MonteQuest wrote:careinke wrote:Monte, I understand very well that BAU currencies today, are based on debt and centralized banks. But they don't have to be.
But I keep asking. What will the
value of a bitcoin be based upon if not faith in GDP growth?
What of credit? How will BItcoins be loaned with interest? Where will the interest money come from?
Like all fiat currencies they are backed by faith. What tangible items back the dollar? Nothing, that's why it is a Fiat currency.
Bitcoin is not a fractional reserve system. Bitcoins are "mined" by computers working on the block chain. There are 21,000,000 Bitcoins, they get harder to "mine" as more are "mined." this rate is known, and written into the program. It's a little hard to explain, but basically Bitcoins are paid to the servers (and anyone can run a server) to run the system. As long as there are at least two computers running, (and there are thousands doing this now), the currency remains.
You can aquire bitcoin in several ways, mine it, buy it, sell or offer a service and accept bitcoin as payment, recieve it as a gift. It's value is determined by the market. You can buy Bitcoin with just about all currencies right now. Once you have bitcoin, you can use it just like cash with anybody who accepts bitcoin. You can also convert it back to another currency.
Interest payments are a contract between two or more parties. It has nothing to do with the currency. Personally, with a deflationary currency, I would be reluctant to take a loan that I had to pay interest on.
It's value is in it's usefulness as a currency. Migrant workers can transfer money across borders at virtually no cost, as opposed to up to 20% charged by the likes of Well Fargo for an international money transfer. you can transfer the funds by e-mail, it's that easy.
In addition, you do not have to keep your cash in any financial institution with the inherent risk of losing your funds.
I predict within five years, at least one country will adopt a crypto currency, (or start their own), as its national currency. It is way cheaper than trying to manage a traditional currency.
I guess cryptocurrencies just appeal to my Anarchist leanings.
Still the fact remains that crypto currencies exist, and their use is expanding.