Basic Formula for the Value of a Currency

[RainbowCurrency]

Thought I'd share this, let me know what you think...

From what I know, here is a basic formula for the value of a currency: it is the BACKED value, plus the ECONOMIC value, plus MARKET value—and that altogether is the CURRENCY value.

Backed Value (currency backed by real value, such as gold, silver, bronze, shares, etc.) + Economic Value (benefit provided, connected to a real economy) + Market Value (what people are willing to pay) = Currency Value

The question is: Is there such a cryptocurrency out there?

Unfortunately, for most cryptocurrencies on the market (including Bitcoin) the formula is zero BACKED value + zero ECONOMIC value + current rate (that people are willing to pay for) = CURRENCY value.

Your thoughts?

Cheers,

Michael

[alyssa85]

The value of a currency is simply what people want to pay for it.

Bitcoin does have real value, as people in Venezuela and Zimbabwe will tell you - those who bought bitcoin in the last few years saw their wealth preserved.

However, you do pose good questions about how to value cryptocurrencies in general. Some have big communities, some are easy to spend, some have an economy developing around them - and you can attach a value to all those things. Most those are pure hype and hope and arn't really worth much.

[Tipstar]

Backed Value (currency backed by real value, such as gold, silver, bronze, shares, etc.) + Economic Value (benefit provided, connected to a real economy) + Market Value (what people are willing to pay) = Currency Value

Michael

Why are you adding them?
As cryptocurrency have no legal foundations, there's no way to guarantee its worthness.
So, its not possible to back it up with real gold or silver.

Some coins have the nature you stated in economic value. For eg. Ethereum is high due to it's high demand for ICOs.

But at last it all depends on what the users are willing to pay. And that is same for every currency and commodity.
Gold is high because people are willing to pay for it. But it's just a shiny metal.

[RichardBTC]

The value of a currency is simply what people want to pay for it.

Bitcoin does have real value, as people in Venezuela and Zimbabwe will tell you - those who bought bitcoin in the last few years saw their wealth preserved.

However, you do pose good questions about how to value cryptocurrencies in general. Some have big communities, some are easy to spend, some have an economy developing around them - and you can attach a value to all those things. Most those are pure hype and hope and arn't really worth much.

shame dude why you got to uae Zimbabwe in your example hahahah... Just joking im from south africa so ya just pulling yo leg. Price ia determined simply by what people wnt to pay... Thats why you have exchanges trading thw same crypto at different prices...

[RainbowCurrency]

Backed Value (currency backed by real value, such as gold, silver, bronze, shares, etc.) + Economic Value (benefit provided, connected to a real economy) + Market Value (what people are willing to pay) = Currency Value

Michael

Why are you adding them?
As cryptocurrency have no legal foundations, there's no way to guarantee its worthness.
So, its not possible to back it up with real gold or silver.

Some coins have the nature you stated in economic value. For eg. Ethereum is high due to it's high demand for ICOs.

But at last it all depends on what the users are willing to pay. And that is same for every currency and commodity.
Gold is high because people are willing to pay for it. But it's just a shiny metal.

Thanks.

I'm not adding them "per se", it's just my way of stating the 3 important variables that determine a currency's "real" value.

Regarding gold, fiat currencies used to be backed by them. Nowadays however, banks literally create money "out of thin air".

We live in an "interesting" world for sure. :-)