Wait... A known and convicted scam artist is where you are getting your information, Dan? Good one, Muppet.

How it works...
There's a mathematical problem. People use computers to try to solve that mathematical problem. Computer X solves the problem and receives a small amount of digital currency for winning given that computers that account for more than half the processing power of all computers trying to solve the problem agree that computer X has solved the problem. When the problem is solved new entries in the digital currency ledger are created. The agreement of what is the correct answer to the problem is also the agreement of what transactions took place on those ledger entries.

This process means that the system has trust built in and does not require a central point of trust that can be corrupted. This process creates an inherent value to the currency that relates the cost of this mining to the reward for mining. The reward exceeds the cost or the mining is without reward. It's basic economics.

This solves the major problem of banking and other similar systems that by their design create niches of power that can be exploited by corrupt individuals.

Currency is just the beginning. The blockchain is really a new internet being born. Currency is just it's first implementation. Next we are going to see a whole bunch of other industries disturbed by this technology. Things like Airbnb and Uber are a halfway house between game a and game b.

It hasn't really got anything to do with trading for profit. That's just a byproduct of its volatility as a new disruptive entity in an old stabilised system.


Peace,

kowalski