Topic: What is bitcoin backed by? My favorite answers - page 4. (Read 10271 times)

I find that what one should see as ideal depends for some large part on the situation in which the currency is to be used.
Casinos have a different view on what is an ideal medium of exchange than, say, society as a whole.

So how do you define "ideal media of exchange" ?

Nice suggestions here, but backing has a specific meaning regarding money, and bitcoin is not backed by anything. So drivel along, but use another word.

All magic is backed by science....
It is the apparent breakage of science that creates the feeling of magic...

The blockchain is not 'a data file'.
It is an ubiquitous piece of information that is copied by every user of bitcoin.
The blockchain itself is worthless. Everyone can get the file trivially by using the client.
Moreover, you cannot get a single bitcoin from knowing the information in the chain. You would have to interact with the whole system in a particular way to get to any kind of value.
In fact i would say that it is the exchanges that actually give bitcoin any real-world value at the moment. How much would you value the blockchain if mtgox said: 0.000 0.000 ?

Fixed your post.

Yes, you can cash them, but not in the bank. You can try on SR, the OTC market or places like that (until a "better coin" takes off)

Oh I see, the problem is actually that you don't understand what the meaning of "being backed by" is.. Tell me, can I cash in my 1btc or 1gram of gold and get utility as ideal medium of exchange out of them? And how does utility as ideal medium of exchange look like?

valued properties != backing, mkay?

If you say backed by the blockchain, I suspect you mean the perception of the people that the distribution of money is fair. If one day the people think otherwise they may either just walk away from that money system (similar to the way the paper apocalypse is unfolding) or they may force massive redistribution of wealth (which is the socialists answer to things).

As you can see with the alt chains - distribution of money is a big factor in the underlying trust in the money system. The only reason why bitcoin can survive such a massive early adopter reward is because it is first of its kind, and the developers did original work.

However, now that the genie is out of the bottle, starting another blockchain is trivial. The "magic" lies in convincing people that the generation of money happens in a fair fashion and that the blockchain has features others don't have (and thus may have a competitive advantage in some areas).

A lot of uncertain answers. I am surprised that the backing for bitcoin is not obvious to all.

Bitcoin is backed by the blockchain. (Currently) a 2Gb secure datafile of historical transactions and issuance.

The genius of Satoshi is like a diamond, multi-faceted. He understands the principle of inertia in persistent systems. As the blockchain grows it becomes more important to everyone who relies upon its integrity defining a medium of exchange. If BTC becomes the global currency then the blockchain will be the single most valuable data file in existence. It is already worth $160m. The fact that it is replicated on so many nodes reinforces its value and persistence.

Or science, depending on your viewpoint. Cute illusion, BTW. It doesn't look like a very comfortable contraption.

Yes, but no.  You were half right.   

'Not exactly' referred to your assertion that "Bitcoin doesn't have backing."  Bitcoin and gold are backed by their utility as ideal media of exchange.

Bitcoin is backed by ... magic.

http://www.youtube.com/watch?v=HqhDHznbLVE

Even back in Aristotle's time theft and confiscation of assets were risks anyone holding money was exposed to.  The more durable and portable the money the easier it is to hide (from all manner of thieves, including the tax collectors).

Bitcoin excels not just as a form of money whose value, once acquired, can be kept hidden well, but it also excels because it can be used during the process of creating wealth as well.  The blockchain doesn't reveal how much in revenues a particular merchant sees.

Anonymity is a property that nearly all money in Aristotle's time had but with today's ubiquitous electronic transaction (and reporting to the state), Bitcoin's user-definable anonymity is something that is relatively unique to Bitcoin.

This is easily one of the longest most wrong economic fallacies of all time. Things are not worth their input costs. That isn't real, that isn't what happens. Laptop + milk = fail.

hear hear

(I would add something of substance to this discussion, but the quoted explanation is obvious enough for me...)

bitcoin is backed by weed. everyone knows that.

Greedy Geeks!!! This is by far the best answer for this question 

wrong. in 2009 bitcoin had 0 value..  and you cant use bitcoin to do anything else. you cant bend it or melt it to make jewellery out of it, you cant eat it or drink it so it has no commodity value. it wasnt till months later that people started putting a monetary value to it making it become an ASSET.

bitcoin is not like gold (commodity) at all. it is more like van Gough art (asset) but instead of a dozen paintings theres a few quadrilian satoshis.
it wasn't till months later that people started putting a monetary value to it making it become an asset.

in 2009 it had no value, but because some people started selling alpaca socks and pizza for it, it created a demand. and the production costs set the price accordingly increasing due to difficulty changes(supply) which then increased the costs of electricity and hardware to continue mining. move on 4 years and the price is now linked to production costs + miners profits.

500 years ago water was free, anyone can have it. no one seen monetary value in it. but then water companies created value. how you may ask.
by making it easier to get hold of instead of the people gathering it themselves (supply) and by setting a cost based on water pipes and treatment facilities (production costs) and now they are making huge profit due to the demand for it increasing.

For a split second, I thought this post was stupid. Then I realized the ingenuity in the comparison. HTML and Bitcoin are valuable because they are useful if people agree to use them...otherwise, they're not.

Who said I am American?