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Author
atrimus


Location: Saint Louis, MO
Member Since: Sat May 17, 2008
Posts: 2,489


In layman’s terms, what is cryptocurrency? Is there a trustworthy site that explains what it is?



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JS


Member Since: Thu Oct 29, 2009


Basically, it’s imaginary money that only exists as computer data on the Internet. It’s not backed by anything or regulated by any government, so it’s not actually worth anything, except people think it is, so it’s treated like it is. It uses blockchain technology to track transactions online, so you can buy some and trade or sell it to other people.




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Late Great Donald Blake 

Moderator

Member Since: Sat May 17, 2008
Posts: 7,566


I think... I have no expertise here.  This is me just thinking out loud so someone can explain why I'm wrong,  but basically bitcoin is a thing that simulates a currency (in that it represents a sort of fluid, liquid value) but at the level of exchange functions more like a commodities market.  Commodities on the global market don't have their value insured by some larger government banking system, nor do they usually have a value secured by some other more stable commodity like gold or platinum.  Pork futures etc. on the global commodities market are generally on the whim of the myriad factors that affect supply and demand.   And while pork futures are also grounded by material concerns--rather than just being "fiat or faith based"-- like a limited amount of total pork consumers and the price they're willing to pay by the lbs, and there's an entire productive industry on the supply side, it's still the case that a process of financialization that's irresponsible can destabilize and even topple those otherwise secure commodity markets.  Think about tulips in Holland or the 2008 housing market crash.  

 So the conclusion I draw is that some of the instability associated with bitcoin and similar digital currencies is exaggerated when taken out of context.  It's only valuable because people agree it's valuable, but that's the essence of commodity trading.   I think the problem isn't it's existence as a form of investment.  The real question is what place should things like bitcoin have in the larger global economy.  I think the problem is when people feel like our entire economy ought to be built atop it or similarly that somehow our FED system should be restructured to be based on digital currency.    Basically attaching our money supply to any commodity, whether it be more consistent like gold is a really bad idea, on the simple basis that the value of these commodities are still highly vulnerable to manipulation (see diamonds), but especially with something as volatile as bitcoin.

Anyway, that's at least how I think it works.  Someone let me know how off I am. Lol

cheers,
--- the late great Donald Blake



Posted with Google Chrome 96.0.4664.104 on Linux
JS


Member Since: Thu Oct 29, 2009


Well, yeah, currencies backed by a commodity can have their value manipulated, but the value of bitcoin is entirely undefinable, precisely because it's not attached to anything. Bitcoin is so volatile because there's no way to determine what it's actually worth. Really, anybody can create their own cryptocurrency and just make as much of it as they want. The question is, how do you convince merchants to accept it as a form of payment? Or, how do you convince somebody to buy it off you? If you can't do either of those things, then what can you really do with it?


Posted with Google Chrome 96.0.4664.110 on Windows 10
Late Great Donald Blake 

Moderator

Member Since: Sat May 17, 2008
Posts: 7,566




Posted with Google Chrome 96.0.4664.104 on Linux

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