RE: Cryptocurrency: Explained For the Layman and the Average Joe
So, I am noob.
Can you explain to me where the money comes from?
I can grasp that STEEM is another cryptocurrency which is limited in amount.(There are somekind of algorithms which dictate the max amount. Miners keep mining them (the algorithms(blocks)). So what is the other bigger part that gets released to the public?
Alright, we have some cryptocurrency, but what gives it the value? Why should someone with dollars invest in BTC which has no market to begin with? I can undestand that we could use this cryptocurrency as money, but how do you decide how much one answer to an algorithm worth is?
And how does STEEMIT work? I know I can mine Steem, but where does the money come from while posting, voting etc. That's what makes the least amount of sense to me.
I think what you are trying to ask is "what is the origin of money, and how does money get it's value?". This is a question that people have spent there entire lives trying to figure out... Here is my answer. Money is nothing. Money is everything. How can that be?
If I have $1, but I am the only person in the world, does that dollar have any value? No, you minus well burn it for warmth. Now, say there are 2 people in the world. Me and Chris. if I have $1, and Chris will accept that dollar in exchange for a slice of bread. Then that dollar becomes valuable. So in essence "money" is the faith that the collective majority of people have in it. Pretty strange, huh?
As for the origin of money... Currently, currency is just printed on paper. It only works because there are people who accept it. The reason cryptocurrency is revolutionary, in my opinion, is because it is backed by 1 exact number. That exact number is always attached to that 1 unit of currency. No matter where that unit of currency is, it will always have the same number attached to it. Plus, anybody can see where that unit is at any given time and it is instantly transferable anywhere, without the use of a middleman (bank).
Does that help shed some light? @sulev
I get that. The problem with paper money is that it can be printed more and more at will.
If we only used BTC for example, its value wouldn't change because there is a constant number of BTC in the world. No inflation or deflation is possible. OK.
Alright, so the value of cryptocurrencies is basically the same as normal paper money... there is no real value except the one we give it. Guess it's the same with gold too. What would a peasant actually do with gold? Nothing.
What I don't get is how the STEEMIT works. Where do the payouts come from? Because we as bloggers don't mine anything here.
So, with steemit, there is always "steem" being mined. When somebody up-votes your post, a portion of this mined steem gets directed to your account.
So, here is an analogy...
Imagine a gold mine... There are guys working hard all day, digging for gold. Except, at the end of the day, the gold gets distributed where the community deems is most appropriate.
This is essentially what steemit is. except the gold is "steem" and it is appropriated by the community through "up-votes".
Does that make sense? @sulev
So the miners mine Steem. They get only a small amount through mining. The majority gets directed to the STEEMIT network here and gets distributed according to our votes.
OK, thanks. Think I finally get it now.