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RE: Why You Should Be Interested in Cryptocurrencies

in #cryptocurrency7 years ago

In a way yes, but it is limited - 21 million max, ever. On the other hand, the federal reserve banks can basically create as much money as they want, as long as it is a loan. That's right, they "loan" money to commercial banks and just create digital money on their computers when they do it. They are then paid back, sometimes within 24 hours (LIBOR, the interest rate we have kept so low that it keeps all other interest low -- except credit cards, but that is another story), but that new money is out there now. Cryptocurrency is (usually) constrained in its rate of creation and limited overall supply, leading to less fear of inflation and meaninglessness. It also usually requires a means of creation (mining/POS/etc) that has some cost and/or strict requirements that we assign some value to. In the end all that cryptocurrency lacks is a government's backing (trust), and hopefully we are all moving to a time when we can trust in each other and a system, not a government's goodwill.

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thanks for you reply. wouldn't going back to the gold standard be a better way? At least it is based on something that has value. Forgive me, but I cannot see why crypto is worth more than the fiat that is 'currency' now in general?

Gold has some utility or purpose (ie jewelry, artwork, etc) but most of its value comes from people agreeing that it has value. They recognize it is fairly limited in quantity (only about 1% inflation annually due to mining) and is physically beautiful. Bitcoin is more rare because we can never have more than 21 million in circulation. After the last coin is mined, no more inflation. Obviously it does not have physical beauty since it's digital, but it has value due to its limited quantity. Just like fiat, it has value because people agree it has value. The difference, and it's a big one, is that fiat is unlimited and bitcoin is not. Banks and the government can make the money supply whatever they wish for any reason or no reason at all. Nobody has that control over bitcoin. Other cryptos have value for their utility as well. Whereas bitcoin was meant to be digital currency (although now it's more a store of value), other cryptos such as Ethereum (smart contracts, decentralized applications), Ripple (cheap payment protocol for banks), Litecoin (digital silver), etc have value for their specific purpose. Hope this answers your question.

Decentralization and cryptography offer their own value to cryptocurrencies as well. The idea that no one can just take your money away from you or stop your ability to make a transaction. Decentralization and blockchain encryption solves these issues and offers security, freedom and privacy that did not exist before. Gold certainly has practical value but it is hard to argue that it above all other metals should be "money." Today it acts as money in much the same way a pound of titanium acts as money. And not a very easy currency to make transactions with I might add; and the fees are terrible on gold (not to mention the 28% collectibles tax!).

Yes, I remember when Cyprus levied a "one-time" tax on their citizens' savings accounts a few years ago to bridge the gap in their budget. That certainly can't happen with crypto, so decentralization itself definitely adds value!