Au – 💲 – ₿



Gold is a chemical element with the symbol Au (from Latin: aurum) and atomic number 79, making it one of the higher atomic number elements that occur naturally.

It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile metal in a pure form.

Chemically, gold is a transition metal and a group 11 element. It is one of the least reactive chemical elements and is solid under standard conditions.

Gold often occurs in free elemental (native) form, as nuggets or grains, in rocks, veins, and alluvial deposits. It occurs in a solid solution series with the native element  silver (as electrum), naturally alloyed with other metals like copper and palladium, and mineral inclusions such as within pyrite.

Less commonly, it occurs in minerals as gold compounds, often with tellurium (gold tellurides).

A relatively rare element, gold is a precious metal that has been used for coinage,  jewelry, and other arts throughout recorded history.

In the past, a gold standard was often implemented as a monetary policy.

Still, gold coins ceased to be minted as a circulating currency in the 1930s, and the world gold standard was abandoned for a fiat currency system after 1971.

As of 2017, the world’s largest gold producer by far was China, with 440 tonnes per year.

A total of around 201,296 tonnes of gold exists above ground, as of 2020. This is equal to a cube with each side measuring roughly 21.7 meters (71 ft).

Gold’s high malleability, ductility, resistance to corrosion and most other chemical reactions, and conductivity of electricity have led to its continued use in corrosion-resistant electrical connectors in all types of computerized devices (its chief industrial use).

The world consumption of new gold produced is about 50% in jewelry, 40% in investments and 10% in industry.

Gold is also used in infrared shielding,  colored-glass production, gold leafing, and tooth restoration. Certain gold salts are still used as anti-inflammatories in medicine.



F I A T


Fiat money (from Latinfiat“let it be done”) is a type of money that is not backed by any commodity such as gold or silver, and typically declared by a decree from the government to be legal tender.

Throughout history, fiat money was sometimes issued by local banks and other institutions. In modern times, fiat money is generally established by government regulation.

Yuan dynasty banknotes are a
medieval form of fiat money

Fiat money does not have intrinsic value  and does not have use value. It has value only because the people who use it as a medium of exchange agree on its value. They trust that it will be accepted by merchants and other people.

Fiat money is an alternative to commodity money, which is a currency that has intrinsic value because it contains a precious metal such as gold or silver which is embedded in the coin.

Fiat also differs from representative money, which is money that has intrinsic value because it is backed by and can be converted into a precious metal or another commodity.

Fiat money can look similar to representative money (such as paper bills), but the former has no backing, while the latter represents a claim on a commodity (which can be redeemed to a greater or lesser extent).

Government-issued fiat money  banknotes  were used first during the 11th century in China.

Fiat money started to predominate during the 20th century.

Since President Richard Nixon‘s decision to default on the US dollar convertibility to gold in 1971, a system of national fiat currencies has been used globally.

Fiat money can be:

  • Any money that is not backed by a commodity.
  • Money declared by a person, institution or government to be legal tender, meaning that it must be accepted in payment of a debt in specific circumstances.
  • State-issued money which is neither convertible through a central bank to anything else nor fixed in value in terms of any objective standard.
  • Money used because of government decree.
  • An otherwise non-valuable object that serves as a medium of exchange (also known as fiduciary money.)

The term fiat derives from the Latin word  fiat, meaning “let it be done” used in the sense of an order, decree or resolution.


Bitcoin – Digital Gold

The most common, and best, ways to think about bitcoin is as “digital gold”.

Like gold, bitcoin doesn’t rely on a central issuer, can’t have its supply manipulated by any authority, and has fundamental properties long considered important for a monetary good and store of value.

Unlike gold, bitcoin is extremely easy and cheap to “transport”, and trivial to verify its authenticity.

Bitcoin is also “programmable”. This means custody of bitcoin can be extremely flexible. It can be split amongst a set of people (“key holders”), backed up and encrypted, or even frozen-in-place until a certain date in the future. This is all done without a central authority managing the process.

You can walk across a national border with bitcoin “stored” in your head by memorizing a key.

The similarities to gold, plus the unique features possible because bitcoin is purely digital, give it the “digital gold” moniker.

Sharing fundamental properties with gold means it shares use-cases with gold, such as hedging inflation and political uncertainty.

But being digital, bitcoin adds capabilities that are especially relevant in our modern electronic times.

The world does indeed need a digital version of gold.


People’s Money



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ASICs vs. SuperComputers

Asics
SuperComputers

ASICs vs Supercomputers


Assigning the most powerful supercomputer to mine bitcoin would be comparable to hiring a grandmaster chess player to move a pile of bricks by hand.

The job would get done eventually but the chess player is much better at thinking and playing chess than exerting energy to repetitively move bricks. 

Likewise, combining the computing power of the most powerful supercomputers in the world and using them to mine bitcoin would essentially be pointless when compared to the ASIC machines used today.

ASICs are designed to do one thing as quickly and efficiently as possible, whereas a supercomputer is designed to do complicated tasks or math problems.

Since Bitcoin mining is a lottery based on random trial and error rather than complex math, specialization (ASICs) beats general excellence (supercomputers) everytime.


End of Lesson !!!



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Return on Investment (ROI)

What Is Return on Investment (ROI)?

Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost.

To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.

KEY TAKEAWAYS

  • Return on Investment (ROI) is a popular profitability metric used to evaluate how well an investment has performed.
  • ROI is expressed as a percentage and is calculated by dividing an investment’s net profit (or loss) by its initial cost or outlay.
  • ROI can be used to make apples-to-apples comparisons and rank investments in different projects or assets.
  • ROI does not take into account the holding period or passage of time, and so it can miss opportunity costs of investing elsewhere.

How to Calculate Return on Investment (ROI)

The return on investment (ROI) formula is as follows:

“Current Value of Investment” refers to the proceeds obtained from the sale of the investment of interest. Because ROI is measured as a percentage, it can be easily compared with returns from other investments, allowing one to measure a variety of types of investments against one another.

Understanding Return On Investment (ROI)

ROI is a popular metric because of its versatility and simplicity. Essentially, ROI can be used as a rudimentary gauge of an investment’s profitability. This could be the ROI on a stock investment, the ROI a company expects on expanding a factory, or the ROI generated in a real estate transaction.

The calculation itself is not too complicated, and it is relatively easy to interpret for its wide range of applications. If an investment’s ROI is net positive, it is probably worthwhile. But if other opportunities with higher ROIs are available, these signals can help investors eliminate or select the best options.

Likewise, investors should avoid negative ROIs, which imply a net loss.

For example, suppose Bill invested $1,000 in New Wave AI Corp. in 2017 and sold the shares for a total of $1,200 one year later.

To calculate the return on this investment, divide the net profits ($1,200 – $1,000 = $200) by the investment cost ($1,000), for a ROI of $200/$1,000, or 20%.

With this information, one could compare the investment in New Wave AI with any other projects.

Suppose Bill also invested $2,000 in Web Pirates Inc. in 2014 and sold the shares for a total of $2,800 in 2017. The ROI on Bill’s holdings in Web Pirates would be $800/$2,000, or 40%.

Limitations of Return on Investment (ROI)

Examples like Bill’s (above) reveal some limitations of using ROI, particularly when comparing investments. While the ROI of Jo’s second investment was twice that of the first investment, the time between Jo’s purchase and sale was one year for the first investment but three years for the second.

Bill could adjust the ROI of the multi-year investment accordingly. Since the total ROI was 40%, to obtain the average annual ROI, Bill could divide 40% by 3 to yield 13.33% annualized.

With this adjustment, it appears that although Bill’s second investment earned more profit, the first investment was actually the more efficient choice.

ROI can be used in conjunction with the rate of return (RoR), which takes into account a project’s time frame.

One may also use net present value (NPV), which accounts for differences in the value of money over time, due to inflation.

The application of NPV when calculating the RoR is often called the real rate of return.

Developments in Return On Investment (ROI)

Recently, certain investors and businesses have taken an interest in the development of a new form of the ROI metric, called “social return on investment,” or SROI.

SROI was initially developed in the late 1990s and takes into account broader impacts of projects using extra-financial value (i.e., social and environmental metrics not currently reflected in conventional financial accounts).1

SROI helps understand the value proposition of certain environmental social and governance (ESG) criteria used in socially responsible investing (SRI) practices. For instance, a company may decide to recycle water in its factories and replace its lighting with all LED bulbs. These undertakings have an immediate cost that may negatively impact traditional ROI—however, the net benefit to society and the environment could lead to a positive SROI.

There are several other new flavors of ROI that have been developed for particular purposes. Social media statistics ROI pinpoints the effectiveness of social media campaigns—for example how many clicks or likes are generated for a unit of effort. Similarly, marketing statistics ROI tries to identify the return attributable to advertising or marketing campaigns.

So-called learning ROI relates to the amount of information learned and retained as a return on education or skills training.

As the world progresses and the economy changes, several other niche forms of ROI are sure to be developed in the future.

Frequently Asked Questions

How do you calculate return on investment (ROI)?

Return on investment (ROI) is calculated by dividing the profit earned on an investment by the cost of that investment.

For instance, an investment with a profit of $100 and a cost of $100 would have a ROI of 1, or 100% when expressed as a percentage.

Although ROI is a quick and easy way to estimate the success of an investment, it has some serious limitations.

For instance, ROI fails to reflect the time value of money, and it can be difficult to meaningfully compare ROIs because some investments will take longer to generate a profit than others.

For this reason, professional investors tend to use other metrics, such as net present value (NPV) or the internal rate of return (IRR).

What is a good ROI?

What qualifies as a “good” ROI will depend on factors such as the risk tolerance of the investor and the time required for the investment to generate a return.

All else being equal, investors who are more risk-averse will likely accept lower ROIs in exchange for taking less risk.

Likewise, investments that take longer to pay off will generally require a higher ROI in order to be attractive to investors.

What industries have the highest ROI?

Historically, the average ROI for the S&P 500 has been about 10% per year. Within that, though, there can be considerable variation depending on the industry.

For instance, during 2020, technology companies such as Apple Inc., Microsoft Corp., and Amzon.com Inc. generated annual returns well above this 10% threshold.

Meanwhile, companies in other industries, such as energy companies and utilities, generated much lower ROIs and in some cases faced losses year-over-year.

Over time, it is normal for the average ROI of an industry to shift due to factors such as increased competition, technological changes, and shifts in consumer preferences.

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