Bitcoin is a new payment network and a new version of digital currency which is the most famous in the world nowadays.
It is a decentralized digital currency (decentralization means that there is no single person or group i.e. bank who can control any transaction) that can be transferred on an end-to-end bitcoin network which means no third party is included as an intermediate.
Its payments/transactions are verified and authorized by network nodes through cryptography and after that, It is recorded in a publicly distributed ledger (a database that is synchronized and accessible across many other sites and characteristics by multiple participants) called a blockchain. Cryptocurrency which means a type of digital currency which is generated by the operationalization of mathematical puzzles or algorithms. If you want to invest in bitcoin, then you can visit here https://bitcoinprime.software.
When thinking about Bitcoin, the first question that arises in the minds of many people is regarding cryptocurrencies.
Cryptocurrency has also been in the news for a long time. But the question arises, how is cryptocurrency so expensive? The concept of money is very old. This system was brought after the barter system. In earlier times goods were exchanged with other types of goods. Then the concept of money came to light. In this procedure, expensive metals started being used.
Similarly, now digital payment is in trend so that you can transfer money in one swipe. Therefore Bitcoin is one of the forms in which people can invest in the form of digital payment for earning benefits in the future. But nowadays due to the rising value of Bitcoin, there is a question in everyone’s mind: what is the reason behind it?
Reasons for Demand and Supply
For example, if the asset is considered to be high in the market due to its limited production, then the asset's value may drop when its production is increased. The main reason for Bitcoin being expensive is that it lies in limited quantities. The value of an asset depends upon its supply and demand. If any asset is low in supply, yet its demand is more than supply, the price will almost always increase. The factors are inversely proportional to each other.
Reasons for the up and down of the Marginal Cost of Bitcoins:
Bitcoin transactions in the form of digital format are recognized in the form of Blockchain. When the distributed database is used in the form of cryptocurrency, it becomes very expensive because of its nature of peer-to-peer transactions. A cryptocurrency is a form in which electronic information is contained and stored in digital format and is mostly used for transactions, just like banks and any government used it to store their financial record. The most significant role of Blockchain plays in cryptocurrency systems. Without Blockchains, Bitcoin cannot be imagined in existence. Their main function is to work to maintain records of transactions that are not under control by any bank, person, or group of people or you can say any firm.
Now the question is how Bitcoin’s production, the role of blockchain is to maintain the transaction which is not under the surveillance of any bank, person, or any firm costs directly depending on the cryptocurrency’s price. So as per the research researchers, whatever the cost of cryptocurrency in the markets is declared, it relates to its marginal cost of production of bitcoins.
Economically we can say that asset production is directly proportional to the total production cost. Which leads to the production making an additional unit. Given the above, a company can earn the maximum of its profits when its production reaches its target where the marginal revenue of the asset and the marginal costs of the same become equal to each other.
Mining of Bitcoin and its electricity usage
One more reason for Bitcoin’s rising value is its mining process through which sources use Digital systems/computer systems with special kinds of chips that work to solve mathematical puzzles. These sources or miners use digital formats or computers to solve mathematical puzzles thus Bitcoin algorithms are generated/created by them to produce more and more Bitcoins. But all this process needs more usage of electricity. The power used to run a Bitcoin mining system takes 24 hours per day, 7 days per week, which leads to a huge electricity bill. This process of generating bitcoin uses a huge amount of electricity as some entire countries do, therefore the cost of the bitcoin rises.
Accept by limited persons/firms/agencies
The number of businesses accepting the trend of using bitcoin for their financial transactions is rising, but still, this type of transaction is not accepted by every person or you can say it universally. When the number of users of Bitcoin will be increased, its cost will drop economically.
However, for now, most people are not aware of its worth and existence, apart from that, it is accepted by businesses and is growing each day. Building Bitcoin payment due to its high demand and expensive value, time-consuming technological abilities, the expense is replicating the cost of the Cryptocurrency. Although businesses are giving priority to crypto payments for making their payment mode faster.
Businesses must submit their personal and professional information in the Bitcoin application. This procedure abolishes Bitcoin’s privacy terms and it becomes one of the reasons why more businesses are not preferring Bitcoin for their digital mode of payment or transaction. It is also a reason which keeps the prices of Bitcoin high.
Being one of the most expensive currencies, Bitcoin is used as black money in some illegal aspects such as hawala, supply of drugs, tax avoidance, and some terrorist activities because in these cases Bitcoin as digital currency is very easy to use without intimation to legal authorities. In this situation also, its demand is increasing very fast. Due to legal issues and security constraints, any controller in India does not prefer to give legal recognization to digital currency. Due to Legal issues, there are still many countries in the world that have not adopted this mode of digital payment such as cryptocurrency so far. Therefore the instant increase of Bitcoin’s price is also reasoned as of now as Bitcoin is not under any government or bank, its prices hikes without any substitution interference. Therefore the use of this virtual currency is not under any control. In this case, the central government is frequently organizing meetings and doing preparations to discuss it in Parliament too. At present, there are more than 90 virtual currencies that came into existence and circulated throughout the world.
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