What are Crypto Assets?
Crypto assets is a digital bearer asset. That is to say, physical possession of the asset constitutes ownership. In that sense, it’s like cash., but digital.
Ownership of such assets is recorded on a public ledger where the owner can anonymously prove the ownership. This ledger can not be modified, closed, or removed by any party, government, or other intermediary.
This enables owners of crypto assets to safely, quickly, and cheaply transact such assets between each other simply with possession of a computing device and access to the internet.
These features have the promise of significantly reducing the costs and times required to transact among participants anywhere in the world. And while the opportunity for anonymity is an attraction for illegal activity, it is also a security and safety for the owners in parts of the world where authorities knowing one’s identity is risk to personal safety. Certified Pseudonymity is the answer to those challenges and trust less policy and compliance enforcement is the answer to governance issues.
Money is an abstraction of intrinsic value: it’s used to represent value; it does not have intrinsic value itself, it has only extrinsic value.
Bitcoin was designed to be money, a technological advancement on money to more efficiently transfer economic value through time and space.
What gives a specific crypto marketable value is the same thing that gives any and all money value: its monetary properties.
Thanks for the explanation. It does seem though as if crypto was a vessel used to transfer value rather than having intrinsic value?
The underlying technology seems to be beneficial as it allows an efficient transfer of wealth but I am still not getting how crypto currency itself has marketable value? – Andreas
Cryptographic assets all share a certain architecture as I described earlier. However, their UTILITY differs from one to the next. Just like Bonds and stocks different from each based on what economic rights they represent.
Some, like Bitcoin works as a sort of a combination of store of value and currency. Kind of like Gold/Cash. Bitcoin’s marketable value is entirely a function of supply/demand. Mostly like Gold. Gold’s value is a function of supply/demand with a bit (8%) used for actual industrial purposes.
Others – like Ethereum – function more like reward points. It’s a method of compensation for performing a certain infrastructure function for financial transaction. A specialized alternative version of AWS cloud. There are many others which promise rights to certain economic value for different purposes. Most are hype. Some are real.
True crypto currencies for everyday use will be issued by central banks – kind of like they do with cash today. It defeats some of the purpose, but still retains many of the benefits.
So what are cryptos really? It is verifiable artificial scarcity, controlled by a set of rules surrounding use of hard-to-reverse mathematical functions, such as those used in public-key cryptography, hence the term “crypto”.