Value anticipation for digital and cryptocurrencies is not as simple as traditional currencies. In a global environment which is highly influenced by business, political and legal factors, you cannot set a fixed value for electronic cash. It sounds simple but it is way trickier than your thoughts. Traditionally, when we talk about the valuation of hard currency, there are some basic factors which determine the intrinsic value of any currency like exchange rate, foreign exchange reserves and treasury notes. Commonly, dollar and gold are the two items which are backed against that intrinsic value.
When we talk about cryptocurrencies then everybody says it is having countless luxuries. But, no one is sure about the cryptocurrency value. When we say value, it does not mean the price only. Value incorporates many other aspects like usefulness and benefits of cryptocurrency. In this post, whenever we will use the term value, it means all of the elements including the price.
Following are the different type of values which contributes in determining the overall cryptocurrency value.
This value is based upon the problem solving approach. It depends upon the nature and complexity of algorithm which the computer is going to solve in order to achieve a block.
In addition to scientific value, cryptocurrencies are also having some technological value. Technological value can be explained in a way that these currencies are having resistance against censorship and can never be shut down by an individual.
Social value is another valuation factor which contributes in determining the cryptocurrency value. Social value means that these currencies are free from third party. These currencies are having public ledgers and decentralized systems which are not in control of any trusted or non-trusted third party.
Design value is the major factor which determines the cryptocurrency value because it is related to the development and storage. The secure storage and encrypted signature system makes the design of cryptocurrency more reliable. Due to this model, people are encouraged to collaborate and make community contributions.
There are many other values which are major contributing factors in value determination of any cryptocurrency like application value, storage and transmission value, network value and contract value.
In addition to the above mentioned value adding elements, there are theories which suggest that monetary preferences of people and economic circle also affect the cryptocurrency value. This may include inflation/deflation policies, coin mining speed, coin infrastructure and transaction costs.
These are the majors which are influencing the cryptocurrency value today. But, in future, there could be many more factors which will influence the value. For example, government regulations can instantly manipulate the cryptocurrency value. Suppose if any government announces to centralize all of the cryptocurrencies or any one of them. What do you think how it will affect the value? Well, I think this will stabilize the value because then there will be someone to monitor and control.
According to the current and past trends of value growth, we can anticipate that cryptocurrency value will keep on increasing and the system will be more stabilized.