Bitcoin

[mr_lebowski]

6. Do not construe this as any sort of advice for or against investing in bitcoin ...

But to answer a few of your questions ...

Money is money because one can reliably exchange it for goods and services. It doesn't necessarily 'matter' whether it's in any way 'backed' by a government or whatnot. As long as enough people believe something is 'money' and hence one can use that thing to buy something else, it's is de-facto money. This is the case for bitcoin and some other brands of cryptocurrency ... and currency in general. For now at least.

Cryptocurrency is 'mined' at great cost of electricity (which is why I kinda hate it, it's very eco-unfriendly unless you're using wind or solar power or the like to power your computers) basically through a process of solving an extremely complex mathematical formula. To simplify things greatly, the formula was reasonably easy to 'crack' (and produce 'bitcoin') at FIRST, but the nature of the formula is such that as more 'coin' is 'mined', the formula becomes more complex to crack. Think of it roughly as trying to strike Oil in 1920 vs striking a massive new find of oil ... in 2020.

As the currency ages (bitcoin itself is pretty old now) there are diminishing returns to 'mining' due to the cost of electricity weighed against the likelihood of a successful mining. Some people do keep doing it though, because each extant coin has become more valuable due to the scarcity inherent to the increasingly complex formula for creating/mining new coin. Typically they'd be people who can get electrons very cheaply for whatever reason.

At some point every currency will mature to the point that nobody will mine it anymore ... unless maybe if there's some miracle new way to produce electricity for a fraction of what it now costs. Currencies must be self-limiting like this, or the whole formula for the perceived increase in value per coin ... falls apart.

There are various types of cryptocurrency mostly because ... currencies mature out as described, and also just cause there can be. The technology needed to manage the systems for making and banking it and using it for trade ... everything is all open source. If you have enough expertise and startup capital you could start up your own crypto.

But the thing is ... you have to generate the trust of enough people for it to be worth anything. And it's somewhat nebulous where that 'trust' comes from afaict. Everyone knows bitcoin, and there's a few others that are well regarded/trusted, but there's also cryptocurrencies that have collapsed and become worthless and even some outright scams. It all depends on 'people agreeing it's worth something', just like regular currency really.