What's the best answer to this question ? "What is its backing? " - page 3.

MoonShadow

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Quote from: eldentyrell on June 20, 2012, 11:25:17 PM

Quote from: MoonShadow on June 20, 2012, 07:09:26 PM

Quote from: eldentyrell on June 20, 2012, 05:23:23 PM

Same thing backing gold: scarcity.

Scarcity is not a requirement.

I disagree. If there is an unlimited supply of something available for free, it is not going to make a good currency.

Disagree all you want, but scarcity isn't a requirement, only a limited supply. They are not the same thing. I should say that scarcity is important in the sense that it affects the value of things, but only as the other side of the equation to demand; however scarcity alone doesn't create that demand. And if something is too scarce for the common person to have any practical experience with it, such as platinum before 1850, then it ends up being regarded as worthless metal and made into cannons for ships built to carry gold.

eldentyrell

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felonious vagrancy, personified

Quote from: MoonShadow on June 20, 2012, 07:09:26 PM

Quote from: eldentyrell on June 20, 2012, 05:23:23 PM

Same thing backing gold: scarcity.

Scarcity is not a requirement.

I disagree. If there is an unlimited supply of something available for no effort, it is not going to be used as currency.

eldentyrell

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felonious vagrancy, personified

Quote from: molecular on June 20, 2012, 06:10:54 PM

Quote from: eldentyrell on June 20, 2012, 05:23:23 PM

Same thing backing gold: scarcity.

In this case it's scarcity of computing power instead of scarcity of 79-proton nuclei.

The usual debunking of this goes like: "My shit is pretty scarce, yet worthless."

I never said all scarce things make good currencies.

You can't send your shit half-way around the world for a fraction of a cent. If you could (magically) do this, and it was easy for computers to distinguish your shit from countershit fit, then I would consider using it as a currency. No joke.

If lots of women thought your shit made good jewelry, we might use your shit as currency too.

nybble41

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"Backing" is a concept which applies to currency substitutes. When a bank issues a note, the backing is whatever the issuer promises to exchange for the note on demand. Back when the U.S. was on a gold standard, for example, the Treasury committed to exchanging each Treasury note for a specific amount of gold (albeit increasingly below the market value, and eventually only in large quantities). These days Federal Reserve Notes are no longer currency substitutes, and no offer is made by the Treasury or the Federal Reserve to exchange them for anything. Ergo, like Bitcoins, they have no backing, and stand (or fall) on their own merits as an independent currency.

MoonShadow

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Quote from: eldentyrell on June 20, 2012, 05:23:23 PM

Same thing backing gold: scarcity.

Scarcity is not a requirement. Mined & refined silver is more rare in our modern industrial world than mined & refined gold, yet gold still has a higher monetary value. The same is true for a great many other things, such as 'rare earth' minerals. Rare earths are not rare, they are just hard to find in a high enough of a concentration to be economically viable otherwise.

edd

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Quote from: proudhon on June 19, 2012, 06:42:05 PM

I mean, that's really all there is to it. It's backed by a sufficient number of people believing that it has value.

I would add, "...just like conventional currencies."

molecular

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Quote from: eldentyrell on June 20, 2012, 05:23:23 PM

Same thing backing gold: scarcity.

In this case it's scarcity of computing power instead of scarcity of 79-proton nuclei.

The usual debunking of this goes like: "My shit is pretty scarce, yet worthless."

molecular

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Quote from: HonorMe on June 20, 2012, 08:57:03 AM

Bitcoin Backs a free decentralized economy

It's nice to see people joining the community are here for the right reasons.

Same time last year a wholly different type of crowd was being attracted to bitcoin.

eldentyrell

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felonious vagrancy, personified

Same thing backing gold: scarcity.

In this case it's scarcity of computing power instead of scarcity of 79-proton nuclei.

DeathAndTaxes

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Gerald Davis

Someone has a good quote in their signature. I smile everytime I see it but I can't remember who it is.

Paraphrased and butchered it is the value comes from its utility. It has value specifically because of what it capable of.

cbeast

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Let's talk governance, lipstick, and pigs.

Fiat currency exists because our masters want a form of tribute that they don't need to store. For awhile they required gold as tribute, because it was rare and portable, but even that became too expensive to transport and store. Now they impose their currency with holy blessings of value that we are allowed to use so that we are forced to pay for all their property storage. Money that has lost the backing of the force behind it becomes worthless. All governments eventually fail so it follows that all money will fail. Items of barter are the only permanent backing of worth. Gold will always be rare and portable and difficult to store. Bitcoin is the first real challenger to gold.

HonorMe

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Bitcoin Backs a free decentralized economy

kangasbros

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Quote from: aigeezer on June 19, 2012, 08:10:43 AM

A related thought: precious metals are backed by the labor it takes to acquire them, unlike paper currencies. Similarly, bitcoin is backed by the labor it takes to acquire, which is perhaps another way of saying "the people", as opposed to some small manipulative group of politicians/counterfeiters. I think it is safe to ignore differences between machine labor and human labor because precious metals are rarely mined by hand.

wat. This makes no sense. Labor can't be a backing. Gold miners and bitcoins miners mine, because they can get bitcoins and gold out of their effort, and they can change the bitcoins and gold to something else they desire. If no one else would value bitcoins or gold, they wouldn't mine.

Piper67

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The quick answer is: what is the USD backed by. And after you've gone through several levels of debunking (gold, fort knox, the US government, and so on) you quickly come to understand that the USD is backed by a tacit agreement, an understanding among most people on this planet, that one USD is worth about one USD.

Same same with BTC.

There are some people, probably deep in the Amazon, who would have absolutely no use for one USD. They're not part of the circle of understanding ;-)

caveden

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As this question is normally asked by goldbugs, my answer normally is: "Bitcoin is backed by the same thing that backs gold, that is, nothing." Wink

No "base currency" is backed by anything btw. People that say: "I don't accept a money backed by nothing" don't really know what they're talking about. Base money is by definition not backed by anything.

Grouver (BtcBalance)

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Maybe this article will help:

http://bitcoinweekly.com/articles/bitcoin-what-s-it-backed-by

molecular

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Quote from: TTBit on June 20, 2012, 06:07:46 AM

It is backed by currencies weaker than bitcoin.

The old joke with the punchline "I don't have to outrun the bear, I just have to outrun you" applies. I'm a huge bitcoin supporter, but if major countries decided to return to a gold standard, I would be selling my coins.

I might sell some of mine in that event (don't know what I'll sell it for, though) as a "internet blackout hedge" (shtf) and because I'd fear the panic (and add to it, I know), but I would try to buy back after the panic, because I think, fundamentally, bitcoin has advantages over gold (also disadvantages, but gold is not superior in all respects, like movability and divisibility).

relevant article by cypherdoc: http://bitcoinmedia.com/bitcoin-vs-metals/

molecular

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Quote from: aigeezer on June 19, 2012, 08:10:43 AM

Delicious question, and your answer is good.

A related thought: precious metals are backed by the labor it takes to acquire them,...

that doesn't sound right to me? Can you redeem the gold and receive labor?

Some say gold is backed by the energy required to mine it. I find that far-fetched, doesn't "backing" imply that you can redeem the currency and get the stuff backing it in turn?

EDIT: I like moonshadows view: bitcoin/gold are not backed.

TTBit

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It is backed by currencies weaker than bitcoin.

The old joke with the punchline "I don't have to outrun the bear, I just have to outrun you" applies. I'm a huge bitcoin supporter, but if major countries decided to return to a gold standard, I would be selling my coins. But while the world plays pretend with fiat, bitcoin is superior.

lonelyminer (Peter Šurda)

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I once wrote that:

Quote from: Peter Surda

With a bit of exaggeration, I could say that it’s backed by government’s arrogance and greed

.

Joking aside and after a more thorough analysis, I came to the conclusion that Bitcoin is an example of a pure network good, like language or the internet. It is not "backed" by anything, but it has a comparative advantage in transaction costs against the alternatives. The actions of the state that increase transaction costs of fiat money (e.g. banking regulation, existence of national currencies, war on drugs/prostitution/piracy/whatever and to a certain extent inflation) only increase the advantage of Bitcoin. As long as this advantage persists, I would not worry about its future.

Topic: What's the best answer to this question ? "What is its backing? " - page 3. (Read 5360 times)