Mining in 21st Century (cryptocurrency)

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 a clear 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 say with confidence that cryptocurrencies mining is just like any other natural resource mining?

Two realities

No. As much as digital reality is real, it differs from physical one. If it was not, we wouldn’t be talking about two realities, if or one reason only. But since digital reality tends to create a kind of parallel world to 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 existence of a man. Oil, coal and variety of minerals are mined for the sake of immediate use or as necessary parts of various production lines that exist for the sake of human existential needs. Even for gold there was a need even before gold became a holder of value. Golden cutlery is not only nicer 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 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 expression of wealth. On the contrary we in western civilization tend to be excited for a design of certain jewellery while at the same time we do not really take in account the weight value of material. Here we can observe a shift from appreciation of gold as holder of value as natural resource to appreciation of artistic/intellectual work inserted in design or brand. In terms of integrated reporting: western civilization gave additional weight to intangibles in comparison to tangibles in evaluation of companies and any other kind of wealth and civilization is going to make intangibles even more important.

Let me explain this thesis a bit further.

Crypto proto-stage

What kind of value is produced through crypto-mining? At the moment, crypto coins are in peculiar proto-stage. I guess such evaluation would be shared by all those that share positive attitude towards possibility of future development. Situation is peculiar since coins and alt-coins at the moment do not accumulate wealth, contrary to common belief. As we (I hope) all know from times of Adam Smith on, currency holds no value unless it is supported by values of goods and services that directly benefit lives of users. Since at the moment it is not possible but in extremely rare occasions to spend coins and tokens for durable goods, they in reality represent no value.

If you do not agree 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 should accept such cryptocurrency as their remuneration?

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 price, but they have almost no value at the moment. They are futures. Intangibles.

Blockchain art?

Let me conclude with a very bold imagination. What if crypto coins tend to act as peculiar kind of jewellery with no intrinsic value similar to trifle jewellery bought on flee market (very low value in material itself) or as art of the Jeff Koon’s style (very high value for some and of no value for 99% of population). What if future generations are going to wear crypto-Bitcoin-chains around their necks? What if blockchains are to be just chains around our necks? What if they become memetic bit-chains that would play a role of jewellery? And what if Bitstamp happens to become major artefact in Museum of Modern Art in New York?

Aren’t we living in disruptive world?

And that is why CreditBit is going to act as a platform for all durable goods and services that could raise their value using blockchain technology as their vehicle.

Andrej Drapal