Thursday, October 30, 2014

"Bitcoin is a techno tour de force" Reason 5: Capped Supply

The most common questions I get about bitcoin relate to its value. Why is a bitcoin worth anything? There are several factors that when combined make bitcoin valuable. One of those is that bitcoins are scarce. How can a digital asset be scarce? Large music companies sued Napster into oblivion because Napster allowed people to easily share digital copies of music. Since a computer can copy data at nearly no intrinsic cost, music companies lost the ability to control music distribution when mp3s appeared on the scene.

Bitcoins cannot be copied like mp3 files. In fact there is currently around 13 million bitcoins and there will only ever be 21 million bitcoins. This is possible through the decentralized ledger. Since all network participant nodes keep a full history showing all account balances and transactions, each node can therefore verify that no extra bitcoins have been created. 

2 comments:

  1. Bitcoin wallet website is a program that allows you send and receive Bitcoin. Wallets also keep track of your Bitcoin balance which is held in one or more Bitcoin addresses. Generally, wallets also have a feature that keeps a history of your Bitcoin transactions.

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