Why bitcoins have value? How are they created?

Bitcoins are created by “mining”, a highly competitive and decentralized process, which means that the network rewards participants for their services. The “miners” use specialized hardware to process transactions and secure the network.

Their main aim is to collect new bitcoins in exchange for their services like bitcoin trading, for example. Bitcoin protocol is wisely made and new bitcoins are made at a fixed rate. That is why Bitcoin mining is a highly competitive business. The more miners come to the network, the more difficult is to make profit, so miners have to reduce their operation costs. Nobody can control or manipulate the Bitcoin system.

The number of bitcoins created is decreasing every year, it is automatically halved. When the total number of existed bitcoins reaches 21 million, their issuance will be absolutely stopped. In this case, Bitcoin miners will likely be supported only by transaction fees.

So, why do bitcoins have value? Just because people think they are valuable. Bitcoins have all the features money has: durability, divisibility, fungibility, portability, scarcity, and recognizability. But they do not rely on trust in central authorities (such reliance is found in the case of fiat money) or physical properties like precious metals. Bitcoins are based on mathematical properties but like any other currency they are valuable till people trust in this form of money and want to accept it as a payment.

The value of Bitcoin can be measured by steadily growing number of its users and merchants, and a numerous startups.

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