What is Cryptocurrency and what's it backed by, anyway?

Have been hearing this term most everyday now on MSM only in recent times, concurrently with reports of bitcoin exchange rate, mostly.

It sounds like encrpypted currency. Ie, a bit coin is not a physical coin it is some digital serial number generated by some entity (ie the entity that started circulating the digital currency?) with the encrypted part supposed to make the holder feel some sort of security.

But what is the digital coin backed by? If it is encrypted doesnt that mean some server or something has to be operational continuously for that bitcoin (or whatever cryptocurrency) to be worth anything?

And even then, how do they determine what each unit of the cryptocurrency is worth? Supply and demand? Obviously it doesnt have any value of use in and of itself (unlike gold, silver, seed, water, etc) so unless the cryptocurrency is backed by something ie petrol or gold, isn't it fiat?

a reply to: Planette

m.youtube.com...


Here ya go

What is Cryptocurrency and what's it backed by, anyway?

The modern day equivalent to the gold rush of yesterday or Wildcatting at the turn of the 19th century.

50/50 odds of striking it rich or drilling a hole to nowhere.

A digital currency backed by faith .

a reply to: Planette

Here is a good thread ChaoticOrder posted not too long ago on this topic.

Understanding the Blockchain

originally posted by: hopenotfeariswhatweneed
A digital currency backed by faith .

Nay, it's an apparent opportunity backed by greed, and the fear of losing out.

It's backed by crazy market hysteria.

They are worth the energy consumed by warehouses full of NVidia gpus crunching numbers to solve an algorithm. They create a huge carbon footprint for a useless number stored in a database somewhere.

So every time you bid on a coin, you contribute to killing the environment and global warming. Millennials love it though, they have visions of jetsetting the world like Al Gore as they feast on Crypto bids.

originally posted by: Planette
Have been hearing this term most everyday now on MSM only in recent times, concurrently with reports of bitcoin exchange rate, mostly.

It sounds like encrpypted currency. Ie, a bit coin is not a physical coin it is some digital serial number generated by some entity (ie the entity that started circulating the digital currency?) with the encrypted part supposed to make the holder feel some sort of security.

But what is the digital coin backed by? If it is encrypted doesnt that mean some server or something has to be operational continuously for that bitcoin (or whatever cryptocurrency) to be worth anything?

And even then, how do they determine what each unit of the cryptocurrency is worth? Supply and demand? Obviously it doesnt have any value of use in and of itself (unlike gold, silver, seed, water, etc) so unless the cryptocurrency is backed by something ie petrol or gold, isn't it fiat?

Cryptocurrencies are mostly backed by an authentication method called the blockchain.

But, ultimately, it has no more 'realness' than US dollars.

All good answers
Well , except for 2
You decide which is real , and which is an illusion.

What is Cryptocurrency and what's it backed by, anyway?

Greed and or Faith.

If you can't hold it in your hand, it only has the value you believe it does.

originally posted by: TinfoilTP
It's backed by crazy market hysteria.

They are worth the energy consumed by warehouses full of NVidia gpus crunching numbers to solve an algorithm.

Well, according to science, energy is neither created nor destroyed, but only "converted" into another form.

However, when "electric energy" is converted into "bitcoin", there's no way to get that energy back out.

a reply to: AMPTAH

Just like you can't unmine gold.

Much of the price of gold is reflected in the work it takes to extract it.

It's backed by belief. Just like regular currency. And Tinkerbell.

originally posted by: Blue Shift
It's backed by belief. Just like regular currency. And Tinkerbell.

4 things are needed for a currency to be a currency (regardless of where it is derived): A foundation of value, adoption, usage, and trust.

Bitcoin's value comes from the work it takes to mine it and the validation process it uses. It's adoption rate is exponential and its price, despite volatility, generally reflects in its level of adoption by businesses, which today stands at over 12000.

originally posted by: projectvxn
4 things are needed for a currency to be a currency (regardless of where it is derived): A foundation of value, adoption, usage, and trust.

Exactly. Usage can be objectively measured. Adoption is a yes or no proposition, based on value and trust, which are essentially consensual wishes on a star.

originally posted by: projectvxn
a reply to: AMPTAH

Just like you can't unmine gold.

Technically, you could go and put the gold back in the mine.



Not that any sane person would do that. But, it's possible.

Much of the price of gold is reflected in the work it takes to extract it.

That's part of it. But, I can also hold the gold bar in my hand. Pound it into a different shape, say a cup, and use it to drink beer.

Some money, such as the U.S. Dollar, is not backed by anything. Money is simply an accounting tool, anyway, for keeping track of goods and services.

Specifically, money itself is simply a method for tracking how much of a service you have provided (for which you get a certain unit of money to show that you've done certain unit of work), and/or it is used to track the amount of goods people have exchanged with other people.

Think of money as a "third party" in a barter trade. Let's say you have an apple orchard that needs picking. You hire me to pick apples, and offer to give me apples as payment. However, I don't want apples; I want bread instead. The baker really wants apples, but he is not able to help the apple farmer pick apples, so the apple farmer has no reason to pay him in apples -- and the farmer does not want to barter apples for bread. I do want bread, though. However, the baker does not have any work for me to do in order for me to earn loaves of bread.

So...
(1) I pick all of the apples from the apple farmer's trees so he can take them to market
(2) the apple farmer rewards me for my work me by giving me a sack of apples,
(3) I then go to the baker, give him the apples, and he gives me bread.

All three of us (me, the apple farmer, and the baker) got what we wanted.

Now, lets make it so that instead of three people being involved, let's say 50 people are involved, each with different services they could provide and different goods to sell. What if 35 of those people who made goods that I maight want did not like or need the apples I earned. So to simplify things, instead of keeping track of the services I had provided by giving me apples, instead those services I provided were tracked by giving me some mutually agreed upon "thing" (let's call that thing "money") that could be used to give to people who have provided a service to you, and could be traded in for goods someone else has produced.

So money itself isn't the thing that has value -- The money is only a way to account for the value you can provide in services you render and/or the goods you can provide.

Thanks all for the links and info

So it IS e-Fiat!

Is there a google gcoin or pple/iphone iCoin yet? im thinking at least that would be backed by alphabet or apple, rather than something never heard of like 'bit' me thinks.

originally posted by: Planette
Thanks all for the links and info

So it IS e-Fiat!

Is there a google gcoin or pple/iphone iCoin yet? im thinking at least that would be backed by alphabet or apple, rather than something never heard of like 'bit' me thinks.

It requires energy to mine.

It is not fiat. Please read up on proof of stake and proof of work protocols.

a reply to: Planette

It's backed by a notion that everybody agrees upon - the notion that it has value.

As long as everyone agrees upon it as having value, it will have value.

Its practical use is that it can be used to exchange value.