It's silly to say that crypto is "backed by nothing," when it is an idea, the same as anything else.
What is the money in your bank account? Can you go down to the bank right now and find it? Your money?
What you would find is a network of computers full of zeroes and ones, the same as any cryptocurrency. When you ask the teller to make a withdrawal, he or she will hand you pieces of paper which serve as stand-ins for these zeroes and ones--these blips on a screen--and that is what you are to construe as being "your money."
Did you know that less than 10% of the money in the world even exists as paper currency? The rest is just...blips on a screen:
In fact, economists estimate that only 8 percent of the world's currency exists as physical cash. The rest exists only on a computer hard drive, in electronic bank accounts around the world.
What of the computer I am currently typing on? It's a concrete reality, right?
Sure it is. And yet, without the idea of a computer and the presence of a mind to assemble the various components fashioned from raw materials and chemical compounds into a working whole, this thing would be, well, "nothing more," for lack of a better turn of phrase, than the components from which it has been assembled via ideas, schematics, and plans.
source.
What of those components? Surely things like gold and silver, and other raw materials have intrinsic value, right?
Wrong. Economically speaking, all value is subjective. Think about the man in the forest who is freezing to death and who happens upon a small flint lighter. Think of the same man with a wallet full of cash at a resort beach in Hawaii in the summertime. He will walk by that exact same lighter lying on the beach as if it were a piece of trash. He may even pick it up and throw it in the garbage if he is an environment-friendly sort of chap.
Even something so ubiquitously valued as, say, gold, is really only valuable because there are humans present who are able to, and who do value it. Now, it may be argued that gold has some sort of intrinsic value, or even "spiritual worth." I am not here to debate that one way or the other. I am simply here to say that as far as economics is concerned, all value is subjective.
With this in mind, let us now examine cryptocurrencies.
I've always been fascinated by the cowrie shell, and how many ancient cultures used them successfully as money and currency. These shells are nothing more than small seashells that can be found near the ocean, yet they served successfully as a device by which to measure value for long periods of time in human history. HOW!?!?
THOSE THINGS AREN'T MONEY!! THOSE ARE JUST TINY SEA SHELLS!?!?
Are you beginning to get a sense of your power yet? Our power? When we realize that this juggernaut called "Bitcoin" was only a "worthless idea" and "not real money" a mere 8 or 9 years ago, and now that it is valued at nearly $20,000 U.S. dollars, we can see the theory of subjective value in action, just as we can with the cowrie shells in ancient history.
Any time a group of human beings (individual economic actors) get together and decide that something has value and are willing to trade it amongst themselves, a market is created. Whether or not this market consists of gold, cowrie shells, bitcoins, twigs, or discarded fingernail clippings is irrelevant. What is relevant is how well the currency serves its purpose, and functions as a useful store of value and means of exchange for the people using it.
Sure, some things work better as money than others. Gold, for example, can be melted down and minted into coins, which are easy to carry around and trade. If I had lived in times past and chosen wagon wheels as my "currency" of choice, I would have had quite a time attempting to store and amass them. Some currencies can also be used in many practical, concrete applications. Gold, for example, can be used to make jewelry or electronics equipment. Some economists argue that anything that can properly be called "money" must have first been traded as a commodity. One could argue that things such as Bitcoin either destroy this idea or reaffirm their own extra-monetary utility in light of such theories. I am not going to get into Mises' Regression Theorem here.
Suffice it to say that, as far as the science of economics is concerned, all value is human-derived and subjective.
I have lots of doubts about cryptocurrencies in general, and a lot of hope for them, as well. I love gold. To me, it can never be replaced. All that said, anytime someone says things such as: "X cryptocurrency isn't real money!" or "It's not backed by anything!" you canbe almost sure they are either uninformed or blowing smoke. Indeed, the "fiat" paper in their wallets is backed by nothing, and a much less reliable--and infinitely more brutal and violent--"nothing."
What I want to get across in this post is the power YOU HAVE. YOUR IDEAS ARE WHAT IS SHAPING THE WORLD AS IT UNFOLDS RIGHT NOW!!! WHAT A POWER TRIP!
Now get out there, value what you value, and CREATE!!!!
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~KafkA
Graham Smith is a Voluntaryist activist, creator, and peaceful parent residing in Niigata City, Japan. Graham runs the "Voluntary Japan" online initiative with a presence here on Steem, as well as Facebook and Twitter. (Hit me up so I can stop talking about myself in the third person!)