In the olden days many made their fortunes in mining for precious metals. In the past decade a new kind of mining has taken the world by storm to create a brave new world of pioneers willing to risk aplenty in search of their holy grail in hitting the motherlode. This mining is called "crypto currency".
So what is this and how does it work?
Crypto currencies are digital codes resulting from a mathematical formulae which not only limits the number of codes that can be "mined" BUT also provides three layers of security so that the ownership of the person through a complete recording of all the transactions on each code is done. Hence it is with a bit of trepidation one wondered how some hacked pieces of code can be "transacted" away in future as the last transacted owner will not be the "seller" hence invalidating the sale. Unless of course it was a direct theft where the uninitiated owner was "conned" into "parting" with his "code" not being aware of the importance of the application of his password.
So how does this work actually? A mathematical formulae creates the pieces of code and the creator of this then releases the same through a token (similar to a pre-ipo sale) sale. Once enough noise is created, then the same are allowed to be bought and sold and the price being a direct function of demand and supply, the price of the piece of code varies. The most famous of these cryto currencies is "Bitcoin".
So is this a good thing? Well if governments were to replace all their cash with crypto currencies, then they would no longer be able to print fiat money as they deem fit, the run up or down of a currency will be magnified and this would destroy economies faster then you can say "hey". For eg., if the government has to restrict money supply, then they will have to "transact" the currency which due to their large buys/ sells will directly impact the price of the currency itself. Also the USD as the defacto global currency will be hoarded leaving hardly anything for the people within the country to transact with!!
Coming to the present, no country has legalised crypto currency as "legal tender" - hence the author is amazed at the concept of people buying something which is nothing more than a piece of digital code, which cannot be used to pay your property taxes or your medical bill!! The chinese government levied a transaction tax, made a bunch of money and then when they had their fill, outlawed the same. This is the fate that is going to befall all crypto currencies.
So you may trade and make money BUT make sure you are not holding the can when the music stops.. also dont forget the last time the financial markets fell in love with a mathematical formulae, (gaussian formula) we had the 2008 crisis.
So what is this and how does it work?
Crypto currencies are digital codes resulting from a mathematical formulae which not only limits the number of codes that can be "mined" BUT also provides three layers of security so that the ownership of the person through a complete recording of all the transactions on each code is done. Hence it is with a bit of trepidation one wondered how some hacked pieces of code can be "transacted" away in future as the last transacted owner will not be the "seller" hence invalidating the sale. Unless of course it was a direct theft where the uninitiated owner was "conned" into "parting" with his "code" not being aware of the importance of the application of his password.
So how does this work actually? A mathematical formulae creates the pieces of code and the creator of this then releases the same through a token (similar to a pre-ipo sale) sale. Once enough noise is created, then the same are allowed to be bought and sold and the price being a direct function of demand and supply, the price of the piece of code varies. The most famous of these cryto currencies is "Bitcoin".
So is this a good thing? Well if governments were to replace all their cash with crypto currencies, then they would no longer be able to print fiat money as they deem fit, the run up or down of a currency will be magnified and this would destroy economies faster then you can say "hey". For eg., if the government has to restrict money supply, then they will have to "transact" the currency which due to their large buys/ sells will directly impact the price of the currency itself. Also the USD as the defacto global currency will be hoarded leaving hardly anything for the people within the country to transact with!!
Coming to the present, no country has legalised crypto currency as "legal tender" - hence the author is amazed at the concept of people buying something which is nothing more than a piece of digital code, which cannot be used to pay your property taxes or your medical bill!! The chinese government levied a transaction tax, made a bunch of money and then when they had their fill, outlawed the same. This is the fate that is going to befall all crypto currencies.
So you may trade and make money BUT make sure you are not holding the can when the music stops.. also dont forget the last time the financial markets fell in love with a mathematical formulae, (gaussian formula) we had the 2008 crisis.
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