It's not an infinite supply. The blockchain is basically a decryption puzzle. It starts off easy and gets more difficult and takes longer to decrypt a full block. When a full block is decrypted, that's a bitcoin. At some point, we will either not be able to decrypt any more because it will all be decrypted so the supply is limited. As time passes, less are decrypted and so the number of bitcoins available won't grow as much and demand will outstrip supply. Currently, it is not economically feasible for regular consumers to mine bitcoin so the wealth of bitcoin ends up in the hands of farmers who get rows and rows or bitcoin mining computers to just decrypt the blocks.
Since the dollar is no longer backed by anything of worth (it's literally just slips of "paper" - aka "fiat currency"), it too is "just created".
The difference is that bitcoin isn't tied to anything. It's not guaranteed or regulated by any government. It's not subject to currency valuations and market crashes. It's not as manipulatable as money.
Think of it like this: for years, people compared the value of a dollar to the value of gold. Gold is used in many things (jewelry, electronics, precious metals markets, and so on) and so is still tied to the economy for its value. Bitcoin is not tied to anything. It's value is purely derived from demand. Although this makes it extremely volatile, it's actually a real measure of the power of a dollar. Gold can't be the measure of the value of a dollar because of how its own value is tied to general market and economic trends. As such, when you see the value of bitcoin skyrocket, what you're really watching is a sliver of how the dollar is actually being devalued. We're not really watching the value of bitcoin go up; we're watching the value of the dollar plummet like a crack whore on a dick for her next fix.
It also helps to stop thinking of bitcoin as a thing like a stock, share, bond, etc. It's a currency. When you trade bitcoin, you're really doing currency trading.
So: dollar = infinite money, bitcoin = finite supply. The finite supply doesn't actually change in value because there's a set number of them. It's the dollar that is devaluing. What you're really watching is the value of the dollar drop due to being fiat currency in a fractional reserve system (which you cannot do with bitcoin)
I totally get that it has value...and more so than the dollar. I just dont get how anyone trusts digital currency. What happens when the grid goes down?
And as a layperson, I am not at all convinced that the creator of bitcoin (or whoever controls it) cant inject as much as they want into their own wallet. It was created once, what gives you the confidence that it is not continuously being created?
The block chain is also a ledger that multiple people have so if you "inject" something, it gets checked against all the ledgers and since they don't agree, the injection is rejected. To do this, you would have to actually alter the blockchain. And because you would have to alter every ledger, it's just not going to happen. It'd be like doing a man-in-middle attack for an online transaction between two banks. You can tell one of them that their other one is depositing an extra million dollars but when they both check the ledgers, they won't agree so the transaction won't go through.
The blockchain is public. You can go and download the whole thing and analyze it. And people have.
You can still deal with bitcoin without a grid. You can trade paper slips with your keys on it (after all, it's just a decryption puzzle and the key is like a serial number on a dollar bill). The trade doesn't have value (only the promise of value kinda like gold backed currency or old style silver and gold certificates where the bank certifies that it has that much gold and you can trade it in for the value on the face of the certificate). The value can't be cashed in until the grid is back up, however (until the bank is open). This is one of the big problems with a digital currency. You could, in theory, trade several people the same key (dollar) but the only one to get it is the one that registers the transfer first. In this case, you'd be a thieving piece of shit but that's another story.
But until the grid completely collapses, that won't happen. On top of it all, as long as one transaction node has a ledger, you can make transactions against it and, if legitimate, will replicate to the other ledge nodes. As soon as a second node comes back up, the transactions can be verified and entered into the chain.
Ok, that's good that there is a ledger and some actual accountability. Thanks for helping me understand.
As far as paying while off the grid though...what would stop someone from writing down the same key and handing it to everyone he does business with. They wouldnt be able to verify until the grid is back up right?
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