Or just a bit thick to not understand cryptocurrencies?

[Iamnotminterested]

I'm an intelligent woman on paper but I just can't get my head around them, how they are produced, valued and how they are used etc, and now Elon Musk has coined his own (no pun intended), Dogecoin or something?

Can someone who understands them please explain in very simple terms?

They're normally produced as a result of computers doing massive amount of computation to 'mine' them. I'm trying to think of an analogy. It's a bit like a giant wordsearch. Just imagine that it's the biggest word search that ever existed, and no one has told you what words are in it. Then they took the word search and translated it into loads of different languages. Then the mixed it up some more for good measure. The computation the computers do is to find the words(coins). They are a finite resource, initially they're easily mined as the simple computations are quick to do. But each time one is mined it gets harder and more resource intensive to find the next one. Each type of coin is a distinct word search with its own hidden words that are all scrambled up.

In terms of value, they have value in the same way anything does. If you can convince someone to trade with it then it has value.

I'd recommend you do some googling on the subject if you're curious.

It's a scam.

Hth.

I think in admitting that you don't understand them, you already posess a better level of understanding than many of the people who have invested money in various cryptocurrencies. Many of those who rave about cryptocurrencies don't understand them either, but think they do (beware those who say things like "jargon jargon....it can only increase in value! Jargon jargon jargon...")

Anything which has no intrinsic value can collapse to nothing.
Anything which seems too good to be true usually is.

A lemonade manufacturer once changed their name to something with blockchain in the name. Their stock rose by 500% as a result, even though (at the time) they had nothing to do with blockchain. Because bandwagons and bubbles are perennially popular.

I don’t confess to know much, if anything about cryptocurrency but it is definitely NOT a scam.

I don't know a huge amount but my DH mined bitcoin and a couple of other crytocurrencies a few years ago. There is a finite amount of all of them which is how they end up becoming so valuable. We sold a lot a few years ago (sadly) but we have some left. One friend bought a pizza with one bitcoin about 5 years ago (most expensive pizza he has ever bought )

Since we mined them and sold one a few years ago to pay off the cost of the miner we have never lost any money thankfully. Anything we make now is pure profit.

I feel like every time someone tries to explain them to me, I understand them even less.

@Titsywoo

I don't know a huge amount but my DH mined bitcoin and a couple of other crytocurrencies a few years ago. There is a finite amount of all of them which is how they end up becoming so valuable. We sold a lot a few years ago (sadly) but we have some left. One friend bought a pizza with one bitcoin about 5 years ago (most expensive pizza he has ever bought )

Ooh, how much are yours worth, do you think?

I’m glad I am not the only one.
My DH has invested around £500 of our money in them in the past month. He has spread them around 4 types.
So far it appears to be holding steady.
According to him, once they halve (apparently in 2023), they will probably double in value

I’m no expert, but my understanding is that the best way to understand cryptocurrencies is as a form of imaginary gold. ‘Coins’ are ‘mined’ as explained above.

The coins have no intrinsic value, and you can’t spend them in the real economy but people who mine them can convert them to real money by selling them to someone who is prepared buy them.

This creates a market of speculators buying & selling the coins according to normal economic principles of supply & demand - just like they do with real gold. A coin is worth what someone is prepared to pay for it. The market is relatively illiquid (ie the quantity of coin available to buy & sell at any one time is limited), so the price is extremely volatile.

What's so complicated? It's no different to any other currency these where it's all hypothetical. The value of the pound these days is plucked from thin air, wheares it used be all based on gold and silver

No-one will ever convince me that it's not all nonsense.

I can’t get my head around them either. But then i was shocked to learn that bank vaults aren't full of gold bullion backing up every euro/dollar/pound etc anymore. So money only works because we all believe in it. As we go more and more cashless it's just moving zeros around in the cloud. I see Bitcoin as the same. It's valuable only because people believe in it.

Am i right in thinking if we all just stopped believing in the value of money then the world would basically implode?

I understand what's been explained so far which is the supply side but I don't understand the demand side. Who wants the mining (calculations) to be done?

@Curiosity101 just wondering g in your analogy who 'they' are? And how did they create the word search in the first place?

According to someone I know who is in to them, The Elon Dogecoin one, has been "made" by him as a joke.
But people are "investing" in it.
I personally dont know enough either way to know if that is true or not, but it could be.

@barkypup I've not delved into it enough to know. I know it's code/software, but not 100% on the specifics. But 'they' is any one person or group of people who codes/programmes a cryptocurrency. Literally anyone could create one and start trading them. Most of the creators give themselves a ton of them before releasing it to the public in the hopes that their coin takes off and they can slowly turn their coins into 'real' cash.

This is where the dogecoin code is - github.com/dogecoin/dogecoin

But yes I agree with your summary of money. We accept money has value because it's 'always been around' and like you said used to be backed by gold reserves.

Crypto currency really isn't any different. The only difference is that it's a lot more to do with speculation, hype as there are less ways to turn it into tangible assets.

No one has explained anything in this thread about mining them. What does it mean? Where do they come from? Without an analogy

@WunWun

No one has explained anything in this thread about mining them. What does it mean? Where do they come from? Without an analogy

Curisoity101 explained it pretty well.

The non-analogy version is that rather then a word search, people use computers to solve some complex mathematical calculations and when they complete the calculations this create a computer file that contains a single 'coin' of the cryptocurrency. This is all that 'mining' is.

The calculations are set by a computer program created by the founder of the cryptocurrency. Generally they are set so that every time a coin is 'mined' the calculations to mine the next coin become more difficult. This limits the amount of coins that can be created for each cryptocurrency, because over time it gets harder and harder to mine new coins.

Cryptocurrencies also use a system called a 'blockchain' which tracks the history of each coin so that it is possible to check that each coin was legitimately mined. This makes it impossible to fake a coin, which is why people go through the hassle of mining them rather than just making coins up on their computer.

@MaggieFS

I understand what's been explained so far which is the supply side but I don't understand the demand side. Who wants the mining (calculations) to be done?

Clever techies who have access to serious computing firepower and want to use it to create a product which they can sell for a profit.

@NotDavidTennant that is mind blowing. How does the computer make the equations more and more difficult? And if a computer can set the equation, why don't people use computers to solve the really tricky ones and then get crypto rich?

Crypto currency have a cost, to mine then you need great processing power, a good processor and graphics card

You “pay” for the crypto currency you gain through use of electricity and your PC, especially the graphics card wears out

Crypto currencies have caused a surge in demands for high quality graphics cards

So there is a price to pay. You do “invest” through time, effort and processing power and hardware (like graphics cards)

The number of bit coins, or other crypto currencies, is finite. This allows demand-and-supply, ie basic economics, to decide the price

I think crypto currencies may end up being very valuable and may destabilise the normal currency markets

If you can get involved, without spending too much on PC hardware, it may be worth it. Though I think, looking at graphics card prices now, that that ship has sailed

In a way it’s not unlike a pyramid scheme, in that works out most for the early adopters

There is a new set of crypto currencies developed for mobiles, much more accessible to ordinary people. All you need to do is click a button once a day

Look it up if you like (don’t want to advertise any particular one)

IMO it’s worth getting involved

They are finite and some people will compare them to gold & claim they have intrinsic value solely based on their rarity.

I'm not sure. Gold has specific properties which gave it value in ancient times - its malleable & extremely ductile, it does not tarnish easily, its noticeably massive. This means it has uses in craft, as a trade medium, and it's a beautiful adornment (humans are magpies).

The part I don't understand about blockchain is apparently it also has commercial value as a means of conducting unique transactions.... I don't understand this well enough and atm I think its trading at values more indicative of a bubble or pyramid scheme. I think it's main "value" as a non traceable trading medium for criminal activity, sadly.

Barkypup, it’s easy to do, just make the equations longer/harder

Doing this makes existing bitcoin more valuable

All crypto currencies have a finite amount of “coins”, as without a limit, their value would lessen, the same way that money is worth less if the government prints more of it (=inflation)

[quote barkypup]@NotDavidTennant that is mind blowing. How does the computer make the equations more and more difficult? And if a computer can set the equation, why don't people use computers to solve the really tricky ones and then get crypto rich? [/quote]
Actually looking at this site it looks like the calculations don't get harder but the amount of new coins available decreases over time. Also it looks like you don't automatically get a coin, but just a chance at winning a coin.

I have to say I don't understand all the technical details, just that it gets harder to mine coins over time and this limits the total number of coins that can ever be mined.