30.11.2021

How Bitcoin Is Backed: What Underpins BTC’s Value As A Reserve Currency?

Parker Lewis, head of business development at the cryptocurrency lending platform Unchained Capital, believes there are several fundamental aspects that support the value of Bitcoin.

In an interview with Peter McCormack on the What Bitcoin Did podcast, Lewis commented on the popular concept that bitcoin (BTC) is unsupported and has no intrinsic value.

Comparing Bitcoin to the US dollar, Lewis argued that the majority was confident that the US dollar was backed by the US government. However, a cryptocurrency proponent questions the essence of this claim.

“Someone might casually say that bitcoin is not backed by anything, and“ the dollar is backed by the government. ” But, as a rule, they cannot answer, what if the government prints three trillion new dollars, and how would you value them? So what is actually backed up? “

Lewis emphasizes that the only thing that supports any form of currency is the reliability of its monetary properties. With this in mind, he said that Bitcoin maintains its value by reliably delivering a fixed maximum supply of 21 million coins.

“The existing mechanisms that allow bitcoin to firmly supply the 21 millionth supply to achieve a fiscal deficit is precisely what gives it its attractive monetary properties.”

Lewis identified three key fundamental aspects that enable Bitcoin to strengthen its value. This is the BTC mining function, nodes and private keys are required to access each BTC. Together, all three factors strengthen BTC as a currency.

“Basically, the cornerstone is currency (BTC). The currency itself is what unites all the interests of miners, node operators and people who own currency and private keys. ”

The chief executive of Unchained Capital added that if Bitcoin can continue to maintain a hard cap on its supply, it will eventually become the world’s reserve currency.

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