CRYPTOCURRENCIES: Mysteries, Myths, and TRUTHS
BY JEFFREY WISE
When I first heard about crypto in 2013, I was sitting in a physics class at Ohio State University. At first, it simply sounded like a novel way of approaching money, but too complicated for a regular guy like me to wrap my mind around. But I’m innately curious, so I dove deep into this murky topic, including supply charts and the method of issuance of Bitcoin. I didn’t understand exactly what it was that I was learning, but the concept, however vague, seemed likely to somehow, someday, affect my personal financial reality. Here I am, nine years older, still a regular guy, with my mind and finances firmly wrapped around how cryptocurrencies work. The purpose of this article is not to go into those operational intricacies. I just want to share the basics of the technology for those regular people, like me, who are curious but have no idea why or how Bitcoin even exists, let alone how it gains and holds value. Let’s first admit that cryptocurrencies seem kind of like unicorns – they probably don’t exist because you can’t see them. To begin, the whole idea of decentralized currencies and blockchain is rooted in the idea of “digital scarcity.” That concept never even existed before Bitcoin “turned on” in 2009. This concept is really hard to grasp because it’s so dissimilar to paper currency – you can’t stuff it in your wallet and the Federal Reserve can’t print more if we, aka the U.S. Government, runs out. That’s a different kind of scarcity, but if you look closely, it’s still “manufactured scarcity.” The fact that the Feds aren’t guaranteeing the value of cryptocurrencies makes the investment sound scary or frivolous, especially when you use hard-earned paper dollars to buy it. But think more deeply and you’ll discover one of the basic tenets of cryptocurrencies: If the Feds aren’t controlling issuance, that also means the Feds aren’t controlling the assigned value of this “digital” method of exchange. Hmmmm. So who does control the value?
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