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What Gives Cryptocurrency Value and How Does it Gain Value? - YouTube
Channel: BitBoy Crypto
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most people go through life without
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wondering why that piece of paper or
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plastic
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they used to pay for their life has any
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value at all if you mention
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cryptocurrencies or
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bitcoin for that matter that's the only
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cryptocurrency most people are aware of
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they will immediately start wondering
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how can someone invest
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in something that's not real or has
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no innate value it's an irony that
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always amuses me
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as they are missing a really important
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point
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money today is just a matter of
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imagination
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imagination
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the mighty dollar and even the euro as
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well as that american express centurion
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card
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only have value because we say they do
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today i will tell you why crypto has as
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much value
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as fiat money let's get it
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welcome to bit boy crypto the hardest
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working channel in all cryptocurrency if
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you're new
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hit that subscribe button and check the
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description for links you can use
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to connect with me and join the bid
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squad all right guys i know you all have
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been in this situation
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of having to explain crypto to other
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people or getting asked about it
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if you haven't been in that position you
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might be new to crypto
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and be the one doing the asking if this
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is the case
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don't worry we all started there in this
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video i'll be explaining why crypto has
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value
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and how it gains or loses it so you can
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answer this question to any peasant
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who asks you how you made your fortune
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a good place to start with this topic is
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mentioning
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how fiat currencies work fiat currencies
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are the national currencies you are used
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to using
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dollar pound euro or any other currency
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from a country that you can think of
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fiat currencies are controlled by what
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is known as a central bank
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an entity that is controlled and
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regulated by a country or a group of
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governments in this case
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the european union which makes the
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decisions when it comes to printing
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setting goals
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and overseeing monetary policy money
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used to be backed by goods such as
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silver and gold in the past
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using what was known as the gold and
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silver standards these meant that a coin
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bill or note
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was a direct representation of a certain
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amount of the good
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which is no longer the case these
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standards ensure that if you have a bill
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or note
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it is worth a certain amount of gold
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which you can exchange at any point
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nowadays fiat currencies are all valued
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depending on the trust that governments
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and users
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have in the central bank or the trust
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people have in the government itself
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is they control it a stable government
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that is in a good economic position
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will have a strong currency with high
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value as third parties
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will trust that piece of paper coin or
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bits
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in a computer the opposite is also the
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case as a government that loses trust
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from the international community
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will see its currency value plummet
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seems like a basic reward system where
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you give us points and then we redeem
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those points for prizes
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you're exactly right and you get a point
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my mom used to have a
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point system like this one where i would
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be
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able to ask or get stuff depending on
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the number of points
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if i did my chores and follow the rules
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i would win points
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if i didn't behave i would get points
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taken away now my dad's point system was
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a little bit different
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uh each notch on his belt was one point
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sorry
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okay these points though were imaginary
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just a number
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they had value for me because i trusted
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that my parents
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would give me that baseball glove if i
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had enough points it was just a matter
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of trust
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my mother could decide that the ball was
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20 points or 25 points
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and i just have to accept that well this
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is the same case with fiat
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doesn't sound good now right now the
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major issue with fiat currencies is that
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they are not only dependent on the
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stability
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and good decision making of the issuer
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but on the perception
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that other governments and their
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citizens have countries like venezuela
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argentina and zimbabwe have experienced
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firsthand the hyperinflation
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that occurs when their governments
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issued too much money
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and they were subject to international
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sanctions or just lost face
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okay so i know at this point fiat
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currency does not sound great right
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understanding this oversimplification of
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how it works is enough to understand how
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fragile
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our current economic system is as we are
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powerless when it comes to how
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our assets will be valued in the future
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this centralization
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creates single points of failure that
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could destroy an entire nation
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taking its citizens down by reducing
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their buying power do you really trust
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politicians enough
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to believe that they can possibly not
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mess everything up well
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most people don't trust them that much
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and this is one of the reasons behind
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crypto
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you don't have to trust anyone so how do
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cryptocurrencies generate value
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with no government or bank backing it up
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well crypto has value in the same way
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that fiat currencies have value
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user trust if enough people agree that
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bitcoin or ethereum have value
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well then they do just like my parents
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point system
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they allowed me to buy and sell i was
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basically working for them by doing
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chores in exchange for that sweet
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imaginary money
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which is not different from people who
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have to go to their jobs every day
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people that work for me they love coming
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to their job but most people hate it you
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trust this piece of paper or number
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though on the screen
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and the person on the other end has to
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trust it too this trust can also be
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translated to supply and demand
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if people trust that someone will
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fulfill their needs or someone else's
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then they look to buy or sell that thing
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capitalism is a thing you know
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if i trust someone will watch the videos
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i am making i will supply them i can be
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right or wrong
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but i'm supplying the same is true in
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the end if there is a need
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then there is trust in that asset supply
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and demand is the most
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basic economic rule there is it is the
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alpha and the omega it is the way
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the end all be all summarizing supply
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and demand
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is something you need to understand if
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you want to get economics
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the law is simple too much demand and
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little supply will make the price go up
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little demand and a lot of supply will
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make prices go down
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this is the reason why scarcity is a big
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advantage of bitcoin over fiat
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bitcoin is scarce and has a set supply
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us dollars and many other fiat
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currencies are abundant and the total
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supply is increasing at an alarming rate
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every day now i already said that trust
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was everything
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quite vehemently too let's change the
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question
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it is not how crypto generates value but
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trust i say this because if trust in a
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cryptocurrency increases
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so does demand which in turn raises its
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value
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i hope i don't really need to keep
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repeating this but anyways this is a
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more complex question
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and depends on the type of
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cryptocurrency as we discussed earlier
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in the series
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different cryptocurrencies are born from
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different intents
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btc was created as an alternative to
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traditional money
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so it had to generate trust in a similar
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way to traditional currencies
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how did it do it well by using
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blockchain technology and mining
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the effort of miners who actively
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invested in mining the cryptocurrency
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plus the security and transparency that
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blockchain technology provided
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generated enough trust for investors to
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jump into the project
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with enough momentum it just snowballed
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to the point where most people don't
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doubt
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btc by now this is why bitcoin has
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become the representative of the crypto
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world
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and the performance of most coins is
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attached to it but hey
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don't be fooled bitcoiners are there for
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the technology
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not the value oh maxis coins like usdt
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usdc and other stable coins
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get trust by pegging their value to
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commodities like gold or fiat currencies
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basically becoming a digital version of
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the currency they're pegged to
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most all coins however are a little
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different
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is native tokens power transactions
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taking place inside a blockchain network
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sometimes called utility tokens coins
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like tether link vechain compound and
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others
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gain value by providing services the
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more wanted the services of those
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networks are
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the more people should be wanting to
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acquire them or use them
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increasing demand so these tokens are
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not only speculative like fiat and btc
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but they also have other applications
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even if most investors forget about that
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that's the truth they have utility that
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goes beyond being used as money
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sometimes people get so focused on the
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economic factor
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they forget what's really important
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but now it's your turn do you know any
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other way in which crypto gains value
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what do you think is the biggest
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advantage of crypto over fiat
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let me know what you think down below in
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the comments section i hope you enjoyed
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this video
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if you did please make sure to smash the
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like button and hit subscribe because
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i'm a member of the bit squad
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thank you so much for watching have a
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blessed day
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[Music]
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you
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