Topic: Whats "backing" bitcoin? (Read 3396 times)

How can you say "almost instantly" and not say "almost free of charge". Because fees do exist.
And I think fees are going to be a HUGE problem in a few years.

The best thing that i 've read so far as an answer to your question is that bitcoin has a value because people yesterday beleived that is has a value and most likely will beleive the same tomorrow

You're wrong: http://www.forbes.com/sites/erikkain/2013/09/20/sony-to-take-a-loss-on-playstation-4-sales/

Many games consoles and also other companies sell at a loss. Sometimes on purpose, sometimes not. If a PS4 costed a ridiculous amount to make and was priced at a $10,000, very few people would buy it. When people refuse to pay for something, the company will likely go out of business or they will need to reduce the price to survive. I think it was the original Mini Cooper that was selling at a loss initially even though they didn't admit it. I think it was Ford couldn’t understand how they were making a car for so cheap so they tried themselves to replicate it and failed. It later turned out Mini were selling the cars at quite big loss. They wanted to sell a car "anybody could afford". The cars became massively popular and the demand and price rose for them, so the marketing turned out to be very affective in the long run even though they were initially losing money on each vehicle.

There's also the Gillette razorblades model. He sold the razors for hardly anything and at a loss so people would buy them. He hoped people would pay a ridiculous price for the blades and they did: http://www.investopedia.com/terms/r/razor-razorblademodel.asp

Your logic and the way you conduct your argument is very "high school level minded".

lol oh you and others are just proving my very first line

that is high school level minded answers... please ditch your ABC books and your maths for dummys books and get into the real world..

no company would sell anything at a loss... meaning below production price... get this through to the reality center of your minds people.

put it this way.

the prices are set, basically the cost of production and wages/profit margin added.

let me repeat it 5 times for you all

basically the cost of production and wages/profit margin added.
basically the cost of production and wages/profit margin added.
basically the cost of production and wages/profit margin added.
basically the cost of production and wages/profit margin added.
basically the cost of production and wages/profit margin added.

ok give it time to settle in and then ill explain.

imagine a porsche COST to produce $50k, to get it to the showroom $2k and to add on just 5% commission for the sales guy
totalling $54.6k this us the nearest to TRUE value. and in most cases customers would finds this acceptable,

the show room would NEVER sell for less then $52k. yet if the commission was 40% totalling $70k then this is speculated, pure profit, extortionate, and people will only pay this if demand was soo high that they have no other choice but pay it.

the supply and demand for this porsche would be a price volatility between $52k $70k... NOT $1-$70k  no one would in any sane way sell for less then cost price...

so true value is cost price and market value is a little ontop for personal profit. afterall if no one is making any profit, no one can make a living..

so now read my words again and put them into the scenario i just wrote.

basically the cost of production and wages/profit margin added.
basically the cost of production and wages/profit margin added.
basically the cost of production and wages/profit margin added.
basically the cost of production and wages/profit margin added.
basically the cost of production and wages/profit margin added.

bitcoins are not magically produced for free.. think about miners costs...

now then if a bitcoin price suddenly rises and you cannot see a mining cost reason (difficulty jump/ hashrate jump) then its simply a rise in price caused by  speculated, pure profit, extortionate.

and finally again explaining.. in the last few months difficulty, hashrate and mining equipment costs have risen. so yes the sudden rise of bitcoin price on the market is expected and is based MORE SO on extra costs, rather then a ramp & dump.

if you think this is not true then try this.

make a loaf of bread knowing that it will take you 1 hour of your time and your only source of income. you have to pay yourself minimum wage, plus the cost of the ingredients.

now i offer you $3 for that loaf, which is more expensive than going to a shop. but i feel the extra 50c (20%) is worth it for the 'personal touch'.
would you accept my offer, which is a fair market offer..no you would not..

if however you were making 100 loaves a hour and after adding labour and ingredients together the price of production came below $3. then of course you will accept my offer.

its all about price of production as the MAIN consideration.... the inexplicable ramps and dumps are the speculation/profiteering part.

now i hope to leave you all with those thoughts and now have an active eye on the graph patterns of difficulty/hashrate in future to see if a ramp/dump is justified or not.

goodnight.

Bitcoins are not really backed by things such as gold. However, bitcoins have utility and is accepted by many kind of stores. If everyone stops accepting them, then bitcoins are practically useless in my opinion.

Oooh that is good. Thank you very much.

Now note how Bitcoin kills itself on funding mining.

You've just elevated my confidence substantially. Thank you. This is the most important post I've read in while.

This is it. The state of the world and peoples' apathy to major issues continually perplexes and appals me. People feel so defenceless to change anything, but they don't realise they power we hold and how easily we could change things for the better. It's us that hold the power, not governments, we only grant it to them, just your average sheeple cannot even comprehend this. Who continually votes for these crooks that do nothing but transfer tax payers money into the hands of corporations and spend billions of our taxes on wars? If everyone in the country refused to vote or pay taxes do you think politicians will work for free? Can they throw us all in jail? Who will pay for the prisons or the jailers? Who will fund the monarchs? They would have to get off their arse and earn their own money instead of living off the state. People simply do not understand our collective power.

Cryptocurrency could singe-handedly destroy the banksters and fiat money-printers if we as a people wanted it to. I'm not saying democracy is useless, but it has failed us. We can use a little bit of anarchy as our leverage for revolution. The current system is not sustainable or fair to anyone but those who profit billions from it.

the backing notion is a very funny argument to me.
Everything is very relative, yeah gold is backed by ohh wait 2000 years of trading? Just as monarchy was before we kick the ass of the kings and just swap.
Things are backed by faith and faith can change. It happens all the time to be true.

We changed politic system , we changed religion, we changed currency, we changed language sometimes for good reason, sometimes for bad and sometimes for no reason.

Any reason is good to me, bitcoin is a step forward period.

It doesn't work like that. Things are only worth what people are prepared to pay. Companies can choose the value of Porsche, fuel and games consoles, but if they try sell them at ridiculous, unaffordable prices; people wont pay it. If we all agreed that we're not going to pay for fuel at it's current prices; guess what: the companies would have to lower the price of it. Supply and demand.

when i see people say, when someone wants something, they assign a value to it and that becomes the price.. WHAT A LOAD OF B.S

i want a porche to me i value it as $500.. guess what folks.. a porche is not suddenly going to be $500..
we ALL want car fuel to be cheaper.. does it make car fuel cheaper by all agreeing to it NO!
we ALL want the new games consoles to be half the rediculous prices they are advertised at. does it make it happen NO!

the price of items are dictated by the supplier, basically the cost of production and wages/profit margin added.

so lets get to it.
if a ounce of gold could be dug from the ground using a pickaxe for under 2 minutes of working. do you think it would still or ever of got to the many thousands of dollar price it is now.. or do you think that the miners now taking a week of labour force of a team of men driving excavators, and sluice machines have something to do with the gold high price compared to last century.

compared to a bicycle.. they have wheels and they help people travel faster then walking. do you think a car should be the same price as a bicycle simply because they both have the same fundimental function.. NO do you think it may have something to do with the costs of production, the expertise and the teams of engineers involved.

now then guys instead of shouting out bitcoin is pure speculation and nothing else.

grab a graph of gold mining costs for the last 150 years. then overlay gold prices. do you see a pattern. now thats been said i think you can guess the next task i ask you to do.

go grab a graph of mining costs/difficulty/electric costs and over lay the bitcoin price. see the pattern.

you will learn that just like anything its all about cost of production as the main % of true value. then added to that is where some profit and manipulation happens.

the best way of knowing the difference between true value and a profiteering ramp& dump is to check to see if the hashrate / difficulty or new mining technology has suddenly appeared. if not, then dont expect the sudden surges in prices to last.

now concentrating on bitcoin, difficulty and new tech has been increasing in the last couple months so these new prices are expected to stay. as for todays altcoin ramps and dumps.. well thats another story.

but bitcoin is backed by the cost of production
gold is backed by the cost of production
FIAT is backed by the value of time of people working ( inshort minimal wage)

think about it if everyone suddenly got a pay rise, the prise of a loaf of bread will increase. with pay rises stagnant the retail prices of the bare essentials remain stagnant. (give or take exceptions)

rant over

Agreed. But note that fiat is backed by the fact that everyone is using it as a currency. We discussed the notion in another thread, that when fiat dies, society does (temporarily, but 57 million gunned in the back of the head in China during the Cultural Revolution is sort of dead I think...ok that example wasn't purely from hyperinflationary failure but it was a factor as usual*). That is a very strong incentive to keep the confidence intact. Bitcoin doesn't have that.

That perceived ethical and efficiency value is largely based on the belief that Bitcoin will improve upon things we all detest. Yet as my analysis has dug in deep on Bitcoin, it doesn't appear to hold up technically. So when that becomes more widely understood, the bubble might be pricked.

Any way, I am about done with trying to spread that message with words. Very inefficient. There are more efficient ways for me to proceed which don't put me into a fight in a forum with every Bitcoin believer. I just wanted to lay out the concepts for posterity, for other writers to use, and to open the door for the most adept to consider improved altcoins.

*It is the fall into insane governance such as communism and totalitarianism that drives the hyperinflation. The point remains, we hang on to the fiat for as long as we can, because losing it coincides with a horrific end. Society hasn't yet found and implemented an alternative solution. Or maybe we have with Bitcoin, except my study of it is that it won't perform as we hope.

In my opinion, there really isn't anything that per we "backs" Bitcoin, only the opinion of its users that it has some value and hence they are willing to accept it as a form of payment. The reality is that nothing is really "backed", instead all conventional forms of wealth are based on a common agreement and perception of value.

Innovation power, 'new', business accepting it and people who use it.

The Power of Love

Bitcoin is backed by its blockchain which is backed by the enormous computing power of the miners.

All money is backed by its users.  This is why gold is forever viewed as the de facto money: you see gold in video games, novels, movies and so forth, always as the ultimate representation of wealth.  Gold is known universally as the money; if people didn't believe this was true, then it ceases to hold this title.

Bitcoin, ultimately, is backed by its users.  By holding and proselytizing it, I have acknowledged that bitcoin is valuable.  As more people agree, the value of bitcoin increases.  Because money only represents the energy of man, there is in no scenario where money can be valuable without a belief that it is so; we seek a money that will best represent our efforts, and both gold and bitcoin hold these special properties.  Nothing more backs these monies, and nothing less.  Bitcoin is backed by you and I.

I have a different answer than the ones I read so far in this thread.

My answer is that the mining pool backs bitcoin. Building up a crypto-currency is a chicken-and-egg problem: how to build up a computational network that can secure my transaction for all time to come, allow me to transfer my family's wealth to this thing and absolutely know that it won't be invalidated. The mining pool is the chicken, and then now the faith of all these users in the mining pool to deposit funds is the egg. Then the egg feeds back to make more chickens.

Since mining seems to be (like farming in the 1980's) a zero-profit industry over time, we will see approx $1B spent on building the network to verify transactions over just this next year.

If you heard of a startup that was well-funded to the tune of $1B going to invest in building out the world's most rigorous financial transaction system, would you think it was worth a $12B market cap? Hell yeah, it's not even up for question.

I think that safely gets you out of "tulip" arguments.

I will condense my November archives.

I can invest $10 billion of gold without converting it to fiat (I retain it in my London approved vault), by contractual leasing as Martin Armstrong taught the Arabs to do, since they are prevented from loaning with usury by Islam. This adds liquidity for the futures markets in gold.

I can't invest $10 billion in Bitcoin without converting it to fiat.

Bitcoin has no intrinsic value without fiat. I can't invest it in a business, because my employees can't use it to buy all the things they need. And purchasing with Bitcoin is very slow and sometimes fails to get in the block chain and much confusion and hassle. Someone down the line always converts it to fiat, even if it is the merchant, yet most often it is the Bitcoin investor who converts it to fiat when cashing out.

In order for that to change, there needs to be 97% of the people using Bitcoin to transact. There is no possible way to get from here to there for as long as Bitcoin is dominated by people buying for gains not for spending. The vast majority are not buying Bitcoin for spending.

The masses will buy Bitcoin only if they think they will have gains too. Once they think they can't get gains, they won't buy (who buys a crazy volatile thing for spending?!! Nobody). Then there are no more gains because not enough new fools buying in. So then, those who bought for gains, leave to altcoin or something that has gains. Stampede. Ponzi collapse. End of story. Wasteland.

Also the altcoins are beginning to dilute Bitcoin's rarity. Litecoin was at $36 and $1.2 billion market cap. And this competition will increase, now that the pie has become large and attractive.

Just tell them that any currency or commodity is only worth what somebody is prepared to pay for it. I find all currencies bizarre ultimately. Fiat currency is just a bit of worthless metal or paper with the Queen's head on it. If people stopped dealing with it and stopped accepting it and switched to digital currency, its value would plummet or become worthless unless there was people willing to accept it as a payment medium. Bitcoin is the opposite of this. It's in demand, people want it, people will accept it for goods; therefore it is worth something and it's value is sky-rocketing because of this.

Why are paintings worth anything? They are just colour on a canvas, but I can't say a Jackson Pollock painting is a worthless piece of shit because there's people out there that will happily pay millions for one. If people are prepared to pay millions, it is worth millions. This logic is applied to anything, including cryptocurrencies. Why is the original Mona Lisa "priceless", yet you can buy a forgery painted by a master of his craft which would fool most experts for mere thousands? 'Worth' of money is ultimately an illusion, but we put our faith in it. I can pay with high quality fake money and people would accept it even though it's just a bit of fancy paper. They can spot it as a fake and refuse it, then it is worthless, but if they don't spot it and accept it; it's worth something.