I’ve heard Bitcoin called many things in my few years in the space: ‘Magic Internet Money’, ‘Drug Dealers Money’ and even ‘F@ck You Money’. I like the last one, and I agree with it, too. But what is it that gives this magic Internet, drug dealing, f@ck you money value?
Many people who don’t understand Bitcoin can’t grasp why it has value. They think of it as a virtual currency and can’t get their heads around how a ‘virtual currency’ can have value.
The best way to understand why Bitcoin has value is by understanding its competitors, so let’s have a look at what gives other assets value first.
The Problem With Fiat Currencies
For those of you that aren’t sure what fiat currency is, it’s money that issued by governments and banks, that we use every day to buy things. Think US Dollar, British Pound and the Euro.
There, now you have a complete understanding of the problem with fiat currencies.
No seriously, the best thing going for fiat currencies, especially the dollar is that everybody uses them. We don’t know any other way. It works for a few Western societies and their currencies are pretty stable against each other, but the only thing giving them value is armies, debt and faith.
Backed By Nothing But Faith
The main problem with fiat currencies is that they’re issued by governments and banks (the very entities that get us into every financial crisis) and they are printed into existence with nothing backing them.
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