How to Determine Intrinsic Value of Crypto Currencies


Cryptocurrency is the type of currency that makes use of cryptography for exchanging digitalized information. Cryptography is a method which helps secure the transaction process and also contributes to the prevention of the creation of new coins. It is a form of medium that can be used to carry out exchange processes. In a way, it can be said that a cryptocurrency is a digital form of currency.

A very famous example of cryptocurrency is the Bitcoin which was the first type of cryptocurrency. The creation of Bitcoin dates back to the year 2009. Cryptocurrency has many advantages over the traditional currencies. Some of the benefits of dealing with cryptocurrency include:

  1. This type of currency is way more secure as tracking of completed transactions becomes easy which results in an enhanced level of security not experienced in the exchange of traditional currencies.
  2. Secondly, currency exchange can be processed without involving a third party, time-saving as instant currency transfer is possible and maintaining your privacy becomes an easy job.

Despite all these numerous advantages, it lags behind in one category. The value of the traditional currency can be easily determined but in the case of cryptocurrency, this is a difficult task. Though this technology has its numerous benefits, many companies still struggle to adopt this feature.

The U.S dollar, for example, has its own ways through which its value can be determined. Some of these methods include; treasury notes, exchange rate and measurement against foreign exchange reserves. Unfortunately, such ease is not enjoyed by the cryptocurrency or the electronic currency. There are different ways to determine the actual value of the cryptocurrency.

Following are the ways of determining the value of cryptocurrency coins (like Bitcoins)-

Scientific Value:

The experiment known as the “Two General Problem” was designed for the purpose of illustrating how difficult and tricky it is to coordinate an action by communicating over an unreliable link. The coins have been used to successfully solve the “Two Generals Problem.”

Technological Value:

The technological value of the cryptocurrency coins can be known by the fact that these coins are resistant to censorship and are near to impossible to shut down.

Social Value:

Moreover, the cryptocurrency coins have their own social value as well. This social value of these coins increases due to the fact that they make use of decentralized systems and public ledgers. This is a factor that discarded the need for involvement of the third party to process transactions.

Design Value:

The design value of cryptocurrency is very significant. This is because cryptocurrency is used in multiple ways such as; secure storage, currency, and decentralized public ledger. Furthermore, the model of cryptocurrency boosts collaboration and contribution in the community.

There are plenty other ways in which the value of cryptocurrency can be determined for example network value, contract value, application value, transmission value, storage value etc. However, the ways of determination of values differ greatly as compared to traditional currency but provide way more facilities and benefits to its users.

Picture source:Pixabay


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