Cryptocurrencies are becoming more common globally, countries are still approaching crypto regulation and supervision. Indonesia is one of the countries that has developed a good attitude towards crypto assets and is considered quite open to blockchain technology. The cryptocurrency itself was legalized in September 2018, when the Ministry of Commerce approved the trading of Bitcoin (BTC) and crypto assets as commodities.
Currency
Currency is anything that is generally accepted and has value as a medium of exchange so that it can be traded for goods and services. By accepting currency, merchants can sell their goods and have a convenient way to pay their trading partners.
The trading system in an economy is based on its currency, which is usually issued by the government specifically for that country. In general, the currency in circulation has physical notes and coins. The relatively small size of coins and banknotes makes it easy to carry anywhere.
In addition, currency in the form of paper and metal has the advantage of good durability. It can be argued that not all commodities used as a medium of exchange in the past were as durable as these two currencies. For example, a farmer relies on his harvest to pay his trading partners. But farmers only have a few weeks before their assets are damaged. With the money, he doesn’t need to rush to sell his assets, but rather his assets can be collected and stored for a longer period of time.
Currency does not only have a physical representation like cash, such as currency in the form of banknotes and coins that have value relative to other goods and services and currencies. Now digital currencies or cryptocurrencies such as bitcoin are increasingly popular among the public. The digital currency itself is in the software and is generated, stored and transferred electronically.
Why Currency Has Value
Currency is useful if it works as a store of value or, in other words, if it can maintain its relative value well over time. Throughout history, many people have used commodities or precious metals as a payment method because they were considered to have a relatively stable value compared to carrying large amounts of cocoa, gold, or early cash beans and of course impractical.
Society eventually turned to printed currency as an alternative. The first currencies used metals such as gold, silver, and bronze, which had a long shelf life and little risk of depreciating the value of the asset due to age or use.
Today, most major global money is fiat. Many governments and communities have found that fiat currencies are the most durable and least prone to loss of value over time. The value of fiat currency is a function of its supply and demand. Like the US Dollar which is considered valuable because the world’s largest economy uses it and dominates the flow of payments in international trade.
determining the value of a currency is problematic because its value is measured by its intrinsic physical properties. For example, the value of gold comes from extraction and certain qualitative factors, such as luster or purity of purity.
But now we can see value in currency through six things: rarity, shareability, acceptability, portability, durability, and resistance to counterfeiting. These qualities support the currency to be widely used in an economy. They also limit inflation and ensure that the currency is safe and secure to use.
Digital Currency Value
Just like fiat currency, digital currency or crypto currency also has these values. Cryptocurrency itself is a digital asset called currency because it was created to be used as a medium of exchange in the same way as using fiat currency. Transactions that occur in it are internet-based and recorded on the blockchain. The blockchain will display the transaction history for each unit and is used to prove ownership.
Utility
Utility is a consideration that can be discussed in other ways, especially in economic and financial terms. Broadly speaking, utility means a product or use for its users or has a meaning of benefit.
The higher the utility, the greater the satisfaction or benefits that can be obtained from the product. This means that utility has a relative meaning. In other words, satisfaction with the benefits of a product can be different. Someone says satisfied with a product, not necessarily other people will say the same thing.
In utility economics it was first coined by the 18th century Swiss mathematician Daniel Bernoulli. Utility refers to the satisfaction received when using or using a product or service.
Therefore, the level of utility is considered very important because it will greatly affect the demand and price of the goods or services. Including to increase the utility of cryptocurrencies, cryptocurrencies must have functions, benefits, and uses for their owners. Cryptos can provide high utility with the services they provide.
Scarcity
Scarcity is between limited economic resources and an unlimited number of necessities of life. Scarcity arises because human needs continue to grow. As a result, the existing resources are not sufficient to meet the needs of life.
The concept of scarcity is defined as a situation in which the number of means to satisfy a need is less than the number of means needed to satisfy a need. This situation encourages people to make choices among the most profitable alternatives.
When the supply decreases, the demand for cryptocurrencies will increase. This will have an impact on the value of the cryptocurrency which will be higher. For example, bitcoin is currently in a constant state of supply and demand continues to increase as bitcoin’s basic technology, called blockchain, is tested and used as a payment system.
Marginal Cost of Production
In microeconomics or more narrowly the cost of production, marginal cost is the change in the total cost of production that comes from the addition of units of production. Marginal cost analysis actually has a function to assist business actors in making decisions to optimize profits.
According to economic theory, in a market competition between producers who all make the same product, the selling price of the product will tend towards its marginal cost of production.
Mining for cryptocurrencies for example bitcoin requires a lot of electricity, and this imposes real costs on the miners. This is clear evidence that cryptocurrency prices tend to follow production costs. Another theory says cryptocurrencies do have intrinsic value based on the marginal cost of producing one cryptocurrency.
Monetary Theory
Monetary theory is based on the idea that changes in the money supply are the main drivers of economic activity. It is argued that the central bank, which controls monetary policy, can increase much of the power over economic growth by the amount of currency and other liquid instruments circulating in a country’s economy.
This theory attempts to value cryptocurrencies like money, using the supply of money, its speed, and the value of goods produced in an economy. The simplest way to approach this is to look at the current worldwide value of all mediums of exchange and all stores of comparable value to cryptocurrencies and then calculate an estimate for that cryptocurrency.
