Never forget these 5 foundational truths of cryptocurrency

Never forget these 5 foundational truths of cryptocurrency

The Coinbet.com team fully supports using bitcoins and other cryptocurrencies to play online. To say we are big fans of cryptocurrency would be to state the obvious. But please know we are also big fans of maintaining a proper perspective. Used wisely, cryptocurrency can be an excellent tool for making payments. Used improperly it can cause more problems than it solves.

In the few days since Bitwise issued a report suggesting that up to 95% of reported Bitcoin trading volume on unregulated exchanges is fake, casual investors are asking themselves whom they can trust. If the numbers they find online have purposely been fudged in order to encourage people to buy and sell, then how do they really know if any of the other data is correct? How do they know if their coins are even worth what the numbers suggest?

Our goal in promoting cryptocurrency here at Coinbet.com is to give our readers usable and truthful information. We do not want anyone getting involved in cryptocurrency without fully understanding what it's all about. To that end, we believe there are five foundational truths of crypto that can help anyone maintain the proper perspective, whether they are investing large sums of money or just buying bitcoins to gamble online.

If you are involved in crypto, never forget these five foundational truths:

1. Crypto is an alternative to fiat

Being that Bitcoin was the first viable cryptocurrency on the market, all five foundational principles come from the white paper that started it all. Bitcoin's original developer, known by the pseudonym Satoshi, made it very clear what he intended Bitcoin to be from the very start. That leads us to the first foundational truth: crypto is an alternative to fiat.

Satoshi's own writing made it clear that he never intended Bitcoin to be a complete replacement of fiat. Nor did he ever believe it would be. Rather, he created Bitcoin to be an alternative way of paying for things. In his white paper, he described Bitcoin as a peer-to-peer payment system that could be used in the absence of fiat or in situations where transacting business via fiat was impractical.

Keep in mind that Bitcoin was released in 2009. It appears that Satoshi could have been working on it as early as 2007. That was 12 years ago; a time when the world's electronic payment systems were much more limited than they are today. Satoshi's vision was to create an easy way to pay for things online among people who did not have traditional bank accounts and credit cards.

2. Crypto is not anti-government

Next, the original concept of cryptocurrency was not rooted in any kind of anti-government stance. Nowhere in his white paper did Satoshi declare that Bitcoin would be a means to overthrow government and replace its economic control with a new system that placed equity in the hands of the people.

Now to be fair, the nature of cryptocurrency does tend to level the economic playing field among the classes. To the extent that cryptocurrencies are fungible, people who own coins are on equal economic footing in that they can all buy and sell freely and without one party having an advantage over another.

Nonetheless, cryptocurrency exists within the structures of human government. That is why governments regulate exchanges. That's why more governments are looking at how to regulate cryptocurrency trading in such a way as to not dampen enthusiasm but still protect consumers against fraud, crime, etc.

It is true that allowing a government to be involved in controlling a given cryptocurrency would run contrary to the decentralized nature of the crypto concept. But that is why we have stablecoins and government-backed coins. They can exist as their own separate entities with other cryptos while Bitcoin, Litecoin, and Bitcoin Cash can remain decentralized.

3. Crypto is not an end-of-the-world-currency

Next, there are some people who view cryptocurrency as an end-of-the-world solution when global economics eventually collapse. The idea of such thinking is so convoluted that it needs to be unpacked bit-by-bit. So first of all, do not count on a total economic collapse that effects the entire globe. It will never happen.

Global trade and financial services are now so integrated that the only way total world collapse would be possible is if every government on the planet agreed to make it collapse. The likelihood of that happening is very low indeed.

Next, even if global collapse did occur, it would take the world's computer networks with it. Then cryptocurrency would be absolutely worthless. Remember that cryptocurrency is digital currency. Without computer networks to transact information, any coins you hold in cold storage amount to little more than digits residing on a computer chip.

Along those same lines, there are some who see the future of crypto as one in which a single coin rises up to exercise dominance over all others. There are some who actually believe that there will be a single universal currency at some point in the future. That is not likely to happen either. Decentralization sees to that.

The point of this particular section is to encourage you not to view cryptocurrency through the lens of the apocalypse. Rather, view it through the lens of its intended purpose: a monetary system to pay for things as an alternative to paying with cash.

4. Prices are determined by supply and demand

The fourth foundational truth of cryptocurrency is that prices are determined by supply and demand. If you don't believe that's true, just pay attention to daily trading volumes and their relation to price changes. When demand of a limited coin supply goes up, a coin's price goes up as well. When demand falls below a certain point, prices fall accordingly.

Supply and demand is the very reason Bitcoin spiked to nearly $20,000 a few years back. Everyone wanted bitcoins but the supply was limited. The two opposite conditions created a perfect storm to send Bitcoin prices through the roof.

By the same token, the current crypto winter we are still in was fueled by significant sell-offs in late summer and early autumn 2018. The markets have not yet recovered from those sell-offs, which is why prices have remained pretty stagnant since November 2018 (until the time of this writing in late March 2019).

If there's one thing to remember about price, it is this: price and value are not the same thing. They are not even necessarily linked. Prices are controlled solely by the market forces of supply and demand. It is that simple.

5. Value is determined by utility

Last on our list of fundamental truths is the reality that cryptocurrency value is determined by utility. Remember, price and value are not the same thing. Price is a measure of how much it costs to acquire something; value is a measure of what you can do with that thing you have acquired.

The price of a brand-new car may be such that it is well within your budget. You go to the dealer and pay cash, eagerly explaining to the salesperson how you are now the proud owner of your dream car. But then the salesperson hands you the keys. Suddenly you realize you cannot drive the car home because you do not have a license.

The car's price may have been set at $15,000, but its value is next to nothing because you cannot drive it. Now what do you do? You have just spent thousands of dollars on something that has no value.

The value in cryptocurrency is what you can do with it. For example, your bitcoins might be valuable to you because you can use them to play slots without having to use a credit card or bank account. Another person's bitcoins might be valuable to her because she can use them to get around London via taxi.

Bitcoin is described these days as more of a store of value that a monetary system. That's true, but only in the sense that people tend to buy bitcoins for the sole purpose of holding onto them until the price goes up before selling. The value of bitcoins to them resides in their ability to generate profit. If the price falls and they lose, that value evaporates.

It is what it is, and that's okay!

Hopefully these five fundamental truths of cryptocurrency haven't dissuaded you from using Bitcoin or Litecoin to play your favorite online casino games. From our perspective, the value of crypto is far more important than the price of individual coins. If cryptocurrency can give more people more opportunities to access the goods and services they want, then Satoshi's original goal for Bitcoin has been achieved.

In the meantime, cryptocurrency is what it is. It is a peer-to-peer payment system and an alternative to fiat. And that's okay. It doesn't have to be a fiat replacement or an end-of-the-world currency in order to be worthwhile. It doesn't have to be a tool to overthrow government to make it worth investing in. It can simply be a way to pay for things. What's wrong with that?

Byline: This article was published by Henry.
About: I'm a bitcoin advocate and admin of Coinbet.com.