"real money" has value because its backed by a government. People in the country where its minted (generally) have to accept it. People who try to print fake money in the country where its minted risk harsh legal penalties. Credit card transactions are settled... those numbers on a screen eventually translate into hard cash.
Just the standard vanilla "why crypto is good" reasons don't really work for anything except bitcoin, they never have.
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I deliberately left this out as i was aiming for a exceptionally basic explanation for those who are experiencing cryptocurrencies for the first time and may have a case of information overload.
Besides all government backing does is add to the perception of value by making people feel their money is secure. Even the IMF admit flat money is essentially worthless.
" Fiat money is materially worthless, but has value simply because a nation collectively agrees to ascribe a value to it. In short, money works because people believe that it will."
And that belief in the value is crucial to it's success.
"Belief can fade
Countries that have been down the path of high inflation experienced firsthand how the value of money essentially depends on people believing in it. In the 1980s, people in some Latin American countries, such as Argentina and Brazil, gradually lost confidence in the currency, because inflation was eroding its value so rapidly. They started using a more stable one, the U.S. dollar, as the de facto currency. This phenomenon is called unofficial, or de facto, dollarization. The government loses its monopoly on issuing money—and dollarization can be very difficult to reverse."
Both quotes taken from the imf's back to basics blog post which you can find here http://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm
Good post nice and simple. You would need quite a lengthy post to explain the monetary system in detail as you mentioned many governments no longer issue currency including some who have their own reserve bank. Once upon a time money (legal tenders )issued were receipts from gold deposits. Now they are just agreed values to stop us fighting the street for food ;)
I think you misunderstamd my argument. I am not saying "real currency is better than crypto currency because the value real currency is backed by the government" I am saying that "cryptocurrency" is better than real currency (at least in some ways) because its backed by intrinsic value, like gold or any other commodity. Crypto is not fiat money. The two should never be represented as the same thing. Because crypto (and, iMO especially steem) is NOT materially worthless.
At the end of the day, the argument that "anything we want to call money is money and its all just numbers on a screen and the crypto revolution will come if we all just peter pan it and believe hard enough" isnt going to convince anyone. It will work against adoption and decentralization.
this is my take on the material value of steem... https://steemit.com/steem/@sigmajin/not-like-the-others-why-steem-price-hasn-t-come-close-to-peaking
Thanks for the feedback sigmajin. I'm still learning myself so I'll edit the post to reflect that when i get a chance tonight.
No, it's not because of government's backing and cryptocurrencies prove that more than anything. But even without cryptocurrencies, people use other "not-backed-by-government" currencies too. One of them is known as reputation, where the only guarantee is the word. People exchange services and goods with reputation being the only counterpart of paper money.