Published Mar, 17 2023

Simple Bitcoin Economics

We’re quickly approaching the fifteen-year mark of Bitcoin’s launch, and it’s safe to say that the original cryptocurrency is here to stay. The trouble is that during its existence, people are unwilling to give the cryptocurrency the credit it deserves as a store of value. This is especially true when it comes to the economics […]
bitcoin economics

We’re quickly approaching the fifteen-year mark of Bitcoin’s launch, and it’s safe to say that the original cryptocurrency is here to stay. The trouble is that during its existence, people are unwilling to give the cryptocurrency the credit it deserves as a store of value. This is especially true when it comes to the economics of Bitcoin.

But before we get to that, let’s answer a quick question:

How can a non-physical currency be a store of value?

Most of our transactions today are simply the moving of ones and zeros from one place to another. However, these ones and zeroes represent fiat currency, which can be physically held in the form of dollars or pounds or euros.

So then, what makes something money? Ideally, money fulfills three primary functions:

Whether you like it or not, Bitcoin meets all three criteria.

Medium of Exchange

Yes, Bitcoin meets the requirements as a medium of exchange, but that doesn’t mean its work is done. There are tens of millions of Bitcoin wallets in the world, and who knows how many of those are using Bitcoin to pay for goods and services. However, one of Bitcoin’s biggest challenges is accessibility. If only there were an easy way to get Bitcoin - a certain Bitcoin BTM might be able to help in that regard.

Of course, as Bitcoin grows in popularity, more people will become more comfortable with using it, and more businesses and merchants will accept it as a form of payment, or a medium of exchange, if you will.

Storage of Value

The strongest argument for Bitcoin as money is its use as a storage of value. So long as society has electricity, the internet, and a device used for connectivity, Bitcoin will continue to make its case as a storage of value. Of course, the argument against Bitcoin in this regard is the volatility of the crypto market.

The reality is that it may take a while for Bitcoin to settle down. While it may not happen over the next year or two, it wouldn’t be a surprise to see the original cryptocurrency stabilize within the next decade.

Unit of Account

Lastly, Bitcoin is considered a unit of account because it can be broken up into smaller units. You may see these smaller parts of a Bitcoin referred to as “sats,” which is short for Satoshis. These units are countable and fungible since each sat shares the same characteristics as all other sats.

Does Bitcoin Need to Have Physical Representation?

The vast majority of our transactions take place without physical representation. We pay for food, clothes, and gas with a debit or credit card. Typically, we pay our bills online. We send money to one another, and nary a dollar bill is needed. It’s all done electronically without using physical cash.

Along those lines, we deal with intangible items that have value on a daily basis. The data we use has value. Personal and work files stored on a computer have value. Our personal reputations have value. None of these items exist in the physical world.

A Limited Supply

What many people don’t know is that there is a hard limit on the number of Bitcoin that will ever be mined. When all Bitcoin is mined, there will be 21 million in circulation. At the time of writing, there are roughly 19.3 million in circulation, leaving less than 2 million left to mine.

However, it’s Bitcoin’s limited supply that gives the cryptocurrency a huge advantage. Because it is scarce, the coin should hold its value for years to come. It’s also one of several reasons why Bitcoin is referred to as digital gold.

Additionally, Bitcoin’s inflation can be controlled since the number of Bitcoin is limited to 21 million. This is in reference to the type of inflation that occurs when there’s an unlimited supply of a currency or coin - this applies to cryptocurrencies as well.

An Easy Way to Get Bitcoin

Bitcoin has been here for a decade and a half. It’s clearly not going anywhere. This cryptocurrency could continue to grow in popularity if it gains traction with retailers and merchants. Want to add some Bitcoin to your wallet? Bitcoin Depot can help with that. We offer an easy, transparent, and safe way to purchase Bitcoin. Find a Bitcoin Depot BTM near you and see just how simple it is!