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RE: How Do Upvotes Work? When I Upvote Someone Does It Give Them My STEEM?

in #steem • 7 years ago

No offence but that still explains not where the money comes from. :) Bitcoin gets it's worth from the miners paying for mining rigs and electricity. There is money and work spend and converted into bitcoin. That it is why it is valuable. Just like you need to spend money on machines and personal to dig gold out of the ground. But i still did not got how on earth steemit creates money. For me it seems like crypto money is created out of nothing and people paying each other with it. Can anyone please explain this to me?

7 years ago in #steem by
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     7 years ago 

    Yeah, this is still something I'm trying to learn more about. From my understanding, Bitcoin doesn't only get its value from people spending money on mining rigs, a lot of it is decided in the markets from the balance of supply and demand. Here's one explanation I've seen from this article:

    Bitcoin's value depends on "transactional" and "reservation" demand.

    It is important to note that the total market value of a currency, its "monetary base", is driven by two things, transactional demand and reservation demand. We can think of Bitcoin's average daily "float" as the analog of our economy's M1 money supply - the currency needed to satisfy transactional demand for goods and services. Similarly, we can think of the Bitcoins which are "hoarded" by speculative investors as the currency needed to satisfy reservation demand for secure long-term savings. Combined, Bitcoin's float and reserves comprise its total monetary base, which is similar to our economy's M2 money supply (M1+money in savings deposits, money markets, etc).

    So the monetary base relies on both consumers and investors who believe that the Bitcoin technology will power a certain volume of economic exchange today and in the future. Speculative investors in particular have shown an extraordinary willingness to buy BTC, leading to a much larger monetary base than would otherwise be expected for a currency with bitcoin's transactional volume.

    And that's ok! As long as the transactional demand for Bitcoin continues to grow exponentially in the coming years, the balance between Bitcoin's float and its total monetary base will likely reflect that of other global currencies. (To learn how Bitcoin enters into circulation, read, "What is Bitcoin Mining?")

    So it's true that with a lot of cryptocurrencies, the price comes mostly from speculation in the market, but over time as the currency is used in exchange for actual goods and services, the price won't be solely based on this speculation. It's similar to something like the US dollar -- nowadays it isn't backed by anything like gold, so it has value because we all agree that it does and willingly use it as a means of exchange.

    Hopefully that makes sense, but I'm still trying to learn too!

    Thanks for watching! :D