Part 2 of the Decentralized Money Series: What Gives Crypto Value? (Hint: It’s Not Just the Price)

 Cryptocurrency is often talked about in terms of price — how much Bitcoin is worth today or whether a coin is “going to the moon.” But price and value aren’t the same thing.

To understand what gives a cryptocurrency value, you have to look underneath the price chart. The real value of a coin comes from what it’s built on, what it’s used for, how secure it is, and how much people trust it. 

The Foundation: Blockchain Technology

Every cryptocurrency is built on a type of database called a blockchain. It’s like a digital ledger that records transactions — but instead of being stored in one place (like a bank), it’s spread out across many computers around the world.

What makes blockchain different?

• Everyone can see it: Every transaction is public and time-stamped.
• No one can change it: Once it’s recorded, it can’t be edited or deleted.
• No central owner: There’s no single company or person in charge — the rules are enforced by code.

This structure is what makes blockchain trustworthy. You don’t have to rely on a bank or government. You can see what’s happening, and no one can secretly rewrite the rules.

What Makes a Coin Valuable?

Not all cryptocurrencies have value. And even the ones that do aren’t valuable for the same reasons. But most coins that hold real value share a few key traits.

Scarcity: There’s Only So Much to Go Around

Some coins are valuable because there’s a limited supply.

Take Bitcoin, for example — it has a hard cap of 21 million coins. That’s all that will ever exist. This built-in scarcity makes it resistant to inflation, like digital gold. People know it can’t be endlessly printed, which helps it hold value over time.

But not all coins are scarce. Dogecoin was intentionally designed to be inflationary. It adds about 5 billion new coins each year and doesn’t have a cap. It’s meant to be lighthearted, cheap, and always available — more like a meme than a financial tool.

Ethereum doesn’t have a fixed supply either, but it added a rule in 2021 (called EIP-1559) that burns some coins over time. That means a portion of every transaction fee is destroyed, which helps reduce the total supply gradually.

Stablecoins like USDT and USDC? They’re not scarce at all. They’re designed to be created or destroyed based on demand and are backed by reserves like dollars or Treasuries. Think of them like digital cash — always replenishable.

Some coins also use token burns intentionally. Binance Coin (BNB) burns coins based on usage of its platform. Shiba Inu (SHIB) has burned tokens to try and create scarcity and boost demand.

Bottom line: Some coins are rare by design. Others can be produced endlessly. And a few use creative tools to manage supply over time. Knowing which type you’re dealing with matters if you’re holding or using crypto.

Utility: What Is the Coin Used For?

Some coins aren’t just for trading or holding — they’re tools.

Take Ethereum again. If you want to run a smart contract or use a decentralized app (dApp) on the Ethereum network, you need ETH to pay the fee. It’s like buying tokens at a fair — the coin gives you access to the ride.

Other examples?

• Some coins give you voting power in decentralized projects.
• Others are needed to earn rewards through staking or liquidity pools.
• Some make cross-border transactions faster and cheaper.

If a coin actually does something people find useful — and people are actively using it — that utility helps drive its value. It’s not just about what the coin is; it’s about what the coin enables.

Security: How Strong Is the Network?

A coin is only as valuable as the network that protects it.

Bitcoin’s security comes from thousands of powerful computers worldwide constantly checking every transaction. This decentralized army makes it nearly impossible to hack or alter the system. That trust in the tech adds real-world value to the coin.

On the flip side, if a coin runs on a weak or poorly maintained network, it’s a much harder sell. People won’t risk their money on something that can be broken, manipulated, or shut down. Security is the foundation of confidence — and confidence is key to value.

Consensus: How the Network Agrees on the Rules

In traditional banking, one central system keeps track of your money. In crypto, that system is replaced by a global network of computers — all agreeing on what’s true through a process called consensus.

This is where Proof of Work (PoW) and Proof of Stake (PoS) come in.

Proof of Work, used by Bitcoin, relies on miners — people using massive computing power to solve complex puzzles. The first to solve the puzzle gets to add the next block of transactions and earns a reward. It’s energy-intensive but highly secure.

Proof of Stake, used by Ethereum today, works differently. Instead of solving puzzles, people “stake” their crypto — locking it up as a kind of deposit. Validators are chosen to confirm transactions based on how much they’ve staked. If they cheat, they lose some or all of it. It’s much more energy-efficient and still keeps the network honest.

Both systems aim for the same goal: make cheating expensive, and reward playing fair.

And through all of this, your real identity stays hidden. Crypto transactions are tied to wallet addresses, not names. Everyone can verify that a transaction happened — but they don’t necessarily know who did it. That gives crypto its unique mix of transparency and privacy. 

Adoption: Who’s Actually Using It?

The more people who use a coin, the more valuable it tends to become — not because of hype, but because of something called network effect.

When lots of people use Bitcoin or Ethereum, developers create more tools for them. Exchanges are more likely to list them. Businesses start accepting them. That growth creates a feedback loop — more users means more utility, and more utility means more demand.

Adoption also increases trust. A coin used by millions — with real-world applications — is more likely to stick around than one with just a clever name and a Twitter following.

Stablecoins: Digital Dollars (Mostly)

Stablecoins are cryptocurrencies designed to stay… well, stable. Most aim to stay around $1. They’re like digital dollars used for quick trades, parking money on-chain, or avoiding crypto price swings.

Popular ones include:

• USDT (Tether) 
• USDC (USD Coin) 
• DAI (a decentralized stablecoin backed by crypto)

They stay “pegged” to the U.S. dollar through different methods:

• Fiat-backed stablecoins (like USDC) keep real dollars or Treasuries in reserve.
• Crypto-backed stablecoins (like DAI) lock up crypto in smart contracts.
• Algorithmic stablecoins try to balance supply and demand with code — though many have failed.

Stablecoins are useful. But they’re not all equal. Some are issued by private companies that can freeze accounts. Others have lost their peg due to bad collateral or technical flaws.

If a stablecoin slips below $1 or spikes above it, that’s a warning sign. Stability is the whole point — and losing it signals risk.

Why Decentralization Changes the Rules of Ownership

In the traditional world, ownership is often just access. Your money sits in a bank. Your stocks are in someone else’s account. Your music, movies, or ebooks can disappear if a company changes its terms.

In crypto, you can own your assets directly.

When you store crypto in a self-custodied wallet (meaning you hold the private keys), no one can touch it — not a government, not a bank, not a tech platform.

Wallets come in different forms:

• A physical device like a USB drive
• A piece of paper with a seed phrase
• A software app that only you control

If your crypto is on an exchange like Coinbase, they hold the keys — meaning they have the power, not you.

True crypto ownership means:

• You hold it
• You control it
• You access it — no middleman needed

But this also means there’s no safety net. Lose your keys, and your crypto is gone. Send it to the wrong address? No one’s reversing that.

Decentralization hands you control — and responsibility. For many, that’s the whole point.

Conclusion: Why Value Runs Deeper Than Price
Price grabs headlines — but it doesn’t tell the whole story. The real value of cryptocurrency comes from what it’s built on, the problems it’s trying to solve, and the trust it earns through security and transparency. Whether you’re holding coins or just starting to explore, understanding these fundamentals matters.

In crypto, lasting value isn’t measured by hype — it’s measured by utility, adoption, and belief in the system running quietly behind the scenes.

So the next time a coin makes the news, remember: there’s more to it. Take the time to investigate. The price might be loud, but the value is in what you can’t see at first glance.

Up Next: What DeFi Really Does
We'll explore how decentralized finance turns borrowing, lending, and trading into a bankless system — and what that means for your money.