Cryptocurrency mining. As if gold or silver mining?
Apparently, there is a deliberate tendency to understand cryptocurrencies mining as traditional mining. For that same purpose, the total amount of each currency is limited, with an unmistakable resemblance to that of gold resource scarcity. Like the cost of mining of gold or any other natural resource rise as much as resource diminishes, rewards for Bitcoin mining diminishes with each new block added/mined. Should we then confidently say that cryptocurrencies mining is just like any other natural resource mining?
No. As much as digital reality is objective, it differs from physical. If it were not, we wouldn’t be talking about two realities, if only that reason. But since digital reality tends to create a kind of parallel world to the physical world, one has to find a point of difference in each of natural and parallel (digital) phenomena. Let us check what such difference would be for phenomena of mining.
The difference is quite apparent. All natural resources and even gold and silver have intrinsic (durable) value for the existence of a man. Oil, coal and a variety of minerals are mined for immediate use or as necessary parts of various production lines that exist for the sake of human existential needs. Even before gold became a holder of value, there was a need even for gold. Golden cutlery is not only more excellent but more durable than those made of iron or other materials.
Double nature of silver and gold
Gold and silver still have such double nature. In rural India, for instance, gold and silver are sold as jewellery but for the price of the weight only. Men do not buy design, but the quantity of gold or silver in which design is worth nothing regardless of hours spent in designing it. Families buy gold as the holder of value while women wear it as jewellery. We could say that women there show their taste and beauty through the expression of wealth.
On the contrary, Western civilization tends to be excited about particular jewellery designs. At the same time, we do not consider the weight value of the material. Here we can observe a shift from the appreciation of gold as a value holder as a natural resource to the appreciation of artistic/intellectual work inserted in design or brand. In terms of integrated reporting: western civilization gave additional weight to intangibles compared to tangibles in the evaluation. Over time, intangibles will gain their added value compared to tangibles even more.
Let me explain this thesis a bit further.
What kind of value is produced through crypto-mining? At the moment, crypto coins are in a peculiar proto-stage. I guess such evaluation would be shared by all those that share a positive attitude towards the possibility of future development. The situation is peculiar since coins and altcoins do not accumulate wealth, contrary to common belief. As we (I hope) all know from the times of Adam Smith, currency holds no value unless it is supported by values of goods and services that directly benefit users’ lives. Since, at the moment, spending crypto coins and tokens for durable goods is still limited, they, in reality, represent no value.
If you disagree with me, please respond to this simple thought experiment: Imagine you own a tourist agency. Would you be willing to accept 100% of your income in this or another cryptocurrency not having any backup in fiat currency? Would you dare to suggest to all of your contractors and employees that they accept such cryptocurrency as their remuneration? The situation in this respect did not change much from 2008 when Bitcoin was invented.
Value against price
Until all or majority of producers and traders around the world accept cryptocurrencies and all workers accept 100% of their wages to be executed in cryptocurrencies, so long their mining is idle. Since we all believe that such idleness will cease sooner or later, we do invest in them, but it would be wrong to attribute them any value at the moment. They have a price, but they have almost no value at the moment. They are pure futures; in other words, speculations.
Let me conclude with very bold imagination. What if crypto coins tend to act as a particular kind of jewellery with no intrinsic value similar to trifle jewellery bought on flee market (meagre value in material itself) or as Jeff Koon’s style art (very high value for some and of no value for 99% of the population). What if future generations are going to wear crypto-Bitcoin-chains around their necks? What if blockchains are to be only chains around our necks? What if they become memetic bit-chains that would play the role of jewellery? And what if Bitstamp happens to become a significant artefact in the Museum of Modern Art in New York?
Aren’t we living in a disruptive world?