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I understand that crypto is a scam that will rob millions of people of money they desperately need.
But what you said there is literally the end of my understanding of what crypto is. It has something to do with computers solving math problems, and somehow that’s worth money.
What?
the problem with crypto is that when you try to explain it, it sounds so stupid that someone else thinks you have to be explaining it wrong
but if you want explanation, this one is fine https://ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-ponzi.html and this https://www.ic.unicamp.br/~stolfi/bitcoin/2021-01-16-yes-ponzi.html
When I think of crypto I think of that bloke grubbing through landfill for a lost hard drive. I think of Sam Bankman Fried. I think of Trump's meme coin. Yes, I'm sure someone must be explaining it wrong to this old lady.
So the same as most currency that isn't backed by actual valuables? Like the US dollar after it stopped being backed by gold like 100 years ago?
Crypto is a world currency that people have assigned value to. Pretty much all other money is a currency that individual countries have assigned a value to. Both types can be just as worthless. Hyper inflation has made money from many countries worth less than a roll of toilet paper to wipe your ass with. For that matter, the US dollar could buy you 30 rolls of toilet paper 75 years ago. Now it can only buy you like 1 roll.
A pretty generous comparison. USD is at least FDIC insured and somewhat tied to our country's finances. Crypto only stabilizes around the markets that use it, i.e. black markets.
At this point, the US is becoming a black market.
FDIC insures you won't lose your money if a bank or something goes under. It doesn't do anything to insure that the money's value stays good.
You have a good point, the value of any money (even a lot of gold's value) is a social construct, i.e. only what the population makes of it. For that reason, I don't think that crypto is inherently bad, but the fact is that most people trading aren't using it as money (you know, an intermediate good to facilitate trades), they're attempting to use its wildly fluctuating value to make a quick buck. Those types of trades ironically only make it more volatile, and are what made it volatile in the first place, so there's now a vicious cycle. Will crypto ever stabilize? Fuck if I know, I'm not qualified to talk about this, but frankly I think you could say the same about most people in the stock market and especially in crypto. Maybe if a critical mass of people start actually using cryptocurrency as a currency it'll change, but who can say.
Crypto has already started stabilizing. But only proof of work can demand the trust and longevity to make it so. Everything else has the threat of a scam. Do not trust proof of stake. Research those terms and the Birds Eye level of the crypto they represent for more info.
These are great, but they don’t explain what a crypto coin actually is.
technical details vary and honestly matter little. what matters more is what people do with these things, and that's what's explained
Its just an entry in a ledger. It says something like, "blandfordforever sends courageousstep 1 coin" along with a cryptographic signature from blandforever that validates the transaction. This means you now have and can transfer that coin to someone else, provided that you have the key to sign the appropriate transaction. That's all it is.
The miners are all competing to sign a "block" of transactions onto the ledger by figuring out new correct answer to a math problem that's determined in part by a number from the previous block. They are rewarded for this by being able to send themselves a preset number of coins in this new block they've signed. Transactions aren't final until they've been added to the blockchain by this mechanism.
This has been my favorite response so far. It explains nothing, but the mental image is priceless.
You know what a normal database is.
The Blockchain is a distributed database instead of a centralized one where normally people can verify that each other part of the database is correct.
Generally anything a distributed database can do, a centralized database in good hands can do better. Except for crimes. It's more difficult to get away with crimes when they can be shut down in one place.
Also it's harder to undo Blockchain/crypto stuff. They sell this as a benefit while the primary use is scams and rug pulls.
"The government can't get your money back." Yeah, gonna be hard to get back thr money you were scammed out of with a court order, isn't it.
They also try to sell it as anonymous, but it's very much not. Everything is on the record, so if they link you to an address (and they generally can), they can see every transaction you've ever made. There used to be services to obfuscate this, but the government has well and truly broken through those. They can find you of they want to.
Crypto is a an MLM for guys. You can make money, if you're lucky enough to be the scammer and not the scammee.
It's a speculative asset that fluctuates based on the whims of billionaire hedge funds and early crypto investors. There is zero value in owning it unless you got in early enough. And even then it's a situation of the last man holding the bag. Someone will end up losing their asses.
Most crypto is. Proof of work crypto is not and brings actual stability and longevity to the table. Most people don’t understand this. Proof of stake is never anything more than gambling.
On average the value of any crypto token is less than 0 because of the high cost to produce and transfer them. Ironically it seems people find the most wasteful tokens more valuable. "It's hard to make so it must be valuable" or some such nonsense.
No, that's basically it.
The reason for all this work is basically the concept of a currency that isn't backed by and dependent upon governments while also being impossible to counterfeit, hence a lot of encryption because it fundamentally says that you can't trust the other computers that you're talking to. Everybody holds a ledger that says that you have $5, so you can't suddenly say that you actually have $10. And all the math is to prevent inflation by limiting the amount of currency that exists at any time. The more currency there is from solving the math, the harder the math gets to slow down the creation of new money.
It all falls apart, though, because the only value that crypto has is what it's worth in traditional fiat currency - the very thing that it's supposed to replace.
So it's just a bunch of computers doing a lot of math to make funny money that's supposedly worth something because...of reasons?
You’re close. 1 unless the coin is proof of work you can’t trust it. 2 the value it brings it in the replacement of third party trust for economic transactions and the infrastructure and labor required for that, along with global, instant access to transfer infinite amounts of value as well as store that value logically within your own mind.
Downvotes are coming but if you’re seriously intellectually curious where the value is, read the Bitcoin standard.
prevent inflation by limiting the amount of currency that exists
which is a flawed premise itself. the supply of currency needs to expand at the same rate as productivity increases or else you get deflation which has its own set of problems
it's also at the same time libertarian political project that aims to, how they put it, "separate money from state", which is in itself absurd, but not for libertarians, because their only problem with capitalism is that they're not on the top. crypto is an attempt to "fix" that "problem". see also doings of peter thiel, curtis yarvin, urbit,
first they build a place with no state interference and then they learn hard way why there's so many financial regulations. sometimes it's deliberate and it's a way to use novelty to repackage old financial crimes to deflect responsibility long enough to fuck off to Dubai. sometimes it's scams all the way and scammer already lives in North Korea
"it's somehow worth money" is basically true of all fiat currencies. It's worth what the consensus agrees it is worth.
(this comment should not be read as a defense of crypto)
Government currencies are backed by taxes - someone did something and gave a portion of the value of their labor to the government, represented by currency. The government then reinvests the labor into the country supposedly for the public good. This is expected to continue indefinitely and it is this cycle that gives the currency value.
Crypto companies have investors. Investors are only attracted by the prospect of growth. They have no natural revenue cycle, no way of creating value without hype and people gambling with their.money.
The exception is the value inherent in being a currency outside of the control and surveillance of the Governments. Hence all the illegal activities. As time goes on cryptocurrencies will be more regulated and controlled by government, and it will diminish that trait.
It's fucking stupid.
Traditional currencies are backed by governments and the global economy. Boiling down USD/EUR to "it's worth money because we say so" is many many magnitudes larger of a splicification than saying the same for crypto.
I think it helps to reinforce how silly crypto is, though. Once you establish that fiat currency is basically magic paper we all agree is worth something because it's backed by things like the government's reliability and contract to uphold that value, and then you say, "and crypto, designed to replace fiat currency, is backed by fiat currency," the whole thing falls apart like the house of cards that it is.
How can you justify a funny money that doesn't do anything new in terms of cyber security, while burning vastly more resources to do it, and is only worth something because of the currency that it's supposed to replace, and that value rapidly fluctuates from moment to moment.
What is a fiat currency?
Oh, I just looked it up. So it’s the USD.
It’s any currency that is unbacked by a commodity.
Fiat currency is just as silly. As is all money, really.
"I trade numbers for food. The numbers are accessible via a magnetic strip on some plastic in my pocket." or "I trade paper for clothing but the number of papers isn't as important as the number printed ON the papers." Both of these realities are absurd. :)
As a store of value representing labor rendered: neither of those are terrible systems and most people don't understand either of them anyway. Fiat seems "normal" because we grew up with it. That said: I'm no apologist. Popular crypto currencies offer little novelty for the layperson, no true improvement on the concept of currency generally, and cost orders of magnitude more to maintain their required infrastructure. I fail to see the appeal.
There are some projects which focus on the practical utility of decentralized currency (I remember thinking Nano (wikipedia.com) was cool back in the day) but they don't get the same kind of attention as meme coins because they can't be abused as easily. I've heard stories of these kinds of tools facilitating commerce in places where the local currency collapsed. Neat as that may be it isn't revolutionary... Still more convenient than bartering via cigarette though.
Fiat isn't "silly" insofar as there's an underlying reason why fiat has value. The US dollar is valuable because the US government only accepts tax payments in USD. As long as the US government demands tax payments and has the ability to make good on those demands, US dollars will have value.
It's decentralized, so how do you prevent people from making up bullshit lies that didn't happen about where the money is? You do it by incorporating a difficult math problem. Then to incentivize people to actually work on that instead of just using the money, people who solve it get a reward.
I am not pro crypto, just explaining.
See, this guy gets it
Public ledger blockchain is genius technology, whether you can imagine a use-case you consider valid is not a condition for it to actually be an amazing construction.
I don't think there is one legal use case that can only be solved by a blockchain and not cheaper and faster with a classic database.
Except money laundering, crapto is fantastic for that.
I am sure scamming people out of their money with crypto is legal in a few jurisdictions.
Considering the last few big rug pulls haven't ended with anyone in jail I'll say that it's legal in the US.
Yes. Absolutely. But I see where the appeal comes from. A few years ago I bought some Bitcoin for 50 Euro. A year later it doubled in value. That was nice. And that was moderate compared to when I first got Bitcoin and it was as cheap as dirt and suddenly it's worth 70k. With the world in the grips of the billionaire class people get desperate for even a chance at moderate wealth. It's a sad symptom of the fucked up world we're living in.
Just a big lottery you'll never really win https://youtu.be/4DUkS98yw5Y
Yall seem to young to to understand crypto. Its original intent was to combat the crazy bad economic stuff from 2007. It’s not inherently a scam as a category. 2007s banking collapse was really scary when it happened if you were paying attention. It made 9/11 seem like NBD. Unfortunately not much has changed and you’ll probably get to see something similar again.
Huh. I've never heard that being the reason, especially when crypto was supposedly made outside US but the 2007 crisis was centered around US.
The original reason is in the name.
Then you don't understand crypto.
The only crypto that makes kinda sense is the idea of a stablecoin (essentially a layer around a stable currency/reserve), but so far there's not really a good implementation of one.
All the big crypto coins are just more volatile stocks with shittier tax implications (assuming you don't try to skirt the law with it)