Value of Bitcoin

True Value of Bitcoin

Every 10 minutes a new 1MB block of space is added to a secure chain of encrypted data. The amount of data that can fit on the block is finite. If each 256-SHA encryption takes up 32 bytes of space then (1000000/32=) 31250 records can fit on each block.

How much money would somebody pay to secure a record on a ledger? Credit cards charge about 2-3% of the transaction for their services. I pick $1 as an example answer. This means that $31250 was paid by people to secure their transactions on that block.

The business of selling space of the blockchain is limited to the type and number of entries allowed. Currently each block is created with the payment of 6.25 bitcoin. So miners are paid about $250,000 to create something that can be sold in the next ten minutes for about $31250. Only if the blockchain charged over $10 per record would the block make more than it paid out with its limited use digital currency.

If you bought something with bitcoin, would you want to pay an additional $10 just to record the transaction? Or are the business efficiencies provided by the global secure ledger only for businesses that care about large or complex transactions. This would leave cryptocurrencies just as accounts, that themselves fluctuate in value, for monetary transactions tied to a specific ledger. I think i will save money and will pay for my coffee with the account I payed dollars and thankfully did not fluctuate in value too much.

The end result is that the value of the bitcoin created to pay for the 1MB block of ledger space is the value in dollars generated by using the block divided by the number of bitcoins paid for the blocks creation. Simple.


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