I waited and watched in the background, as I began to gain perspective and acquire more knowledge, pondering the answer to this question!
I invite you to join me in my search for truth as I try to find us the best and most simple answers I can along the way. I am not that tech savvy nor am I an economist so, this will not be some expert investigation but rather an investigation of the basics. This post is mostly for people, like myself, that are trying to understand the essentials better. I will give my non expert opinions and analysis along the way.
The very word Crypto means Secret or Concealed, so trying to decipher a reasonably thorough and concise answer is quite a process of decryption itself! The ultimate irony is that the Crypto aspect of the question is definitively more answerable and surprisingly more discernible than the money or currency portion of this riddle!
You can ask a simple question... but you can't expect a simple answer! The information that I have come across so far has been pretty confounding! Instead of getting answers... I feel like I am just finding more questions to ask! The implications hidden within the data is pretty staggering. The deeper I look into this topic for the answers, the more I get the feeling this revolution in technology could be breaking the bank, in more ways than one! At the very least, this new era of technology could evolve our Piggy Banks of old into unbreakable vaults that are in many ways more protected than those of your local central bank!
When I ask what Crypto Mining or Bitcoin Mining is, I would imagine many people visualize an actual miner with a pickax mining some ore, gems, and jewels! I know that is the first thought that came to my mind.
It's 'Digital Money', Remember?! No, CryptoCoins and Tokens are not digital 'Super Mario Coins' but they aren't your actual traditional tokens or regularly minted coinage either! However, don't be fooled to believe that all minted coins these days are even worth the metal they are fabricated out of.
Image Source- Chuck E Cheese's via Instagram user@serge__egres
So now the real question we are left to ask is, "How is CryptoCurrency any different?" In order to best understand Crypto Currency we need to better understand our current economic situation. I mentioned that we are mostly operating on a "debt based fiat system" but what does that Really mean?
First, we need to know what the word fiat means and why it continues to be such a prominent term used. The etymology for the word Fiat indicates that it is Latin for "Let It Be Done." Fiat is the 3rd person singular present subjunctive form of the latin word 'fieri' meaning to become or to be done. Merriam-Webster's definition of Fiat is an authoritative determination or arbitrary order by dictate or decree.
The Financial Times Lexicon defines Fiat Money as Paper money or coins of little or no intrinsic value in themselves and not convertible into gold or silver, but made legal tender by fiat (order) of the government.
I feel like the Financial Times Lexicon's definition was pretty straightforward. I would suggest clicking on the link and reading the rest of the definition along with the examples given for further context. Investopedia.com had an interesting article on the subject (that I block quote in the following section) which mirrors the same sentiment as the Financial Times. I recommend that you check out that link as well and read the entire article. There is also a video available on that Investopedia page that takes on defining the term "Fiat Money" in about 1 to 3 minutes. It's well worth watching for more insight!!! Here is the excerpt from that article along with another from Merriam Webster's and some appropriate gifs...
Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on the faith and credit of the economy.
Because fiat money is not linked to physical reserves, it risks becoming worthless due to hyperinflation. If people lose faith in a nation's paper currency, like the U.S. dollar bill, the money will no longer hold any value.
Historically, governments would mint coins out of a physical commodity, such as gold or silver, or would print paper money that could be redeemed for a set amount of physical commodity. Fiat money is inconvertible and cannot be redeemed. Fiat money rose to prominence in the 20th century, specifically after the collapse of the Bretton Woods system in 1971, when the United States ceased to allow the conversion of the dollar into gold.
Fiat money allows the declaring government to employ virtually any material, such as paper
(which is lightweight and convenient for carrying), as a medium of exchange.
However, since the value of fiat money lies solely in the faith of those using it,
its value can be easily diminished and result in rapid inflation.
"Rapid Inflation" is exemplified here from the recent experiences within the great country of Venezuela where one Bolivar is worth less than nine cents at the time of writing this post! These examples are way beyond implication and where the rubber meets the road... outright manifestation! Click on each of those links and read a bit... if you think that couldn't happen where you live.... ask yourself one question!
Some of this information may seem like common sense... and some of what you just read may sound like the truth is lost in a sea of lingo and double talk! Don't worry... I will break it down for us.
In my opinion, the biggest takeaway from those excerpts was that Fiat money is currency declared as legal tender by a sitting government that has no physical commodity backing it and therefore no intrinsic value. Fiat currency's value is derived from a relationship with supply and demand as well as credit and most importantly... FAITH
We can understand fiat to mean in modern layman's terms, BECAUSE THEY SAY SO!
Fiat Currency is a System of Money With Value basically "Because They Say So!"
"They"... would be The Powers That Be, deeming what is and is not legal tender, usually national and international governments in collusion with private and central bankers. Merriam-Webster's definition of Tender, as in "Legal Tender" is defined as follows: an unconditional offer of money or service in satisfaction of a debt or obligation made to save a penalty or forfeiture for nonpayment or nonperformance.
Defining Legal Tender as an Unconditional Offer of Money or Service to satiate a debt or obligation in order to avoid a penalty or forfeiture seems to equivocate Legal Tender and Money as well as conflating the term Currency...in my opinion. Doublespeak used to be a fictional concept from Orwell's 1984 that has unfortunately become the Status Quo of our current politically correct culture.
I had a friend ask me one time.... "What is Money?" At first, I scoffed a little at the question but then when I searched for the words to answer verbally... I found myself at an absolute loss. The more I thought about it... the more baffling it all became. I didn't answer much better than the responses I got for "What is Cryptocurrency?!" I really struggled to cut to the chase and get to his point as well as find the core meaning of the word. He asked me again with emphasis, as I struggled to find a suitable answer to even satisfy myself, "What is Money... REALLY?"
Currency isn't dollars and cents REALLY... those are (or were) mere representations of value that we call money and/or tokens. Fiat Money is the Illusion of Value symbolized in the paper and coin we use as the legal mediums of trade for goods and services that we then generalize with the term "Money."
In one sense you could look at the game Monopoly as a perfect analogy. The only reason Monopoly money holds a value whilst playing the game... is because the players all agree to the rules of the game in the beginning. Our current world economy works in much the same way. In fact, it is that exact same faith in value that makes the system work. If you were to play Monopoly long enough... you may need more paper 'FIAT' currency... or begin a system of credit and this is where we find ourselves in today's economies.
The world seems to be playing one incredibly mammoth game of Monopoly through the central and world banking systems! Cryptocurrency and the Blockchain Technology behind it appear to be game changers... even if you don't like or agree with the game! The key to getting ahead in this game is understanding value. Value is the underlying tie that binds all of these enigmatic riddles together. Value is where we begin to discover the meaning and worth of anything!
I started this post out in the beginning by asking, "What is Cryptocurrency?" Wrapping up part 1 here, I still feel the same as I did when I said... "The honest answer to that question is... I don't completely know, YET!" I won't lie... My mind is pretty blown just trying to wrap around this much information so far!
This first post was a great primer given topics we mentioned in which to build from in subsequent posts following this ongoing investigation. I still have many avenues to explore in collecting my information and forming my thoughts and opinions. At this point there are more questions than answers... but I believe that is something in which we will change. I am excited to further this discussion and to grow our basic knowledge in what all of this means in this series of posts!
One last thing I can say before finishing this long beast of a post... the SBD is trading right now (as i write this) for $10.12 USD according to coingecko.com.
