Topic: why can't bitcoin be based on something that has value? - page 3. (Read 1988 times)

Some people would argue that, in the case where cryptocurrency is to be backed by a physical commodity such as gold or other precious metal, its existence is quite justified since that physical commodity, while being valuable, cannot be transported to another place trustlessly, costlessly and securely. Bitcoin solves the problem of lack of portability. But in my view, this whole concept, I mean pegging cryptocurrency to a commodity, doesn't make much sense, especially from the standpoint of the "finality" of transactions. When you make a regular transaction in bitcoin, you essentially hand over your bitcoin like physical cash because it is, in essence, a bearer instrument where all transactions are immutable and final. When you try to back it by something else (e.g gold), transactions stop being considered final because the underlying asset hasn't even moved. To make a payment, you need to relocate gold physically, but that means we haven't achieved anything, and gold is again subject to centralization and government capture. Bitcoin pegged to a physical commodity is not "real" money, it is a money substitute, questionable claim on something valuable, essentially, it is a form of IOU.

The world has moved on for many years now to place the value of money on a commodity. In the past countries had a fixed exchange rate between their currency and gold, which was very a difficult issue for the country. They always had to store large amounts of gold in the central bank and could be attacked by speculative traders. UK stopped the Gold standard in 1931, and USA in 1973 after Bretton Woods. Today it is enough for a country to guarantee the value of money. It doesn't make sense for crypto currencies now to go back to an outdated monetary system. First of all, which commodity should the value of bitcoins be based on? Gold? Then Bitcoins would just mirror the gold price and we wouldn't need cryptos. The same effect we could have by buying ETCs on gold. I think we are past the time where we other to tell us the worth of things. Just because there is no big central bank behind bitcoins guaranteeing it's valu doesn't mean it will be worthless.

I was just pointing out how absurd it sounds for someone to say that bitcoin is based on fiat. Bitcoin is not based on anything. Except what people think it is worth, what people are willing to pay for it. What you refer to as "mining cost", that's has nothing to do with bitcoin's value or what bitcoin is based on. Bitcoin's mining cost is a direct result of the "difficulty target" in the sha hash. That target is periodically recalibrated to ensure a bitcoin block is mined on average about once every 10 minutes. but that has nothing to do with bitcoin's price. not sure why you would want to convolute the issue by bringing the term "mining cost" into things.


As I was saying, this "difficulty target" is based on the amount of total hashing power in the network. Over time, that hashing power has grown larger obviously. Thus the software has to make the "difficulty target" a smaller number to make it harder to get a suitable hash. that has nothing to do with what people are willing to pay for bitcoin on coinbase.

what you're trying to do is say "coinbase has btc listed for $20,000 so the cost to mine bitcoin is $20,000" wrong. that's not how it works at all.

you can quantify your costs to mine gold out of the ground. i won't argue with that.

no, i can't agree with that. so lets see why.

not sure where you are getting these numbers but i don't think they are correct. bitcoin has not always been $13k or higher.

wrong. mining cost has nothing to do with the value of bitcoin. in fact, we could say that mining cost depends on the difficulty target which is based on how much competition exists among miners, ie, total hash rate. bitcoin could theoretically be selling at $100,000 but satoshi could be the only miner. he would have no competition thus he would be able to mine on his lowly cpu, thus producing bitcoin at almost no cost.

people determine bitcoin price, miners dont. miners do determine gold's base price, that's not how it works for something like bitcoin though.

7 pages on and larry still asking the same question as his first post

bitcoins underlying value is based on mining cost.
bitcoins PRICE sits above this and is speculated based on different peoples personal costs that are above this underlying value

its very simple.
if everyone on the planet could mine for gold for just $1 of labour, a spoon and a coffee filter. in their own back yard. no one would want to buy gold for $1,700. because they can acquire it for just $2
and so the market would be at the $2 because no one would be foolish to buy it for $1700

however because gold costs hundreds to mine and even more to get access to land to be able to mine, people do speculate in the $1k-$2k window of speculation for the price of gold.

same goes for bitcoin
cheapest mining cost is $13k most expensive is $75k. and so the price speculates in that window

its the mining cost that underlies bitcoins value. and the market price speculates above that underlying value and within the window.

have a nice day

Bitcoin is based on fiat? That's a new one for me. I never heard no one say that before. If bitcoin is based on fiat then what's the use of bitcoin? who needs bitcoin if bitcoin is based on fiat? the only way bitcoin could be based on fiat is if satoshi would have made it a stablecoin but he didn't do that so... maybe you need to re-read the thread where people are talking about bitcoin being based on people's trust and belief in it as being "valuable" for whatever reason.

They can create a new crypto but it will never be the same as bitcoin anymore. Just like a gold, bitcoin supply is also limited but it's already known that its supply is only 21 million. We can't just say that we will increase its supply because that can affect the value of btc.

I am sure that all of us don't want btc to become less valuable or to become less volatile because this is how we earn a profit thru it. @nurilham, I think that gold is backed by governments while for bitcoin, it's only back by its community. You are wrong @OP but bitcoin is already based on something that has a value and that is none other than fiat money or local currencies.

Anyone with particular knowledge can create cryptocurrency. But not anyone can produce gold because it is an natural mineral resource that has limited supply. While this is true, it should also be noted that bitcoin can't just be reproduced easily by copying and renaming. It doesn't work that way. If you will insist on doing so, you will definitely not succeed in renaming it alone. You can do another crypto coin, but it isn't guaranteed that it will be as valuable as bitcoin.

Remember, there are many crypto coins now circulating in the market, but not everyone has a value. Not everyone of it have the potential to rise up or surpass bitcoin too. Because without patronage, a crypto coin is useless.

As a general rule, money must be backed by gold and foreign exchange resources and the amount of goods in the civil circulation of each state. The US dollar is just the exception to this general rule, refusing to be backed by gold. But after all, it is backed up by many other provisions, which at first glance seem to be not obvious. First of all, it is the advanced US economic system, permeated with a huge number of mutual settlements. The most developed trade with the highest status in the world.
Secondly, it is the world's foremost political and military power. No country in the world has so many military bases around the world, such firepower, and the ability to influence the internal politics of other countries.
Thirdly, the United States has a concentration of various resources and tangible assets according to conditional estimates of 45 trillion dollars, which constantly generate income.
Fourth, huge loans have been issued in dollars. The banking system expects their return with interest. And this is a very good provision.

If bitcoin moves to be backed by gold or other material values, it will lose its current status and turn into a stablecoin or regular fiat, depending on the conditions under which such security will be introduced.

trying to compare bitcoin and gold is kind of a longshot. they are not as similar as you might think.

You can replace bitcoin with something similar like ethereum if all you want to do is transfer digital money. The something similar argument. There's alot of cryptocurrencies out there. They do similar thing. they let you transfer digital money. so bitcoin can easily be replaced by any of them because they can do the same thing.

on the other hand, you can't just as easily replace gold with some other metal in every application. there are probably certain applications where gold is the only thing that you can use. or at least a much more limit set of choices than with bitcoin where you can literally pick dozens of other cryptos to use to "send your money".

Bitcoin is not a physical asset like Gold, it is a digital currency which is not controlled by any person or organisation. Moreover, no one can ensure that bitcoin will be a 100% success.

Also real value comes from a flexibility and we all know bitcoin have expand through the years and it made a great impact. That's the reason bitcoin is good because of its unexpected disappointment or happiness of its results. Investing with security ensures you money but with very low rate and it's not always we don't need money that's why people sometimes take risk for this benefits even though they know it is very tricky sometimes.

Bubbles are caused by people that only pretend it is valuable. Real value comes from utility.

I probably understand just as much about those things as you do.


The way I see it, it's all fine and good to say bitcoin has value and for people to agree it has value. But if it was backed up by some real world asset like say real estate or something tangible then it would be even better because then it couldnt ever go to 0 as long as the real estate didn't go to 0. Simple as that.


Keep in mind that bitcoin is the first but not necessarily the best that mankind will ever be able to come up with. how many people are still driving around a Ford Model T?

maybe part of it is psychology. but it can't just all be psycological. there really does need to be not only a perceived value but the thing really does have to be useful in some real world way. otherwise we're just pretending it is valuable.

That's not why I would be interested in bitcoin. I don't think it was designed for that purpose just my opinion though.

The OP really doesn't understand what Bitcoin is and how it works. If he did, he wouldn't had come up with backing Bitcoin against something that has value. I'd say Bitcoin has value because people say so. It's the people who determine how much a Bitcoin is worth, just like any other thing in this world. It's all a matter of psychology where anything can have value as long as people believe it to be valuable.

What backs Bitcoin's value is its decentralized and censorship-resistant nature. Being sound money no one can control, makes it extremely valuable. Not only that, but the limited supply and deflationary mechanism of the pioneer cryptocurrency makes it highly-desirable among any other cryptocurrency on Earth. BTC has proven to be superior than Gold, so it's probably it will stay with us forever. Just believe in Bitcoin and you'll see how it'll make you rich in the future. Just my opinion

First of all, Bitcoin is not imaginary, it is real and it has its existence in the digital world. An asset of the digital world does not turn Bitcoin into an imaginary object, if that was the case then Microsoft and Google would have been imaginary as well, but they are not. They are very real.
The thing is, Bitcoin having a fixed existence of $21million in this world is more important than people realise. It keeps the cryptocurrency rare, guaranteeing that its value remains stable for years to come. This is why Bitcoin is sometimes referred to as "digital gold"; like gold, there is a finite supply of Bitcoin. Although Bitcoin was never created with the purpose of hedging inflation, many financial analysts believe that bitcoin’s fixed value is what can serve the purpose.
Moreover, comparing it to gold does not make sense. Because gold too is a natural resource, and one day it will come to an end as well.

Bitcoin is not backed by gold or silver or USD. As bitcoin is based on blockchains and no one can counterfeit that.

That wouldn't be possible to do in a trustless manner. Also, say every dollar bill was backed by bitcoin. What would happen if someone loses that dollar bill?

To expand on the "trustless" aspect, you can't trust the government to back up its worthless paper money with a certain amount of ANYTHING.

Fiat can be counterfeited. But bitcoin can't. But if fiat was backed by bitcoin then you could counterfeit bitcoin i guess.

I would say the other way around. To pegg fiat money to Bitcoin as it was once pegged to gold. It would make more sense no? Make Bitcoin as if it was gold, because it was gold that held value over time. Same happens with Bitcoin, so I would say that fiat money could instead be backed by Bitcoin, couldn't it?

then don't store your gold with a 3rd party. not your keys not your crypto. same idea.

except you can't replace gold. it has applications in diverse industries.

gold is just too old and so many flaws we don't even know if the vaults storing our golds can be trusted or if the gold bars are hollow. this is why we are not in this fiat system shrouded by ponzis and governed by ponzis.

anything old is to be replaced because they are flawed. like the horses that use to roam in the towns but are not replaced by cars. BTC is base on computer networks working together spending huge amount of energy to create few of them.