Bitcoin’s value proposition
Today, all of the existing bitcoins are valued around $ 70 billion, about the same as the market capitalization of PayPal. This valuation has just reached a high in September 2017, after 8 years of existence. The price, despite very high volatility, is resolutely upward. Let us try to clarify the arguments of investors who have hoarded bitcoins for several years by being convinced that the price will appreciate considerably in the medium and long term.
Bitcoins exist in finite quantities. Far from being trivial, this state of affairs results from several decades of cryptographic and algorithmic innovations. Creating a scarcity of scarcity on digital data in a decentralized way represents a real technological feat. It was to solve this problem of decentralized control of scarcity that the first blockchain was invented. The total amount of 21 million has been coded in the protocol since its launch on January 3, 2009. The limited number of bitcoins allows them to be subject to market mechanisms and to see a price established for them resulting from the encounter. between supply and demand.
The protocol parameters can hardly be changed because the governance of the protocol is decentralized, with power distributed between developers, miners, network nodes and the main companies in the ecosystem. The technical controversy, which has preoccupied this community for the past two years over the problem of scaling up, shows that the slightest change in parameter is discussed at length and that the inertia can be significant. Thus, the change of an economic parameter as fundamental as the limit of 21 million bitcoins appears unlikely in the near future.
In addition to the finite nature of their stock, bitcoins have an extremely low price elasticity of supply. Indeed, the speed of creation of new bitcoins is programmed by the protocol: increasing the resources dedicated to mining would only modify this speed marginally. On the other hand, periodically, every 4 years, the protocol halves the speed of creation of new bitcoins, thus asymptotically tending the total stock towards 21 million. This reduction, called halving by specialists, creates a negative shock on the supply, the effects of which seem to have materialized on the price during its first two occurrences, in 2012-2013 and in 2016-2017.
Investment in technology and ecosystem
Bitcoin is a computer protocol for transferring value. The most used computer protocol so far is probably TCP / IP. Today, a significant part of world economic activity is based on the operation of this protocol. TCP / IP has revolutionized the exchange of information while Bitcoin aims to revolutionize the exchange of value. www.bitcoin-champion.com provides the all bitcoin related transaction and the investment.
Given the scarcity of monetary units allowing transferring value via the Bitcoin protocol, if this protocol should one day occupy asn important place in the economy of the future, the price of the monetary units allowing to use it would undoubtedly be significantly more high than it is today. In the 1990s, it was impossible to invest in Internet technology itself. Investors had to invest in startups that exploited this technological breakthrough, exposing themselves to all the uncertainty as to the success of the said startups that this entailed. For example, if it was wise to invest in Google or Amazon, it was much less to invest in pets.com, which went bankrupt following the explosion of the Internet bubble.
Today it is possible, in a certain sense, to bet on the technological breakthrough itself, without having to take a risk on the hypothetical success of startups competing with each other, simply by investing in the monetary tokens of the computer protocol itself. Of course, there is still uncertainty as to the value transfer protocols which will achieve wide adoption. However, Bitcoin is dominant today and therefore has the advantage of the “first mover”.
As the market penetration rate for this technology is still low, strong growth potential is possible. As the performance of bitcoins is likely to follow the trajectory of a technological adoption curve, it is an investment likely to produce, as it has been the case for 8 years, exponential returns.
An asset that unlocks the asset portfolio
The value of a bitcoin depends on its own characteristics. These characteristics are reminiscent of those of gold: rarity, durability, divisibility, portability and fungibility. On many of these key qualities, bitcoins even surpass gold. It is much easier to transfer value in bitcoins over a very long distance over the Internet than an equivalent value in physical gold. Likewise, a bitcoin being divisible almost at will (up to eight digits after the decimal point, i.e. fractions of cents), it is superior to gold in terms of divisibility.