Topic: why can't bitcoin be based on something that has value? - page 5. (Read 1988 times)

Actually it all comes from a Trust and agreement.. It also comes from paper money or coins that we often use, even gold can be valuable because it also comes from the agreement that it has value. The only distinguishing element is its stability and instability, paper money, gold, get government or country support. So bitcoin or any other crypto today has value because of trust and agreement, no much country support. If it wasn't there then it would be of no value. All countries are only worried about instability because it has the potential to be detrimental. IMO

I don't know much but using logic I think Bitcoin can't have any backing like other stocks because by having backing it would only have that base and that base could be controlled by a government or multiple banks and I think if something like that happens it could take control of bitcoin, instead if bitcoin is given value by negotiations and because millionaire movements caused by whales are generated, it is more valuable than any backup that can be stolen by someone, for example if bitcoin will be backed by 100 tons of gold and if those tons are stolen? How could bitcoin be? worthless.

Why do you feel the need to reply this long to someone who doesn't even get what "digital" means. I mean the idea that people would want something, and would get it digitally, is a thing that has been around for decades and you are talking with someone who thinks there needs to be a tangible thing to make it valuable and otherwise it shouldn't be a thing.

Even bitcoin could be physical for Christ sake, you could print it, and then spend it anywhere that accepts it, and that would be physical and that is still not the point. Bitcoin is valued because we said so, and that's it, that's all there is to it, nothing more is required about this.

Value is subjective, nothing has true and inherent value.

Bitcoin could be pegged to a fiat currency like USD like as stablecoin are. But USD does not have inherent value. You could tie a crypto currency to the gold standard, the gold's value is only attributable to what a consumer is willing to freely pay for it. Does the gold have inherent value? Or is the value attached to whatever someone will pay for it? Ask a man stranded on an island whether he'd rather have a pound of pure gold or a few matches. Gold is "worth" more than the matches on the market, but the value is subjective.

Perhaps your question is suggesting why Bitcoin isn't based on something tangible. There isn't an answer for that. You can only make the comparison to other currencies that aren't based on anything tangible either. What is USD based on?

Basically it doesn't need to be backed by anything. In fact, the properties that Bitcoin was built with, are more than enough to keep it's value.
Take these examples:
Divisibility - in fact, there are no Bitcoins. There are sats. The code in Bitcoin core and all the math is made up with sats (I think I am accurate on this statement, correct me if I'm not). So you can have millions of small parts of a Bitcoin and transfer each of those parts to another owner!
Portability - Bitcoin cana be sent easily at minimal costs all over the world, even if there is no internet!
Scarcity - There is fixed supply. This is a major property. No debase can happen as it happens with fiat currencies. Take the example of Venezuela that they have been kinda rebranding their currency name and removing zeros by law.
Durability - Theoretically, Bitcoin can last forever. It won't oxidise, it won't suffer from erosion, it can't be destroyed chemically. The only thing that could hipthetically happen is all 21M coins be "lost" by means of losing all PKs of all addresses containing Bitcoin. What are the odds?
Sovereignty - this is another major difference. Among other things, this means that Bitcoin is the only thing that cannot be stolen from you in extreme scenarios. You can literaly take your Bitcoin to your grave and no one can take it from you by any means. Just memorize your PKs, yes it's hard but not impossible. As for fiat, things are quite different as most fiat in circulation are numbers in computers that can be controlled by banks, governments and can be taken from you even if you don't reveal your account password/pin/whatever.

These examples and a few others makes Bitcoin no need for any backup material to grant value!

Information is just that: information. If two people know the same information then either one of them can use that information.


Well, you're transferring physical ownership of the bill itself. The information on the bill is just there to try and stop counterfeiting and prove the bill is legitimately produced. But everyone can see that information. Just because they can see the information on the bill doesn't mean they own the bill though.

Right.

Well, the bill is not information it is more of a physical object that has some public information on it. Nothing is hidden. That's why it is vulnerable to counterfeiting. Not only that but it has another problem too which is that its supply is not fixed and government can just print more and more of them thus devaluing the printed bills in existence.

I don't want a different form. I want a physical form. Like the opendime but non-electronic. As I've pointed out before.

I know about all of that which is why I like to having bitcoin in physical form. Rather than using fiat which has problems I discussed above like runaway inflation.

To be able to transfer bitcoin in physical form, no one can know the private key. But it has to be part of the physical object. There can't be any third parties.

I'm not sure about that. Because we can't be relying upon a 3rd party for signing.

I don't have any problem with that.


It would have alot of value. But it would even have more value to me if it could be presented in physical form also. that would remove alot of friction such as having to do "on-chain" transfers. Instead I could just pay for coffee using some micro-bitcoin coins. Then the government wouldn't need to know about it.

It can’t be invented physically in that sense, but my question is, how do you classify information?

When you’re using a bill, you’re also using it to transfer some kind of information. You’re giving its ownership to someone else and they now can spend the amount on the bill themselves too, by giving it’s ownership to someone else. Something physical is used to transfer that information(the bill), but like you already said below, this form of transferring information has drawbacks.

Now you have the option to use something like Bitcoin to transfer the same kind of information, but in a different form. And the advantage here is that it’s way more secure, efficient, verifiable and trustless to transfer this kind of information.

Isnt there a point to be made about that using physical things(in the classical sense) to transfer information has its boundaries and we’re seeing the consequences of it?

There was ways to make them work more like a paper wallet, and used multisig in a way that you don’t have to trust manufacturer. They really hold the key on the bill. And are verifiable by anyone etc.

Anyways this wasn’t the point of my discussion, i just wanted to highlight that information can be stored in many different physical ways. And that using something like Bitcoin as the basis for this can actually prevent the problems we had in the past, with bills for example. Because the information inside the network can’t easily be faked like that, is open to anyone and is much more secured than other systems.

What value would a system have to you personally where information can’t easily be faked, flows without someone in control, is secure, verifiable, censorship resitant and so on(we know what Bitcoin offers), and this system stores the information about your wealth?

i dont think i am confusing the two words. intrinsic is something that exist within the object itself so it has to be physical. for example, a bank account has intrinsic value of the amount of its balance. the bank account number itself? no intrinsic value. banks can and do change account formats and numbers sometimes and that could cause the old account number to stop working. zero intrinsic value.

people doesn't realizing that information has to be tied to something that has intrinsic value. the information itself have no intrinsic value. that something it is tied to has to be physical. the example i gave with banks changing account number formats could happen with bitcoin. that's why the private key itself has no intrinsic value. it depends on the entire external infrastructure of bitcoin to give it value. miners around the world storing the utxo set. and allowing them to spend their "information".

but put them on a desert island by themself with their private key and they can't use it for anything. it's useless. they can't do anything with it at all. now if you had a bar of gold in that situation, you could transform it into a very long wire. then string that wire accross the ocean and use it to transmit morse code SOS. since gold is a very good conductor of electricity.

it could be but it's not right now. someone would had to invent a physical bitcoin. but that's alot harder to do than just inventing some "bitcoin bills" as you refer to below.

well if those "bitcoin bills" are backed by some centralized 3rd party then they are not really true bitcoin. that's the problem. that's why they have the same "potential risk as traditional bills" i.e., being backed up by nothing, the company stops redeeming your bitcoin IOUs

we already had alot of things like usdt, gusd, usdc that are backed by the us dollar. what's the purpose of making another one? i was talking about backing something with a physical asset or electronic commodity. so that it would always have the value of the underlying asset thus guaranteeing it can't go to 0 as long as the underlying asset retains its market value...

The best basement for Bitcoin is the Proof-of-Work algorithm and its Protocol. The disappear of Satoshi Nakamoto is another solid basement for value of Bitcoin. It supports the decentralized protocol of Bitcoin, and developments etc.
Also bitcoin doesn't need to be backed up by some commodity. Not everything on earth need to follow a traditional method. Sometime out-of-the-box assets are far more sustainable than others.so,it's fundamentally incorrect.

Your proposing that bitcoin should be backed just like the USDT that is supposedly rumored to be backed with $ and also pegged as such. Then, it would would sense or have a real value to it right, @OP.
Why should a currency be backed by another currency? Fiat currencies are backed by the CB which are saddlers with the responsibility of its printing and as such, could bring about inflation and vice versa in a nation. Now, bitcoin have got non of that but is capped at 21million  and the fact that no one can alter it being a complety decentralised currency it what makes for its uniqueness and differentiates it from other currencies out there. It puts the power in the peoples hands. Except you don't like it then, you could settle with fiat currencies. It's simply choice.

Then the price of bitcoin would be measured not by the value of bitcoin, but by the value of what it was tied to. I think this is really worth understanding and paying attention to.

You open up an interesting point larry, it’s hard to even say if Bitcoin is physical or not. It’s information that is contained in atleast/ more than 15000 physical nodes worldwide. It’s not completely detached from physical objects. Im not sure how to classify information, but it can be stored in the most different ways.

This gives it a certain kind of flexibility, that no physical object in the classical sense has. You can choose the physical form to store your keys for example. Steel, paper, digital etc. You could even store your key in your brain(not advisable). Your coins/ the information on the other hand exist worldwide in different places at the same time, you don’t need physical possession over them to redeem them. Imagine you could recover your money or Gold worldwide from wherever you want, this is only possible with information. The question is how practical usage is defined for you, and how you classify information. Information is definitely powerful and has usages. Then there’s people who are developing Bitcoin bills for example, similar to fiat bills, which kinda gives you an physical object that you can pass around for trade, with the same potential risk as traditional bills. Information can be stored in many different physical objects and in different ways.

Exactly it’s just one factor out of many, but important for becoming a durable store of value.

Since we see how easy it is to manipulate, corrupt, bend, fake, censor, control, destroy information in our current times. My question becomes, what value would a system have where information can’t easily be censored, manipulated or faked(and the things i mentioned above)? Where information can’t easily be destroyed from outside and it starts to flow freely without intervention, in one of the best protected networks ever created. And then uses the advantages of a non physical object, it can’t be confiscated, destroyed, redeemable from anywhere, can move faster etc. And we start to use this as the foundation of money.

And then the other question becomes if information isn’t the basis of everything in the first place, and that physical objects are used to transmit some kind of information anyways, but underlay physical constraints that limit them. So wouldn’t using something that isn’t physical and doesn’t have these constraints be the more efficient way to do this in the first place?

the physical ability to touch and feel it is called "tangible" dont confuse that with intrinsic

also if you think digital things have no practical use.. then i guess your in the 1800's wild west, where you have never seen or used a computer and see no benefit of computers..
... wait. your here on a forum communicating with people across the world due to digital code..
this forum is not physical. the [Post] button and the digital message sent over the internet that allows others to see your messages is not physical

but lets pretend you are stuck in the 1820's, because it seems your mindset is stuck in that era's narrow concept of value and money.
lets use an example, lets fast forward a bit to the 1840's.. i guess you think morse code is not physical. and has no practical use... well i guess telegrams in your updated time are something you would never use.

lets fast forward a bit. and evolve electronic messages and code.. welcome to the 1860's.. bank wire transfers.. . i guess they have no use in society..

lets fast forward a bit. and evolve electronic messages and code.. welcome to the 1930's encryption to secure these messages and secure the code around it.. hmm.. i guess they have no use in society. seems it was useful in WW2

.. i guess you might see where im going with this. or do you need me to take you through every step of evolution, or are you going to remain with 1820's mindset

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i think maybe you are confusing price, value, values.
they are 3 separate concepts but they impact each other

values are the sentiment and usefulness of the features and benefits.
value is the economic base number no one wants to sell below
price is the more volatile/variable number above that than changes quicker based on sentiment values+value. where each person has their own number in mind for price

bitcoin has values(features and benefit(utility) and it has value. its intrinsic value is value within itself not something its backed by externally. bitcoin has that.
you wont find the value on a PRICE market. which is why i think you find it hard to realise it has value. but it does have an underlying value no one wants to sell below

ill give you a hint. PoS coin value is alot lower than PoW coin value

"For example, mass is an intrinsic property of any physical object, whereas weight is an extrinsic property that depends on the strength of the gravitational field in which the object is placed."

maybe bitcoin has a value but i wouldn't call it intrinsic. gold is a physical object. it has intrinsic value since it has practical uses in society. bitcoin is not a physical object. so it can't have any practical uses UNLESS and this is a big caveat you were able somehow to turn bitcoin into a physical object that people could use to barter with.

just because a cryptocurrency has a finite/fixed supply that's not a necessary nor sufficient condition for being "valuable". all the things you mentioned I would say are features of bitcoin but not really anything more than features. something could have all of those same features and have very little "value".

It does have value that is intrinsic and extrinsic derived from having a finite/fixed supply based on PoW, being deflationary nature, security via cryptography, scarcity, and blockchain for tx & rx verification to name just a few.

yeah to each their own. i don't disagree gold has its own disadvantages such as storage but that cost is maintained by the person that owns it. it does not impose any costs to anyone else other than its owner. now bitcoin is an entirely different story. it costs its owner to store it in the sense that they have to buy a hardware wallet or have some type of cold storage setup like metal stamping. or safe deposit box at bank. but not only that but all the nodes around the world on the bitcoin network are obliglated to store that bitcoin too in the utxo set. so it takes up disc space on EVERYONE'S computers. in realitly i would say that storing bitcoin is just as inconvenient and burdensome as storing gold unless you have a ton of gold we're talking like lots of bars of the stuff. just one big bar is no different than storing your bitcoin paper wallet somewhere.

as far as travelling goes, i wouldn't know but i would assume you have to declare it if it is worth more than certain amount just like you have to do with cash.

Bitcoins sitting in a dormant wallet do not require anything but the blockchain continuing, which at this point, is pretty much never going to stop in our lifetimes, even if we wanted it to fail.

You should have said "Every MINED bitcoin has an ongoing cost to the network" instead I guess, but not really the point:

Gold, sure ... It's gold, from the ground, with not a fixed supply, unlike BTC. It also WEIGHS a LOT, it requires safe storage, is difficult to transfer across borders, and is just a pain in the ass overall - So, I'd rather have all my $ in Bitcoin than in Gold personally.

To each their own, amirite?

AND you picked out about 7 words out of an entire paragraph taking it completely out of context, but no need to worry.

here's another thing I realized about gold vs bitcoin maybe you have something to say about this: gold doesn't require any further maintenance costs after it has been mined and refined and put into a nice shiny gold block. bitcoin does. bitcoin requires an entire infrastructure behind it in to be in constant operation in order for it to be used. so in that sense, every bitcoin has an ongoing cost to the network whereas gold doesn't. gold is more environmentally friendly than bitcoin once it has been mined.

Why should bitcoin price be affected when oil price changes? Like when the idiots in power fight each other shooting the energy price up!!!

If that were true, any shitcoin with a limited supply would have had the same high value as bitcoin.

In fact, it is the dollar that is an exception to the general rules for the functioning of the general financial system of public money. According to the general rule, which most states adhere to, the nominal amount of all money in the state should be equal to the sum of all goods of the state that can be in civil circulation. If the government's gross income grows, it prints money for the amount of this profit. If the government prints more money, then inflation occurs.
If a cryptocurrency is backed by fiat, gold or other values ​​of the material world, then it will cease to be a cryptocurrency in its current sense and will lose its attractiveness for investors.