Why is crypto gambling and not investing?

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The current trend of people to acquire cryptocurrencies, propelled by relentless marketing and verbal advice from amateurs who have already bought, must end in tears. And some organizations have also been introduced.

The reader may notice that I have not used the terms “invested property” or “encrypted property”. First of all, while some on-track bettors may humorously call it an investment, it is actually a speculative wager or wager. The same goes for making decisions about exchanging real money with bitcoin or ethereum property and so on.

Second, the term “asset” means that the item is the liability of the issuer or represents the ownership of a tangible (intangible) asset or intangible asset that can be used to generate future profits or services of value.

The only potential value of cryptocurrencies is that any Crypto Gamblers might be willing to buy them at a higher price. This is not to say that technological advances in creating cryptographic objects are not a real result. The concept of blockchain (although perhaps overrated) can be used as a decentralized alternative to centralized ownership and corporate accounting.

In the same way, the possibility of creating contracts containing emergency conditions that automatically come into force when certain events occur can also be validated. There are many benefits that society can derive from innovations based on digital technology, but cryptocurrencies are not classified as socially useful inventions.

However, it is a technological advance that comes from the digital age and is not dependent on any cryptographic factors. But their connection to crypto objects allows their creators to generate revenue from the fruits of their innovation.

By way of explanation, it should be noted that governments have traditionally benefited from “seigniorage” in the production and issuance of paper money (banknotes and coins). This term refers to the issuer’s advantage of being able to exchange shares (fiat money) at almost no cost to produce something of value (goods and services).

Creators of native cryptocurrencies like bitcoin also get signs if any bettors are willing to buy the original issued shares in exchange for “real” money.

But the necessary trick is, firstly, to convince such bettors that cryptocurrencies are likely to rise in price, and secondly, that creators won’t be burdened with the costs of running cryptocurrency holdings when they change hands.

Agreements that limit future supply growth, as they are embedded in bitcoin, are a factor. Provided that demand from new bettors exceeds the growth in allowable supply, prices will rise, raising self-reinforcing expectations.

And current punters have an incentive to talk about the benefits of cryptocurrencies to create that increase in demand.

This is a huge waste of resources

The second factor is the outsourcing of registration and verification transactions to a public blockchain system, where those who verify are rewarded with a new cryptocurrency in accordance with the underlying algorithm.

As a result, early writers ignore further exchange surcharges on the new cryptocurrency, but new cryptocurrency verifiers / recipients don’t always make a profit. The expenses (use of electricity and IT resources) incurred during the verification process reduce profits to zero, especially when there are many competitors in the verification market.

And this is a huge waste of resources.

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