Topic: Re-visit the question: What is bitcoin's value backed by? - page 4. (Read 9138 times)

You could say it.
But that would not make it true. 

Value <> Backing
These two concepts are too often confused. 

Captain Pedantic to the rescue:
"The value is supported by dreams of getting rich with a lot of luck." yes, true.

But you can not redeem any amount of bitcoin for a specific amount of "dreams of getting rich" from anyone that I am aware of...
http://en.wikipedia.org/wiki/Private_currency#Currency_backing

You'd be better to ask what the reason for the confirmation speed is. It was not a mistake or an oversight, it was a very deliberate design decision. Making it shorter also increases the amount of stale blocks produced by the whole network, and so adds more to the burden of discerning the longest chain.

lol, bitcoins as a retirement plan.
Gold had value for 1000's of years, fiat for century's and bitcoins lifespan will be decades. The speed at which technology moves anyone has to be the ultimate dreamer to believe bitcoin is the leading crypto in 90 years time. Its not a matter if a superior crypto will emerge but when. Could be days, weeks, months years.  Steam engines and bitcoins are similar in the sense as world changing, revolutionary but then replaced by better concepts. What is the confirmation speed again?

This is an interesting view. Recently I'm researching that John Law's money creation scheme and he hold a similar view that money's value is decided by people's consensus and belief. People's belief used to be religion related, but now science and mathematics have become most of the people's belief

It is not necessary for bitcoin to become a standard international currency to make dream come true, just become a quality medium of saving is enough to raise its value constantly, since more and more savings from all over the planet will enter bitcoin system. Today, government can not fulfill their promise of pension payment, so many people will save for their retirement privately using bitcoin

If enough people accept bitcoin as a medium of payment, then its value will be established like fiat money. All it need to hold people's belief is the trust or credit rating, and in principle bitcoin has the highest credit rating among all currencies due to it is based on mathematics and networks

True

That's not value, that's anticipation of future value.

Bitcoin works like a lottery ticket. IF it becomes the standard international currency, each bitcoin unit will be worth many many times its current value. So, even though the chance of success is very small, people gamble on it.

You could say bitcoin's value is backed by dreams of getting rich with a lot of luck.

No, and BASEL III puts us even further from redeem-ability, for better or worse, richer or poorer, we are married to it.

The computer MMORPG models do this through a variety of drains and still get interesting inflationary effects.

It looks like the next move IRL is to create ever greater too-big-to-fail issuers.  IMF Special Depository Rights may become the new global interchange currency.
For the US, the alternative is to let it fail like the USSR and break into many different states.  The number of those that hyper-inflated in Eastern Europe or had other currency failures and unrest exacerbated by currency games may prove instructive to avoid that in the other direction and enlarge the problem to SDRs.
That could provide another 30 years, by which time Bitcoin may also be in full swing.

yup, if the hardware goes down, then bitcoin goes down: viva la miners!

hardware + agreements, since we agree that we will trade with BTC

excellent analysis. representative value! love it.

1 US Dollar is redeemable for 1 US Dollar worth of Tax burden fulfillment, in fact it's the ONLY thing that can be used to fulfill tax burdens.  So while this is not 'backing' in the traditional sense of it is a key reason why fiat currency has value.  Instances of states that try to issue fiat currency but fail to tax (The Confederacy in the American Civil war is a prime example) invariably have a collapse in their currencies valuation.

Actually, if no one mined, how would new transactions get recorded and confirmed?

And of course, if there is just one miner running (ignoring the "51% problem" so maybe lets say seven miners running) the number of Bitcoin would increase at exactly the same rate as it does now.

It would be worth almost double the price. Instead of 21M only 11M would exist, so much scarier.

Yes, so by the proper definition of "backing" as you described, modern fiat does not fulfill it. There is no way to exchange the units for the debt "backing" (the units effectively are the debt itself). Christ, the value really is completely imaginary, and I knew that already but this way of looking at it really drives that home. It's like a circular argument to define the value of something that is inherently worthless.

No, none are backed by anything more than debt  (full faith and credit).  The US$ was the last and ended with Nixon.
Arguably there are some nations that could... maybe...
http://www.businessinsider.com/are-there-any-currencies-backed-by-gold-2012-3

But BASEL III takes us  further away rather than closer.  (It classifies the best risk-free asset as other countries money and reduces the ranking of physical assets)

Someone said much earlier in the thread that Bitcoin is backed by "proof of work" which I think is closest to true but not very illuminating. Rather than being backed by a good such as gold, Bitcoin is backed by a set of services: authentication, transmission, and confirmation of financial transactions. If you don't think those services are worth anything, walk into a bank and see how much they'll charge you to wire money to another country in a way that can't be intercepted or lost.

It's not backed by the hardware, it's backed by the work that the hardware does. Maybe I'm splitting hairs there but I think the distinction is important.

Now, the above services are what Bitcoin does so the benefit may seem invisible. But the benefit is intrinsic—that's why it's less visible. Saying "yeah, but bitcoin already does that, so what is it backed by?" is a bit like looking at a gold coin and saying, "yeah, I can see it's round, but is it backed by gold?" So I'll amend my statement: Bitcoin isn't backed by extrinsic value; it's value is intrinsic.

You don't go around asking whether the price of steel is backed by gold, do you? No, you just build buildings and cars and bicycles and other things with it. Like steel, whose value is dependent on how many people want to build stuff with it, Bitcoin's value is in what can be done with it.

So, when someone claims that modern fiat is "backed by the legislation of the issuer", or "backed by state coercion", these are false statements. Redeeming the equivalent quantity of legislation or coercion in exchange for your fiat is also a physical/logical impossibility. Does any modern state run a redeemable fiat system these days?

These are all examples of elements supporting bitcoin value, none of these are backing.
Backing is for redeemable currencies.  If a currency is a promise from an institution that issued it, that the institution would give the holder of the currency a specific amount of a specific good from the institution's stockpile, then it is redeemable, and backed by that quantity of goods.

Well, there's at least half a dozen suggestion in this thread, and I'm inclined to agree with most of them. So, Bitcoin has a multitude of backings:

- Market value (supply v.s. demand)
- Utility/Acceptance
- Design
- Infrastructure
- The most common commodity that it is used to purchase (the consensus appears to be marijuana, but that's just a straw poll!)


Sounds like some fairly powerful winds in our sails! Just need to improve the utility/acceptance factor that little bit more...

The debate around this topic is often distorted by a fundamental misunderstanding of what is a natural commodity in statements like:
"Bitcoin is not linked to anything physical."

Bitcoin is linked to something physical, namely numbers.
Prime numbers are a commodity in unlimited supply (although the greater the prime number, the harder it is to find).
Bitcoins are a commodity in limited supply.
The fact that you cannot see a number (one can only see a representation of it when writing it down or looking at an enumerable set - if its an integer ) does not make a number any less physical.

Just like the force of gravitation is an invisible yet very real, physical force: one can describe it with formulas.
Note that a gold coin value is derived form its substance (gold) AND its weight..

In short, Bitcoin is a representative money system, backed by cryptographic formulas.