It's silly to say that crypto is "backed by nothing," when it is an idea, the same as anything else.
What is the money in your bank account? Can you go down to the bank right now and find it? Your money?
What you would find is a network of computers full of zeroes and ones, the same as any cryptocurrency. When you ask the teller to make a withdrawal, he or she will hand you pieces of paper which serve as stand-ins for these zeroes and ones--these blips on a screen--and that is what you are to construe as being "your money."
Did you know that less than 10% of the money in the world even exists as paper currency? The rest is just...blips on a screen:
In fact, economists estimate that only 8 percent of the world's currency exists as physical cash. The rest exists only on a computer hard drive, in electronic bank accounts around the world.
What of the computer I am currently typing on? It's a concrete reality, right?
Sure it is. And yet, without the idea of a computer and the presence of a mind to assemble the various components fashioned from raw materials and chemical compounds into a working whole, this thing would be, well, "nothing more," for lack of a better turn of phrase, than the components from which it has been assembled via ideas, schematics, and plans.
source.
What of those components? Surely things like gold and silver, and other raw materials have intrinsic value, right?
Wrong. Economically speaking, all value is subjective. Think about the man in the forest who is freezing to death and who happens upon a small flint lighter. Think of the same man with a wallet full of cash at a resort beach in Hawaii in the summertime. He will walk by that exact same lighter lying on the beach as if it were a piece of trash. He may even pick it up and throw it in the garbage if he is an environment-friendly sort of chap.
Even something so ubiquitously valued as, say, gold, is really only valuable because there are humans present who are able to, and who do value it. Now, it may be argued that gold has some sort of intrinsic value, or even "spiritual worth." I am not here to debate that one way or the other. I am simply here to say that as far as economics is concerned, all value is subjective.
With this in mind, let us now examine cryptocurrencies.
I've always been fascinated by the cowrie shell, and how many ancient cultures used them successfully as money and currency. These shells are nothing more than small seashells that can be found near the ocean, yet they served successfully as a device by which to measure value for long periods of time in human history. HOW!?!?
THOSE THINGS AREN'T MONEY!! THOSE ARE JUST TINY SEA SHELLS!?!?
Are you beginning to get a sense of your power yet? Our power? When we realize that this juggernaut called "Bitcoin" was only a "worthless idea" and "not real money" a mere 8 or 9 years ago, and now that it is valued at nearly $20,000 U.S. dollars, we can see the theory of subjective value in action, just as we can with the cowrie shells in ancient history.
Any time a group of human beings (individual economic actors) get together and decide that something has value and are willing to trade it amongst themselves, a market is created. Whether or not this market consists of gold, cowrie shells, bitcoins, twigs, or discarded fingernail clippings is irrelevant. What is relevant is how well the currency serves its purpose, and functions as a useful store of value and means of exchange for the people using it.
Sure, some things work better as money than others. Gold, for example, can be melted down and minted into coins, which are easy to carry around and trade. If I had lived in times past and chosen wagon wheels as my "currency" of choice, I would have had quite a time attempting to store and amass them. Some currencies can also be used in many practical, concrete applications. Gold, for example, can be used to make jewelry or electronics equipment. Some economists argue that anything that can properly be called "money" must have first been traded as a commodity. One could argue that things such as Bitcoin either destroy this idea or reaffirm their own extra-monetary utility in light of such theories. I am not going to get into Mises' Regression Theorem here.
Suffice it to say that, as far as the science of economics is concerned, all value is human-derived and subjective.
I have lots of doubts about cryptocurrencies in general, and a lot of hope for them, as well. I love gold. To me, it can never be replaced. All that said, anytime someone says things such as: "X cryptocurrency isn't real money!" or "It's not backed by anything!" you canbe almost sure they are either uninformed or blowing smoke. Indeed, the "fiat" paper in their wallets is backed by nothing, and a much less reliable--and infinitely more brutal and violent--"nothing."
What I want to get across in this post is the power YOU HAVE. YOUR IDEAS ARE WHAT IS SHAPING THE WORLD AS IT UNFOLDS RIGHT NOW!!! WHAT A POWER TRIP!
Now get out there, value what you value, and CREATE!!!!
~*~
~KafkA
Graham Smith is a Voluntaryist activist, creator, and peaceful parent residing in Niigata City, Japan. Graham runs the "Voluntary Japan" online initiative with a presence here on Steem, as well as Facebook and Twitter. (Hit me up so I can stop talking about myself in the third person!)
I'm with you mate, I love gold and trust it's ability to protect my wealth, not only from inflation but through any changes to the financial system. Let's face it, big changes are coming.
I've done well with crypto's in the last few years but always transfer some of the profits into gold (and silver).
I don't know where we're going with Cryptocurrencies in the future, yes blockchain tech is here to stay however it would be unwise to invest everything in CC's unless you're 100% certain they will carry on their current format. BTC is already dinosaur like with its slow confirmation times and ever increasing fees, so while I think it'll carry on doing well while there is a mania around it I think the new adopters will go increasingly for the cheaper, faster crypto's that frankly have more to offer.
The devs have too much say in the BTC space now and some believe it has already been co-opted by govt entities determined to either destroy its rep or take it over. I guess what I'm saying is that we are still at the very beginning of this economic revolution and I still believe it could go either way. I sincerely hope we get the economic freedom we aspire to and free ourselves of the central banks but it would be naive to think they won't go down without an epic battle.
Buckle up, the next few years could be a wild ride.
That’s very true. And something I think not enough people in the “crypto space” are thinking about.
nice post on cryptocurrency nice work.
People have such a hard time understanding that the only thing that gives something value, is peoples belief in it. Crypto certainly has a lot of believers and it reflects in the price.
Fiat currency and cryptocurrency have no inherent value. A gold-back currency does because there's a physical good it can be exchanged for. While the value of gold can change, it still has inherent value in that it's a tangible asset. The difference between cryptocurrency and regular government-back fiat currency is that governments don't guarantee cryptocurrency.
This lack of guarantee means that crypto is extremely unstable, but it doesn't have to be. A corporate backed crypto could be almost as stable as a fiat currency, though it's next to impossible to get as stable as the US dollar.
The only reason gold has value is because people believe it has value. If nobody believed gold had value it would be a worthless rock. Things don't need to be physical to have value. The only thing that gives value to anything is people's belief.
You're missing the point. Since gold is physical, regardless of how much people value it, it still has inherent value in that it's real. There's no equivalent in fiat or crypto.
Lol 😂 things don't need to be physical to be real or have value. Your missing the point.
A make believe object that doesn’t really exist has no inherent value. It can have value but not inherent to itself.
Think a bit harder about what value is and why physical items have inherent value opposed to fictional ones which have no inherent value.
Things don't need to be physical, to exist. Open your mind! I know it hurts to be a gold bug and miss out on a once in a life opportunity and revolution. It's sad to see the dinosaur's go extinct because they couldn't evolve.
Beat me to it. Wanted to comment about the same. Depends on what our choice and beliefs are on things being valuable. In the end a bill is just cloth and paper with ink on it. A diamond is just a compressed mineral and c02. In actual survival value, food and water are most valuable for our species and yet we value other 'stuff' more. Hell, even the air we breathe is more valuable than anything in a logical belief.
The transferred value is exactly as you say, the belief by both parties that value has been exchanged, willing parties both ends. This is easy when face to face. You barter and settle on a value and value can be exchanged. When you are distant, then you have to rely on a conduit to transfer that value for you and the traditional banking system has largely been that for many years. However, the cost and hassle for people has become a problem and disruptor banks are stepping in, though even they are not the perfect solution. The benefit of a distributed network removes all these slices that are taken from our own value and it is for that reason that people will support the idea. Money/ value counts between two people exchanging value and no matter what socio economic system you believe in, those exchanges will exist. About time that disruption happened by unlocking open minded thinking. D
YES! Preach on brother.
I’m pondering lately about how our individual skills and contributions are the realest and most valuable store of value and currency we will ever be enriched by.
For instance, at a cashless autonomous gathering such as Rainbow, we can give monetary donations of course to fill the kitchen.
But even more valuable are the people who contribute their expertise, Time, and labor to grow that food, prepare it, serve it, and clean up the utensils after. Not to mention whoever builds and maintains the fires, cut the firewood (only fallen timber please!), constructs tarp and other eco structures, digs the shitters, helps secure water from pure natural springs, teaches adults and children nature and yoga skills, play music, cleans the site, and helps heal the ailing...all of these are far more secure forms of currency than fiat, gold, or crypto. But I do love crypto ;)
We are so rich and valuable, our experiential wisdom collectively is the greatest social security net that will ever exist...
Wow man. This is beautiful. I have a friend here who has been telling me the same thing recently, interestingly enough. Thanks for this.
My pleasure!
The most awesome thing about cryptocurrencies is, that in order to truly believe in crypto - you have to understand how fraudulent and broken fiat is. It goes hand in hand, and it's beautiful;
Great topic!
The mind is so so powerful, whatever we place value on is going to be a focus in our life. If we make money valuable like we have, we'll sacrifice great things for it, like our health and happiness. If we value our jobs and security more than say, spending time with family, it can detract from our life in some way. We have so much power to re-allocate our value system and change our lives in the process.
I recently did this with food, opting to give up more of one thing(money) for higher quality and local food which I value for a number of reasons.
This would be a great read for people who make the comment "but it's not backed by anything". What gives many things value is it being back by gold, silver or something else.
However, in 10, 20 or even a 100 years from those things may be worthless to us. As a society we will find something else to place value in so I see no reason that crypto can find it's own place among mainstream values!
Precious metals may be worth less in the future, but they will always be worth something since they are tangible. A government's guarantee of value is worthless if that government ceases to exist, and cryptocurrency is worthless if nobody wants it/places value on it.
Crypto can struggle because it has no guarantee by a government, however, it's a global currency meaning you can exchange it with anyone around the world without the restrictions from governments like trade borders.
There are two factors that make cryptocurrency useful:
All other currencies are regulated and no other currencies can be used in every country. Crypto isn't guaranteed, but at the moments that's a feature not a bug.
Keep up the good work...
Crypto is best then physical currency due to bit coin and much better then gold and other one else the point to be notised that crypto will get higher and higher in no time do you agree with mee???
Thanks for the article and I resteem it for more to read!
nice
best picture
Crypto certainly has a lot of believers and it reflects in the Price.
Let´s call it #Cryptosophy :)