Who's invested in Cryptocurrency

....but what exactly is the value of the cryptocurrency....

Every "cryptocurrency" is different in some way, and there are more than 2000 of them.
Take Ethereum and its Coin ETH.
If you want to use the Ethereum blockchain then you need some ETH coins.
If you think Ethereum is going to be a huge success and used for say storing all NHS records or legal contracts. Then the limited number of ETH coins will be in high demand, hence the value of ETH will rise.

Theta101 wrote: »

If you want to use the Ethereum blockchain then you need some ETH coins.
If you think Ethereum is going to be a huge success and used for say storing all NHS records or legal contracts. Then the limited number of ETH coins will be in high demand, hence the value of ETH will rise.

If I understand you correctly, what you are saying is that if the NHS wanted to make use of the Etherium blockchain to store all of its records it would need to pay for this service using Etherium coins. Is this correct?

ivormonee wrote: »

The thing is I still can't say I understand what cryptocurrency is and I cannot see any definitive way of ascertaining its value.

It's worth what people someone will pay you for it, like anything else.

• What is an ounce of gold worth?
• A bit of copper wiring?
• A bag of flour?
• An old painting?
• A bag of sand?
• A piece of slightly sharpened wood that a hominid made 10,000 years ago?
• A piece of thin polymer that the Bank of England wrote £5 on?
• A number on a screen which says you have a certain amount in your bank account, but in reality, your bank does not have funds that match everybody's balance, they play with your money and lend it to others at interest, and you trust them because if you ask for your money in a cash machine, you know they will give it to you?
• A piece of paper with "I will pay $200, signed <signature>"?
• A solution to an algorithm that a warehouse full of specialised computers spent a lot of electricity and time calculating and that millions of other computers around the world verified and agreed it was valid?
• A token of which only 200,000,000 will ever be made and somebody told you will be used for some amazing purpose in the future?

What will someone pay you for any of those right now? What will they pay in the future? Probably less, or... more, depending on how the item appreciates in value, or how the payment method you use suffers from inflation.

Some of these items are finite resources that will run out or become much harder to obtain in the future. Some involve work to obtain. Some are unique and can never be made again. Some are fungible (in that any unit is identical and interchangeable). Some can simply be "printed" whenever it is deemed politically necessary.

ivormonee wrote: »

the resulting coins are simply a by-product, are they not? Eg. the bitcoin blockchain is a way of confirming transactions, so it has a significant and practical application. But the bitcoins themselves are the by-product, the reward to miners for carrying out the confirmatory transactions. Why should those resulting coins have value? That bit is the bit I'm struggling to grasp.

Bitcoin is a bad example to use there, because Bitcoins aren't just a by-product. The intention of Bitcoin (and the blockchain) is to function as not only a public ledger, but also a currency. Due to the way it works, coins are expected to be discovered at a certain rate, which goes down over time (this means it's inflationary, but not as much as the fiat currencies we're used to). Some cryptocurrencies have a set amount only, which makes them more like investments, since there will never be more.

Of course, at the moment Bitcoin barely functions as a currency due to the poor decisions of a group trying to centralise and control it. But other cryptocurrencies are trying to take on the same vision of being a decentralised currency where people are in control of their own money.

Then you have cryptocurrencies that are trying to do something on top of that, such as those that seek to provide smart contracts (Etherium, NEO).

Other cryptocurrencies issue tokens in ICOs, purchased with ETH or NEO, and those tokens might then be used on whatever service they provide when their product launches, but until then the price is really just speculation on the fact people think it will be good, rather than because there is any useful product.

Others try to use blockchain technology (the idea of a distributed immutable ledger that everybody agrees on) to offer other services, such as file storage, or use it in audit trails for whatever reason.

Others, such as Stellar, are trying to solve problems of transfer from one commodity to another, functioning similar to credit, and if they realise their dream, you would be able to exchange any currency (or asset) for any other to someone on the other side of the world almost instantly and at virtually no cost.

The truth is, the vast majority of projects are garbage, many are simple cash grabs where someone or some people create a website, put their pictures on it, write a document, and use buzzwords to claim they're solving all the problems of dentistry, or publishing, or casinos. Maybe some of them even will, who knows?

But where we're at now is basically like how in Britain in the 1840s everybody and their dog was opening a railway company and promising to build a track, and everybody and their cat was rushing to buy shares in it. A lot of the railways never got built, a lot of them were abandoned, and we now have a fraction of the track that we had then, although railways are still important. The same will happen when the bubble bursts on crypto. All the shitcoins will fall away, and we'll be left with a big few players.

Personally I think people should read the whitepapers, and understand them, so that they know what it is they are "investing" in, rather than just seeing the green lines and greedily throwing money at it in the hopes of becoming rich in 5 years. Although in reality, you could have invested in pretty much any of the major cryptocurrencies last year and become rich this year. But mass adoption is usually when the bubble bursts, so when my hairdresser or taxi driver is asking me about it, I get worried.