Why mining? Why Zcash?

So I got into a discussion with my cousin one day about investing in cryptocurrency. I have already invested in my first rig for about a month by that time and she is a doubter in this field. How will you convince a doubter into a believer? These are some of her questions and views:

  1. What is bitcoin? What’s the foundation of cryptocurrency? There’s nothing physical to hold unlike brick and mortar so to me there’s no value to base on (or no value at all).

  2. It’s another tech bubble to me like the one in 2000s. It can burst anytime and go to 0.

  3. There’s nowhere to spend the coins and no countries accept it as of today.

  4. There are hundreds of coins on the market and this is like a copy-paste action in terms of creating more coins. So why should one coin be 10x more valuable than the other if we can create the same type of coin in a short time?

  5. Why invest in zcash? It’s a technology only after all.

It is an interesting talk because I can’t even answer her questions to convince her to invest, but I already invested without doubting a lot. To me there are only 2 types of people when looking at cryptocurrency: either you are a total believer (because you already step your feet in so you will hope for the best) or you are total doubter and will never invest a penny in this ‘technology’.

I am curious have you guys asked yourself this before: Why mining? Why zcash? And how will you convince someone like my cousin to invest into zcash/bitcoin?

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Question #1 can be answered with a little research. There is a ton of information regarding cryptocurrencies and the foundation of such currency. As for the physicality of cryptocurrency, my counter question would be “How often do you carry money?” “How often do you leave your money in the bank and use a debit card? A credit card?”. Physical currency will not be around forever and we already live in a world where the currency we’re paid with never has to take physical form. My pay is directly deposited into my bank account, digitally. I then pay my bills using online banking. Money never touches my hands or anyone else’s. I go out I use debit. I can buy literally anything I want without ever touching physical money.

Keeping in mind that just as with “real” money, I can at any time withdraw physical money regardless if it’s crypto or not.

Question #2 can’t be answered. But your cousin should know that just as with any currency, a bubble can burst. Look at the Canadian dollar compared to the US dollar. Even “real” money doesn’t have the same value everywhere.

You can spend Bitcoin anywhere you want. There are debit cards, ATM’s, vendors who accept it directly. That answer’s question #3.

Question’s #4 and #5 are a little more in depth and require more research before you can make a decision on your own.

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To me the value of a coin/currency depends on 1. people’s perception on the currency 2. liquidity of such currency. The reason USD becomes the world major currency is because people around the world accept it and are willing to trade it for goods, thus it provides enough liquidity to USD and helps creating its value. It is true and I believe that we are moving away from physical money sooner or later, just like what amazon is trying to do to its brick and mortar stores. So my thinking is that bitcoin or Zcash or whatever coin wouldn’t become a ‘real’ currency (to the majority of people) until one day you can use it to buy groceries. I am willing to be the first to create a grocery store that uses Zcash and serves this great community :slight_smile:

That’s actually one of those solutions that is going to arrive sooner or later, and when that reality comes, i think it will take no time to have a big shift: i don’t believe fiat money is going to disappear, im pretty sure it’s going to be upgraded to a centralized blockchain mechanism-software-thingy, but I don’t see them dominating the markets like nowadays.

The tech is soooo valid, it’s so strong and useful already today! People aren’t realising that we are about to live the next Industrial Revolution

IBM and others have created blockchain based supply chains for permanent trace ability in a food supply chain. Where’d that tainted meat come from? We know. Right now. And no single company processing that meat can fudge where it came from or “lose the paperwork”

My “short” version of answer, touching on each point:

  1. Bitcoin (and most other altcoins for that matter) are… “blockchains”. That’s the fundamental technology behind them and what the new hype is all about. I don’t have such a good grasp and condensed definition for blockchain in my head, to put it down in one paragraph, but in layman’s terms I would say it’s a distributed public ledger. I’m sure you can find much more detailed explanations both of how blockchains are created to work and the various uses they can be employed for; one of them is cryptocurrencies.
    I’m not sure if your cousin knows but the money everyone uses now it’s called fiat money. For instance the U.S. government abandoned in the seventies (I think) backing up all the issued money with equivalent quantities of gold (which had been the case until then, pretty much since the creation of U.S.A). Most countries on the globe (to my knowledge) stopped doing the same thing, during around the same period. So, the money we use now are called fiat (from the Latin “let it be so”) in order to point out exactly that fact: the money you use has whatever value it has only because the government says so (and backs it up). However, at a bigger scale, it’s not all that stable (not unlike cryptocurrencies).
    Take for example the value of $1 around 100 years ago; it’s not at all worth the same as today but instead around 23 times less, today. Other major economical events can screw up fiat money value as well (e.g. crysis). And the U.S. dollar is the better example among many other currencies; other countries have had it much worse with inflation rates of several orders of magnitude that rendered money put into mattresses virtually useless in a matter of months. This is to say that fiat currency is not at all that safe, when you look at it over more than just one or two years and in a larger context.
    As far as the “physicality” of currency goes, I hope your cousin knows that all the “printed” currency (a.k.a. banknotes/bills) are only a fraction of a country’s total amount of currency in circulation. This page gives some examples (a bit dated but still relevant to make the point) about the amount of US dollars in printed bills, being around 1.2 trillion (in 2013) out of more than 10.5 trillion dollars existent at that time in all kinds of bank accounts and financial assets. Sooo… all that big chunk from 1.2 trillion to way above 10.5 trillion is just as virtual, as virtual can be.

  2. I don’t think it’s a tech bubble per se since the blockchain technology is real, verifiable and provable not some ponzi mechanism, but being the emergent new thing that it is, the market is quite volatile at present so, if you invest you should be aware of the risks. On the other hand even though company shares and cryptocurrecy are not exactly the same thing, I guess the analogy holds: If you buy shares of this or that company at any point in time you are taking a similar risk. They could do great and you could make a fortune in time, or some event can make the shares plunge and you end up with even less than you invested initially.

  3. There’s lots of places to spend Bitcoin on the web already buying all kinds of products and services you’d also buy with fiat money, and it begins to sip into the everyday life as well (https://www.cryptocoinsnews.com/swiss-town-zug-continues-allowing-bitcoin-payments-municipal-services/).

  4. I guess in a large measure the value of any currency will be its acceptance and the usage level. Bitcoin is so highly priced today in good part because it’s being used by much more people than any of the other cryptos. Imagine and fast-forward 20 years from now, in your country, Bitcoin (or any other crypto) being accepted and used so much by all entities (persons, banks, administration) that the current fiat currency becomes all but obsolete, even if it would be still accepted by public institutions but nobody wanted to use it anymore. It would be an interesting question to see, how much it would still be worth and if the government would still bother to back it up for long.

  5. Fiat money is a “technology” also; something invented by people in order to be able to trade easily goods and services. In that respect Zcash or any other serious crytpo is pretty similar, provided that it gains enough acceptance to allow for a similar level of trading easiness.

So now… despite all the stuff I’ve written above, I guess that my advice to your cousin would be: don’t invest!
Or should I say: don’t invest unless you already want to invest (because you’ve studied and read about it, understood it well enough, made an informed call and decided to jump that band wagon) not just because someone else just told you to do it and got you half-convinced but you’re not 100% sure you want to take the step!
At present time we’re still in the incipient phase for most cryptos in a kind of “wild west” if you will. The crypto market is still quite volatile and nobody should invest (either by buying coins or mining hardware) anything they’re not prepared to loose.
Definitely, no one should invest without doing their homework and getting at least a basic level of understanding about what they’re investing in, how it works and what are the potential risks and benefits. I would think anyone would do the same when investing in some company’s shares or crowd-funding some venture so, why not here?

On top of it, if your cousin and everyone else starts investing now, how are we to become the tomorrow’s millionaires? They’ll totally ruin it for us. :wink:

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What do you think about investing Zcash then? I mean why Zcash specifically or has it included in your investment portfolio? To me the reason is that it is the privacy technology and resistant to asic (I hope it will stay this way) that makes me invest in Zcash. Will there ever be a solution to resolve the problem(or not?) that the majority of bitcoin (or other alt-coin with asic mining) is in China because of asic?

From where I stand, the privacy aspect offered by zkSnarks is the strongest point of Zcash as compared to many other currencies.
We live in a world where our lives become increasingly “available” in the digital world, for anyone with the right skills and resources to read, quantify and profile… I like the fact that the protocol behind Zcash seeks to address the need for privacy and I think that a few years from now, when buying and selling with crypto currency becomes common place, this will be a major strength of Zcash and something that other cryptos that will survive will seek to add in a way or another.

I’m not sure if anyone really knows how Bitcoin will evolve in the future, but the fact that a huge part of the mining is centralized in China shouldn’t necessarily affect the future of the coin, in and of itself. The fact is, for the coin to remain valuable it must continue to be used as a means of exchange (the way fiat money is used now) so it needs to circulate. Hopefully many of the current miners are selling at least a part of the coins they mine, launching them in circulation (and the incentives are high enough for those who need quick money now, given the current price).

I think there are some useful answers from Youtube channel of “Ivan on tech”.

  1. https://z.cash/technology/zksnarks.html
  2. https://z.cash/team.html

take a time and analyzes the team’s curriculum :star_struck:

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For an intro to blockchain the best demo I’ve seen is https://anders.com/blockchain/ another good video is https://www.youtube.com/watch?v=bBC-nXj3Ng4. The block chain is a list of “send .00542 of bitcoin to alice from bob” and “send 12.5 bitcoin to bob” (create bitcoin out of thin air as a reward to bob for keeping the list alive by burning a lot of electricity).

Also read https://en.wikipedia.org/wiki/Keynesian_beauty_contest https://en.wikipedia.org/wiki/Greater_fool_theory https://en.wikipedia.org/wiki/Tulip_mania

Blockchains also have a major problem that they can’t scale. Visa does 1000 times more transactions per unit of time than bitcoin or Zcash could possibly do. And it takes about an hour from when you send the funds until they are deposited in the recipient’s account.

Zcash specifically has a lot of problems, checkout a good list here https://petertodd.org/2016/cypherpunk-desert-bus-zcash-trusted-setup-ceremony#trust. The key signing ceremony means that it’s possible there’s a small group of people who can give themselves Zcash coins for free. In cryptography we strive for mathematical guarantees, not “I promise I did the right thing”, so from a purely theoretical standpoint you should assume that that is the case. They can’t deanonymize your transactions though (as far as I understand it), only massively devalue the currency.

Also you can’t trust people (especially people on this forum) to give you honest advice because we usually own crypto currencies, and have a financial incentive for the demand for our tulips to go up.