Is Bitcoin a scam? If anyone can create their own cryptocurrency, isn't it like printing money themselves?

This question comes from Shankar Balaji.

“Is Bitcoin a scam?”

Well, what is a scam? A scam is when someone promises to do something for compensation but lies about either how it works or how much you will get out of it. Bitcoin doesn’t really claim anything so it can’t really be a scam. So I think the real question you are asking is “is using bitcoin a good idea?” That is a more complicated question. Try starting with this article to learn what makes a good currency and see what advantages and disadvantages bitcoin has.

Your second question is what I’ll focus more on right now.

“If anyone can create their own cryptocurrency, isn't it like printing money themselves?”

I often hear a similar statement that people make when a cryptocurrency “forks” or splits into two chains. They say that this is “free money” that has been “created out of thin air”

Both of these claims show a lack of understanding of what money is and how it gains value.

If you read the article I linked to above it might also answer this question pretty well.

So first off, what is money? Money is simply something that we use to more easily trade with one another. Before we had money, people would simply trade their goods and services in a barter system. I have wheat and you have meat, let’s trade! There are several inefficiencies that money solved such as what happens if I want your meat but you already have wheat? There is no way for us to trade. Also it makes deciding the value of things much simpler.

So you can think of money as an IOU that can be redeemed from anyone for anything. I want your meet so I give you money which allows you to then buy the things that you want.

So what can we use as money? Well really anything, but some things work better than others (again see my article linked above on what makes good money). Throughout history people have used shells, rocks, cocoa beans, and of course, gold and silver.

Let’s use an analogy real quick, let’s say that you are living in a society where they were using cocoa beans as their money. You are a green bean farmer so you decide to use green beans as currency. You announce this to everyone. Does this make you rich? No, just because you say something is money does not mean that everyone else has to agree with you and also use it as money. Just like with everything, the value is determined by supply and demand. (I won’t go too much into how supply and demand work in this answer, but basically supply means how much there is and demand means how many people want it) If no one wants to use green beans as money then they will be worthless as money.

So back to your question, if you make a new cryptocurrency are you just printing money? Well yes you are, but if no one wants your money, it will be worthless. Only the best forms of money will survive, so if you create a cryptocurrency that is valuable to society then it may gain value eventually and used as a currency. But if it doesn’t, then it will just be worthless.

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