Many people are not fully aware on how an asset derives its value. They believe it is purely a function of supply and demand. This however is only 1/3 of the full story.

Any Blockchain asset’s value is generally decided by 3 factors:

  1. How many people are interested in the value = supply & demand
  2. The asset’s ability to generate profits for its holder = cashflow
  3. The holder’s ability to liquidate an asset = liquidity

While point 1 and 2 are generally quite easy to understand, the 3rd one can be quite crucial: If you own something that generates a lot of cashflow and a lot of other people want it, but you cannot get it to them, its value will be significantly lower than if it was easy to transport. One of the reasons why currencies in general prevailed over physical goods such as pigs, sheep or chicken is exactly this 3rd point.

Many cryptocurrencies have seen similar challenges in the past: A lot of people would love to own them and some of them also provide great internal value for its holder. Actually using and spending a coin/token in the “real world” however can be harder than one might think at first glance. If you look at Bitcoin’s dominance, this is mainly due to it being quite the only cryptocurrency so far, that can be used in at least a few stores and shops.

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Until next time,


Dr. Julian Hosp (www.julianhosp.com) is a world renown blockchain expert. He co-founded a Singapore based company that has received over 100M USD in funding. Prior Julian was a 10-year professional athlete and a medical doctor.

He is the author of several bestsellers such as „Cryptocurrencies simply explained” and “Blockchain 2.0 – more than just Bitcoin”, which have been translated into 15 languages and has sold over 100,000 copies: www.cryptofit.community

He was named one of the world’s top Blockchain and Cryptocurrency experts and also works in blockchain groups with the European Union on topics such as regulation, social impact and economics.

As a Speaker of the Washington Speakers Bureau, he is frequently invited to global tech and entrepreneur events as well as government summits around the world and he is also a regular commentator in the media on current blockchain trends, the future of cryptocurrency and best practices.


Original post: https://medium.com/@TenX/how-do-blockchain-assets-trulyderive-their-value-f42573e75d59