National Credit and Legal Tender: For modern fiat money, the foundation of this trust is state authority. Governments grant legal tender status to their currencies through legislation, requiring them to be accepted for debt repayment and mandating their use in tax payments. This reinforces public confidence in the currency.
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Why Gold Has Value
Physical Properties and Scarcity of Gold
• Highly Corrosion-Resistant and Stable: Gold is chemically stable and doesn’t tarnish, even after centuries. It retains its luster and form, making gold artifacts last for millennia.
• Naturally Rare and Non-Reproducible: Gold is rare on Earth and difficult to extract. Its total global supply is fixed and limited, and it cannot be artificially mass-produced, ensuring its intrinsic scarcity.
• Malleable and Divisible: Gold can be shaped and divided into various units without affecting its total value, enhancing its versatility as a store of value.
Gold as a Store of Value
Thanks to these properties, gold has long been seen as an ideal store of value and safe-haven asset. Unlike fiat currencies, which can be devalued by government policies, gold carries no default risk and is highly credible. During inflation or economic crises, gold prices tend to remain relatively stable, protecting investors’ purchasing power.
In fact, numerous studies show that central banks and investors view gold as a long-term inflation hedge and crisis-resistant asset, often incorporating it into diversified portfolios to manage risk.
What Gives Bitcoin Its Value?
Store of Value and Wealth Preservation
Describing Bitcoin as “digital gold” is one of the most accurate representations of its core value. Bitcoin was designed to serve as a store of value in the digital age. When evaluated by traditional monetary standards, Bitcoin not only meets but often exceeds the attributes of gold in a digital context.
• Absolute Scarcity: Bitcoin has a hard cap of 21 million coins—an unalterable level of scarcity. While gold is naturally rare, its total reserves are still uncertain.
• Durability: Bitcoin exists as records on a global decentralized network. As long as the internet exists, it does not degrade, wear out, or corrode like physical goods.
• Portability: A key advantage of Bitcoin over gold. Transferring billions in gold involves extensive logistics, insurance, and security. The same value in Bitcoin can be sent across the globe within minutes at a relatively low cost.
• Divisibility: While gold can be cut into smaller pieces, it's physically limited and costly to verify. Bitcoin can be divided down to its smallest unit—one satoshi, or 1/100,000,000 of a bitcoin—offering extreme flexibility.
• Fungibility and Verifiability: Every bitcoin is interchangeable and holds the same value as another. More importantly, all transactions can be mathematically verified on the public blockchain, almost instantly and at no cost, eliminating the need for costly appraisals or the risk of counterfeits.
Real-World Use Cases
1. Cross-Border Payments
Traditional international transfers often involve multiple intermediary banks, taking 3–5 business days and incurring high fees. Bitcoin allows for direct peer-to-peer transfers, bypassing intermediaries.
2. Financial Inclusion
Billions of people worldwide lack access to traditional bank accounts—the “unbanked” or “underbanked.” Reasons include lack of ID, remote location, distrust in banks, or insufficient account balances. For them, Bitcoin offers a crucial alternative.
3. Payments and Consumption
Although price volatility still limits Bitcoin’s everyday use for small transactions, an increasing number of companies accept it for larger or online purchases. For example, users can fund their Microsoft accounts with Bitcoin and buy games, apps, or movies from the Xbox Store.
4. Legal Tender
El Salvador: In September 2021, El Salvador became the first country to adopt Bitcoin as legal tender alongside the U.S. dollar. President Nayib Bukele aimed to attract foreign investment, reduce remittance costs (which account for over 20% of GDP), and provide financial services to the 70% of the population without a bank account.
How Can Bitcoin Be Trusted Without Government Oversight?
You might wonder: without government regulation, how can we trust Bitcoin?
Bitcoin’s trustworthiness comes from a set of automated, transparent, and tamper-resistant mechanisms:
Blockchain Ledger: Think of a public ledger that anyone can view—not controlled by a bank or corporation, but distributed across thousands of computers worldwide. Anyone can verify it; no one can secretly alter it.
Proof of Work (PoW): Like a global math competition, computers solve complex puzzles to maintain network security. To cheat, you'd need to control over 50% of the global computing power—practically impossible.
Cryptographic Security: Your Bitcoin is secured by a digital signature that only you can produce. This ensures full ownership and protection.
Once we understand how Bitcoin establishes trust without central authorities, we realize it’s not a lawless system—it transforms trust into verifiable mechanisms, secured by algorithms, cryptography, and global consensus. Its value lies in this decentralized trust structure.
For everyday investors, this means Bitcoin offers an alternative way to protect against inflation, diversify assets, and participate in the emerging digital economy. If you have extra capital, why not consider trying Bitcoin?
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ZONE Wallet is a blockchain investment gateway designed for Taiwanese users. It combines full regulatory compliance, cutting-edge security, and TWD transaction support, with a mission of making “every crypto transaction safe and secure.” Start building your crypto portfolio with ease—today.Investing in virtual assets carries risks related to price volatility and liquidity. The above content is for reference only and does not constitute any financial advice. Please carefully assess your financial situation before investing and be cautious of potential fraud.
