If Bitcoin were backed by something. - page 3.

pawel7777

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Quote from: devphp on December 03, 2014, 04:57:37 AM

Backed by something also means the currency is centralized by the backer's ability to honor commitment to redeem the currency for an underlying asset. As far as I know no decentralized mechanism of redemption exists, please someone correct me if I am wrong. What can give Bitcoin and other crypto currencies value is demand for use cases. The more use cases - the higher the demand and the price.

It's probably possible to set a decentralised 'backing' if it relates to other intangible/digital asset.

Yes, backing bitcoin with physical goods would require trust (to the 'backer') but that won't necessarily make bitcoin centralised. Anyone can really back bitcoin with anything. For example, I can publically promise/oblige myself (making formal signed off statement, with all my details etc) to exchange 1 paperclip for 1 bitcoin. Each full bitcoin would be officially backed with one paperclip (as long as I'm alive), but that won't make it centralised. It won't make any difference whatsoever, other than no one could say that "bitcoin has no intrinsic value" anymore.

odolvlobo

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But what is gold backed by?

devphp

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Quote from: RobbinHoodz on December 03, 2014, 04:25:08 AM

Can anyone come out and say, ok this thing "x" is backing up the BTC?

And I don't mean any organization - just an individual?

Because how I see it, if these bitcoin is powered by consensus, then wouldn't an individual be able to empower others to back it with consensus?

Sheesh I hope I make sense Undecided

Bitcoin is not backed by anything.

'Backed up' by something means a currency can be converted to a fixed amount of the underlying asset. There is no such thing in Bitcoin. Some people say that it's backed by electricity. No, it's not. You can't convert a bitcoin to a fixed kW/h of electricity.

Backed by something also means the currency is centralized by the backer's ability to honor commitment to redeem the currency for an underlying asset. As far as I know no decentralized mechanism of redemption exists, please someone correct me if I am wrong. What can give Bitcoin and other crypto currencies value is demand for use cases. The more use cases - the higher the demand and the price.

RobbinHoodz

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Can anyone come out and say, ok this thing "x" is backing up the BTC?

And I don't mean any organization - just an individual?

Because how I see it, if these bitcoin is powered by consensus, then wouldn't an individual be able to empower others to back it with consensus?

Sheesh I hope I make sense Undecided

Atdhe

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Atdhe Nuhiu

Quote from: Possum577 on December 03, 2014, 02:30:27 AM

Does Bitcoin need to be backed by anything?

Of course. By trust. By trust that BTC is currency.

I think the economic definition - tangible, valuable, finite (able to divide...) etc. was somewhat too restrictive from the beginning and was about the money of the past.

The best definition of the money is that money is what is considered being money. Just this crazy tautology is always true definition of money.

Dollar now is also backed. Not by gold, but by the trust. Money do not need anything real (=rock solid) as backing. Money need just the real trust and belief of other people in the particular money.

When gold itself was money, it was not something so different, the metal was not accepted as money because it was concrete, but because people believed started to believe in Gold and it went on. Platinum might be same quality material for money and for sure it was always better than silver, but never became money. Because there was already money set. It is called path dependency (and because of that reason and only because if that I am extremely sceptical about altcoins).

Possum577

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Loose lips sink sigs!

Right now Bitcoin is kind of backed by the fiat currency (dollars, etc) we all use to purchase it. At a minimum that's what influences the price, which influences how much goods and services are per BTC.

The reason the Dollar was backed by gold (long ago) is because gold was something tangible (which means you can hold it, it's real), it's finite (there's only so much that exists or has been mined out of the ground), and it's valuable (which means people collectively place a value on it.)

It would be cool if Bitcoin were seen as this stand alone thing because it has a finite volume (only so many exist or will exist once all are mined) and people collectively believe it's valuable. The tangible part is harder to prove or agree on since you can't hold it in your hand but our definition of tangible may need to change in the internet age.

Does Bitcoin need to be backed by anything?

RobbinHoodz

newbie

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ELI8 (i feel like a 8 year old) Roll Eyes

- I've been doing research about the Gold standard and how it works. I'm trying to wrap my head around the concept to get a better understanding. http://money.howstuffworks.com/currency7.htm

I've searched the forums too and found https://bitcointalksearch.org/topic/is-there-any-currency-in-the-world-backed-by-gold-24541 which further reinforced my knowledge to a certain degree.

My two questions are;

1. If it were backed by something, what does it mean to cryptocurrencies?

2. Is it a good thing or bad thing ?

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