Topic: Re-visit the question: What is bitcoin's value backed by? - page 6. (Read 9149 times)
What is gold's value backed by? Utility. Bitcoin is no different. What if everyone stops using bitcoin? Who cares. What if everyone stops using gold?
~code writers , mathematicians and lawyers ! 
Bitcoin is backed by the number of people who host the blockchain on their PCs at their home, or some other kind of bitcoin software. Ultimately, everyone who has a wallet is a bitcoin backer.
It's a bit like a religion. If many people believe in something, that thing just gets real.
That might be more supported than backed though.It's a bit like a religion. If many people believe in something, that thing just gets real.
http://en.wikipedia.org/wiki/Private_currency#Currency_backing
Bitcoin is backed by the number of people who host the blockchain on their PCs at their home, or some other kind of bitcoin software. Ultimately, everyone who has a wallet is a bitcoin backer.
It's a bit like a religion. If many people believe in something, that thing just gets real.
It's a bit like a religion. If many people believe in something, that thing just gets real.
Originally, Bitcoin had a value of zero. But then, a while back someone bought 2 pizzas for 10,000 BTC. This put the value of 2 pizzas into the overall system. It was a tiny amount but it still counted. Others have bought drugs and other contraband with BTC. Some have exchanged work for BTC. Some people bought electronics. All of these tiny amounts add up until a currency that is worth essentially zero begins to have value. A while back, a single BTC only traded for a penny but the "intrinsic" value was in there and it grew.
You are misunderstanding what intrinsic value is. You're talking about market value. There is no intrinsic value to bitcoin, only market value. Intrinsic value is typically calculated in finance by looking at the sum of the future income that's generated by that asset, in terms of discounted present value.
What you describe in your post is entirely about market value, which is the only value an unbacked currency has.
Based on your definition, it is a calculation based on future income, how would you know the future if you are not an oracle? The calculation about the future typically based on an assumption that the current environment do not change, and it only works very short term
There is no such thing as intrinsic value, in most of the today's economics the value is only decided by supply and demand.
Maybe some food/shelter that satisfy the basic requirement of living have intrinsic value, but obviously gold is not among this kind of things but still have intrinsic value
While one is at it, one might also ask "What is email's value backed by?", well we are now a world based on digital information.
Also I would argue that Bitcoin is actually physically backed - by hard disks.
Found this : http://www.whyisntbitcoinworthless.com/
Also I would argue that Bitcoin is actually physically backed - by hard disks.
Found this : http://www.whyisntbitcoinworthless.com/
Backed by one thing, and one thing only.....
FUCK THE BANKERS!!!!
I will support that any day, that means..... it's backed by my full faith and credit I give it.
FUCK THE BANKERS!!!!
I will support that any day, that means..... it's backed by my full faith and credit I give it.
Originally, Bitcoin had a value of zero. But then, a while back someone bought 2 pizzas for 10,000 BTC. This put the value of 2 pizzas into the overall system. It was a tiny amount but it still counted. Others have bought drugs and other contraband with BTC. Some have exchanged work for BTC. Some people bought electronics. All of these tiny amounts add up until a currency that is worth essentially zero begins to have value. A while back, a single BTC only traded for a penny but the "intrinsic" value was in there and it grew.
You are misunderstanding what intrinsic value is. You're talking about market value. There is no intrinsic value to bitcoin, only market value. Intrinsic value is typically calculated in finance by looking at the sum of the future income that's generated by that asset, in terms of discounted present value.
What you describe in your post is entirely about market value, which is the only value an unbacked currency has.
What is bitcoin backed by?
Bitcoin the currency is backed by blockchain the ledger, with everyone's holdings. The blockchain is in turn is backed by decentralized replication, consensus, advanced cryptography and enormous computing power.
Result: virtual gold.
Sorry, I missed one word, it should be "What is bitcoin's value backed by?" Already corrected in the OP. Value is decided by demand and supply, it is less related to technology. Even if you have most advanced technology in the world, if no one want it, it worth nothing. There are some other maybe more advanced coin designs, but since the demand has all been attracted to bitcoin, they did not succeed
The value backed by trust. There are many ways to modify the demand and supply. It is not easy to follow but it is.
The definitive answer: Nothing, it is unbacked.
In a market based economy, anything's value is backed by the power between the buyers and sellers
For example, if everyone takes out their gold and sell them in the market to exchange for USD, the gold price will immediately crash more than 90%, because the seller's power is much stronger than buyer's power
But, if you take one Picasso's paint and sell it in the market, it will always have a high price, since the supply is only 1, seller's power can be ignored
The definitive answer: Nothing, it is unbacked.
Heh, I'll back it.
One ounce of silver for every bitcoin. I have my 21,000,000 ounces here. Redemption on demand.
Weed
Or rather the criminalization of it, and the rest?
The definitive answer: Nothing, it is unbacked.
The Bitcoin is backed on the full faith and trust on Cryptology.
Bitcoin is the biggest decentralized transaction network in the world. As there is only a limited supply of BTC every unit in BTC can be seen as one share of this network.
At least part of the value is backed by how much such a network is worth. In it's current state ~250.000 Members (assumption) the Value of this network is surely not $1 Billion.
At least part of the value is backed by how much such a network is worth. In it's current state ~250.000 Members (assumption) the Value of this network is surely not $1 Billion.
Great view! Currently so many people want to get a share of this economy before the economy itself fully developed
In another post of similar topic, I looked at the gold, even it does not have payment function today(you can't buy anything with gold directly), and it does not have some real practical use, it still holds significant exchange value. That value is basically decided by the speculation in the gold exchange, those speculations are affected by fiat money supply and sentiment
Bitcoin's value is also basically decided by speculators, no big difference than gold, but at least bitcoin can provide payment function, that's better than gold
If the gold exchange value dropped below the production cost, the gold miners will shutdown the machine to reduce loss, thus reduce the gold supply, establish an equilibrium. But for bitcoin, the supply is always constant in a 4 year period, so volatility is guaranteed
Bitcoin is the biggest decentralized transaction network in the world. As there is only a limited supply of BTC every unit in BTC can be seen as one share of this network.
At least part of the value is backed by how much such a network is worth. In it's current state ~250.000 Members (assumption) the Value of this network is surely not $1 Billion.
At least part of the value is backed by how much such a network is worth. In it's current state ~250.000 Members (assumption) the Value of this network is surely not $1 Billion.
What is a fiat currency's value backed by? It is backed by the economy behind it, you can use that currency to satisfy certain kind of demand, so it has value
What is bitcoin's value backed by? It is backed by some properties, although those properties do not provide goods/services that satisfy any kind of demand, but they combined together can satisfy an ultimate demand: To get a lot of income quickly, and all the other demand will be satisfied in turn
The problem today is not that your demand can not be fulfilled, it is you don't have enough increase in income and the cost is getting higher every year. So, there will never be a race to bottom phenomenon for bitcoin: Everyone selling their last coin to buy a cup of milk before they starved and bitcoin price crash to 0
In general people will treat it as a digital asset and hold them in hope of fast price appreciation. Price will rise eventually due to higher and higher difficulty and lower and lower coin supply, and you can buy more and more things with bitcoin throughout the world because many merchants will try to get bitcoin through their sales later
Gavin mentioned an interesting thought: If the coin price double each year, you only need to spend half of your coin each year and your purchase power will stay the same forever. So when you have accumulated a certain amount of bitcoin which worth 2 years' worth of living expense, you can retire
Some one will argue that if everyone is doing this then there will be no one working to provide the goods/services, but currently it is over production and low income enviornment, until we have a shortage of labour force (which is very unlikely due to rising of AI and robots), nothing to worry about
What is bitcoin's value backed by? It is backed by some properties, although those properties do not provide goods/services that satisfy any kind of demand, but they combined together can satisfy an ultimate demand: To get a lot of income quickly, and all the other demand will be satisfied in turn
The problem today is not that your demand can not be fulfilled, it is you don't have enough increase in income and the cost is getting higher every year. So, there will never be a race to bottom phenomenon for bitcoin: Everyone selling their last coin to buy a cup of milk before they starved and bitcoin price crash to 0
In general people will treat it as a digital asset and hold them in hope of fast price appreciation. Price will rise eventually due to higher and higher difficulty and lower and lower coin supply, and you can buy more and more things with bitcoin throughout the world because many merchants will try to get bitcoin through their sales later
Gavin mentioned an interesting thought: If the coin price double each year, you only need to spend half of your coin each year and your purchase power will stay the same forever. So when you have accumulated a certain amount of bitcoin which worth 2 years' worth of living expense, you can retire
Some one will argue that if everyone is doing this then there will be no one working to provide the goods/services, but currently it is over production and low income enviornment, until we have a shortage of labour force (which is very unlikely due to rising of AI and robots), nothing to worry about
bitcoin is backed by Extraordinary Popular Delusions and the Madness of Crowds.
The American currency is backed on Petrodollars.
http://i.imgur.com/A23EH.png
In a similar sense, the Silk Road is backed by Bitcoin.
Based on data from February 3, 2012 to until July 24, 2012, Christin (2013) estimated $15 million in transactions are made annually on Silk Road. Buyers and sellers conduct all transactions with bitcoins (BTC), a cryptocurrency that provides a certain amount of anonymity.
http://i.imgur.com/A23EH.png
In a similar sense, the Silk Road is backed by Bitcoin.
Based on data from February 3, 2012 to until July 24, 2012, Christin (2013) estimated $15 million in transactions are made annually on Silk Road. Buyers and sellers conduct all transactions with bitcoins (BTC), a cryptocurrency that provides a certain amount of anonymity.
The transactions are mostly for weed so Bitcoin is backed by weed.
The American currency is backed on Petrodollars.
http://i.imgur.com/A23EH.png
In a similar sense, the Silk Road is backed by Bitcoin.
Based on data from February 3, 2012 to until July 24, 2012, Christin (2013) estimated $15 million in transactions are made annually on Silk Road. Buyers and sellers conduct all transactions with bitcoins (BTC), a cryptocurrency that provides a certain amount of anonymity.
http://i.imgur.com/A23EH.png
Quote
The petrodollar conspiracy. Please note that I'm not a libertarian, nor a supporter of Ron Paul. Feel free to poke holes in my explanation or google for better ones/rebuttals.
The US basically killed Qaddafi and Saddam and is actively trying to topple Syrian and Iranian regimes because these countries have refused to peg their oil to the USD, meaning, price it and only sell it for the dollar like the Saudis do. If the USD is a necessary commodity to have in order to purchase oil, then the USD has value beyond being just pieces of paper. Creating this artificial demand for the dollar has been the goal of the US in the Middle East for the previous 30 years. Every other reason you've been told for the senseless wars, trillions wasted and tens of thousands killed, is empty rhetoric. If this monetary driving force wasn't there, there would be little reason to go to war, and we most likely wouldn't have.
Why do we want to create artificial demand so bad?
Because the special interest groups that control the Federal Reserve, want the Fed to print more money but doing so would cause inflation if there wasn't demand for the dollar. Pegging global oil supplies to the USD creates this demand.
Whoa there, the Federal Reserve is a government organization, what do you mean special interest groups?
Actually the Federal Reserve is a private organization. By law, every bank in the US must buy into the Fed and together all major banks own the Fed.
Wait, this is outrageous, how can we justify letting private interests control our nation's money supply?!
The law says that Congress appoints the board that runs the Fed, so its not controlled by the banks.
Oh, so it's cool?
No, as we both know, banks have bought out the congress several times over, so the board is undoubtedly composed of ex-bankers or banker friendly figures.
OK, but what does the Fed have to gain from being able to print money? Why do they want this artificial demand?
Ah, the people who own the Federal Reserve make money by charging the taxpayer interest on every dollar printed in the country, by law. So, naturally, they want to keep printing and printing money and they want us to spend the printed money.
Where is this money going?
50% of govt spending is defense*. So it goes straight to the defense contractors who fight the wars to topple "dictators" who want to keep their national oil, of course! And to top it off, banks own the defense contractors!
But, CNN and MSNBC and Fox News and the rest of the media told me Iran was building nukes because they hate my freedom?
You seem not to recall them telling you about the WMDs. But WHY? Well, guess who owns all five major media companies that control 90% of all information you receive through TV, radio, newspapers, music and movies?
-lolzfeminism
The US basically killed Qaddafi and Saddam and is actively trying to topple Syrian and Iranian regimes because these countries have refused to peg their oil to the USD, meaning, price it and only sell it for the dollar like the Saudis do. If the USD is a necessary commodity to have in order to purchase oil, then the USD has value beyond being just pieces of paper. Creating this artificial demand for the dollar has been the goal of the US in the Middle East for the previous 30 years. Every other reason you've been told for the senseless wars, trillions wasted and tens of thousands killed, is empty rhetoric. If this monetary driving force wasn't there, there would be little reason to go to war, and we most likely wouldn't have.
Why do we want to create artificial demand so bad?
Because the special interest groups that control the Federal Reserve, want the Fed to print more money but doing so would cause inflation if there wasn't demand for the dollar. Pegging global oil supplies to the USD creates this demand.
Whoa there, the Federal Reserve is a government organization, what do you mean special interest groups?
Actually the Federal Reserve is a private organization. By law, every bank in the US must buy into the Fed and together all major banks own the Fed.
Wait, this is outrageous, how can we justify letting private interests control our nation's money supply?!
The law says that Congress appoints the board that runs the Fed, so its not controlled by the banks.
Oh, so it's cool?
No, as we both know, banks have bought out the congress several times over, so the board is undoubtedly composed of ex-bankers or banker friendly figures.
OK, but what does the Fed have to gain from being able to print money? Why do they want this artificial demand?
Ah, the people who own the Federal Reserve make money by charging the taxpayer interest on every dollar printed in the country, by law. So, naturally, they want to keep printing and printing money and they want us to spend the printed money.
Where is this money going?
50% of govt spending is defense*. So it goes straight to the defense contractors who fight the wars to topple "dictators" who want to keep their national oil, of course! And to top it off, banks own the defense contractors!
But, CNN and MSNBC and Fox News and the rest of the media told me Iran was building nukes because they hate my freedom?
You seem not to recall them telling you about the WMDs. But WHY? Well, guess who owns all five major media companies that control 90% of all information you receive through TV, radio, newspapers, music and movies?
-lolzfeminism
In a similar sense, the Silk Road is backed by Bitcoin.
Based on data from February 3, 2012 to until July 24, 2012, Christin (2013) estimated $15 million in transactions are made annually on Silk Road. Buyers and sellers conduct all transactions with bitcoins (BTC), a cryptocurrency that provides a certain amount of anonymity.
In a way you could say that it is backed by Fiat Currencies...
Think about it you can buy and sell things with bitcoins and what do people do with those bitcoins when they have them? Buy things with them ? Maybe, but the majority of them will eventually exchange it for Fiat. Because lets face it in the physical world there's not alot of places where you can use Bitcoin.
Even though i think it's backed by Fiat I personally believe imho that this is still great. Because even though Bitcoin can not replace fiat it provides so many great features for E-Commerce. Bitcoin to me is Virtual Cash and I will be very happy to use in when it stabilizes in the end because of that.
Think about it you can buy and sell things with bitcoins and what do people do with those bitcoins when they have them? Buy things with them ? Maybe, but the majority of them will eventually exchange it for Fiat. Because lets face it in the physical world there's not alot of places where you can use Bitcoin.
Even though i think it's backed by Fiat I personally believe imho that this is still great. Because even though Bitcoin can not replace fiat it provides so many great features for E-Commerce. Bitcoin to me is Virtual Cash and I will be very happy to use in when it stabilizes in the end because of that.
All it takes is one or two supermarket accept bitcoin payment, nowadays large supermarket almost has everything people want in daily life. And the supermarket can pay their employee and sub-contractors with bitcoin
Fiat money has been existing for a long time, so most of people don't ask why it still has value after the gold that used to back them were removed 1971
If you are a merchant and everyone have both bitcoin and fiat, you will definitely welcome bitcoin over fiat, but people might want to spend inflative fiat and save deflative bitcoin, so anyway bitcoin will not be used at large scale, it's like some kind of high powered money which seldom used to do the payment, although it has the payment function
If bitcoin value always double each year, who will spend them? They will more likely to mortgage them and get a fiat loan to spend
In a perfect world Bitcoin would replace fiat. But I think it's gunna take more than 1 or 2 supermarkets for people to use bitcoins.
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