What we’re going to be doing in this lecture is going over how the bitcoin ecosystem works as a whole. Predominantly, we’ll be highlighting how all the different players and resources come together to make this ecosystem thrive, which in effect, determines the value and security of bitcoin in the market.

1. Miners

So to begin with, the bitcoin ecosystem is founded on the hard work of miners. To put it pretty bluntly, without miners, the bitcoin ecosystem wouldn’t exist in the form we see it today, if at all. Miners are the only way transactions get processed, and therefore, they are the reason that new bitcoins are created. So as mentioned, without these miners, the actual bitcoin ecosystem wouldn’t exist.

2. Traders

The next type of member of the bitcoin ecosystem, which is a form many people take, is as traders. Traders, as I’m sure you’ll be aware, trade bitcoin for profit. Whether it’s through exchange trades or face to face transactions, whatever method in which they trade, they trade to profit from bitcoin, and are often switch back and forth between fiat currency and bitcoin - which helps increase bitcoin’s transaction volume and liquidity.

3. Merchants

The third type of members of the bitcoin ecosystem we have are merchants. It’s natural that traders need an income to survive, and therefore, many of them will convert their bitcoin to fiat currency, goods, or services. You can have all the bitcoins in the world, but if no one is accepting it as a form of currency, then it isn’t a form of currency. So merchants also play an important part here.

4. Hoarder

The fourth type of member we have this in this ecosystem is the hoarder, which is another popular way people get involved. The logic behind a hoarder is that bitcoin will be worth millions one day, hence hoarders buy, and hold, never spending or feeding the ecosystem. Of course, since only 21 Million bitcoins will ever be created, there is some logic to their thoughts, however, how long will they hold? They’ll more than likely not be around when the final bitcoin is created.

5. Consumer

Then the final jig-saw in this bitcoin ecosystem are consumers. As consumers buy goods and services using Bitcoin, they too help grow the transaction volume, and get more people using bitcoin as a currency rather than a form of digital gold.

As you can see each of the players in this ecosystem couldn’t really help make bitcoin thrive without one another. Yes you could have miners create all the bitcoins in the world, but if no one is buying or using them, they’d all be worthless. Truly, each player is just as important as the others.

So that really sums up the players that make the bitcoin ecosystem work. We have miners, traders, merchants, hoarders, and consumers.

How The Cryptocurrency Ecosystem Works