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[deleted] t1_j1qggll wrote

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explainlikeimfive-ModTeam t1_j1qlfef wrote

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-domi- t1_j1qk4y2 wrote

It's a currency which is "printed" according to a mathematical problem. The more of it that gets printed, the harder it gets to print. In that regard it's an attempt to simulate gold mining, the way it gets more expensive the more you deplete the more accessible lodes. Crypto has no inherent value, apart from what people vest in it, unlike gold.

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Flair_Helper t1_j1ql7ms wrote

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Adam-West t1_j1qgrpk wrote

Crypto is a catch all term to describe all digital currencies. Most of our existing currency is digital anyway but the difference is that crypto is entirely digital, therefore no physical coins or notes exist. The word comes from the word ‘Encrypted’ as each $ of the currency is usually heavily encrypted in order to stop fraud. Usually each $ is created by a computer solving an algorithm. You might have heard the term crypto mining which is basically where somebody creates a powerful computer than can solve these complex algorithms quickly and therefore create money quickly. There’s a lot of talk about crypto at the moment as it’s a popular and controversial way to invest. The value of a given crypto currency fluctuates (usually) much more violently than regular currency’s which means large gains and large losses are possible in a short spate of time.

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fredmull1973 t1_j1qjus1 wrote

“Usually each $ is created by a computer solving an algorithm. You might have heard the term crypto mining which is basically where somebody creates a powerful computer than can solve these complex algorithms quickly and therefore create money quickly.”

This right here is what I can’t wrap my head around. How can solving complex math problems create “money”? No one has been able to sufficiently explain this to me

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Adam-West t1_j1qkdny wrote

Your national bank will also create money out of nothing. It’s as simple as typing numbers into a computer. They don’t even need to bother printing it out. However if they suddenly added trillions of dollars then it would cause huge inflation issues in the economy, so they do it sparingly and responsibly. The difference with crypto is that the creators use the difficulty in solving the algorithm as a way to curb the production of their currency. If anybody was allowed to just add money to the currency then there would be runaway inflation. By making it deliberately very difficult to create it allows a slow and steady supply that doesn’t tank their economy.

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fredmull1973 t1_j1qlt7n wrote

You are explaining it well, I just can’t understand how equation solving equals free money.

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Adam-West t1_j1qm43u wrote

It’s basically a game. Let’s say I created a currency but I made a rule that you can only add a dollar to the pot if you scored a bullseye on a darts board. That’s all it really is. Except that the bullseye is the answer to an equation and the equation is created by a super high tech computer. It’s an arbitrary method of controlling how much money enters the economy

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Skusci t1_j1qhscg wrote

So that makes monopoly money different than regular money? It's that monopoly money is really easy to reproduce, no one will stop you.

With government backed money the thing stopping you is the government. They arrest you if you try.

With gold the thing stopping you is the ability to dig out more.

With cryptocurrency the rules are enforced cryptographically through any number of different algorithms. That basically means that more or less anyone can create a bunch of rules for how their new currency can be used, traded, etc without needing to be a government.

The trick then is convincing other people that your idea is worth it as a currency.

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