Crypto Thoughts - Value
Money is the promise of value in exchange for goods and services. Because I can't build a car, I give a guy, who has a car, money. He accepts the money, believing that he can use it to buy other stuff. Whether the value of money is based on gold, silver or sea shells, I can't carry enough to do all my daily purchases so I use currency. People, through their governments, decide both the standard of value and the value of good and services related to that standard. As I said in my first post, money is basically an idea.
When thinking about cryptocurrencies, its important to understand their value. We understand the value our currency because we know what it will buy for us. Often USD (United States dollar) is the standard for other currencies around the world. Cryptocurrencies are not based on something of value like gold or silver. They are created through complex mathematical formulas. Most cryptocurrencies are compared to USD to show their value because USD is familiar. Right now, for example, one Bitcoin is worth $14,258.29 USD. One Dogecoin is worth $.0116 USD. Apparently, people think both have value.
The other important factor is how a particular cryptocurrency is used in the market place. After all, if it can't be used, its not worth anything to anyone. For example, Coingecko.com states that, "Dogecoin is primarily used as a tipping system on Reddit and Twitter where users tip each other for creating or sharing good content." So, Dogecoin's value is known in USD. It has at least one use in the market place.
Just as common currency is usually only purchased with other currencies, cryptocurrencies can only be purchased with or traded for other cryptocurrencies. In my next post, I want to write about how this is done. In the meantime, google "compare the value of cryptocurrencies" to see the range and value of this relatively new concept. The most current articles you can find will help you keep on fishin'.
Recent Comments
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A couple of points, Jim.
Crytpo currencies can be purchased with everyday currency, ie, cash. How else would people enter the crytpo market if they don't have any to start with?
You are completely correct in saying that crypto currencies are not linked to anything with intrinsic value, such as gold or silver, but this is also the case with every day currency such as the US Dollar. In your wording, you may give the unintentional impression to your readers that they are.
Nixon took the dollar off the gold standard in, I believe, 1971 in order to finance the Vietnam War by running continuous rainforests of dollar bills off the printing press. I believe there is now not a single national currency linked to precious metals. These Fiat currencies, as they are known, have all devalued massively since the link with precious metals was severed, and all will eventually go to zero.
This has enabled governments and central banks throughout the world to manipulate currencies to hide their economic incompetence and increase their power.
It has led to politically sanctioned malpractices such as Fractional Reserve Banking, ie, banks being able to lend money they don't have - causing an ever increasing 'credit bubble' that inevitably leads to economic collapse and people have absolutely no choice the matter.
This is nothing less than fraud and if ordinary people did it, they would quite rightly go to prison but if governments and central banks do it, it's ok apparently.
Fiat Currencies are based on 'trust', ie, people being forced to 'trust' politicians and big banks who most definitely are not acting the best interest of all.
Detractors of crytpo-currencies point out quite correctly that this 'trust' is not in place. I'm firmly in the camp that believes that such 'trust' is grossly mis-placed and that crytpo is the little guys way of fighting back against a global financial system which has effectively become socialism for the rich and powerful.
The blockchain technology that crypto runs on is completely transparent and I would rather rely on the mathematical proof than the misplaced 'trust' of a politician and a central banker.
It's always and interesting debate and one that's very much alive and well in the WA Community.
Cheers
Rich :-)
Thanks for that. You are exactly right. Cryptocurrency is the "little guys" way of fighting the financial system. I think that may be why won't go away. Many places in the world where adequate banking can't be accessed for whatever reason, are using cryptocurrency to build their lives. The value will rise and fall, but its not likely to go away.
I just reread your reply which was written some time ago. Thanks for taking the time to read and write.
You're welcome. Crypto is a very interesting place to be at the moment, but definitely not for the faint hearted. I'm waiting for the next bubble so I can move it all into Gold.
Cheers
Rich :-)
It's great to see the interest in Cryptocurrencies as I am not a fan of the present Banks, Financial Institutions and Federal Reserves. Keep up the good work.
Did you know that DaveSw is forming groups in WealthyAffiliate with Kyle's support? I am joining the Cryptocurrencies group and hope to see you there.
Regards,
Roger
Doesn't almost everything, Michael?
Emotion or intellect.
I choose intellect while incorporating emotion.
Thank you for sharing.
Paul.
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Thanks for the education about cryptocurrencies. I am a low-risk investor, so I probably won't purchase any bitcoins, etc.
We've had a great deal of fun watching very small investments in cryptocurrency grow. I am going to be posting about that.