Cryptocurrencies have value -- they're used as an exchange medium from one entity to another. Casino chips have value -- they are used as an exchange medium from one entity to another. Are they different? Well, only in the sense that one is digital. Otherwise, they're basically exactly the same.

Hear me out....

The Casino Chip Analogy
Let's start with the concept of a casino chip. You walk into a casino and need to get fiat currency converted into an exchange medium used in that operational space. There's several ways to acquire the precious chip. You can exchange your cash money for them, you can sell something to someone inside the casino for their chips, or hypothetically you can do a chore for the casino and they will give you a chip as payment if you so request.

Once you have the casino chip, what can you do? We'll, you can use it to purchase items in most casinos since they function like actual currency in that space, you can exchange it back into your fiat money, or you can gamble with it and hope that it might generate some wealth for you and hopefully won't make you take a hit to your personal net worth by going down in value.

Most of these concepts everyone will agree with and they are something that everyone already knows. Well, let's look at an option where these chips could be used outside of the walls of the casino.

If my friend owed me money and he offers to pay in a certain casino chip, would I take it? Maybe. I guess it depends what casino it is, what sort of deal I'd get, or if I'd be near that casino to get real fiat back (or keep the cycle going and maybe sell or trade it back to him at some point?).

The point is that the chip still has the same technical value and usage inside or outside of the casino. If I take a $100 Bellagio chip to Europe and then back to the Bellagio, it is still worth $100. The value doesn't change, but the demand will fluctuate based off of one thing.....USABILITY! How valuable is something that you can't use? Inside a casino, the chips has usage for anything. It doesn't increase value because it's backed by USD and lists its (max) net worth, but the demand for those chips definitely goes up in a casino where it can be used.

Let's apply this concept of usability to cryptocurrencies. How valuable is a cryptocurrency that you can't use? How valuable is a cryptocurrency that's usable but you can't spend it?

Where cryptocurrencies gain their longer term value is from being usable. The more usable a currency will ultimately be, the more it will be in demand because the options are greater for its usable versatility. If the only use case for Bitcoin is sending large amounts of money internationally (which I realistically think is the only reason for it), why am I likely to select that over something has has a multi-use blockchain, more usability because of better fundamentals, etc....

Cryptocurrencies can be seen as casino chips, because the greatest demand and usage for them is always going to be inside whatever medium they are branded for. For example, Ethereum will always be the most utilized when using inside of the Ethereum blockchain for smart contracts, ICO's, etc.... Where's the demand for a currency that can only be used for one thing, and that's just generic wealth transfer. I can do that with Ethereum, and I can also power things inside of Ethereum.

Now, I'm not advocating Ethereum is the best ever, but that's just the most well-known example for everyone to relate to.

Casino chips can be generated cheaply and easily, just like cryptocurrencies. With the growing number of cryptocurrencies in the marketplace, the usage will get selectively narrower and narrower for each coin. If I want to do something on the NEO blockchain, I'll get NEO. If I want to do something on Ethereum, I'll get ETH. This is really the longer term concept. Coins that are around as just financial transfer from peer to peer might make it, but the longer term value in cryptocurrencies is really going to come down to the ones who have usage. Even at that, usage is still mostly going to be kept within the confines or their creation medium.

Thanks for reading and please share your thoughts!