The crypto community brags that there are thousands of cryptocurrencies these days. But doesn't that, almost by definition, demolish the idea that cryptocurrencies have real value?
When Bitcoin was unique, that was one thing. But over the past few years it's became clear that nearly any random person can create a cryptocurrency. All it take is some technical knowhow, a little bit of marketing skill, and a highly artificial mechanism for guaranteeing scarcity. Every cryptocurrency is nearly identical to every other one.
Put aside the complicated arguments and long conversations about why crypto is for real. Just answer one question. It makes no sense that just about anyone can create a cryptocurrency. So why can they?
Well, there's nothing to stop anyone from doing it.
Should there be a law? I don't know; I suspect most of the big scams of the "hot-new-coin!" variety have already been pulled; suckers are falling for different things now.
At some level, it is no different than Emperor Norton money, or the various community scrips that pop up. Perhaps the threshold should be similar - people can play, but if it starts getting real use regulation starts biting.
q: What's even worse than literally burning fuel in return for money?
a: burning fuel for no money.
It renders the pretence that somehow it is different than state fiat currencies rather silly.
Fiat currencies are backed by the state's ability to tax. What are cryptos backed by?
vapors
Electricity grids in the end.
Backed is nothing more than pretextused to convince yourself, an atavistic concept. Both really are all about collective confidence.
Which renders the pretences of crypto ever more silly as it is "pretend Gold" in the end.
What are cryptos backed by? Greater fools, of course.
Something, anything really, has value only if people believe it does. Right now, lots of people seem to believe crypto currency has value.
From what I can gather, the value of crypto is that it's not controlled by banks or governments. To these people that is an advantage. I think that's more hype than reality, but like I said, crypto has value because many people think so.
About anyone creating a crypto currency, I don't see the late comers making an inroads in the current crypto market.
Right. It's also not supported (or not very damned much) by government or banks. So what holds it up? The same thing as every other medium: at minimum, the users' faith in its value. But also, faith in banks and governments holds up the trad currencies. Crypto has none of that; meaning, you're on your own, and it's more a gamble than a medium. To me its volatility is evidence of that; it's little different from mortgage-backed securities. Some people did get out of those at the right time and did well. Everybody else got pillaged. Cryptos however will flop (and maybe be reborn) on different schedules, from different stimuli and opinions. The people who know how to work it will do fine, but once again, the rest will lose their arses.
Right, and when you have large networks of people from social media playing the game just a little bit, the scammers can still rake in a ton of money while the losses are distributed across a million people who each lost $100.
There’s a big market for late-comers (or shitcoins as they’re also called) as a whole. Individually though, none of them command big chunks of the market
Cryptocurrency is haunted by the specter of the Bitcoin boom, so people are far more willing to bet on longshots than they might otherwise
How is cryptocurrency different from NFTs? They're both based on the Greater Fool Theory.
NFTs are 'non fungible tokens' which are just unique certificates.
Lately, they have been connected to the tokens in cryptocurrency - because they have serial numbers - but serial numbers are not something new or unique to crypto.
might as well ask why can anyone create baseball cards or beanie babies or send emails about the nice Nigerian Prince who needs some help and will pay you a lot of money.
I think WC Fields had an apt quote.
And. this is the point.
Kohl's issues Kohl's dollars. Is this a currency?
Products issue coupons with value against their products. Is this a currency?
Do we regulate these?
As noted, except for currencies specified by law as legal tender and backed up by sovereign governments, all such "currencies" are complete fictions underwritten purely by people's faith in the issuer.
Indeed any fiat currency is based on faith in the issuer, even sovereign fiat currencies.
Yes, we do regulate these. They're held against income as debt, so Kohl's can't just cash them out.
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Maybe look at it this way: People are now able to "mint coins" of themselves. Why do they do it? Ego and profit off fanbois.
Think of it like issuing stock. I can issue all the stock I want in Me, Inc. The trick is getting other people to pay money for it.
but there are regulations regarding stock. not so much re crypto.
Because stock represents ownership of something that legally exists.
I invented a crypto currency!
It's called Cyptid, it's worth as much as you can see in complete darkness at 3 am while incredibly drunk and pissing beside the highway without your glasses on.
Or maybe,
Crypt. Id.
sounds way more dashing and hyp.
You'd think Warner Brothers would come out with their own crypto currency based on Superboy's dog, Krypto.
Think how that would take off in the collectible market!
Seems like more of a Lex Luthor move.
It certainly undermines their key criticism of fiat currency, but crypto freaks seem to have a special talent for holding wildly paradoxical beliefs. When I started observing the scene back around 2014, I recall CoinMarketCap listing somewhere about 500 crypto currencies. That number is now nearly 18,500 -- an explosion of 3700% in only eight years!
I also find it amusingly ironic (and revealing!) that several of the crypto currencies which have been among the top performers are so-called "stablecoins" that peg their price to none other than the US dollar. How hilarious is that?
Yes indeed, it's really quite amazing how humans can keep completely contradictory beliefs that normally don't stand up to the slightest rational scrutiny.
We are naught but chimpanzees playing at being rational.
Crypto is just another neoliberal globalist con job.
Hmm, I am puzzled then that cryptocurrency seems to be the darling of the libertarians.
This does seem to be a bit of a knee jerk reaction claim.
DNFTT
Performance Art troll, with no attention to any internal coherency of any kind, sometimes not even in the same thread. Only to be read for the amusement value.
Well, any country can create its own currency. And whether you have any interesting in Rubellian Zloties depends on whether Rubellia provides anything you care about buying.
I think there's some value to the analogy. Any group (Apple, the Mormons, the NBA, the City of Ithaca) can create their own currency. And I may or may not find it worth looking at, to the extent I have any interest in transacting with them. BUT of course the flip side of this is why would I want to juggle 500 separate currencies when I can just use dollars everywhere?
If you have some sort of weird childish obsession with avoiding dollars, the analogy sounds good ("make our own currency and avoid the US government") -- but that weird childish obsession does not solve that second problem of "who wants to juggle 500 separate currencies"...
I'm sure you juggle 200 separate national currencies.... No wait, you probably just juggle the Dollar.
I just juggle Bitcoin. No one can create Bitcoin at will. It is scarce, unlike the dollar.
The blog "Moneyless" as some interesting posts on crypto. Also on some interesting national currencies.
http://jpkoning.blogspot.com
Crypto's great value is in money laundering.
Any bank can create money by issuing a loan. During the Free Banking era many banks issued their own notes. Why should anyone else be prohibited from making their own monetized token?
The technical reason why is that the bitcoin algorithm is open source code on github, so anyone can fork it. And legally, by the intent of its creator, there is no authority to say what's a "real" cryptocurrency and what isn't. Technically the algorithm was brilliant becaus no one thought of it before, but once someone did, any group of fairly good coders can reproduce it easily enough even without forking the repo.
Kevin, I love you, and there are plenty of arguments against certain cryptocurrencies, but this is a pretty illogical one: essentially the equivalent of, "anyone can create software - so doesn't that mean software has no inherent value?"
If you look at all of the cryptocurrencies out there, a number of them vary materially from each other in ways both minor and significant. The fact that anyone can write some code has zero bearing on the value of a given crypto.
Software doesn’t necessarily get its value from other people using it. If you write a program and fail to sell it to anyone else, you can continue to use it yourself and it still can provide utility to you.
Cryptocurrencies aren’t like this. They only have value if you succeed in getting others to buy it. If nobody buys your crypto, you can’t continue to use it yourself and it won’t provide any utility to you.
I'm replying to you, but this is true of the other responses so far as well. Here at least, Kevin isn't making a general argument that crypto is inherently valueless. He's making the highly specific argument that the fact that anyone can create crypto *shows* that crypto is valueless.
But crypto is just software. Just because "anyone" can code something with no value (a child making something pointless, for example), doesn't inherently mean that the concept of software itself is valueless. Again, it might be! But the fact that anyone can create a coin has no bearing on the question.
"They only have value if you succeed in getting others to buy it"
Well...... We've succeeded in getting others to buy it. In fact I'm still buying it and I'm confident others will continue to see the value.
The fact that you don't see the value has little bearing on its ultimate value.
Software is a tool, generally capable of accomplishing something, and therefore has intrinsic value to those who benefit from it. Crypto is a currency, generally only capable of being trader for something else of value, and therefore only has extrinsic value.
Nft's were an attempt to blue this line with terrible art that nobody actually wants.
Actually, software does have no inherent value.
There is a difference between "inherent" and "intrinsic" value.
Oops.. didn't notice the autocorrect
That’s like asking why can anyone start their own religion. Because they can. Hopefully, crypto does less damage than Qanon.
If Russia starts accepting Bitcoin for oil what does that do to the value of Bitcoin?
How does Russia turn that amount back into real money?
When evangelical preachers start flogging their own Jesus Cryptos you'll know that the grift has reached full maturity.
A bit of web searching and: https://religionnews.com/2017/10/04/christ-coin-launches-as-first-faith-based-cryptocurrency/
If you don't believe you're going to hell.
Yes but is that full faith???
Why? Are you launching your own CatBlogging Coin? Or would that be better as an NFT?
/s
"The process by which money is created is so simple that the mind is repelled." (John Kenneth Galbraith, "Money, Whence It Came, Where It Went")
"Anyone can create money, the hard part is getting other people to accept it." (Hyman Minsky)
The reason is simple. As P.T. Barnum supposedly said, "There's a sucker born every minute." And the birth rate is much higher today. 🙂
Completing the quote: And two to take him.
As soon as Earth gets hit by the next gargantuan solar storm that shuts down the power grid for a year, the ridiculousness of cyber currency will be manifest.
"Earth gets hit by the next gargantuan solar storm"
Good luck getting to your dollar bank account when that happens. In fact banks will probably be closed by fiat under much milder catastrophes than those that can shut down the Bitcoin network.
Anyone can sell Tupperware.
Another reader hit it on the head with this: ""The process by which money is created is so simple that the mind is repelled."
Money is made up / does not occur in nature! So I think we inherently have a hard time deciding when it's "real enough".
Also remember that the original idea is that a cryptocurrency merely exists to support a larger ecosystem, run by contracts programmed on its same blockchain. Any given coin is *supposed* to be akin to the national currency of another country, run by it own laws and economic mechanisms. Thus, unrestricted use of the technology (akin to the proliferation of traditional, open-source, server-based technology) allows many people to create their own vision of how an economy can work. Theoretically. It's sort of like how WordPress allows anyone to make a a website. I really mean that. We're just dealing with economics instead of communications.
Today, however, the landscape looks silly, because *it is*, because buying a given token doesn't *really* make you a participant in a separate ecosystem. It just makes you a speculative investor.
I think this is the part where we're stuck, and it looks likely that legislation on cryptocurrency will treat it as a speculative asset, not as a part of a larger open-source technology movement.
If anything, we should restrict who can list on exchanges (sort of how we do with stock exchanges), rather than restrict who can create a coin. As far as things that ordinary citizens can invest in, crypto coins are basically publicly tradable from the get go, whereas if you have dreams of listing on the NASDAQ you have a lot more work to do (y'know, building a whole business) in addition to the paperwork. My sense is that people asking "why are there so many coins?" are getting at this part of it.
Again, this is the theory. Bitcoin isn't even close to the answer of "Why cryptocurrncy?" or "why blockchain?", but we also don't have good notable examples to use as answers either.
Quick note: why would anyone want to build an organization on a blockchain in the first place? It's *just another way* to digitize identity and handle encrypted transactions. Once we reach the point where a blockchain can be run across a few smartphones, I think we'll start to see a lot of activists using this technology (there's no server to shut down, no way to fraudulently create an identity, no central point of failure). I'm excited for that part.
That Hyman Minsky quote is a pretty good explanation of why anyone can create seven new cryptocurrencies before breakfast, yes. Shakespeare also gave a good answer to that question.
GLENDOWER
I can call spirits from the vasty deep.
HOTSPUR
Why, so can I, or so can any man;
But will they come when you do call for them?
It's the trendy thing, we'll see how it bears out. And I support Joe Biden 100%, he's right about Vlad, we can't have that lunatic threatening the world, we just have to take care of it the right way.
I didn't say 99%, 100%.
Right now, it is illegal to issue your own currency and has been for a while. Before then, anyone who had the precious metals could issue their own paper money. That meant you had to look up any bills tendered in the American Bank Note Reporter - they're still around, but for hobbyists and collectors - to see how whether the issuer would likely redeem it for specie. If you think crypto was wide open for scams and shenanigans, that was what all paper money was like through the 19th century. That's why the federal government changed the rules.
This led to other problems. Back in the 1907 crisis, it was hard to find currency to buy things. You had the money in a bank account, but the bank didn't have any bills or coins to give you. A guy named Lauridsen - they named the street next to mine after him - issued his own currency, and that kept the town afloat. After the crisis, he was ordered to stop. During the 1933 bank holiday,some economists thought we would all climb trees and shy coconuts at each other. Instead, people issued checks or IOUs that could not be cashed since the banks and clearing houses were closed. After the crisis, there were a lot of checks to process.
The whole point of crypto was to get away from government regulation. It was like Uber evading taxi and car service laws or those "private clubs" in Utah that could serve alcohol. The problem is that people want government regulated money, because they don't like getting cheated. They just like to gripe about it, and, if they are wealthy and benefit from regulation, they don't want to pay for it. Crypto doesn't make sense for running an economy, but it does make sense for criminal transactions: laundering the profits of crime, avoiding sanctions on enemy combatants and so on.
I expect various versions of crypto to stay around because people who steal other people's money will find it useful. There will probably be a cycle with new versions of crypto that are obscure enough to avoid government crackdowns becoming popular with well heeled thieves. As they get more popular, the circle of users will widen as lesser thieves start using it as well. Since there are people who enjoy places where "the underworld meets the elite", some crypto will get an even wider circle and more allure. At that point, expect the serious criminals to move on to a new blockchain and the government to start following the old blockchain to close criminal cases and try for restitution.
The point of "money" is that it's issued by an agent, typically a government or a bank, that is trusted to stand behind its money. Bitcoin is trusted to do...what?
Avoid accountability.
I think people are making a mistake in saying 'money is made up'.
Value isn't made up, it's recognized, and that recognition can only happen in social context. A diamond is just a rock without the human interest.
The sense of value reflects the recognition of a capacity of movement and that becomes abstracted and applied to some kind of token, which can often be seen in non-human creatures like birds and other animals, where they might present an especially attractive stick to a prospective mate, the stick having no utility at all except as a token.
It becomes more complex as consciousness increases but it is always capacity for movement. The good faith and credit of the United States is it's ability to do things.