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June 25, 2014, 06:46:24 AM |
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You need to understand the basic mechanism of trading one thing versus another.
Person A has some amount of x and wants y.
Person B has some amount of y and wants x.
They agree on a deal (how much x is exchanged for y) and exchange their goods.
Whether x and y are apples and oranges, euros and dollars, or pesos and bitcoins does not make a difference.
In the trade, they need to make sure that each party actually gets what they agreed upon, so either they exchange in person, or they need trust in each other or a trusted escrow.
In the case of exchanging cryptocurrency for fiat currency, normally an exchange is being involved that acts as a mechanism for finding the price (through their order book) and as an escrow. Dealing with an exchange normally eliminates the need to trust or even know the trade partner because you only trust the exchange. Exchanges can only enable trades up to the amounts that buyers and sellers offered to trade, of course, so neither good is created out of thin air.
Note that "goods" to be traded can also be promises of actual goods. Promises can actually be created out of thin air, for example, I could sell you a promise of 22 million bitcoins if you're willing to accept the deal. Of course I'll never be able to keep this promise...
Onkel Paul
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