I’m new to the crypto-currency world but I have a background in the foreign exchange trade market and I have a few questions because I’m confused to the long term possibilities of this type of currency since it’s not backed by a government like the Euro, Dollar, Yen… I fully understand that most world currencies are floating due to not being backed by silver or gold and that their intrinsic value can vary from day to day. But each country uses a unified currency locally (fiat currencies) that is manufactured, destroyed, monitored and accounted for by their governments.
FIAT
AND BITCOIN has intrinsic value purely because its useful as a means of trade between people. neither are backed by anything tangeable.
FIAT is backed by the beleif that X amount of labour = X amount of fiat (minimum wage laws help with this resistance point)
BITCOIN is backed by the belief that miners wont sell at a loss = resistance point (miners costs and traders buys help with this)
(yes bitcoin just like the forex/stock market has resistance points, so this should not be new to you to understand)but in both cases of bitcoin and fiat this is fluid and not solid rule.
Right now there are approximately 275 different crypto-currencies that you can mine and trade online. What makes any one currency a better choice than another?
in short if the altcoin is only used as speculation on exchanges and has no real world use, it wont survive. so far bitcoin has over 100k merchant USES and thousands of other infrastructure elements. which no other altcoin can even come close to
initially on launch day an altcoin has a nice story, a plan and a concept of how it can change the world. so at launch it may have the belief of value. but as the intrinsic (usefulness) does not become a reality (no merchant acceptance/ no infrastructure) then this causes a price dip, then miners move away and the resistance point weakens causing the price to drop.
Currently, it seems that Bitcoin is the standard, followed by Litecoin. Most other currencies seem like they are mined or traded on speculation that they will take off or to acquire fractions of Bitcoin. Here’s my big issue; if no one is using a currency for commerce, then, how are blocks being generated?
it only takes 1 person with a USB stick to 'mine blocks'(more than 1 is better but it can survive on just 1 miner) so the altcoin inventor would be mining, even if no one is moving coins between blocks (no transactions) blocks are still made and the miner still gets the block reward. if later all the exchanges dropped the coin off its listing as no one was playing the penny markets. then the last miner(using the coin created) just stops mining, and he moves on with his life and the coin is pretty much dead
Are they just generating blocks to verify the trade, movement or dispersion of a block? It’s like they are creating busy work to generate more blocks to create more busy work for something that has absolutely no value and has not been accepted by the masses.
although blocks are suppose to be made to verify transactions, there can be blocks with no transactions in them. and if no transactions are happening this usually means it has no purpose in real life. and as such there would b low-no resistance point, meaning the price would drop, this would make miners not profit from mining it. and give up.
the flip side if a coin has a proper purpose and usefulness there would be a value and those buying the coin would set a resistance point (lowest price they would sell at) and if this price was above mining costs, miners would mine it for profit. and then those mined coins sells would reset the resistance price higher as the buyers wont sell theirs at a loss. if the price keeps rising more miners will mine it for profit. and then increase how many mining rigs they have to try grabbing more of the reward compared to other miners. which is where the cost of mining increases.
now if the coin has usefulness and purpose the increase of mining costs, which helps to raise the resistance to sell at a loss, will cause a price rise, which as i said if the coin is useful and purposeful, there will always be a demand for the coin. and so the price would naturally rise.
its like gold. if gold had no purpose, no one would mine it and no one would buy it. so as long as people have a use for bitcoin it will be mined and will be bought. and as i said above bitcoin not only has well over 100k merchants that people find useful, but bitcoin also has the benefits which paypal and credit cards cant offer. (pseudonymity, no chargeback, small transaction value, large transaction value, micro fee's)
People would probably take a currency more seriously if there was some kind of structure to it. Right now the market on Bitcoin is volatile and I would never use it as a means of commerce for my company…
It’s also expensive as you have the trade fees that go along with changing a crypto back into your local fiat currency. Most local companies will only trade in their local currency, they will not accept foreign currency due to the volatility in the exchange rates and the cost of the exchange.
there is a structure. not only are there merchants, but there is the network security of its non-central nature, the security of the mining, and the other things like bitpay which if you ask for $10 of bitcoin from a customer, you will get $10 in your bank account (bitpay freeplan:
https://bitpay.com/pricing)
What’s going to happen when the cost of mining exceeds the profit for the miners? How are trades going to be verified?
this happens often. when the cost of mining rises or due to dumb traders dumping the price below the resistance price, making mining non-profitable. smart miners continue to mine as they know its only a blip. whilst dumb miners give up and switch of their units for a small period. but as i say all though there are thousands of miners today it only really needs 1 to make blocks and maybe 3 people to make it decentralised and less prown to manipulation.
but as those dumb miners that turn off their units for a small while are no longer getting their 'cut' of the block reward, those who continue mining get a bigger slice of the reward and as such this should compensate them when they sell their coin at the low price because they have more coin to sell.
I’m not opposed to the thought of crypto currency that is widely accepted, but none are. I say this just based on all the hoops you have to jump through to just change the USD into Bitcoins. You have to use a third party clearing house to move your fiat currency to a point that it can be sent to an exchange to purchase bitcoins. You are literally paying multiple agencies for the privilege of buying something with bitcoins.
when you work. your business pays you a wage, in alot of countries it takes 3-5 days to move the funds. then lets say you wanted to buy something off ebay. your funds have to move into paypal and then into the ebay auction ,then to the seller and then the seller has to move it into his own bank account. so thinking about the funds movement. thre is alot of work hppening that you dont realise, even in the FIAT market.
take buying stocks and shares. you had to sign up for a trade account, put your life story into the registration page. then move funds in and buy the stock/share. you may have noticed the commission/spot/capital gains causes the funds that you had in the bank being of different value to the stock/share you finally get. again its not a 1 step process without fee's is it?
lastly services such as bitpay, localbitcoins, ATM's are making the swapping part easier. but i have to agree with you in part, that it is still not quite there in being 100% consumer/layman friendly. but that is where bitcoin is still growing and developing. bitcoin is not their yet for the mass adoption stage, its still early, we are still at the innovator stage. so dont worry, the best is yet to come.
So, you literally diluted your fiat dollar to buy something with a crypto that you could’ve just purchased with a fiat…
at the moment its not 100% for people to use as a direct paypal replacement (although people do, do it) bitcoin is still early innovator investment area, so people buying it are those looking to turn it into profit to later spend. not to just buy bitcoin to spend withing the same hour, though that time is coming. and people are noticing that the loaf of bread that cost $2 last year is now $2.50 and that U.S dollar, argentinian peso and many other currencies are going the same way as the Zimbabwe dollar, due to inflation (bitcoin is deflationary) thus more people are seeing this benefit to hold bitcoin as well as the other benefits that credit cards, paypal and paper cash don't offer people.
