Are you still wondering why SteamDollars have real USD value?
If your brand new to SteamDollars and cryptocurrency in general you might be wondering around the site trying your best to work out why people would pay real money for a virtual coin that's nothing more than numbers on a screen.
The problem i've come across when someone who knows a lot about cryptocurrencies tries to explain it to someone who has never come across it before is they often skip the why, and head straight into the how.
(Quick note for the clever folk. Going on about some guy and his fancy maths stuff that mines a virtual coin that's traded and exchanged with virtual wallets. Before we understand the why will lead to glazed eyes faster than an amphetamine fuelled Speedy Gonzalez can say "Ándale! Ándale! Arriba! Arriba!" you have to break us in gently)
What gives "real" money Value
Before we can look at cryptocurrency we need to have a look at the real stuff and why it has value. So take a note out of your wallet and have a good long look at it.
what gives the piece of paper in your hand value?
Is it the material it's made of?
would you hand over $10 or $20 for a random piece of paper the exact same size and weight?
No, well it's not that then.
Could it be the pictures or the words printed on it?
well they are only to differentiate it from other pieces of paper and to let you know how much value that piece of paper has.
How about watermarks and metal strips? well we all know that's so we can tell that this particular piece of paper wasn't printed by some dodgy bloke in his shed, who happens to have a printer and nefarious deeds in mind.
That piece of paper in your hand has value simply because you and everyone else on the planet thinks it has value. so eveyone will readily exchange goods, services and time in exchange for it. Simply put it's valuable because someone wants it.
So why will people spend real money on the virtual stuff? well the vast majority of real money is virtual to. Only a tiny percentage of money can actually be held in your hand. When you go to a bank for a loan or mortgage the bank don't send a cashier into a vault to borrow the cash from some OAP's savings to fund that lone. Someone simply types a few numbers into a computer creating the money simply because
A) you want it
B) you are willing to pay more than you borrow back
C) you meet their conditions to get it
when you use a credit or debit card no one runs to a vault and moves actual cash about, a figure is deducted from your account and added to someone elses through a computer network. So most "real" money is just numbers on a screen. just like Steamdollars and bitcoin.
It's the same with SteamDollars
And I mean exactly the same! SteamDollars have value because people want them and there are a lot of reasons to want them..
It's harder to trace and tax
It offers potentially bigger rewards than a savings account.
they can act as an equity investment
some people just don't trust the banking system anymore.
There are probably as many reasons to use cryptocurrencies as there are people using them and so long as those reasons exist and you'll be able to convert your SteamDollars into cash.
Note: I have over simplified quite a bit, this is just enough to give you a very basic understanding. There is so much more to cryptocurrencies value than this, but with this and a basic understanding of how it works combined you're set to learn and earn as you go along.
Thank you for the explanation! Now, instead of explaining to my friends about cryptocurrency, I can simply make them read this post! hahaha
great share! :)
Awesome I really hope it helps you get them on board.
yeah! already managed to get two on board! more to come soon :D
Liking this post for the questions asked in this section. Spot on. The way you present the questions is enough to get the average person questioning money in the correct way.
Well done! 👍🏻
Thank you Shayne.
"real money" has value because its backed by a government. People in the country where its minted (generally) have to accept it. People who try to print fake money in the country where its minted risk harsh legal penalties. Credit card transactions are settled... those numbers on a screen eventually translate into hard cash.
Just the standard vanilla "why crypto is good" reasons don't really work for anything except bitcoin, they never have.
I deliberately left this out as i was aiming for a exceptionally basic explanation for those who are experiencing cryptocurrencies for the first time and may have a case of information overload.
Besides all government backing does is add to the perception of value by making people feel their money is secure. Even the IMF admit flat money is essentially worthless.
" Fiat money is materially worthless, but has value simply because a nation collectively agrees to ascribe a value to it. In short, money works because people believe that it will."
And that belief in the value is crucial to it's success.
"Belief can fade
Countries that have been down the path of high inflation experienced firsthand how the value of money essentially depends on people believing in it. In the 1980s, people in some Latin American countries, such as Argentina and Brazil, gradually lost confidence in the currency, because inflation was eroding its value so rapidly. They started using a more stable one, the U.S. dollar, as the de facto currency. This phenomenon is called unofficial, or de facto, dollarization. The government loses its monopoly on issuing money—and dollarization can be very difficult to reverse."
Both quotes taken from the imf's back to basics blog post which you can find here http://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm
Good post nice and simple. You would need quite a lengthy post to explain the monetary system in detail as you mentioned many governments no longer issue currency including some who have their own reserve bank. Once upon a time money (legal tenders )issued were receipts from gold deposits. Now they are just agreed values to stop us fighting the street for food ;)
I think you misunderstamd my argument. I am not saying "real currency is better than crypto currency because the value real currency is backed by the government" I am saying that "cryptocurrency" is better than real currency (at least in some ways) because its backed by intrinsic value, like gold or any other commodity. Crypto is not fiat money. The two should never be represented as the same thing. Because crypto (and, iMO especially steem) is NOT materially worthless.
At the end of the day, the argument that "anything we want to call money is money and its all just numbers on a screen and the crypto revolution will come if we all just peter pan it and believe hard enough" isnt going to convince anyone. It will work against adoption and decentralization.
this is my take on the material value of steem... https://steemit.com/steem/@sigmajin/not-like-the-others-why-steem-price-hasn-t-come-close-to-peaking
Thanks for the feedback sigmajin. I'm still learning myself so I'll edit the post to reflect that when i get a chance tonight.
No, it's not because of government's backing and cryptocurrencies prove that more than anything. But even without cryptocurrencies, people use other "not-backed-by-government" currencies too. One of them is known as reputation, where the only guarantee is the word. People exchange services and goods with reputation being the only counterpart of paper money.
Straight to the point.! Problem today is that people resist change.
Hence, the slow process of opening their minds!
I think people have always resisted change to a certain extent. massive social and economic changes are usually only achieved after a some sort of upheaval that forces people to adapt or demand change.
Given the current political and economic climate it's might not be long until we are forced to reassess many aspects of the way we function as a society. .
https://steemit.com/power/@bendjmiller222/seeing-more-details-about-the-money-you-make-on-steem
GREAT ARTICLE. THANK YOU FOR SHARING :)