Disclaimer: This blog is informational in nature and is not any kind of financial advice. Know what you're doing if you're going to invest, and consult with sufficiently qualified experts.
Foundational Crypto Concepts
OK, let's establish some real basic, foundational ideas, critical to really understanding crypto currency before we get into crypto currency too deeply. We'll start with the "currency" part.
I'm going to skim over the surface of these topics. For deeper exploration, I highly recommend the resources listed at the end of this update. This is a fascinating topic, about which I guarantee you know less than you need to. It will blow your mind to understand the most basic elements of currency and the financial system.
So let's start with a simple question: What is money?
Think about how you acquire it and what you use it for. You spend your time at work (most of us) making it, then some part of it goes into the bank to "save" for the future, and in that future (whether it be next week when you by groceries or 20 years in the future when you retire), you then spend that saved money.
When you make the money, you're converting your time and effort into money. So money represents a store of your time and effort. I say "store" because you don't immediately go out and spend every dime you make; you don't need to at that moment; you expect to spend a portion of it later. The implication in this scenario is that the currency effectively stores your time and effort.
Consider how hard you work each day at work. You could look at a day worth of pay and consider how many Dairy Queen blizzards that could buy you, and that would represent your capacity to convert your time into things. For instance, at $4.09 for a Medium blizzard, "With my current job, 8 hours at work will earn me just about 98 medium Blizzards." Money is just the medium between your time and work and the things you will eventually spend it on. You don't really care how many dollars you earn; you care how much stuff you can turn that time into.
When later comes, and you spend that stored time and effort on something, the hope is that that same day of hard work buys you what it would have the day you made it (or preferably more), otherwise, you probably should have spent it all while it had that value. But we know better, don't we? We know the stories we and/or our parents or grandparents told, "When I was a kid, a gallon of milk used to cost..." or "I used to go down to the corner store and buy penny candy." Penny candy is candy you could actually buy for a penny!
We know that the name for this phenomenon is inflation. "Inflation"--or more accurately "price inflation" (distinct from the economic definition of inflation) is the loss of purchasing power over time. We're used to the idea of our dollars being worth less, but I want you to really chew on the idea more than you have before... did you work less back when you put that money away? Is there any reason that the saved up day worth of money from 10 years ago should buy you significantly less stuff today? Stop here and mull over this until you're pissed. If you've never gotten violently angry about this, you should stop reading now and ensure that you understand this fully. You won't see the full value of crypto currency without getting this.
Thoroughly mad? Good, let's continue.
Every day that goes by with inflation happening, that hard day of work you did in the past gets reduced in what it buys you. Nowadays, that leads to us having to invest to "stay ahead of inflation". Have you ever considered why we have inflation in the first place if it's so detrimental?
Many ridiculous reasons can be given for why we "need" inflation, but it comes down to something really simple. The cause is that the government (who is in charge of our money--kinda) prints more money each year. More money, less value per unit. Why does the government do it? It's a bit tricky to fully understand that, but the simple version is as follows: the government produces more money out of thin air and gets to be the first to spend it, before that money dilutes the supply of money in the economy. Then as that money makes it out into the hands of the people, people have more units of money to spend on things, feel richer, are willing to spend a little more because they have a little more, and prices rise. The government gets the benefit of that money at its max value, and we spend our lives absorbing the negative consequences.
Bitcoin and crypto currencies (as least the majority of them) eliminate this effect by having caps on their total supply. Limited supply stops the effect of inflation altogether. Imagine making money from work, literally stuffing it under your mattress, going to spend it 40 years later when you retire without ever learning to invest, and still being able to buy the same amount of stuff you could the day you made it. That's kinda how it was before 1914 in the United States. Extraordinary idea, yes?
Come to grips with this idea. Crypto currency combats inflation in a real and simple way: it has a fixed supply / is not inflated.. It is critical that you understand this to fully grasp one important aspect of crypto currency.
Knowing what you know about Supply and Demand, should you buy more or less crypto currency today?
We'll get into other important aspects of crypto currency in the next few posts to establish a solid conceptual framework, on which we'll be able to build.
Further Reading
G Edward Griffin's The Creature From Jekyll Island. This is the book on the Federal Reserve, the banking system, and money. I consider it required reading if you're going to talk about money and know what you're talking about.
Mike Maloney's book Investing in Gold & Silver. It's not only about gold and silver. It is also an excellent intro to the Fed and the banking system. It's worth a few reads to fully understand it all.
Mike Maloney, more recently, also published a phenomenal video series discussing issues around money as well as some really long-term perspective charts and analysis, called "The Hidden Secrets of Money" on Youtube. He also has valuable content on his website, although mostly about gold and silver.
If this stuff is new to you, Peter Schiff is a great resource on YouTube as well as his podcast (until you get his very repetitive message). He's also written numerous books worth reading about the economy.
If you get hooked and really want to get in up to your eyeballs, consider reading the following:
Lords of FinanceThe classics of Austrian Economics by Friedrich Hayek and Ludwig von Mises.
Murray Rothbard wrote a few amazing classics.I also highly recommend reading James Rickards, one of the most brilliant modern minds in modern economics. His web site. His Twitter feed.
My Latest Viewpoint on the Crypto World
The Overall Market
The market seems to be looking to confirm a bottom here. Bitcoin, and most of the coins, are trying to make new highs and confirm that we've seen the bottom.
EOS
While the vast majority of the rest of the crypto market is moving laterally and trying to confirm a bottom, EOS has retaken it December high, made a new high, and is now seeking a bottom to its recent (relatively minor) pullback.
It's amazing to watch the relative strength here of EOS vs the overall market. This project launches June 1st. It's basically been nothing but amazing news. Every day we get closer to June 1st is one less day between "this project is vaporware and isn't even live yet; the market cap is pure speculation" and "this thing's live and does everything we were promised it would do; the market cap could be multiples of where it is now".
Even any major fraction of what we've been promised would be outright revolutionary. EOS is, far and away, the most innovative blockchain project--in numerous ways--that we've seen in the crypto space in a long while.
Big names continue to sign on. Cool projects continue to pop up. Big names with massive integrity are showing up to run the network. It's going to be super exciting to watch this roll out.
Watching the price do a super strong version of what the rest of the market is doing is also quite exciting to watch. While the crypto market just started to rise off a seeming bottom, EOS retook its December all-time highs. As the market dips a bit seeking a higher low, EOS dips a little, seeking it's own higher low, just below it's December all-time high.
The number of things Dan Larimer has come to understand, try, innovate, and succeed at is hard to even relate to. Keep you eye on this project... and get yourself in this ecosystem if you're seeking a job!
Find more from me...
My dTube channel where I host my (growing) free educational videos about cryptocurrency and blockchain. dTube is a blockchain-based version of YouTube. It and it's underlying tech Steem is well-worth checking out and reading about. If you have any trouble with the d.Tube channel, you won't be alone... try the same set of videos on my YouTube channel.
My website, where I have archived these updates as well as where make other announcements from time to time.
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