Intrinsic value of cryptocurrencies

Can someone explain me in simple terms what gives most cryptocurrencies value, apart from supply and demand?

I understand the value of Bitcoin and other "currency" type cryptocurrencies, since one of the characteristics of money is that it has no other purposes than to be exchanged for goods and services, and for these, as long as there is adoption and people are willing to use them, then they have value, or at least whatever value that people will give them.

But what about coins for platforms, like Ethereum, Cardano, Icon, Neo, etc. As far as I can see, the coins are not meant to be truly used as a currency, and they don't really seem to needed to use the platform and are not backed by anything. They can be used to pay node operators, but is that it?

The fact that they can be used to buy into ICOs that happen on these platforms doesn't seem relevant, since the same problem arise with the value of the coin that the ICO companies create - most of the time, their actual use, apart from being traded to make money, are far from obvious.

I understand somewhat the values of "in ecosystem" currency, like BAT and FUN somewhat, and I could see their use, but I can't figure out in what universe having these currencies fluctuate constantly in price would be a good thing if they were to ever actually be used for their stated purpose.

What I'm trying to say, is that I don't really get what I'm investing in if I buy cryptocurrencies. It's not a share of an actual share of whatever project or company is behind the coin. For example, people buy Ripple, because the company is in talk with banks, but even if banks adopt some of Ripple's technology, why would they ever give a flying fuck about the coins?

There's a disconnect there that I'm having trouble to understand. Can anyone explain to me what is the intrinsic value of cryptocurrencies, or point me to ressources that could help me understand it?

tldr; I'm dumb, why do give money for crypto

Other urls found in this thread:

cryptoambit.com/blog/ethereum.
twitter.com/SFWRedditGifs

Bitcoin uses a global network of computers that maintain a shared ledger called a blockchain that keeps track of who owns bitcoin. Once blockchain technology was introduced to the world, people realized that blockchains could be used to keep track of anything of value. In 2013, a 19 year old named Vitalik Buterin introduced the Ethereum white paper, which proposed an open source platform that would let programmers build blockchain applications that could facilitate the exchange of money, content, property, shares or anything of value. Much like with Satoshi Nakamoto's paper, Buterin's was met with widespread excitement from software developers around the world who began building toward the vision Buterin laid out.

Much like Bitcoin, Ethereum isn't owned or controlled by any one person. Unlike Bitcoin, whose creator remains anonymous, Ethereum has a leader in Vitalik Buterin (pictured below). While Buterin doesn't control Ethereum in the way that a CEO does, his word carries tremendous weight in dictating the direction of the project - something that is considered a strength or a weakness, depending on who you ask.

The basic function that programs built on Ethereum perform are called smart contracts. Smart contracts are digital agreements that execute automatically based on real world data. An easy way to think of them is an "If-then statement." IF condition A exists, THEN perform function B.

Let's say for example Grandma wants to make sure she never forgets to give Little Billy birthday money each year. She could write a smart contract that says IF it's Little Billy's birthday, THEN pay him $10 from Grandma's account. Once this contract is broadcast to the Ethereum network, it will execute automatically each year on Little Billy's birthday.

Smart contracts have applications far beyond improving the reliability and efficiency of Grandmothers around the world. Another simple application of a smart contract is for rental payments: IF date = 1st of the month, THEN pay landlord rent amount. Processes that currently involve manual interactions between two parties can now be automated and the value can be moved in real time over the blockchain rather than settling days later as with traditional banking.

As stated in the intro, Ethereum is a platform for building blockchain applications using smart contracts. What you may have just purchased on Coinbase is called Ether, which is the cryptocurrency that fuels the Ethereum network.

Ether functions more like a digital commodity than a digital currency. Just like you need gasoline to fuel your car, you need Ether to run applications on the Ethereum blockchain. In the Grandmother example cited above, Grandma would have to purchase small amounts of Ether to fuel her smart contract that pays Little Billy his birthday money.

The Ethereum blockchain functions in the same way as the Bitcoin blockchain: a network of computers run software that validates transactions through majority consensus. The people running these computers are called miners. Bitcoin miners are compensated for their resources by being paid in Bitcoin. Ethereum miners are compensated in Ether. On Little Billy's birthday, Grandma's ether transaction fee will go to whichever miner adds the block containing Grandma's transaction to the blockchain. That miner will also receive new Ether in the process.

The same supply/demand economics that apply to commodities like oil and gas also apply to Ether. Oil is valuable because it powers many of the things we use in our everyday life - it heats our homes and fuels our engines. The more people and enterprises that rely on Ethereum based applications, the higher the demand will be for Ether which will increase its value. As with all cryptocurrencies, there's plenty of speculation baked into the price - speculation that the demand for Ether will increase in the future. Since Ether is valuable, exchangeable and transferable, certain merchants are also starting to accept it as a currency.

Applications that run smart contracts on the Ethereum blockchain are called "dApps," or decentralized apps. Just as any app developer can build apps on top of Apple's IOS operating system, developers can build on top of Ethereum's blockchain infrastructure. To the end user of a dApp, it might not look and feel any different than the apps you use today. It's the underlying blockchain infrastructure that make them different.

Since dApps function on top of the blockchain, they can be used to transfer value peer-to-peer. To return to our Grandmother example, there could be a dApp that Granny can download that lets her schedule Little Billy's birthday payments without having to code the smart contract herself. dApps are also completely open sourced so other people can access the code and build on top of them. Someone could take the code to the birthday payment dApp and add the ability for Grandma to add a note that says, "Happy Birthday Billy!" Running dApps on the blockchain also offers added security benefits. Since the transactions are distributed and encrypted across the Ethereum blockchain, there is no central place for a hacker to breach and gain access to all of the world's Grandmother to grandson birthday payment data.

At this point, I'm really beating the Grandmother/Little Billy example to death because I think it represents a simple illustration for the kinds of applications that can be built on the Ethereum blockchain. In reality, the dApps that are being built are much more complex

“Ethereum aims to take the promise of decentralization, openness and security that is at the core of blockchain technology and brings it to almost anything that can be computed.” - Vitalik Buterin

With dApps, smart contracts and blockchain technology, Ethereum is leading the decentralized revolution. Bitcoin is the world's first decentralized currency, that operates on a global network of computers outside of central intermediaries. Ethereum gives programmers a platform to develop a decentralized version of just about anything.

Decentralized networks like Ethereum have the power to remove the intermediaries that currently exist between producer and consumer. Let's take a company like Uber. Uber is a platform that brings people who need rides together with people who have cars. To facilitate this interaction, Uber collects 20% of every ride. With Ethereum and blockchain technology, there is nothing to prevent a bunch of software developers from writing a dApp that creates a decentralized Uber. Instead of 20% per ride, transaction fees are paid to the network and the driver takes home the lions share of the transaction. Tokens can be issued that represent ownership in the network. Coders who work on improving the network can get paid for their efforts in ownership tokens. Non-technical people can come up with marketing campaigns that spread awareness for the network and also get compensated in ownership tokens. As the decentralized Uber network grows and improves, the value of its ownership token increases, rewarding the people that built it. The result is whats referred to as a "Decentralized Autonomous Organization" and theres a strong possibility that DAOs replace a lot of the world's biggest corporations.

This may sound like a radical concept but blockchain technology enables these kinds of decentralized organizations to exist - Ethereum provides the tools for people to go out and build them.

You're publishing your school essay on Veeky Forums? No way you type that fast. It's obvious you and op are the same people

do we know how much ether it takes to run a small smart contract like an autopay?

like if we knew how much ether it would cost us to send billy 10bucks automatically then we could assume a realistic value for the ether based on what we'd be willing to pay

also why the fuck would I want to pay ether to set up an autopay when i can just do it from my banking site for free? the autopay thing was a bad example

No, he's not me. I found the article he's posting (don't know if he's the one who wrote it or not), it's here: cryptoambit.com/blog/ethereum.

I still read it in the thread, I understand the value of Ethereum better now and platforms better now at least.

Thanks user, that was useful.

There's no disconnect. You've arrived at the only sane conclusion: it's all bullshit. (Except for the single privacy coin that will survive/come out of the apocalypse. XMR? Maybe?)

It has no value outside of a tool for trade, so it has no intrinsic value.

What to do with this knowledge

The disconnect you feel between the tech and currency aspect is valid. Don't conflate Normie hype, new token every day bullshit, with the actual tech that drives it all. Cryptos value comes from its decentralized nature, a restless environment. In terms of currency you can think of it like an the value an escrow provides. Trust and resilience. It's tough to take down a "service" like bitcoin and other cryptos since they run on thousands of nodes.

That's the inherent value of a decentralized ledger. Trust

>Can someone explain me in simple terms what gives most cryptocurrencies value, apart from supply and demand?
The same thing that gives jewbux any value; because someone says it does. Neither currency is backed by anything but hollow promises. As soon as the illusion is shattered that their currency has any value it breaks.

They're all just Chuck E Cheese tokens.

Trustless **

Long story short basically all cryptos have very low intrinsic value. On the other hand there's no reason to expect them to drop into those levels because any demand will be higher than the absolute minimum. If you look at gold, it's valued several times higher than its intrinsic value.

A world currency that's not technically controlled by any central authority can have value. (I get that BTC and others might not fit the bill since some early adopters hold a disproportionate amount, but I like the concept.) Privacy coins are good, but all coins currency coins should be privacy coins, it shouldn't be a niche, it should be the default.

I also like the concept of decentralized computations, so 's post explained at least why platform coins can have value. I don't fully see why they wouldn't be able to simply charge customer's fiat and pay miners/node operators/etc. the traditional way instead of creating crowdfunded tokens though.

So in most cases, crypto's are used as scrip/non-cash vouchers to pay the people who give processing power or bandwidth to maintain the network. Unless I'm misunderstanding it, I get that part now.


>Don't conflate Normie hype, new token every day bullshit, with the actual tech that drives it all
I like the tech, what I didn't understand is what I was getting from buying cryptos whose main goal wasn't to be a general or specific purpose currency. For exemple, if I like cars, I could either buy a car, or shares in a car company, but cryptos seemed to me to be the equivalent of buying a picture or even a more abstract representation of a car that doesn't have a true elation from the actual product, like a car souvenir.

>They're all just Chuck E Cheese tokens.
A lot of them still do seem to be.

The current value of crypto is zero, because there is nothing in the real world that cannot be done without crypto.

Until there is an actual real world demand for something that only crypto can provide, all this shit is worthless and we are only speculating on what the actual value of shitcoins are.

Currency coins are pure worthless shit because Dogecoin pegged to 1 cent would be good enough for most use cases requiring currency transfers.

The rest of the utility tokens are still fucking worthless until they deliver a working product that people will use. Even so, if they cannot get enough users or demand, it may fall by the wayside like some of the first movers in the early Internet era simply because they were before their time.

Anyone trying to tell you there is any value outside of supply and demand is coping hard as fuck

this shit literally represents nothing but the money retards have put into it

while real currencies prices in long run are representative of the economic activity the currency is a medium for

until (or really rather IF) cryptos are ever widely accepted as currency, they will continue to represent nothing

>The same thing that gives jewbux any value; because someone says it does. Neither currency is backed by anything but hollow promises
Regular fiat is backed by a central authority and a lot of people with guns whose goal is to make sure that people's convene on its value as a mean of exchange. That said, there is nothing stopping people from creating a parallel borderless currency if enough people are willing to adopt to convene that it also has value. I don't know anything about this, but it would seem that after it reaches a critical mass, whatever it may be, at some point "it just works" (until for some reason people's trust in it gets eroded.)

you fucking libertarian retards are so fucking stupid concerning economics a fucking topic you all pretend to love so much

read a fucking book nigger

You're not wrong, theres 1200+ coins and tokens, and 3/4th of them are pure shit.


But where you're wrong is that there are up and coming project's where you own a stake in the company and actually draw dividends, paid in ETH quarterly. Take a look into Moria Token.

I think it may revolutionize security tokens.

That and Polymath

Things like Ethereum and decentralized computing platforms do seem cool as hell, and if cryptocurrencies like Ethereum can be used to pay people who maintain the network, that seems fair. That said, it's true, as I said in another post, that I don't fully see why they need to be paid in Ethereum rather than traditional money, i.e. why Ethereum wouldn't be able to simply charge $X for people to use their platform. If they theoretical maximum coin supply is also unlimited and it's moving away from proof of work, I also don't see what truly stops them from creating more coins just because and deflate the price, just like governments can print more money, even if it's known that most governments won't deflate the value of their currency more than 1-2% a year.

I don't see how I came across as a libertarian, but I didn't hide that I don't know anything about most of this, that's why I started this thread.

the problem with crypto to me is it is too complex for the average person.

imagine the average person figuring out how to look up if their internet of things front door was locked at 8am last tuesday. no fucking chance unless their amazon alexa does that shit for them automatically

even looking up the blockchain on your bank statement to see if one of your purchases was legit or not seems like it would take high IQ to understand

>But where you're wrong is that there are up and coming project's where you own a stake in the company and actually draw dividends, paid in ETH quarterly. Take a look into Moria Token. I think it may revolutionize security tokens.
So then it becomes identical to stocks but there's just no one regulating or watching them to make sure that they give tokenholders the dividends they should? Why wouldn't they just go public and use the traditional stock markets? I get that it's probably a lot more trouble for them to go the stock market route, but all the additional regulations are there to protect those who buy a stake in the company, no?

>That and Polymath
I'll look into it. I had completely disregarded because of the ads, so I still don't know what it is.

>simple terms what gives most cryptocurrencies value, apart from supply and demand?

At some point someone spent money on (which they exchanged for their labour or services) on equipment to mine. Also they paid for, or stole, the electricity. This is essentially the start up value the currency holds... The fact someone expended wealth to create a none inflatable currency. Someone has suffered a real/actual loss in order to create the currency that is 'worth nothing'. Because loss/investment in electric and hardware is actually better than what the banks are offering. The loss creates the currency and the currency can not be inflated. So when you're in the game, you're in a pool of people playing the money game with a none inflatable currency.

You can't really 'invest' in crypto without being a part of it. If you invest you buy to hold. If you buy to make a profit, you have the intention of selling. If more people buy to make profit than buy to 'invest' or 'believe' in the crypto then you get what has just happened. Idiots taking out loans to buy worthless magic beans that all they can do is sell them or hold onto them, since there are no products or services that can be offered to normies with them, right now.

It will become worthless only when people stop trading with it. Right now IMO it is backed by DNM drug dealers and people who accept payment in bitcoin. As long as a fentanyl/xanax pill can be delivered to your door for $10 a user is going to come up with the money, and there lies your value, at least currently. As more merchant join crypto the price will average out. Lets say all supermarkets accept crypto... You can bet the relative price of milk to a fentanyl pill is going to be reflected in the currency within a matter of days/weeks and it will automatically adjust.

If you have a profession or business, integrate cypto into it and save your profits, in turn when you hold onto coin and the supply decreases, then prices rises.

You're one of the biggest fucking pajeets on Veeky Forums if you don't think fiat is backed by guns.

The way polymath and Moria operate classify them as a security, thus have to be regulated by the SEC.

Don't get me wrong there's a lot of shady crypto games played but there are a few decent ones here in the US.

I agree up to a point, I'm not sure it takes a high IQ to understand if explained correctly though, and hiding the more technical things like looking up a transaction on the blockchain looks like the kind of thing which would be hidden under abstraction layers and automated if these technologies ever truly get adopted by mainstream institutions, people shouldn't need to do these kinds of things themselves.

>You can't really 'invest' in crypto without being a part of it. If you invest you buy to hold. If you buy to make a profit, you have the intention of selling. If more people buy to make profit than buy to 'invest' or 'believe' in the crypto then you get what has just happened. Idiots taking out loans to buy worthless magic beans that all they can do is sell them or hold onto them, since there are no products or services that can be offered to normies with them, right now.
If you buy and hold on coins that have proof of stake, I can see the value for the network, but what would be the value of buying and transferring the coins in a cold wallet, like a lot of people seem to advocate? This doesn't seem better than simply buying "to make a profit". If less coins are in circulation, the price will rise, but as dumb as it may seem, in what way is this a good thing? Most coins are highly divisible, so I can see how price doesn't really matter, but wouldn't most platforms have an incentive to keep the price relatively low to keep people using them? Let's say DeepBrainChain. If they want companies to buy their token to use their network, if the price rises too much wouldn't most customers just go use one of their competitor?

>It will become worthless only when people stop trading with it. Right now IMO it is backed by DNM drug dealers and people who accept payment in bitcoin. As long as a fentanyl/xanax pill can be delivered to your door for $10 a user is going to come up with the money, and there lies your value, at least currently. As more merchant join crypto the price will average out. Lets say all supermarkets accept crypto... You can bet the relative price of milk to a fentanyl pill is going to be reflected in the currency within a matter of days/weeks and it will automatically adjust.
Ok, a parallel economy creates a need for a parallel currency.

>Polymath
>Moria
Researching them now, thanks user.

Wasnt polymath an ad on cmc?

memecoin has no value, it doesn't provide a service which isn't already filled by something else.

Its growth in value so far has been completely manufactured to turn into a giant ponzi. The exchanges are carefully designed to make sure they always make money.

Fiat isn't backed by anything concrete. Sure there's entities enforcing its use as an official currency, but if for some reason people were to lose faith in it its value would go to almost zero. There's no entity that can guarantee it won't happen ever since it's the people who make the decision in the end. Currently fiat isn't doing too well, we'll see where it goes.

Here's a question for you OP. Why does fiat currency backed by nothing but the word of increasingly untrustworthy governments and institutions like the Fed have inherent value? What makes those digits in your bank account or the paper in your hand worth anything?

People who make absolute statements like this are always retards. Even if crypto was absolutely useless it would still have some value just for the sake of being fun to trade

I just realized the irony in this post since I forgot to include the "almost" before "always"

Skycoin is backed by bandwidth and the infrastructure of the new internet