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Communications of the ACM

Economic and business dimensions

Why Bitcoin Has Value

Why Bitcoin Has Value, illustration

Credit: Sbastien Thibault

How can an intangible currency have tangible value? Bitcoin is a currency composed of nothing but bits. Unlike dollars or euros, bitcoinsa have no physical form, no government backing, and operate with little more than technical regulation. What value can a bitcoin have? If information can be copied or "wants to be free," and bitcoins are nothing but information, why are they not free? As Bitcoin enters popular consciousness,b the digital economy offers this interesting question.

Consider four answers. First, Bitcoin's technical value lies in solving the double spend problem. Each bitcoin transaction uses public key cryptography to create a permanent public record that registers a buyer, a seller, and an amount as a tuple. This shows who can and cannot spend a bitcoin. Even someone who observes the transaction cannot forge coin copies. Software keys prevent anyone but the rightful owner from spending them.


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