As I sit at home trying to convince friends and family to invest their hard earned United States Dollars in STEEM COIN and other cryptocurrencies I am repeatedly faced with several questions:
Where do "coins" get their value?
Who's pockets are lined by the purchase of "coins"?
Where are the "coins"?
I will provide my responses to the above questions, and I encourage anyone to help clarify what's going on:
- Where does anything get it's (monetary) value? Supply and demand. (?) Exchange rates. (?) I am no economist and while supply and demand makes some rational/tangible sense, exchange rates seem ruthlessly arbitrary. I hope someone will help clarify the inner workings of exchange rates.
In any event, applying the concept of supply and demand to the top-valued BTC, currently trading between $12,000 and $12,200 as of the writing of this, there is a mathematical limit to the amount of BTC that will ever be "minted". 21,000,000 total. With that in mind, a BTC itself obviously is a commodity.
But still quite mysterious is the ever-changing value of any given cryptocurrency. I have read a million times that BTC and "coins" are unique because they are decentralized and not connected to any Government. I understand that work is done to "mint" coins and computer networks of all sizes and different languages facilitate the transfer of "coins". I have an working knowledge of inflation (what you could get for $.05 in the 1950s is now $10.00)and interest rates (the percentage of money you will be charged for a loan) and APR (somehow tied to interest rates) and a budget (a record of income and expenses), depreciation (inverse of inflation), etc.
To get back to it: I have come up with the following analogy: The Internet has become a digital continent. Each network: BTC, ETH, STEEM, etc (there are dozens), is like it's own country. So, each currency is pitted against one another. Like the EUR and the USD.
But, here's where I'm ignorant:
What is a (the?) blockchain? Is there a single blockchain or several? What is ledger technology? What are "smart contracts"? Also: Isn't cryptography pretty old? Why is it so valuable now? Because it's gone digital??? That's silly.
2.Whose making money? Or whose making profit?
There is a subtle, but critical distinction there. There are fees to exchange FIAT currencies, so its only fair that there are fees to buy/sell/exchange digital currency. Also, someone needs to pay to keep the electricity flowing.
PLEASE NOTE: I don't want to stretch the discussion too broad. I want to keep the discussion in the realm of Capitalism and I want to include electricity as an expense of powering the digital things that chatter and bing and boop and make this crypto-currency possible. I know about Nikola Tesla and zero point energy, but let's pretend money is the only way to make all electrical/electronic devices function.
3.Does it matter?
Put it this way: a bag of diamonds, 3 tons of gold, $100,000,000 USD can be exchanged for one another, right? Great.
They can also be gifted anonymously, of course the USDs would have to be in cash form. Banks keep too many records. Where are my US dollars? Direct deposit is common place. I have an income my balance goes up on my computer screen every two weeks. I pay bills, my balance goes down, and round and round we go.
How is Bitcoin any more intangible than that?!
Last twist: People also play the morality card. Think what people can do! BTC is anonymous. And fast!
As far as I'm concerned, violent, corrupt, immoral, illegal and..... let's drop this all under the umbrella of "NEGATIVE THINGS" happen for sacks of gold, dollars, euros, reals, diamond rings, pearl necklaces, heck, for scraps of bread. BTC or any other cryptocurrency is no worse or different. And plenty of good is done for/with the same financial objects.
