When we talk about cryptocurrencies, we often get comments saying
that Bitcoin, Ethereum, and others aren't worth anything. That people are just artificially creating its value.
And you know what, that's true.
I also hear that they're not real because
it's only virtual money, not physical.
That's true as well.
But over here, I would like to put these into context.
I'm not trying to convince you to buy crypto, just putting things in context.
So let's start with the argument that cryptocurrencies only exist in the virtual world and that if all computers were wiped out, none would be left.
That's undoubtedly true, but the same can be said for the currencies that we use in our day-to-day lives.
Take the dollar for instance: there are about 14.4 trillion US dollars in existence, but only 1.7 trillion of those exist in a physical form (that is coins or banknotes).
That's just 11%.
The remaining 89% is just virtual money, stored as a number in the databases of financial institutions.
So that makes our "real money" not so different
from cryptocurrencies.
The second thing I'd like to address is that people seem to be under the impression that paper money is worth something because it's backed by a commodity like gold.
We call this the "gold standard."
A system in which a currency is tied to a certain amount of gold.
Doing this has two implications: first of all, it fixes the value of a currency to the value of gold.
That's believed to be good because gold prices aren’t volatile.
And secondly, the supply of a currency is now limited to the amount of gold you have.
If you want to create more money, you have to acquire more gold.
The gold standard was in use for quite some time, but the system was abandoned in 1971 after president Nixon decided to end the dollar's convertibility in gold.
That meant the value was no longer fixed to gold, and the dollar was allowed to "float."
It also allowed the government to control the supply of money by printing more whenever needed.
This could be done to limit the impact of an economic crisis, for instance.
Other countries soon followed, and the world switched over from the gold standard to what we call “fiat money”: a currency without
intrinsic value.
In fact, currencies only have value because governments have declared them to be legal tender and because we all agree that it's worth something.
That's it.
Our modern monetary system is only held upright
by our belief that money has value.
We're willing to go to work every day to get
payed because we believe that someone else will exchange our hard-earned money for something else, like for buying food or renting a home.
It’s actually a self-fulfilling prophecy.
We all trust that our money has value and therefore it has.
If we stop believing in the value of money or the government can no longer guarantee it, we see hyperinflation.
The value of money drops and the prices of goods increase substantially.
We've seen this a few times in history.
For instance, in Germany after the First World
War. Prices of goods doubled every two days.
At one point people burned their money because it was cheaper than buying firewood.
So if our money has no real value, we should
all start buying gold, right?
Well, we could take it one step further and ask ourselves: why is gold considered to be valuable?
I mean sure, it's a shiny metal with useful
properties.
But is that enough?
Could we say that gold has no real value either?
That we all believe and agree that it does?
Well, yeah!
That’s completely true.
Throughout history, gold has been considered
as one of the most valuable materials out there, probably because of its unique look.
But that’s about it.
The only thing that gold has going for it is that's relatively rare, and that's it crucial for some industries like electronics.
But other than that, gold is just like money.
In the conclusion, I would say that...
People are right when they say that cryptocurrencies
have no value and are worthless.
But they're wrong to think that the Dollar, Euro or Yen are any different.
We created them, and each of us is keeping the idea alive that it's valuable.
So that was it...
I hope this brought some clarity to the topic.
Signing Off!!!Peace out✌️
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