A Fundamental Way of Understanding the Value of Cryptocurrency & Blockchain
The fundamental concept of money is lost on most people, as most people unconsciously accept the fact that they can spend a dollar on something and it just works, and inflation happens but they don’t really quite get it, they can invest in a stock and it magically goes up or down, and so on.
So this is the real problem actually. Crypto/Bitcoin is not confusing at all if you understand that money is simply social recordkeeping as to how much work you did vs how much the world owes you for it.
We use numbers to count stuff and relate that to our work. We don’t need anything except for numbers; we don’t need gold, we don’t need coins, we don’t need a physical “backing” for the money. A “dollar” or a “bitcoin” just symbolizes which recordkeeping system we’re using.
We just need to socially keep track of the transaction that relates work that you did at some point (or work that you will do) to the goods or services you are buying. Otherwise, we have to barter for everything.
In society, we equally accept digital dollars (verified by a large payment system ie. Banks, VISA, etc.) and physical dollars because people from these parties are manually tracking the whole thing along with the digital records.
We trust the complex recordkeeping system which is the intercommunication between the US government, banks, and private payment networks. They all talk to each other and keep the books straight.
Money is record keeping/accounting for the work you’ve done. Blockchain is a reliable, digital (often monetary) record-keeping system.
Bitcoins are part of a record-keeping system that requires no single party to trust the records to. The system is self-regulating by a clever method of programming. You essentially can’t trick the system into thinking you have more money than you really do, which is the fundamental requirement for money.
Some confusion may come from the fact that Bitcoins can’t enter the physical world as paper money or coins. That is because this would require one trusted party to manufacture and count the coins, and there is no single trusted party that can do this – the whole network itself is the trusted party, and there’s no way to “manually enter” a physical transaction onto the blockchain.
I think it is important to understand the main utility of blockchain, which is reliable bookkeeping. Often, when blockchain is being explained, it is a technical explanation, which leaves many people confused as to how it can be used to make payments.
Broken down simply, blockchain is nothing more than a clever system of programming that creates a reliable way to store information. It can be used as a payment system simply because of how trustworthy the records are.
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