I am backend web developer by trade and I am sure like many of you have been hearing more and more about cryptocurrencies such as Bitcoin. I did research about the underlying Blockchain technology and after some perseverance I think I understand the basics.<p>However I am struggling to understand the economics of these cryptocurrencies and I am hoping the HN crowd can shed some light on it by answering a few questions.<p>The original Bitcoin paper was titled “Bitcoin: A Peer-to-Peer Electronic Cash System” however from talking to people who have Bitcoin they don’t want to use it as cash because the price is too volatile instead they are basically buying Bitcoin as an investment. Is this a narrow view and are people around the world using it as a cash system? If people are not using it as cash is this even a problem but then what is driving its value?<p>To me it looks as if the Bitcoin system is wasting vast amounts of computing power and in turn electricity. Is this actually scalable or are we going to reach a point where it no longer becomes profitable to actually mine Bitcoins and as a result the network dies.<p>Etherium is another cryptocurrency that seem interesting due to it’s smart contract system. However is anyone doing anything useful for the end user with these smart contracts? I had a look at https://dapps.ethercasts.com/ and I struggle to see the value of it from looking at the list.<p>I apologize for coming over quite negative but I feel as if I am missing something and it is difficult to find balanced arguments when looking at cryptocurrencies. It seems to either be the “next big thing” or simply a bubble.
Here is my take:
Crypto (pick your favorite hash) is used more as a study of supply/demand than a currency. I considered mining and buying a bunch of ANT machines. I also think that the lure of bitcoin was the fact that there would only be X number of Bitcoin to mine leading to an appreciation of the coin because of less supply. But now there are many crypto currencies with more total supply than the current money supply. I eagerly await to see what happens after the last bitcoin is mined.