A common argument that you’ll hear against Bitcoin is that “it has nothing backing it”. This is meant to be a jab that points out there is not a centralized institution such as a government or a bank holding up the value of bitcoins.
While the fact that there is no central organization is true, the general statement that there is “nothing” backing the Bitcoin network is flawed. As we will discuss below, the network actually has robust groups of decentralized individuals upholding its value through varied interests. These groups are the miners, investors, and evangelists (the type of people who use bitcoin on Amazon or Overstock):
The Investors
Maybe the most obvious group of individuals giving bitcoins value are the investors. This consists of every single person on Earth who, at one point, decided to purchase them and still has not sold their stash. This simple fact of holding bitcoins gives them value because it represents a conscious decision on the part of the investor.
source: betcoin.ag
Every person who is consciously holding bitcoins in the hope of a future increase in value contributes a small bit of support to the overall value of the network. On their own, these individual holders do not mean much. But, as a whole, they represent an incredible force towards making the Bitcoin network worthwhile.
The Miners
Bitcoin mining is the process of network participants performing computational tasks to chronologically order transactions. When this is done, miners are rewarded with “blocks” of new bitcoins to pay them for their contribution.
source: coindesk.com
Since these “blocks” have a market value, miners compete to be the first one to discover them. This competition leads to increased investment from miners into the hardware that is used for mining. More electricity is also used by this hardware to gain a competitive advantage. All of this leads to a size able amount of money being poured into the bitcoin mining industry. Many economists consider this investment to be an indirect investment in the bitcoin network as a whole. Mining has clear value based on the money that is spent, so one can assume that this lends value to the network itself.
The Evangelists
This group of bitcoiners may be the most important. This is because, in the beginning when the Bitcoin network had no value at all, they were the first ones to give it a chance. You see, these are the people who would never give up on the project regardless of the price. They are the users that support Bitcoin not as a get rich project, but from a purely ideological standpoint.
source: thedailybeast.com
If the Bitcoin network value were to collapse, they would be considered the “holders of last resort” because they could care less what the price is. Their support is completely based on the idea of helping any open source financial project that allows for individual sovereignty.
Conclusion
As you can see, while the most popular crypto network does not have a centralized institution giving it value, it does have the support of a decentralized architecture. Understanding this key fact is important in analyzing the health of Bitcoin.
source: ethereumworldnews.com