Since 2015, cryptocurrencies have swiftly entered our reality, and now only the lazy haven’t heard of them. But despite the frequent discussions about cryptocurrencies, most people still don’t fully understand the meaning and essence of their existence. Some believe that Bitcoin and similar digital currencies will replace traditional money, others see cryptocurrency as an investment, while still others think you can mine them and not work.
In general, it’s time to understand the most important principles of digital currencies to accurately assess whether they’re worth our attention. AdmiGram.com explains Bitcoin and its counterparts in simple terms so that everyone can make the right choice for themselves.
What many still don’t understand about cryptocurrencies
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Blockchain is a decentralized database, a chain of blocks simultaneously stored on multiple computers connected to the internet. This technology is used for decentralized data storage to reflect all transaction data.
Cryptocurrency has no material or electronic form — it’s simply a number representing the amount of digital units. From this follows that a “digital coin” is just a non-material asset and nothing more.
Cryptocurrency questions the economic system and traditional financial institutions. This is unacceptable in the current model of the world, as it would disrupt everything. Therefore, no state will allow cryptocurrency competition with its money.
Cryptocurrency isn’t initially a financial pyramid, but it inevitably transforms into one as soon as demand for any of the digital coins increases. Demand is dictated solely by speculative sentiments and has nothing to do with the “real” economy.
Cryptocurrency is a way to profit off others. If Bitcoin and its counterparts claimed to replace real money, they wouldn’t be sold or mined to sell and profit; cryptocurrency would circulate freely, and we could use it in any store.
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Can you profit from Bitcoin and its counterparts? Yes. But only if you buy cryptocurrency on a decline and then sell at a peak. And even then, only if you can find an honest seller, buyer, or exchange. Mining at home today, like it used to be, is economically unfeasible.
Why can cryptocurrencies be called a “scam”? Because everything depends on demand and speculation. The majority of digital coin owners only want to profit from them by selling them for real money. No one is striving for cryptocurrency to become any kind of alternative to money.
The cryptocurrency exchange rate isn’t its real value but only an indicator of speculative demand expressed in monetary terms. Nobody aims to express it in terms of the value of material assets. The digital coin itself isn’t backed or secured by anything, which once again suggests the idea of a financial pyramid.
When will the cryptocurrency bubble burst? When the “whales” (major investors) find more profitable investment spheres, or when they are prohibited from investing in Bitcoin and similar instruments.
Currently, no state aims for any control or regulation of cryptocurrency circulation. And where there’s the “Wild West,” nothing good will come of it. It’s easier to ban than to deal with it. Therefore, everyone should make their own conclusions about whether to “get into crypto.
image on top: Dmytro Demidko / Unsplash
