INTRODUCTION
What is cryptocurrency?
• Cryptocurrency is an electronic money created with technology controlling its creation and protecting transactions, while hiding the identities of its users.
• Crypto- is short for “cryptography”, and cryptography is computer technology used for security, hiding information, identities and more. Currency simply means “money currently in use”.
Cryptocurrencies are a digital cash designed to be quicker, cheaper and more reliable than our regular government issued money. Instead of trusting a government to create your money and banks to store, send and receive it, users transact directly with each other and store their money themselves. Because people can send money directly without a middleman, transactions are usually very affordable and fast. Cryptocurrency is a new revolutionary type of currency. Like any other currency or unit of account, they only have value because people think it has value. Some currencies are backed by gold or other precious metals; others are backed by nothing but hot air although have value because people think it has value and use it as a unit of exchange. Cryptocurrencies were designed as a unit of exchange and as a place to store assets without relying on a central bank.
What aids the price of a cryptocurrency?
The following are the main keys that aids to the price of cryptocurrency: Limited Supply and demand, Energy input, Blockchain difficulty level, The utility of the currency, and how easy it is to use and store, Perceptions on its value by the public, Price of Bitcoin, Media, Investors, Scams, Market dilution, Innovation, Confidence in traditional systems, Legal/Governmental issues.
Above the listed factors that contributes to the price of cryptocurrency. I will discuss on each point.
Limited supply and demands: Supply- The total amount of a product (good or service) available for purchase at any specified price. Price of other goods: lower prices of competing goods will reduce the price and the supplier may switch to switch to more profitable products thus reducing the supply. Demand-demand is the quantities of a commodity or a service that people are willing and able to buy at various prices, over a given period of time. In some countries, cryptocurrencies is classed as an asset, in others as a currency. Precious metals gain their value due to their utility and limited supply, and price is often tied to supply/demand. Supply/Demand is a simple economic factor that affects the price of cryptocurrencies. For example as of today the supply of some cryptocurrencies are;
Bitcoin-available supply-17,073,487
Ethereum-available supply-99,855,851
EOS-available supply-896,149,492
Steem-available supply-258,248,907
Steem dollars- available supply- 14,676,177
The supply is also bought in at a constant rate and is unchangeable due to the coconscious rules. This creates a supply that is limited, and thus people will pay more to get the coins they think have value.
Energy input: the strength and vitality required for sustained physical or mental activity. The energy put into securing blockchains can be intensive. In cryptocurrency like bitcoin, the blockchain uses as much energy securing it at present as a small country uses.
Blockchain difficulty level: The more secure the blockchain and the higher the mining difficulty, the higher the perceived value and price and the harder the coins are to get through mining. The crypto-currency Bitcoin recorded an all-time high at USD 4,300 in Mid-August 2017. The popularity of crypto-currencies like Bitcoin and Ether (Etherium) have tremendously increased adaptation over the years. Blockchain is the underlying technology that powers these digital crypto-currencies. Blockchain-A “blockchain” is a public database of transactions shared in a peer-to-peer network between participating nodes secured by cryptography. Miners-Blockchain “miners” are special nodes in the network that validates new transactions to create new blocks on the blockchain.
The utility of the currency: A key factor in the price of any cryptocurrency is its utility. If you cannot use it for something, be it an investment or for payments, then it would have no or little perceived value. In the case of Ether, as it was designed a smart contract platform this is a practical utility, which increased the price of Ether over many other alternative cryptocurrencies. In the case of Bitcoin, it is usable for payments on a reasonably high and ever increasing scale, meaning that its utility is high. Its high difficulty and energy usage give it a reasonably high price and as such can be used for an investment. The changes to utility can cause price volatility.
I will be talking on the remaining factors soon which will be the part two. Please do as well to upvote and resteem.