CRYPTOCURRENCY BASIC IDEA
The basic idea of what gives cryptocurrency value includes:
1. Demand: if digital currencies do not have inherent value. So what gives any digital currency value are the people who are willing to pay for the currency at the price that is set for it. If no people are willing to buy the currency then it would have no value whatsoever. So basically the currency needs to have high demand with a lot of people wanting to buy and use the cryptocurrency. Since digital currencies tend to have limited supply, when the demand is high, what happens to the price of something that is in low supply but high demand? It goes up! Currently, there is a high demand for the currency therefore it is gradually increasing its value over time.
2. Concept: it’s the purpose of the cryptocurrency and why it was created. There are hundreds of the currencies out there so the currency should have a purpose that is appealing, unique and would interest people who want to buy it and also the ones who sell it.
3. Usage: cryptocurrency should be able to be used by people, otherwise how would it ever gain value if people are not willing to accept it in trade. The more usage the higher the increase in the value. The value of the currency has been greatly impacted by the increase in usage hence this gives it a higher value. Since the currency is not also taxed most people have turned to this trade thus increasing its value.
4. Infrastructure: the cryptocurrency has a good infrastructure that is built around it which fulfills its concept and enables its usage. The more infrastructures the better it is for the currency and its users thus it enables easy access to many.
5. Big Community: the cryptocurrency has a group of strong active users and the users tend to increase daily. To go viral the currency should have a strong active community of people who support it if no one ever supports the currency and people do not use it then it would go nowhere but since the currency has been supported and used by a big community its values have increased.
6. Active admin: the cryptocurrency has an active admin and a development team who are constantly working on the currency and its success. They ensure that it’s monitored to ensure it’s continuously in use and reach to the majority of the people around the world. If the admin abandons the currency development or they are not active in the digital market then it would go nowhere since many people will not be familiar with the system hence there will be few buyers and sellers but the presence of the active admin has increased the value of the currency.
7. Programmable: cryptocurrencies introduce a new concept of programmable money. The programmability is being used today by a lot of companies that want to raise funds where they sell tokens with few lines of codes which when run lead to cryptocurrency e.g. bitcoin. The programming takes a very short time.
8. Limited supply: the cryptocurrency is a rare commodity hence this makes it increases its price frequently. Like precious metals, the fact that they are not plenty makes them increase their value that’s the same reason why a limited supply of the currency increases its value.
Money functions as a placeholder in any economic system; it does not have value outside of what its users place in it as a system of exchange. As noted by Asmundson & Oner (2012), the creation of money is one of the most significant developments in human civilization. Without money, human beings would be reduced to bartering for goods and services. While this may be feasible on a small-scale, community basis, this is not true for a national economy. For many centuries, gold and silver were the primary means of universal exchange, and all national currencies were linked to the possession of precious metals. But “eventually, the paper claim on the precious metal was delinked from the metal,” and paper money became common, although “fiat money is materially worthless, but has value simply because a nation collectively agrees to ascribe a value to it”
Money as a Means of Exchange
This is a vital function of money in an economy because without money, the only way of exchanging goods and services would be by means of barter, which implies a direct exchange of one commodity for another. The economies we line in are monetary economies in which most of the goods and services produced are exchanged via the intermediary of money, rather than through barter. Whenever money is used to pay for goods and services or for the purpose of settling transactions, it is functioning as a medium of exchange (Jain et al., 2011).
Money as a Unit of Account
Money ought to be able to measure exactly what something is worth. Money should provide an agreed standard measure by which the value of different goods and services can be compared.