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Sometimes it becomes challenging for people who have entered the rabbit hole of crypto to explain to newbies what it is all about. What is the value of it? Then what they do is monitor the price movement of crypto and make their value judgment on that.
The misunderstanding stems from having a standard point of view when in fact one needs to use a different paradigm or even part of the brain to approach it.
When we were kids we used toys as a currency to trade between our friends. It varies. Girls might trade Barbie dolls, while boys might trade baseball cards or GI Joes. Even now, some adults still collect valuable toys as grownups.
When we get older we make promises to co-workers, friends, families and colleagues that we will treat them to lunch, dinner, coffee or even a steak dinner.
Let’s say we make a promise to someone that we will treat them to a steak dinner as a means to reciprocate. The “thing” we are exchanging is a promise to deliver something, in this case, a steak dinner. Note that we do not really compute in our head what the dollar value of that steak dinner will be when that day comes, or even track its price day to day. All we know is when that time comes, we need to buy a steak dinner for someone.
Now think of all those promises around the world to buy steak dinners, coffee, Barbie dolls or baseball cards. Then imagine there is a way that you can put all those promises on a global ledger, and those promises can be traded to other parties.
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It’s a strange and different way to think about crypto, but the point is that crypto is used as a store of value, a medium of exchange and a unit of account. In short, all three are properties of money, without the guarantees of governments and central banks that fiat money comes with.
The next time you think of what crypto is, think about it in these terms, instead of always relating it to the value of the dollar. Sometimes its relative value to other currencies goes down, sometimes it goes up.
All you need to remember is that there is global demand for these things, and some people already treat it the way they would treat a religion. They all have different reasons but suffice it to say that they believe in it and its value. While you might trust the Fed and Washington to protect the dollar, you cannot say the same for people living in Argentina, or some countries whose currencies have become hyperinflated to become almost worthless. That is also what happened to 1939 pre-Nazi Germany, which preceded the rise to power of a certain politician and dictator.
People can argue about intrinsic value all they want. They say gold has intrinsic value because it is used in electronics, in jewelry and even in cooking. But try giving it to a Gen Z and sometimes they will appreciate it, sometimes they won’t put value in it. So much for intrinsic value if they do not care about it.
Increasingly we live in a digital age where the speed by which we can pay someone or transfer value in minutes is the intrinsic value. Try paying someone with gold who lives in another country. Sure there is paper gold but how often do people do that anyway. Or go through airport security with $10,000 worth of gold. See where that gets you.
They do it more with crypto. It is the natural money of the Internet, and like a promise of a steak dinner, happens more often than you think.
