What is money?

No one to create all the necessary goods and services. Why people exchange goods and services and money to facilitate this exchange. As money can be and convenient for this purpose products, such as rice or salt. A more abstract example money is promissory notes, secured, for example, gold. Another abstract example – the counting stick. It is possible to record economic transactions in the blockchain. The most abstract examples of money generally is not associated with any product or service and have a minimum intrinsic value, or does not have. An example is the dollar bill. Its only intrinsic value is the cost of paper and ink. Another similar example code cryptocurrency. It represents a set of random numbers without any intrinsic value!

Another task of monetary units to facilitate their storage. Dollar bills are much easier to store than, say, horses or eggs. Money also facilitates distribution. Much easier to send someone bitcoin, for example, than a horse. In addition, money also facilitate the pricing. It is convenient to relate the value of all goods or services with one kind of money.

What is monetary policy?

Monetary policy – a plan for the management of the money supply in circulation. Someone in favour of a fixed volume of the issue, someone is a supporter of adjustable volume. After the great recession of 2008, many governments have significantly increased money supply currency of their countries.

Satoshi Nakamoto Bitcoins are set for a fixed amount of emissions. Probably he was troubled by the possibility of corruption in the case, if he left the possibility of its regulation. He hid in the first (Genesis) block of Bitcoin is the message: "The Times 03/Jan/2009 Chancellor is ready to provide banks with a state subsidy". This refers to the editorial of the newspaper "The Times".

How is the price of cryptocurrency?

The value of the cryptocurrency, as a rule, is not static. Satoshi Nakamoto decided to do without a Central Bank and to make the price of Bitcoins are potentially volatile:

Satoshi Nakamoto 18-02-2009 20:50:00 UTC:

You can tell the coins are provided by the majority. They are available in a limited, predetermined quantity... there is No one who would carry out the role of the Central Bank... In this sense, it is more reminiscent of precious metals. Instead of change the volume of the issue in order to keep prices at the same level, the volume of emissions is fixed in advance, and the price varies freely.

An argument can be made that the price of cryptocurrencies will change depending on the complexity, and, as a consequence, the cost of mining. Satoshi Nakamoto believed that Bitcoin is a fair. Until then, while it will be a cheaper way of acquiring bitcoins, mining is likely to engage more people. This will hamper efficient mining, with the result that the cost of creating a bitcoin closer to its market price. Conversely, if the cost of mining would exceed the cost of buying bitcoins, apparently, will deal with less people. Resource consumption and the cost of mining will decrease and, again, closer to the price of bitcoin.
Satoshi Nakamoto 21-02-2010 05:44:00 UTC:

The price has a tendency to aim to the cost of production. If the price is below cost, the production slows down. If the price exceeds the production cost, then this difference can generate profit by producing and selling more. At the same time, the increase in production will increase the difficulty and resource intensity of the process, bringing the generation cost to the sales price. In later years, when generation of new coins will be a small percentage of existing emissions, market price will dictate the cost of production to a greater extent than Vice versa.

In addition to the complexity of mining, the price of cryptocurrencies can be affected by fluctuations in demand. Satoshi Nakamoto believed that economic growth of Bitcoin will be able to offset the inflationary consequences of (temporary) growth in the money supply:

Satoshi Nakamoto 08-11-2008 16:38:26 UTC:

The fact that the release of new coins means growth in issue volume for the planned amount, does not mean that it will inevitably lead to inflation. If the amount of the emission increases at the same rate as the number of people using bitcoins, the price remains the same. If the increase in the money supply will lag behind demand, there will be deflation, and early holders of coins will see their value increases.

Furthermore, the reduced growth rate of the money supply of Bitcoin. Emissions will never exceed 21 million BTC. These properties should help to contain inflation. Satoshi Nakamoto believes that the lost bitcoins will also help curb inflation by reducing money supply in circulation:

Satoshi Nakamoto 13-12-2009 16:51:25 UTC:

Will be natural deflation due to payment mistakes and lost data. The creation of new coins will eventually happen slow enough... we've had net deflation.

Unlike Bitcoin, Ethereum and the Ethereum Klassik has not yet determined a fixed amount of money printed. In both communities there is ongoing discussion of possible changes to their monetary policies. To ETC already have a detailed proposal (note the wording: in the coming days on Ethclassic this will be discussed in a separate article). Any changes are also likely to impact on prices.

Conclusion

Cryptocurrency is a new form of money with its monetary policy that has mainly protection from abuse. The price of cryptocurrencies can change depending on many factors. As more and more people are starting to understand these technologies, we hope they will gain sufficient confidence to start using their benefits. As said, the inventor of the block chain,

Satoshi Nakamoto 14-11-2008 17:29:22 UTC:

This is a very attractive idea from a libertarian point of view, if we are able correctly to explain.

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