Can anyone explain crypto currencies to me?

[Neome]

I’ve never really tried to understand them other than thinking ‘it all sounds a bit dodgy’. I realise they are based on some complex mathematics (I’m not bad at maths).

Given the current situation I’d love to have a more detailed understanding of what’s going on and how it relates to eg Putin.

If you can explain at all I’d be very grateful.

Please?

The good story

• they are an innovative way to organise money that doesn't depend on central banks & gives more freedom to people to control their money

The bad story

• they are a pyramid scheme because early investors do well and later investors don't, and the valuations will fall soon; they are very bad for the environment because masses of energy is used to generate cryptocoins; they are widely used by crooks / drug dealers / mafia etc because they are not controlled by regular banks.

I think the bad story is closer to the truth and I would definitely never invest in crypto.

A cryptocurrency is an encrypted data string that denotes a unit of currency. It is monitored and organized by a peer-to-peer network called a blockchain, which also serves as a secure ledger of transactions, e.g., buying, selling, and transferring. Unlike physical money, cryptocurrencies are decentralized, which means they are not issued by governments or other financial institutions.

Cryptocurrencies are created (and secured) through cryptographic algorithms that are maintained and confirmed in a process called mining, where a network of computers or specialized hardware such as application-specific integrated circuits (ASICs) process and validate the transactions. The process incentivizes the miners who run the network with the cryptocurrency.

Bitcoin, Ether, Litecoin, and Monero are popular cryptocurrencies.

thats from the internet. Cryptocurrency is generated by computers (more the better). It's not regulated by banks and you have to know what do. It involves codes and 'digital wallets'. It avoids scrutiny by tax authorities, indeed all authority because its all encrypted. So can be used to pay for anything

Be aware that English law is likely to need reform in order to provide certainty about the possession of digital assets - there is a Law Commission review underway but it is yet to report:

www.lawcom.gov.uk/project/digital-assets/

It's causing huge problems in Kazakhstan where they've been using massive amounts of energy mining it. As pp pointed out, it's a pyramid scheme lived by criminals. Nothing about it is good.

It's a pyramid scheme and anyone who tells you otherwise is conning you.

No matter how many people make some money someone somewhere is making an extortionate amount of money as this is a global scam.

You buy fairydust, mined in pixie mines and the more people who buy fairydust from the same pixie mine the more each sparkle is worth. Until one too many people make a wish, spend their fairydust, and the sparkles all fall down with a sad fizzle. The only person left with anything then us the person who opened the pixie mine. Because he took commission on every sparkle ever sold.

The End.

Thank you so much. The only notions I had were ‘pyramid scheme’, colossal use of energy and some vague ideas about prime number factorisation.

Cryptocurrencies were mentioned on a thread about the war in Ukraine does anyone know what the relevance is to Putin?

@Neome

Thank you so much. The only notions I had were ‘pyramid scheme’, colossal use of energy and some vague ideas about prime number factorisation.

Cryptocurrencies were mentioned on a thread about the war in Ukraine does anyone know what the relevance is to Putin?

One of the concerns I think is that financial sanctions might be left toothless if Putin/Russia use crytocurrencies to sidestep them. Obviously if they have access to sufficient digital assets, preventing them from using SWIFT and conventional foreign exchange won't hurt them as much as is hoped.

*cryptocurrencies

It's pretty fascinating - I've been reading a bit about it recently. I can't explain any better that PPs but I'd recommend looking further into it yourself if you're interested - it seems to be one if those things where many people think they understand it, but they don't.

And most people who think they understand it have very strong opinions for or against, which isn't especially helpful when you're looking for information including pros and cons!

Having read the post upthread that 'explains' it I am struck by an old truism, somewhat bastardised: if the explanation makes your brain implode consider this, it might be the point of the explanation rather than some defect in your brain.

Word salad is never edible, or edumifying!

@SamphiretheStickerist thank you that's the clearest explanation I've come across!

I thank you 😊

Everything has its price. But in this case it does not physically exist. You can only calculate its worth based on what other people are prepared to shell out for something that doesn't exist except in the programs of computers controlled by... er... who, exactly?

@Fernandina

Everything has its price. But in this case it does not physically exist. You can only calculate its worth based on what other people are prepared to shell out for something that doesn't exist except in the programs of computers controlled by... er... who, exactly?

I believe that the computers are 'controlled' by anyone who wants to be a part of it. Just individual people with an interest.

Money does not physically exist either...

Just to add - I don't know very much either! I've read enought about the subject to make the 'word salad' (as somebody described it) above make perfect sense to me and I'm finding it fascinating.

I've been recommended the book The Bitcoin Standard as a good introduction/overview but I've not read it yet so can't add my recommendation.

Bitcoin's key idea is "trustless" financial transactions. The ledger of all transactions is public and prohibitively expensive to fake, including reverting an old entry. So there's no need for a trusted party (like a bank) to handle transactions.

In practice this seems only to be attractive to criminals and an anti-state libertarian fringe.

The current wave of adopters typically don't interact with the Blockchain directly, but (ironically) through a trusted intermediary. The current bitcoin Blockchain couldn't handle the volume of transactions if everyone were to attempt to use it directly.

New cryptocurrencies often add new features to the bitcoin model. None of them have demonstrated anything that would drive mass adoption.

@NotImpossible

Just to add - I don't know very much either! I've read enought about the subject to make the 'word salad' (as somebody described it) above make perfect sense to me and I'm finding it fascinating.

I've been recommended the book The Bitcoin Standard as a good introduction/overview but I've not read it yet so can't add my recommendation.

I bet you had to read a lot if dictionary definitions and still have to gloss over some of it. But I am interested a, could you explain it without the obfuscation please?

@SamphiretheStickerist

It's a pyramid scheme and anyone who tells you otherwise is conning you.

No matter how many people make some money someone somewhere is making an extortionate amount of money as this is a global scam.

You buy fairydust, mined in pixie mines and the more people who buy fairydust from the same pixie mine the more each sparkle is worth. Until one too many people make a wish, spend their fairydust, and the sparkles all fall down with a sad fizzle. The only person left with anything then us the person who opened the pixie mine. Because he took commission on every sparkle ever sold.

The End.

Excellent summary!

@HighburyHope "One of the concerns I think is that financial sanctions might be left toothless if Putin/Russia use crytocurrencies to sidestep them."

Won't happen.

More accurately, if this was tried to move any significant amount of money, the process of trying to convert from whatever ponzi coin they choose to use back into real currency would cause the price to crash.

To the OP, everyone telling you they're a scam is 100% correct, stay well clear.

My son is doing his dissertation on this and I genuinely don't understand it!!Am obviously not as clever as my son

@SamphiretheStickerist

It's a pyramid scheme and anyone who tells you otherwise is conning you.

No matter how many people make some money someone somewhere is making an extortionate amount of money as this is a global scam.

You buy fairydust, mined in pixie mines and the more people who buy fairydust from the same pixie mine the more each sparkle is worth. Until one too many people make a wish, spend their fairydust, and the sparkles all fall down with a sad fizzle. The only person left with anything then us the person who opened the pixie mine. Because he took commission on every sparkle ever sold.

The End.

The problem is that pretty much describes the pound, the dollar or the rouble as well. All money is madey-uppy. Just some more than others.

If Putin is evading sanctions by using crypto then could western governments harm him by encouraging the value of crypto to fall?

@ThreeFeetTall

If Putin is evading sanctions by using crypto then could western governments harm him by encouraging the value of crypto to fall?

If he is, then he's worse advised than I thought.

It's entirely possible to bork the value of a crypto currency if you control enough nodes. Control costs "gas", which is the blockchain version of a processing fee. It's why some people operate blockchain nodes. They get paid in factions of the crypto they validate.

Most recent crypto schemes do try to enforce a regional spread of nodes that get to validate transactions. But if an actor is prepared to buy a lot, they could effectively control the blockchain.

However now we are straying into PhD territory at least.

The other attack vector is - as always - badly implemented cryptography. And GCHQ and it's equivalents across the world will have a very secret file with little or unknown flaws in various implementations they will be using to make their lives easier. And (allegedly) out lives safer,

With one difference @DGRosetti. Currency has a government backed promise. Ours has the Queen on it.

We don't rely on an invisible Gnome King, we can see, have some influence over the banking gnomes who control normal currency.

It's disingenuous, at best, to claim some real area of similarity.