stevensfo wrote:I have to admit that I still don't understand.
A share, dollar or sterling banknote and gold coin is worth what someone is prepared to pay for it. However, the shares and banknotes are supported by the power of what they represent. The dollar bill represents the US economy. The share represents the strength and profitability of a company. These are real things you can see and experience. The gold coin is tangible and even if the price plummets, you still possess it and can make a nice piece of jewellery.
It's this aspect of cryptocurrency that I don't understand. What exactly is supporting it, apart from the buying and selling?
Steve
Right, let us start by agreeing that from one point of view, you are right about bitcoin. Crytpo currencies are too wide a field so lets narrow it down to one that we can talk about with some knowledge. You are right that the ONLY purpose of bitcoin is money/currency. Ignore for a moment the value of gold or silver, the purposes of money/currency are "medium of exchange", "store of value" and "unit of account".
Now specifically you are wrong in some of your claims. Or at least your claims are not what is claimed by the things that you mention. The dollar very specifically doesn't represent the US economy. It use to claim that it was backed by the "Full faith and credit of the US government". Some may question those things. It no longer makes any claim but to pay a dollar, whatever that is. Oh and "In God we trust".
A share does indeed represent a company, but while it may act as a store of value, you can't use it as money, anywhere. Well actually there is a fictional story where shares in the Barbie Consortium do become paper money, but I know of no real life example.
Gold and silver. You do know that there is a reason that we talk pound sterling? It did use to be a pound of silver. Specifically 240 silver pennies that in total weighed a pound. Check the history books.
Now imagine having to cart pounds of silver to the local car dealer. See any problems with that at all? Of course gold is lighter so why not mint gold coins for large purposes. Still many thousand ounces of gold still weighs a lot (remember 1 troy ounce of gold is valued at one pound of silver and there are 12 ounces to this pound)
Hence the concept of keeping the silver or gold in a bank, possibly the same bank as the car dealer and simply turning up with a bank note.
Now what does a sterling bank note (your words) say upon it?
"I promise to pay the bearer on demand the sum of twenty pounds"
Take one out and look at it. So you can turn up at the bank of England and say, "see here is your promise, now give me my silver", can't you?
A quick look and today you would pay £690 per kg for silver. So 20 pounds of sterling silver might just be worth a bit more than the promise that you hold.
https://www.chards.co.uk/1kg-vat-free-s ... land/13321So neither note claims what you claimed for it, and there are serious doubts about the claims that the notes actually make.
So, does the dollar or pound note act as a "medium of exchange"? Well yes. Does it act as a "store of value", err remind me what inflation is. How about "unit of account", well yes.
Now what of gold or silver. The answers would be "no", "yes", "no". Both metals have lost their use as money, though they still have value.
Arguably, and it is arguable, the answers for bitcoin are, "yes", "yes", "no". So it's not a perfect money by any means. However at least to some it is a form of money.
And at this point we come to the question, what forms of money do you like.
Do you own any US dollars? What about Euros? How about Canadian dollars? Maybe you own the Krona or the Swiss Frank.
The latter were not chosen at random, but because people did chose to own them pre-bitcoin. Even though they were useless as a medium of exchange or unit of account in the county that they lived. Why? Well they had doubts about the US dollar and the UK pound money supply. Increases in the money supply usually are the same as debasement and often known as or cause inflation.
Why bitcoin, well it's supply increase follows a geometric progression with less and less being produced every four years. Next year less new bitcoin will be mined than gold.
I've recently finished Lyn Alden's book and can heartily recommend it. It only covers bitcoin in the final chapter having spent very many chapters talking about money in all it's historic forms (including debt used in ancient times or by hunter gatherers).
https://www.amazon.co.uk/Broken-Money-F ... C81&sr=8-1By all means reject bitcoin and other crypto, but I really do recommend finding out more about money. Lyn Alden's book is only one of very many.
Want to avoid books that mention crypto, then read ones that predate it. Such as "When money dies" published in 1975.
https://www.amazon.co.uk/When-Money-Die ... C73&sr=8-1Or "A history of money" 1994 (sorry I've not read that one).
Pdf here
https://library.uniteddiversity.coop/Mo ... nt_Day.pdfYou can't get to grips with crypto currency before you understand currency and money itself.
and no one knows what its worth either, lol! despite what advocates would claim!