Today I had an interesting encounter with one of the economists I know. We discussed what Cryptocurrency and Blockchain were and the value behind them.
Here are some key points he brought up:
The dollar is backed by gold, the gold is the bareback of it. What is behind Bitcoin?
What inherent value does Bitcoin have?
We don't know how created it, maybe it's a government funded project
It's just speculation, the technology hasn't been tested yet.
My answers:
At one point, I think I lost because we value Bitcoin in Dollars. So, it's "backed" by dollar technically, even when we use Bitcoin to pay for something, it's calculated in $.
Bitcoin's core values are the following: Open source, censorship resistant, decentralized, peer-to-peer and verification of rules (everyone can be part and run a full node).
We don't know it, and it also can be some guy in his basement for all we know. It's core values prove that this is not government funded project, it can't be. How could they benefit? One of the interesting theories is that they released this untested technology to the masses and let them develop it further to then adopt it if it works.
Yes it is speculation, but internet was a speculation as well back in the days. I heard that when they sent out the first bits of information, the whole internet crashed. The technology needs time to adopt, and since there are so many programmers and IT experts around the world, we will see adoption of this technology even faster than ever before.
But here's the kicker that I have been thinking about since we talked: He believes the private/public sectors will adopt the Blockchain, the governments, businesses to further improve their systems. But it will NOT be an open Blockchain, rather a Centralized Private Blockchain. It will just be Database replaced with the word Blockchain, same principles. Non-censorship resistant and not open source.
I want to know what you guys' thoughts are on this. How would you counter these arguments? Let me know because this last thing has been bugging me the whole day!
This is not true for a long time. Dollar is backed my nothing. It's intrinsic value is 0
Bitcoin on another had has intrinsic value by cost of electricity used to mine it.
At first, humans used to trade goods for goods, then they used salt (for example in Roman Empire, soldiers were paid in salt). Then coins were created from gold, silver etc. Now you couldn't carry 2kg of gold with you could you? And that's why the Chinese in the 17th century created what's called Bank notes (basically paper money), which its value was backed by keeping Gold in the reserve.
The money we have today, which most of it is credit and not paper money or cash, came in when sailors from Spain as I remember, ran out of money when they were sailing to find new lands. And the king signed playing cards which then was used by the sailors as money. That's where the value based on trust comes in. The problem today, is that most of the money we the individuals, banks and governments use is credit and not paper money. Credit which is based on trust, we trust the governments and the banks that the value of dollar or any other fiat currency stays what it is today, or goes up in value right? Because if we go to the banks right now, and tell them give me my 10,000$ I have in my account, they will tell me give us 1 week to gather it for you. Why? Because the money that appears in your bank account is credit, it's not real hard cash. And so they need time to get the cash for you.
That's the problem.
I see your point, you need money to make Bitcoin. Dammit, when I was debating I knew I had something up my sleeve but I forgot that point. Next time I will bring it up :D
Yeah the dollar isn't backed by gold lol so you could use the death of the gold standard as a counter argument.
Blockchain technology has various applications and the blockchains they will run to encrypt patient records in hospitals (etc) won't be held to the same standards that blockchain cryptocurrencies are held to.
In the future centralized blockchain currencies could be launched, albeit as a new Banana Republic gift card or something, but those will have less appeal to investors and shouldn't steal from DEX market shares.
I replied to the "USD backed to gold" point above.
But we still end up with alternative currency (Bitcoin, Ethereum etc. decentralized currencies) and we as individuals will still live in a centralized system.
To the question in your title, my Magic 8-Ball says:
Hi! I'm a bot, and this answer was posted automatically. Check this post out for more information.
Lol.