system
Given the following post, respond as if you're commenting on Reddit:
human
How does money have value?

I am trying to understand how cryptocurrencies have value. I always thought money had value because you can translate it back to gold or silver, and this made cryptocurrencies look like an absolute joke thing. In university i took a basic economic class and there i found out that we dropped the gold standard a long time ago. I was taught that the money we use today has value because people trust it has value and trust that people will accept it as a currency, and the demand for it determines its worth. Is this true? Could someone just clarify it a little bit, maybe with an example? I don't think i understand it well enough. And if i am off my rails, please correct me.
gpt
Yes, for "normal" fiat money this is definitely true.

Basically, $10 have the value of $10 because you can buy $10 worth of goods with them. $10 worth of bananas, or screws, or Pokémon cards, or weed, or whatever. You could buy the same stuff for the same $10 tomorrow and you could have done the same yesterday.

People have faith in the USD being stable and reliable and that faith is verified every day because every day people go out and spend USD and get the value they expect.

While the USD isn't technically backed by anything, you could look at it in the sense of being "backed" by the entire US economy because all the USD out there can buy all the goods and services offered in the US.

Cryptocurrencies behave differently. Their value doesn't come from your ability to freely and reliably exchange them for goods and services.

There are basically two angles you can take.

First, you could say that *today*, no you can't purchase a lot with them, but you will be able to in the future, once they take hold in the economy and become widely used an accepted. They still have value because of their ability to purchase goods and services, it's just that the point where they have that ability lies in the future.

Or you could say, well it's a bubble. It has value because people think it does and think it will gain value over time. Of course if it never actually has any "real" value, the bubble will eventually collapse and cryptocurrencies will return to their "real" value, which is nothing.

The truth lies probably somewhere in between those two extremes. Really, we don't know yet. At least some cryptocurrencies certainly *could* become useful currencies in the future, we don't know yet.