Originally Posted by
MaxQ
What is Bitcoin, or any of the cryptocurrencies, based on?
Nothing, other than the expense and effort required to "mine" them.
Their hypothetical utility is a currency which cannot be tracked, supervised, or manipulated by any government. There is some real appeal to that.
Originally Posted by
MaxQ
Do they have the backing of any sovereign country? Do they have a central banking system?
That would defeat the purpose.
Originally Posted by
MaxQ
In short, what is the reality basis of their value, or even existence?
Can I buy a car with them? A house? Or must I first convert them to a currency backed by a nation state before purchasing?
That depends on the seller... how reliable HE considers crypto to be, and also how badly he wants his finances to be opaque to city hall.
Originally Posted by
MaxQ
When their values rise, is it due to an increased wealth of the nation, or is extractive from the productive aspect of the economy?
No. It's due to either pure speculation, or supply vs. demand. Since crypto must be "mined" there's not an infinite supply and if the practical utility is perceived to be high then it will be in demand and value will rise. Obviously we had a big speculative bubble that just popped.
Originally Posted by
MaxQ
I am curious as I have not made any effort to really understand this phenomena, but it does leave me a bit puzzled. It appears to me to be very ephemeral, but that may be due to my ignorance of what they are based upon.
The fundamental potential value is freedom from .gov. That's appealing to some, mainly criminals, perverts, and tinfoil hat types.
There has recently been a lot of speculation, based on the expectation that crypto would be appealing to many and that demand would grow faster than production.