I feel like I don’t understand cryptocurrency. I have a fairly vague understanding of the block chain technology, but I don’t understand how that translate into the valuation of bitcoin and others as an asset class. Can someone more knowledgeable enlighten me with resources to learn more? Reddit? Blog articles? Feels most resources are pretty superficial and don’t help to understand the valuation of it as an asset class. I’m interested in learning more.
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Do you understand non crypto currency? Start there and the add in the reality that a cryptocurrency's value isnt tied to performance or conflict of the issuing country. Venezuelas currency is in crisis, bitcoin and ether isnt.
Here are two good articles that explain the key points https://www.luno.com/blog/en/post/how-bitcoin-price-determined https://techcrunch.com/2017/08/03/from-barter-to-blockchain-a-history-of-money/
Think about how absurd it is that centuries of monumental historical events involve thousands of people fighting and dying to own a chestful of shiny metal. Then reverse the argument. If that’s not necessarily absurd and makes sense to you then apply that frame to btc.
From quora: In a prison, there are no currencies. No one has access to money of any kind. But a prison, although small, is still a society. And a society needs to trade goods and services. Maybe someone is a barber. This person will cut people’s hair but wants something in return. Something that he can use to later go to his cellmate and give him in return for the book that he wants from him. The cellmate also needs something in return for the book to use for getting himself another book. How do you do this without money? Well, they use cigarettes as a currency. A hair cut is worth 20 packs. A chance to play basketball is worth 10 packs. A book is worth 5 packs and so on. There is a problem. There are not enough cigarettes inside the prison in each person’s hands to be able to do all the transactions. But everyone knows that once a week a new supply comes in. So instead of getting the packs from each other, they start “owing” each other some packs of cigarettes. Joey gets a haircut and he owes the barber 20 packs. The barber gets a book and owes John 5 packs. Once the new shipment comes in, everyone will settle their debts. But how do we keep track of all this? Well, everyone will have to carry a notebook with them. Whenever two people make a transaction, they both write it down in their books. Luke writes “I owe Johnny two packs” and Johnny writes “Luke owes me two packs”. This way we know who owes what to whom. But we all write everything in the same format. One transaction after another. So it becomes a long chain of transactions. If I know how many cigarettes I had at any point and go through the transactions after it, I can figure out how many cigarettes I will have. Last problem: how do we know what people wrote in their books are correct and no one is faking transactions? I can go steal someones book and write a fake transaction in it. Well, to overcome this we assign the wisest most trustworthy person in the prison as a witness. Whenever two people are making a transaction, he has to witness it and sign both books with his own signature. This way, we know that each transaction is witnessed by our trusted person and actually happened. Cigarettes are bitcoin. Notebooks are ledgers. The agreed upon text format in the notebooks is blockchain. The wise persons are bitcoin miners.
Wow..that's a really good explanation!!
Dude - you rocked that
I don’t understand what gives diamonds value. It’s just a hunk of rock. The point is, scarcity creates value out of anything. What gives gold value any way? How did we arrive at a point that we all agree that gold has value?
I’m cross posting but here goes... As absurd as it sounds gold has value simply because people choose to impart value to it. There is no other reason. It is completely absurd yet centuries of human history is defined by it. Is btc absurd? Yes. But it’s no more absurd than gold. Yet it has some real advantages over gold. So if humans are certifiably crazy for worshipping a shiny metal, at least Btc is gold++.
What’s advantage over gold? Other than being weightless?
The valuation of Bitcoin isn’t derived from the blockchain technology. It’s valuation is only determined by supply and demand. Just like any other asset.
Can't you buy fractions of bitcoins? How many float numbers we have between 0 and 1?
You can. A fraction of a Bitcoin is called Satoshi and is worth 1/100,000,000 bitcoin.
There's an excellent course called 'bitcoin and cryptocurrency tech' on coursera. They're lightweight and the profs do an amazing job of making them easy to understand.
@numtu I love that piece you posted. And not to dispute what was said, but my question is what utility does resistance to entropy provide to anybody? It certainly is a curiosity, but gold had its allure well before anyone even knew about the definition of entropy.
Is there a chance that BTC will change from proof of work to proof of stake in the future?
At this point there is no understanding. It’s just a big bubble now which will probably go bigger before collapsing.
Define collapse? Any hard proof of your hypothesis?
When everyone buys because they think it’s going up - it’s a bubble , when it goes down and people start selling then it will be known. The point is that there is no fundamental reason except everyone jumping on it - that IS bubble.