Few people doubt that it is possible to earn on cryptocurrency. But anyway, the question “What Bitcoin exactly is?” remains one of the most discussed. Miners, mining other types of digital coins, are often worried about the same. This is to blame for the numerous publications that speak either of a “soap bubble” or of a new currency that can soon replace ordinary pounds, dollars or euros.
Finding out the truth is easier in comparison with the most popular assets: stocks of enterprises or banks, currencies of various countries, precious metals (gold, silver, platinum, etc.). Their exchange for national currency or goods is quite simple. There are official exchange rates published on public services — bank sites, Forex market, and stock exchanges.
The Bitcoin exchange rate can be seen there, on the same list as the US dollar, yen, and euro. This only fuels interest in the question of what stands behind this cryptocurrency. Once it is traded along with gold or ordinary money, there must be a reason. And this is true. Formally, Bitcoin is evaluated on the same basis as real currencies: the price is set at the level offered by the seller for a certain number of coins at the time of trading.
By the way, there is a myth that Bitcoin exchange rate is directly dependent on the price of electricity. But this is not so. Electricity consumed belongs to the digital money production stage and does not participate in the formation of the value of coins in the market.
There is no direct relationship between the official Bitcoin exchange rate and the cost of mining coins. The same is observed with valuable metals, stocks of enterprises and national currencies. It turns out that digital money is a full-fledged asset. You can invest in Bitcoins, make a profit from fluctuations in the exchange rate and purchase/sale operations. And it doesn’t matter if there is a tangible medium for them (recently stocks have also ceased to be transferred in paper form - they are being sold as an extract from the register of shareholders).
A typical reason for skeptics' doubts is the comparison of cryptocurrency with the Ponzi pyramid. There is one similar sign in it: money does not appear as a result of the production of goods or services, but “out of thin air”. This is where questions arise about what cryptocurrency is provided for, why it costs exactly that much and what needs to be done to get coins.
Real money can be obtained by selling products and providing services. Mining in the understanding of many investors seems to be an imitation of work, because no efforts are made in the extraction of new coins (everything happens automatically). In fact, the economic essence of digital money is similar to manufacturing.
The miner faces the following costs:
One-time - purchase of powerful equipment (video card or ASIC-computer);
Permanent - payment of electricity consumed;
Variables - repair or replacement of equipment that has failed.
There is a risk of serious damage when you have to purchase equipment from scratch. And only after the completion of the “production” cycle, when a new coin appears, we can talk about earnings. It is difficult for those owners of bitcoins, who acquired them through exchange transactions, to understand where they come from and what the calculation of the current value is based on.
It turns out that all comparisons with the pyramid come from misunderstanding, reluctance to analyze and delve into the fundamental foundations of what is happening on the market. Bitcoin has taken root in the role of an asset worth investing. This confirms the regular appearance of altcoins - its analogs. It remains to adapt to reality just as we got used to the US dollar, euro, and other currencies.