- This topic has 4 replies, 1 voice, and was last updated 2 months ago by BitcoinCentrum.
- Saturday, October 1st, 2022 at 09:39 #385079CFootUnderParticipant
As above. I have a basic understanding of crypto and BTC mining, but there’s something i cant get my head around.
Say you have some isolated system in which only £1,000,00 exists at any given time. One person in the system invents a crypto currency, and it’s agreed that one ‘cryptocoin’ = £1
So this person exchanges everyone’s money for equivalent crypto. That person has £1,000,00, but there’s £1M worth of crypto, so now there is £2m ik currency in this isolated system. The available money has doubled, it’s worth the same amount intrinsically. How does this work?
Money is limited to how much is printed, and BTC is limited by how much money exists, and how much it’s worth. Is there just more currency around these days? Does currency become less valuable to more of it there is? How does this not lead to some kind of economic crash? Does this just make money less valuable basically?Saturday, October 1st, 2022 at 09:41 #385082Charming_Sheepherder
Read the bitcoin standardSaturday, October 1st, 2022 at 09:54 #385083BitcoinCentrum
I feel like I am capable of answering your questions but I don’t understand your question.
Could you please rephrase it in the simplest manner possible?Saturday, October 1st, 2022 at 10:01 #385080FlyingTerrier
Well money is being printed and becoming worth less.
As to how does it become bitcoin, it is doubling the supply unless bitcoin replaces the cash.
So right now is a weird time.Saturday, October 1st, 2022 at 10:16 #385081MilesPower
In your example the 1m in dollars that was first used to swap the coins is no longer in circulation so the monetary supply hasn’t really changed, the value of the digital coin is pegged to the asset that was used to “mint” it and the entire thing is done in a bubble. This is similar to being on the gold standard. You have dollars that represent gold that is stored somewhere but you can’t spend the gold unless you “burn” the dollars – in theory (but we all know how that turned out).
If the person who now has the 1m dollars then went and used that 1m dollars to create 1m more digital coins, then each digital coin would be worth half (again, in theory).
Printing money devalues the money that already exists, always. This is why the amount your dollar (and eur, gbp etc) can buy you at the store seems to always decrease. Inflation is stealing the value of your money every second of every day and it’s only gotten worse due to massive printing of money( and expansion of the monetary supply) and it’s not going to suddenly reverse course. Over time, fiat currencies all trend towards 0.
Bitcoin was created as a potential solution to this and, if the idea holds, will trend upwards against every single fiat currency that exists over a long enough period of time. Yes there will be volatility and yes there will be periods where you may be down on your initial investment cost but, since coming off the gold standard, there is no cost to printing money anymore and we’re seeing the result of that now.
Purchasing power of the dollar since 2000:
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