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.
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
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.
fredmull1973 t1_j1qlt7n wrote
You are explaining it well, I just can’t understand how equation solving equals free money.
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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