Bitcoin, Cryptocurrency, and Cryptoassets: Excerpts
Beginner’s Guide to Trading and Investing in the Digital Money Revolution
The digital world is like a parallel universe: it exists within our world, it has permeated our thinking and our society, and in so many ways has opened up a world of new possibilities in communication and information, and what is finance but essentially the intersection of both?
Zero trust is an assumption made by cryptographers. Yet with traditional currencies, all trust lies with a Central Bank, ruled by (some would theorize ruling) governments. Here is a logically slippery slope: Do people trust the government to have their best interests at heart, and do they trust them to manage with fiscal responsibility?
Blockchain technology, in addition to zero trust mechanisms, also is a straightforward approach to the exchange of value, with no real consideration given, at a fundamental level, to interest, lending, and debt.
Most people take for granted that the unit of our society’s value as currency is some kind of fixed, stable constant. In reality, foreign exchange markets will quickly teach you that your Dollar/Euro/Pound/Yen, et cetera, is just an undulating wave in an ocean.
For crypto assets, the underlying network’s utility and its adoption create value through its use case.
The more people utilize the services, the greater the demand becomes for the asset itself. Demand versus supply causes prices to increase, which fuels even more interest in the crypto asset as a standalone value holder.
This process becomes a self-perpetuating loop: people desire to hold the asset for its potential future value, increasing the developers’ incentive to maintain and improve the network to facilitate better functionality and utility capabilities.
All currencies stand on arbitrary (made up but mutually agreed upon) value. The question becomes, “what promise do I want to base the value of the currency on”?
Bitcoin has proven as an experiment that a global exchange of value can and will be established without a central governing authority by utilizing cryptographic…