I’ll take a stab at this.
What makes things valuable is rarity. If chunks of gold poked out of the ground everywhere where anybody could pick it up, its value would be almost nothing; the same as any other rock.
So how do you make a digital thing (cryptocurrency) rare?
By enforcing some mathematical rules that must be calculated over and over again, billions of times before a new “coin” can be “mined”.
You know how you can program a computer to calculate Pi to infinite places, and it’ll just keep cranking and cranking, making more and more numbers for all eternity? Cryptocurrency mining is a little like that, where an ever-increasingly huge collection of numbers is calculated (the blockchain) and the next number in the chain can be calculated given enough processing horsepower.
Each calculation takes time, which can be shortened with faster computer hardware, but still… it takes (for example) 7.5 days of constant grinding to create one Ethereum coin.
And note, that number is already out of date, since it was posted in November 2021. The actual number of days now to mine one Ethereum, when you’re reading these words, is gonna be much more. See, every coin you generate makes it harder (more calculations) to generate the next coin, increasing its rarity; increasing its value.
If the calculations were simple and could be calculated quickly then bazillions of “coins” could be created instantly, and everyone could have some. But that doesn’t make them rare, and their value would be zero.
Okay so what happens when it takes “too long” to generate a new coin?
Firstly, that calculation time can be mitigated by throwing more and more hardware at the problem, which professional cryptominers do by filling warehouses full of custom mining rigs. Each warehouse chews up enough electricity to power a subdivision, by the way.
Secondly, if a particular currency (there are MANY) becomes too difficult (i.e. time-consuming) to mine, there usually occurs a massive sell-off where the oldest coin holders dump their coins on the market, converting them to hard currency like USD. And of course this tanks that particular market, the price goes down, and any new investors in that cryptocurrency are left holding cheap coins that originally cost them more to buy or mine. They’re screwed.
That’s why cryptocurrencies, the way they’re implemented now, are basically pump-and-dump schemes and should be illegal. The same way any other pyramid scheme is illegal.
And when you factor in the absolute waste of natural resources, the stupid carbon footprint, the needless pollution too? Cryptocurrency miners should be treated as worse criminals than simple scam artists.
dededos
prguitarman
romaincrisis
ellievsbear
vaporwave
