Crypto made simple:
–Jack has a big computer, and says he has a ‘bank’ and an “exchange.”
–You give Jack $$$. Jack gives you an ‘account’ and a receipt for your real money which he says he’s keeping safe for you.
–For you to get your money back, you need to sell your account to somebody else who is willing to buy.
–Jack is not paying you interest. The only reasons you pay real money to Jack in exchange for an account number and receipt: 1) keep your funds secret.2) Make money selling your account funds as the price on Jack’s exchange go higher. This is whitewashed as ‘investment’ but it’s really just speculation.
–There is also a side market in Jack’s account, as people buy, sell, and trade account funds, for various reasons (see 1) and (2.)
–The value of these transactions are determined by the current value of the accounts in Jack’s Exchange.
–BUT you all assume that people’s accounts are backed by the real $$$ that they gave to Jack and that Jack is holding for them.
–OOPS: it turns out Jack was spending the real $$$ on fun stuff and bribing politicians.
–So the backup money is gone, and the value of your account on Jack’s Exchange is exactly what someone else will pay you for it. Which now is Nothing.
–Jack goes to jail but your money is gone.
PS: this also how Wall Street works.
Crypto for Dummies.
Give this guy your money. You can totally trust him, Dummy.