Bitcoin Forum

The following blog by a PhD of Economics says Bitcoin could be improved by backing them with something "real". Anyone care to explain why he's wrong? Sounds smart to me.

http://www.capitalasmoney.com/

The author doesn't give any reasoning except to say that it should be backed by something.  Not even a hint as to why it's important, what difference it would make, nothing.

Waste of time.  Here's my counter argument: it shouldn't be backed by anything.  Just as sound as the author's post.

Does gold have something backing it?

Yes: people who believe it has value.  ;D

Software isn't "real" but it provides utility just like bitcoin.

Well said friend

To expand on my last post, having Bitcoin "backed" by something would only remove its credibility as something which can work on its own.  Bitcoin is perfectly fine as-is.  If it's pegged to a commodity, it implies Bitcoin was worthless before it was pegged to said commodity.  This is wrong.  Bitcoin has many uses that nothing else can do; Bitcoin is the very first of its kind.  It's valuable because these traits are non-existent in any other commodity, especially if you realize what the banks are about nowadays.

exactly. and the same is true for bitcoins. it's just that the one thing can be touched, while the other is an abstract piece of data. but seeing how other abstract pieces of data are already given value (such as media, software, games) it's not so far fetched to give a digital currency value as well.

"The bitcoin is backed by math argument" is kinda silly if you ask me. It´s backed by people who belive in it, but it have no other use than a medium of exchange, therefor it will fail.. In the long run, or short run. It could even be tommorow who knows. The problem is that the source code of bitcoin can be copied to infinity and create infinite new eCoins, you cant do that with physical things like gold.
You can also do something else with physical things like gold rather than use it as a medium of exchange, you cant do that with bitcoin.

I would say yes.

If the only thing you can buy with Bitcoins is more Bitcoins, the the value of the currency is completely speculatory. However, once you start to regularly tie other real-world objects to it like food/drink/etc., Bitcoin actually becomes valuable as a medium between end-goods, which is what a currency is for.

Currently, since Bitcoin's value is so volatile though, nobody really likes trading it for anything other than speculation reasons, which hurts it as a currency. Maybe one day the coin will be easy enough to get into and the value stable enough that it becomes widely adopted.

Although, the system and infrastructure to support transactions in general might find some use in small mini-economies immediately without worry of speculation/legal issues... like a forum currency or something.

Modern money has no value, just trust. Bitcoins are no different, except, you don't need trust as it's secured by every user, not a central authority who can change things as they please.

K.

I don't think so.

Not physically, no, but people are real.

What backs up gold?

Gold is hardly useful. All we use it for is jewelry, and plating our connectors.

The only thing that backs up gold is scarcity and the fact that people have all agreed it has value. Something that bitcoins have achieved, perfectly.

Same with diamonds.

Up to 100-ish years ago, diamonds were, to people, perceived as worthless shiny rocks. Just like any other worthless shiny rock. They only have value now because we agree they have value. Diamonds aren't even rare.

Maybe if it was backed up by something like gold (which backs up everything else non digital), the exchange rate would be more stable.
Nevertheless it's backed up by merchants who accept bitcoin, so don't worry about it, it's tehnically backed up by that ;)

If anything backs bitcoin other than the math that makes up the work... its the power supply. currently for most people, thats the energy companies. thats what gives it value, not to mention the amount of work put into mining them in the first place. actually the two coincide pretty much. but even then, that is a speculative backing, because who is to say that like 1/3 of all the bitcoins created were powered by one of those companies. it wouldnt take much for a person to build a self sufficent solar powered bitfarm. so i guess the best backing the bitcoin has is the people who hold them. we give the coin its true value, the value being whatever the people willing to trade them, are willing to trade them for.
before i wrote this i just recently watched the mt.gox ticker go from 86/bitcoin to 103/bitcoin, just because two people agreed upon a value for it. volume went from 1300~ish to 23000~ish.  :o

Stability is good, but gold hasn't been doing so hot lately, and has been going down in price pretty consistently.  The downside would be, wherever gold goes, Bitcoin would have to follow; plus, there's no way to peg it without any legal fiction to back it, which would mean government would get involved.  If a bank-owned government actually wanted to do this, I'd say:

http://cdn.cultofmac.com/wp-content/uploads/2011/03/nope.jpg

Everything material that has value in this universe ONLY has value because people agree that it has value, that is all. If anyone tells you differently, they are either ignorant or are trying to sell you something.

Yeah no-ty to goverments.
I mean bitcoin has a lot of potentional, and backing it up with something that is let's say "real" (since the currency is digital), would just destroy it's own itention.
It should remain at planned conditions from the start till the end.

Maybe we could see even better digital currencies someday :).

Gold is a very useful element especially for things like the development of technologies of space travel :)

wrong, gold have uses: cables(stuff that is useful) and jewellery(which is just people thinking its pretty).

kokjo:  People don't generally buy gold because they want to use them on cables (but probably will buy them as jewelry, which is a lot like using gold as a store of wealth/showing off wealth.  Looking pretty is exactly why people think it's valuable.)

But the point I'd like to make is that because Gold is useful in many applications, it should not be used as money.  The fact that Bitcoin can literally do nothing but act as money is one of its better qualities; you don't want Bitcoin to have any other uses.  This is why we don't store wealth in food; not only does food rot, but it has a very important purpose, which is, being sustenance.  Certain items are better at this, precious metals being one, but even they have many applications in the real world.

Bitcoin does not.  It does nothing but be money.  It cannot be used in any other way.  It will never be used in any other way.  Nobody can say, "Well we need Bitcoin to build our space ships and it's kinda expensive so we need subsidies" no, it will never happen.  Bitcoin has value only because it is given value, the same as gold, minus the uses outside of storing wealth.

Beacause math is an "abstract 'idea' " you cant really touch it or measure how many other identical cryptocurrencies there could be or how much better you could make them, the answer is infinte. I´m just saying that I can create xCoin, yCoin, zCoin with the exact same properties and now the challenge is to get other people to value those as much. This expansion of cryptocurrencies will probably happen. And therefore you will see an "inflation" of all cryptocurrencies so I dont think the deflation argument of bitcoin stand either.

You cant just look at the properties of Gold and then Copy it into existance without putting extreme amount of energy into it, do you see the problem?
Gold = Physical matter that have some real-world properties, Cryptocurrency value= Abstract and Subjective, can be copied to infinity.

But I´m still a cryptocurrency supporter but I dont think it will stand for much long. I wouldnt bet my life on it, thats it. :)

I don't quite follow bitcoin is useful, because its not?
I only halfly get your point and it does not feel right, i would be much more comfortable with something i could use.

You can't eat bitcoins in case of a zombie apocalypse. Frozen carrots would be a better currency.

If you were totally alone in the universe and then you could choose between a bitcoin or physical stuff that you could form, shape, build things with. What would you choose? Not agreeing with anyone else but yourself

No, frozen carrots would be better as food, which is why you'd eat them instead of trade them for something else (like more food.)  Bitcoin makes the perfect money because it does nothing outside of being money.  There's no incentive to use it in any other application.

Well put it!

The professor who said Bitcoin should be backed by something but that it is a "step in the right direction" wrote a book called Capital as Money.

It proposes a new form of money, too.

http://www.amazon.com/Capital-As-Money-ebook/dp/B009AP9ZG6

I think the argument for "backing" money with something is that it SHOULD have a backing, even though we all agree that our current money does not. That is part of the problem....it's just made up with no real controls other than bankers issuing new notes or issuing credit.

As long such idiots run central banks there is no need to back bitcoin.

Wait a sec ... That might be the REAL backing of BTC. Bitcoins are backed by goverment stupidity. Every smart goverment could launch a premined crypto currency and bitcoins would be worthless. Unfortunately there is no such thing as smart gov ...

No goverment on earth is capable to create a online currency without a total screwup or adding at least 10 stupid features that make worthless. There must be AML to fight wars they can't win. There must be confiscation so they can pay for their dep ... ehm fight terrorism.

so stuff that have alot of uses, is less useful. and stuff that does one thing and one thing only is more useful. i feel kind of wrong, but im not able to explain it.

To be frank, dollars are backed by banks.  Because it's next to illegal to use anything else but the prescribed national currency (see: liberty dollars), you're SoL and at the mercy of whatever the higher-ups decide to do with that currency.  It's completely out of the hands of the people.

On the other side of the spectrum is Bitcoin, which also is also backed by "nothing", but to correlate it with fiat, it's backed by the public.  In other words, we're in control of its price, and where it goes.

But that expect someone else to value it as much as you did when you traded it otherwise you loose, and in case of a catastrophe of some kind I would have big problems accepting something that is subjectived valued.

oh god no! not another debate about subjectivity...

Any better?


In a zombie apocalypse, Bitcoin would be useless, and you probably wouldn't survive anyway.  In a realistic catastrophe, and the Internet was knocked out, Bitcoin would also be useless.  However, you still could not eat gold, and you still could not eat dollars.  In a catastrophe, odds are, you'll revert to communism, or forced communism (a.k.a. stealing.)

Good point in many ways that dollars are backed by banks. They are backed by banks needing to pay back dollars to someone else. Dollars are also backed up by underwriting procedures that say what is "worth" putting money into in order to get more money BACK from....which is how banks try to tap into value and productivity in the economy. So there IS the IDEA of being backed by the real value that is out there in the economy. Of course, that doesn't cover credit cards...

Sort of makes more sense. but i do not understand why money should have no "value"(you know what i mean!).

Specifically, it should have these qualities: durable/long-lasting, easily transferable, and limited in supply (that is, in the case with fiat, more should be printed only to replace the old.)  The trouble with money that can do other things (lets say gold for example), if someone needed gold to build a spaceship, that spaceship is now much more expensive, simply because gold is treated as a store of wealth and its price is way over what it's actually worth in practice.

If gold were not used as a store of wealth, it wouldn't come with the added price tag of being money, and wouldn't cost so much to use in application.  This makes it harder to get shit done.  If a single Bitcoin hit $5,000,000 it would be a killer for someone who needed exactly 1 Bitcoin to create their time-flux capacitor :P

i agree completely. its exactly what makes them perfect for use as currency.

I always get the answer "You just dont understand", but I have studied currencies, economics, finance a lot.. And when youre saying that we will be using it 50 years from now I see your total lack of understanding from my subjective view. 50 years from now I think there is a much greater chance that we will be using some kind of money measured in energy. It is portable, durable, fungible, and you can do shit with it. So no I dont think cryptos like Bitcoin, Litecoin will stand much more than 5-10 maximum 15 years. But I could be wrong, but I have a bunch of ideas that would serve a much better purpose as a medium of exchange than Bitcoin.

I also have big issues with the asymmetric distribution of bitcoin. Some entities are sitting on 1 - 10 % of all Bitcoins just for them self, thats even worse than the Fiat distribution, although this is not an argument for that bitcoin is bad and will fail, I just dont like the asymmetric distribution. Read this: http://eprint.iacr.org/2012/584.pdf Check pg 8 and 9 for distribution of the coins.

It seems like they would but then again a lot of fiat really doesn't have much backing it when you get down to it .

Fiat currency really doesn't have anything backing them anymore.

Thats totally true, they are backed by laws and to some degree what their centralbanks own in gold. But the rest is temporary and will fail in the long run, how long is hard to tell but I dont expect Fiat-money in its current form or Cryptos in its current form to last another 15 years. The gold will be there, although maybe less subjective valued than now, who knows? But it´s very unlikely it will vanish out of existence.

This.  And transactions occur because there is a disagreement over either what something is valued at currently, or that it will be valued higher or lower in the future.  Bitcoins are worth exact $106.33 right now, IF I chose to buy or sell them on Mt Gox right this second.

PhD = spent a lot of time in, and money on, school.  No more, no less.  They may be more educated on a given subject in theory, but in my experience are often walled in by what they learned on the way.  "I have a PhD in blah, blah."  Some ARE brilliant, talented and do great things, but the label in itself is overrated.

“You dropped a 150 grand on a fucking education that you could’ve got a $1.50 in late charges at the public library” – Good Will Hunting (1997)

Bitcoin is measured in energy... the mining directly ties the value to amount of energy available for processing transactions. It is a self limiting system. The value of transactions cannot sustainably grow beyond some percentage of total energy production.

I´m having really hard deciding what is best to own right now gold, fiat or cryptos they all have their shortfalls. A energybased currency would be one of the best alternatives if you asked me, but thats my point of view.
Fiat could stand this storm and then the gold and cryptos just will be seen as big bubbles, so right now I´m just passively observing. I´m actually still not comfortable putting my savings into a highly speculative currency based on a software that is far from flawless.

If a organization would like to shut down the cryptos they would only have to invest about 20$ millions(this a piss in the sea for a government or bank) into ASICs and then kill it with a 51%-attack. It´s probably not gonna happen, but it isnt totally unlikely either.

Shells, pebbles, anything can be "money". As long as there is someone willing to accept it, in trade, for other goods and services it is money.

Very interesting question. The answer is no. Bitcoin does not need and should not be "backed" by anything. To really understand the issue, however, we need a little history lesson. Gold used to "back" paper money because everyone knew that gold was money and paper money was just a money substitute. Gold was perfectly good money for thousands of years. Paper money was originally (starting in the middle ages for the sake of argument) just a warehouse receipt given to the owner of gold who chose to store his gold in the goldsmith's safe. The goldsmith gave the customer a receipt. That was the first paper money. That receipt was redeemable on demand for the quantity of gold printed on the receipt. In other words - gold backed the paper.

Over the years, people got used to carrying around and trading paper receipts (which were more convenient than gold) and would use them as a substitute for actual gold. But everyone was acutely aware that the paper was not the money. The gold that backed it was the money. In those days (and before that as well), gold's value was overwhelmingly based on its ability to be money. See my post https://bitcointalk.org/index.php?topic=169517.msg1871316#msg1871316 (https://bitcointalk.org/index.php?topic=169517.msg1871316#msg1871316) on inflation and the properties of money. As time went on, people started to forget about gold and started to believe that the paper receipts were money. The problem with paper money is that it is much easier to debase (inflate) than gold. Governments hate gold (as they will hate bitcoin) because then cannot simple "print it" to fund their welfare/warfare states. There are numerous examples in history of governments (in bed with the goldsmiths) creating paper currency (out of thin air) divorced from any real gold and thereby destroying their own economies. (I include all modern electronic versions of official currency when I say "paper money".)

The reason history and common sense says that paper money needs to be backed by gold is that gold is the market winner (over thousands of years) in the contest of what is the best money. Its money properties were almost single-handedly responsible for the advancement of civilization from barbarism to the modern world.

So, when x backs y, x is money and y is the money substitute. As long as people honor the one-to-one relationship between x and y, it's perfectly ok for gold to back paper money or even for bitcoins to back paper money. So, nothing should back gold because gold is (or was) money. Sadly, society has been so far removed from gold for so long, that gold no longer really qualifies as money. And while Bitcoin doesn't quite qualify as money yet, it may someday, and as such it might back something else (even informally). Something as simple as an IOU on the back of an envelope that says IOU 4BTC qualifies as paper money backed by bitcoin.

Final thought on gold. I read a few years ago that if gold were still commonly understood to be money it would be worth over $20,000 per ounce. The reason for this is that the nominal value of all the goods and services in the world divided by the weight of all the gold in the world comes out to about $20K. I could be way off here, but you get the point.

Please explain why bitcoin (and other PoW cryptos) are not energy credits. What would meet your definition of an energy credit?

But I mean that I would like to OWN the energy rather than performing a task with energy to perfom a transaction. I would like to store it so i could use it to what ever i wanted to. I would transfer it over a net without anyone having to confirm it because you could see something physical "realworld"-event occur when you recieve your kW/h´s (or how ever you would like to measure it). And Instead of mining bitcoin into existence you would have solar cells/ wind turbine "mining" energy. Do you see where I´m coming from?

Ah, I'm not sure if the tech for storing large enough value is there yet.

This.

And people suggesting that bitcoins aren't "real" cause you can't hold them in your hand, should consider the fact that 99.9% of all euros and dollars in existence (including the ones on their bank account) are just as real. Pretty much ALL the money out there is not coins and bills, but mere bits and bytes in cyberspace.

Welcome to the Information Age. Physical and digital are just as real.

Gold/fiat do have one advantage over bitcoin...  you can still trade with them when the lights go out.  Don't get me wrong, I think Bitcoin is superior in many ways... but imagine a world that trades exclusively in Bitcoin, and then imagine an EMP strike anywhere.  We are close to this being an issue already with fiat being exchanged almost exclusively electronically, of course.  I believe the smart course of action is "diversify".

Energy I can only use it for one thing... Are you kidding me?

And yeah bitcoin is mostly based on faith and have only a value as a medium of exchange, you can use dollar, gold, potatos, kittens, stones or energy for that to.
There is nothing that makes bitcoin better than terracoin else than it have more "Belivers".. Actually cryptos kinda remind me of religion and other political views; get enough people to belive in it and value what you offer and you´ll win!

You have big faith in Bitcoin and you will probably go on claiming that it´s the best thing ever like religious and political people. So I dont expect you do change your mind although I like the debate :)

I want to own the energy. Like have it in a battery or some other medium for storage (Hydrogen maybe) so I can choose what´s tasks it should perform and when.

You cant deny that bitcoin only have one purpose and it´s for exchange, If I owned the energy itself I could consume it to do other things.

Beyond excellent point.

Nah it wouldnt take more than $20 million I´m surprise to see that you seems to know so little although it looks like you have been into bitcoin for a while.
The total tH/s of the bitcoin network is 64 terahashes/s right now. And a minirig from BFL costed $30 000 and produced 1,5 tH/s so to get up over 64 tH/s I would have to get 43 minirigs and that would cost me about 1.3$ million so I was being generous when I said 20$ million, calculating that the hashrate would increase a lot and that goverments usually are cost ineffective.  

I could make alot of money if I had the capital to perform a 51 %-attack because I could short the bitcoin-market before, Actually a big organization dont really have anything to loose in a investment like that. Because they could make a lot of money shorting the market and in the same way getting rid of competition, and if they failed a 51%-attack they still would control a huge amount of the bitcoin market.
I think the bitcoin far from flawless, but that´s just me and I like you to prove me wrong.

In all honesty, nothing has true backing. Similar to the example with gold.. Nothing has any more value than the value people give it. I could get a bottle of fresh water for under a dollar in the US, but if I would go somewhere where it is not as easily accessible, it would be highly valued and priced.

Yeah I´m no big fan of Euro and Dollar either so I kinda agree with that comparison. I think that a transition from Fiat to Cryptos would be a transition from one crappy system to another "little less?" crappy system.
I want a medium of exchange that I can do something else with than exchange. I also think that the big guns in the cryptosphere gets unfair amount of financial power rather than the users of the currency, kinda like banks and fiat-related issues.

Just as valid would be a major blackout, such as the Northeast blackout of 2003 (https://en.wikipedia.org/wiki/Northeast_blackout_of_2003) (and also 1965 (https://en.wikipedia.org/wiki/Northeast_blackout_of_1965)) in the US, or the 2012 India Blackout (https://en.wikipedia.org/wiki/July_2012_India_blackout), or 2003 Italy Blackout (https://en.wikipedia.org/wiki/2003_Italy_blackout)... or any of the others on this list:
https://en.wikipedia.org/wiki/List_of_major_power_outages#Largest (https://en.wikipedia.org/wiki/List_of_major_power_outages#Largest)

With fiat, there exists the possibility that you could drive to another city with power, and extract some paper money from a bank.  Bitcoin needs an easier way to transact physically, in person, even when the network if offline or inaccessible.  Pretty big challenge.. given that the strength of Bitcoin *is* the network.

Okay lets say someone had invested 1,5$ millions in 45 minirigs that were offline right now and then they put all that 67,5 tH/s of power onto the network controlling over 50%... Why wouldn´t that someone be able to perform a 51%-attack?

Explain.

There is also nothing that "backs" gold, it can be easily counterfeited (plated tungsten) and it too, even like oil, began it's path to becoming a symbol of wealth as a "pyramid scheme". The Bilderberg Gold Pharaohs of Liechtenstein still wield their monopoly over it as their fiat authority to own and enslave us all and our nations though the mechanisms of their exclusive proprietary ownerships of our national mediums of labour exchange currencies today.  When the "lights go out" fuels, ammunition, weapons and food will all have far more value than gold.

A Bitcoin is simply a derivative that only represents the LOOT or SERVICES that the guy that you got it off, got out of you for it, and made off with. It is a fiat "futures derivative contract" that arguably has some but really has no certain inherent added-value, other than as a virtual digital sort of a much fancier kind of an encrypted GM ignition key, that you can move, swap and store electronically.

Like a "gold contract' or "mortgage backed security' (I love that last word) derivative it is a "BTC -securitized Future Derivative Contract" that merely allows you to keep, transfer it around or transfer it somewhere else to resell it there for whatever it may seem to be worth to the next guy, a minimum of an hour from now.

The suicidal crisis with Fiat Bitcoins is that there is no convention nor systematic mechanism of well-regulation to stabilize nor assure users the stable Fiat "value" of them, relative to anything else practical. This means that they are doomed to being totally unsuitable, unreliable, non dependable and useless as a Medium of Labour Exchange Currency.

Sorry, I was adding to my post as you posted this...   I added:


That being said, I don't disagree with you... mostly.  Like I said in my original post:


There are other slight differences between writing down credit card numbers and writing down Bitcoin addresses....  I can make up Bitcoin address on the spot, out of random numbers and letters.  I cannot fabricate a plastic card (not very easily, anyway, and not with the power out).  That gives *some* assurance that the card could valid, as it is *issued* by largely trusted entity.  And, writing down the bitcoin address isn't enough -- I have to prove that I own the private key to that address by signing the transaction.  How does one cryptographically sign a transaction on a piece of paper? :)

Quite frankly, I do not expect bitcoin to last long, unless there is a serious force behind it, who recognizes the revolutionary power and behavioural-model dissolving power of bitcoin.

Not only is it freedom beyond which many vast institutions are perturbed practicably ad nauseam by, but it is also an excellent form of breaking the current cyclical system that tears apart the large lower class and middle class from the 1% who own 90% of the wealth in the USA. It also happens to scare the living gut-flora out of the entire banking complex, and subsequently (through tied interests) pharmaceutical industry and the media complex (also through shared ties).

Just imagine. First they will try to tax it, because it is a legitimate candidate for a component of tax evasion, in all forms. Choose to not be paid at work, and instead have your boss wire you the money in BTC, saving you I-T. This concept can be applied to other services as well, and can be used to circumvent much of the carefully laid out rules of the current economy that allow so much profit to be funneled into the pockets of few, and into the projects of the mad and evil.

Bitcoin stands a chance in changing the world with extreme magnitude, even magnitude greater than the change in our world resulting from the internet.

Bitcoin is feared, believe that shiatsoup my friend-o's.

Lol do you seriously dont get my point?
For me to OWN a bitcoin I have to put my faith in it that some other person would value it as much as I did, otherwise I loose. Lets say a bitcoin 2.0 gets online with much better properties making your bitcoin 1.0 worthless. If I own Stored energy, I can USE it to something like powering my computer, TV, cooking plate, powering ASICs performing protein folding, (not useless shit like double SHA-256 hashing :P )..

Do you still dont get it??

Dont you think the trust in Bitcoin would get hit really hard in a 51%-attack making it hard to restore.
Is it easy to fork a new mining process for bitcoin and who decides if that should be done?

so much newbie fail today...

there is no bitcoin 1.0 yet

securing the network is not "useless shit"

you can use crypto's for other things, provably fair voting, file timestamping, namecoin has even built a domain name system that exists in a blockchain...

lurk moar

So for me own a dollar the same would have to be true, that is true in any currency. Your energy currency theory is still under the same law. What if one computer requires X energy to be powered. Yet computer 2 requires X+1 energy.

for you to own a dollar you also have to trust the government not to devalue that dollar :p

Oouuf, dont you get my point with the 1.0, 2.0 analogy that you can do a BETTER cryptocurrency making the previous obsolete and worth muchmuch less. Making the holders of the currency to loose purchasing power.
And Securing the network is useless is not totally useless for a virtual currency but in regards to real p2p transaction where you could see the transaction physically taking place it´s useless. Not just in a virtual environment.
"newbie fail".. lol, so smug!

What is best,
Using FLOP/s-power to perform proteinfolding to understand dieases like Alhzemiers or Securing a imaginary currency network that only have subjective value?

I said nothing about gold being "backed" or that it couldn't be counterfeited.  I said it had one advantage over Bitcoin (no more, no less)... It can be traded when there is no power.  No power doesn't have to equate to anarchy or some post-apocalyptic world you saw in a movie.  It can be simply "the power went out, and will be out for the next X days".  Even in your post-apocalyptic world, people will still want to trade in a currency -- the relative value of that currency to other commodities is irrelevant.  So what if gold is less valuable than food?  If I have food to trade, and you have fuel that I don't need, then we're going to have a tough time trading.  I can carry more "value" of gold than I can gallons of fuel... unless fuel *becomes* the new "gold" (it's value "density" being quite high).  That's the problem that currency solves.  That is not a problem that Bitcoin can currently solve unless one has both electricity and working connection to the network.  The rest of your ramblings are irrelevant.

Then I would like to offer a Service or a Product to get hold of "1" more energy if I wanted to power computer 2..

I still want to know who decides to change the mining process!

No, they already have the drug trade behind them.

That sounds kinda centralized if you ask me. Could you please explain the forking process and what effect it have on othe holders of bitcoin and bitcoin softwarer? And you say that the fork have to get long before you can validate transaction.. So that 51% holder would still be able to reverse transaction during that time, how long would it take to get the fork long enough?

The more I read about cryptos I actually starting to feel safer holding crappy currencies like fiat, Swedish Krona to be exact :P

The rest of my "ramblings" were with regard to the subject of this discussion:

Do Bitcoins need something REAL to back them?

not to do with the "ramblings" of yours.  :D

The relatively assured stable value over time of a Medium of Labour Exchange Currency is it's most critically important and indispensable feature, eclipsing even it's portability and immunity to counterfeiting!

In Economics, Labour alone is the Prime Commodity-Resource, without it, nothing happens, period!

It doesn't matter if it's scratching a nose at an auction, hitting a key, doing a heart transplant, changing a tire, wiring a house, curing a disease, buying or selling a share, paying a bill, inventing a Bitcoin or taking out the garbage.

The Prime Commodity Resource of the Fruits of all Labours is the hopefully ever-expanding (growing) Wealths of all Nations. The wealth of a nation's exports is what "backs" the "relative to other currencies" day to day value of it's people's Labour Exchange "currency" in the global marketplace.

Finite, precious resources like fine art, antiques, collectables and to a lesser extent second rate finite commodity resources like platinum, gold, gems and other generic junk are "deflationary" Mediums of Savings simply because they are finite as the fruits of all labours cannot be.

All other commodity resources are mere Mediums of Investment that can go up or down like toilet seats depending on a myriad of esoteric elements of technological chance, adaptations or happenstance.

No contractor, entrepreneur not merchant can price a contract to do anything or hire others to do them in an unstable supposed "Medium of Labour Exchange Currency" that may be $80 one day $100 the next, $260 the next and then $50 two hours after that, nor one that changes 15%-70% of it's value any time of any day like a toilet seat.

Nobody could risk the time it takes to get or spend it.

BTW gold and oil have had a totally consistent relative value to one another for a hundred years, and you cannot really trade gold unless you have a battery operated drill and assaying equipment.

Gold was never a pyramid scheme. But it was at the top of the pyramid of acceptable commodity monies. And everybody used and accepted it.

Translation: Central bankers control the world because they control the money supply.

True that.

Bitcoin is not a derivative of anything. Neither is gold. And neither has any inherent value.

Securitized Future Derivative Contract. Really? What are the terms of this contract? What is "securing" this contract? Are you just trying to say that holding Bitcoins is bit of a gamble?

Translation: Bitcoins will never be good money because their value will never be dependable. Maybe, but not for lack of convention, systematic mechanism or well-regulation.

I enjoy parsing circumlocutory prose as much as the next guy, but seriously, that was a lot of work.

Fair enough.  I just assume people are talking to me when they start by quoting me. Sorry for the misunderstanding :)

I would like to reverse the question:  Does fiat need to be backed by Bitcoin instead of "full faith and credit of the State"?  I would say, wholeheartedly YES.  I doubt this would happen... but if we could get governments to be open again about how much money they have in circulation, and this was tied to the balance a specific Bitcoin address, this would solve the single problem I have with Bitcoin (how difficult it is to trade, especially with no power), and ALL the problems of government-issued currencies.  Or am I completely wrong?

I think you might find the professor's book http://www.amazon.com/Capital-As-Money-ebook/dp/B009AP9ZG6 interesting. The Kindle version is free right now. He proposes the idea that money is better when backed, but that how it's backed is tricky. It SHOULD be backed by the value of the economy. A reasonable approximation of 'the economy' is the largest publicly traded corporations....using something like S&P500 ETF shares. To purchase Bitcoin, for example, you should have to put 1 or 10 shares of SPY on deposit.

I think it has potential.

What can you personaly do with gold besides trade it for money? The answer for someone without a smelter is not much. Most money today is fiat currency and backed by the economy it represnts. In other words currency is moving in the bit coin direction.

Backing fiat money with bitcoin (or gold or anything else) would convert the fiat money into an honest money substitute (and no longer fiat) again. Fiat money is "money by decree". It is in a very real sense fake. The only things which gives it value are the cultural memory of "dollar-ness" coupled with the legal tender laws which make it illegal to issue private competing currency.

Bitcoin has most of the properties necessary to make it money. If and when it is widely considered to be money, then it could conceivably be "kept" in a safe place (e.g. the distributed network in which it currently exists) as backing for some unspecified, more transportable surrogate. In the heyday of private and state banking, the checks cross-written against groups of banks were cleared every day at a clearing house. The differences at the end of the clearing calculations were then settled between the banks by physical gold transfers. This was done continually all over the world in a local, regional, national layered fashion with the final clearing done in London. Only the interbank differences were settled in gold.

The days of the gold standard did not mean that everybody carried gold around in their pockets. It only meant that their "paper money" was fully backed by gold. And "at the end of the day", all accounts were settled. It worked beautifully. This may be a good model to think about with respect to Bitcoins. We don't all have to deal directly with Bitcoins, as long as the accounts are settled in Bitcoin periodically. This leaves us free to invent an honest bitcoin substitute that may be more convenient to use, but is backed by Bitcoin (like gold used to back bank drafts).

Yes. They should have something of economic value (besides their own utility) on deposit. It needs to be difficult to produce (like mining gold or bitcoins), but able to expand dynamically (unlike gold or bitcoins), and able to shrink rather than hang around in surplus (unlike gold or bitcoins), and completely liquid (unlike gold).

That's why the professor's idea of Capital as Money has potential.

A person should have to put a share of an Exchange Traded Fund that represents all publicly traded stocks of a certain size. The shares (not the price of the shares) represent true value with a limited ability to be created (starting a profitable company of that size is much harder than mining for bitcoins). Their appearance and disappearance is not magic (like fiat money and fractional reserve banking) but it is not contrived either (like Bitcoins).

The rest of the process of creating more stable money should evolve along a natural path in the open source manner that Bitcoin is.

The problem with that is the same as whast the creator of the liberty dollar came up against; when you create currency to be used to pay debts, the government tends to frown upon that. As long as bit coin stays in the realm of the virtual, I believe it will be able to survive long enough to gain the traction it needs to survive the direct pressure a government can bring to bear. Plus with it being internationally traded as long as one coumtry gives it Safe harbor if it comes under regulation we should see a long term sustainable sitation.

Right, that's exactly what I was getting at, and why I thought it would solve all the issues of "fiat money", and also my single issue with Bitcoin.  The advantage of turning fiat money into representative money backed by Bitcoin (over, say... gold or oil) being that if I own a large store BTC, I can (presumably) convert it instantly to the local Bitcoin-backed currency no matter where I've traveled without carrying it with me.

I beg to differ. In fact salt, necessary to preserve meat before refrigeration, was the first "money", and all new markets for a new commodity are trade and distribution "pyramids".

The first cave guy who stumbled upon shiny yellow stones he couldn't eat or kill anything with in a pile of rocks at the bottom of some stream was exactly like Sitoshi. He picked them all up and went "kool" to himself, went back to the campground. probably pounded them into ear rings and pawned some of them off on some pals. Immediately these guys noticed that their shorties were fascinated by and thrilled with them. Soon other guys also came across chicks with them and also noticed they could also make rings and bangles out of them that really drove the chicks crazy and they all went back to Sitoshi to get some more.

Soon Sitoshi was fat, buried in other valuables and out of places to find more gold just laying around, so still having a bunch of gold that cost him nearly nothing, he decided he had to get guys to pan or mine for him around where he'd got the first batches. Also some dudes named litecoin also got hired by mistake and also figured out exactly what was going on with these ugly dudes getting action with all the hot chicks with this junk. Once Sitoshi's mine was sold out he was fixed for life, still selling it now for many hundreds of times more than he first did and out off the top of his 1st sales pyramid with a fortune. (and probably all the hottest babes in the region)

Meanwhile everybody else was left to either holding on to them as long a they could, and flipping bits for more stuff to new horny dudes or selling their hoards for similar fortunes of value to other tribal warlords etc. using bits of it for barter, whacking one another or "getting their sins forgiven" for some.  

This of course prompted other gold mining and gold panning "pyramids" to be started as get rich schemes for their bankrollers. The story of oil is little different.

What actually increases the marginal value of gold and oil is the fact they are relatively scarce, lots of work to get, of marginal utility and are thus always worth bidding-up and fighting over.


No, they ENSLAVE the world's people and their nations because they OWN it's people's Labour Exchange "money" supply, being it's rentiers, it's usurers for power and influence, it's fiat counterfeiters and the fiat devaluers of all labours.

In the Economics 101 lesson in Genesis of the famine in Egypt, Joseph, conveniently (greedily) sells Pharaoh’s stored grain until Pharaoh accrues all of the rare gold which was then the only form of "money" in the first year of famine. In the second year, the people were then forced to barter their animals and other holdings for the grain and then, thereafter, they end up bartering themselves as slaves for grain merely to survive the famine as they are all then finally left gold-rent debt-enslaved and bonded in indenture to Pharaoh for eternity. The famine was prepared for but the preparers sought only to enslave by it.

Finite gold or any "finite something" like DaVinci paintings or '57 Chevy Bel Airs could not ever be used as a Free Market "labor exchange currency" in any growing freed market economic system. A finite and privately hoarded “old money” (gold, silver, Quagga-skins etc) public Labor Exchange Currency supply system is prescription for slavery.

In any commercial system by means fair or foul a "commercial" winner (or winners) will always eventually emerge to own nearly all of the available, finite dual-use Labor Exchanging "currency" resource (all the gold or DaVinci paintings) after which point the rest of the economy (all property) becomes their private chattel, and all of it's participants become their rent-debt-slaves. In a private, finite currency system after that point everyone else has to go to them, cap in hand, to rent some piece of one of their loaned-out DaVinci paintings or a fiat token of their wealth derived from it (gold) even just to use a pay-toilet!

Even if everyone had some tiny reserve of gold or DaVinci painting scraps set aside as savings the debt enslavers could drive prices up by raising token-rent-debt-prices (tax-interest usury) or printing-dilution money-supply (monetization) inflation and thus force all the small gold holders to be forced to exchange their paltry holdings to eat or heat their homes or fuel their cars. (hoarded false-scarcities, engineered famines or pandemics).

One "winning" consumer (Gold Pharaoh), no matter how audacious his corruptly consumptive lifestyle cannot "urinate down" a "Free Market" economy getting his yards cut, building his pyramids or renovating his palaces. The power to counterfeit, loan and issue (from nothing) a fiat Labor Exchange Currency token is the power to corrupt. The Wealth of Nations is their public property expressed and represented by the foreign-export fruits of all labors value of their publicly owned and issued "Medium of Labor Exchange Currency".  Defending, maintaining and growing the ongoing utility and labour-exchange value of its own citizens economic "currency" is the public work of a nation, it is not ever to be regarded as the private toy-hobby of some "beneficent" private Tory-Bilderberg Trotskyite Menshevik gang of wealthy boardroom(or stock market)-socialist Pharaohs.


Legally speaking a "bitcoin" is a "Crypto-chain-securitized future-derivative-exchange token" contract, (just like a gold futures contract, a corn futures contract or a mortgage backed securities[gotta love that last word] futures contract) and this is why (loophole) it is NOT lawfully a Ponzi or Pyramid scheme. It is an exchange traded contract on the current value a (bull) speculator or (bear) thrift seeker places on the future value of some commodity.

In this case a Bitcoin-Securitized Token itself is the commodity the "futures derivative-value contract" is about.





That is exactly all that it is. The terms are you pay it's holder what you think it is/will be worth to you in the future in order to possess it. It is "secured" by the encryption chain that guarantees and certifies it's provenance and makes it unforgeable.

It is almost all a gamble, except it undeniably has value and utility of it's own, and is therefore not legally a "nothing for a something", the risk is in it's market valuation.

And, it is "backed" by the good faith and trust of all in the fruits of the labours of it's owners who are the economic "Nation of Bitcoin". It is also the first Global-Economic "nation" of digitally productive citizens.


I have proposed a solution

See this proposal/explanation
Re: stable bitcoin pricing...The "Bubbles with Bitcoins" nightmare
https://bitcointalk.org/index.php?topic=175708.msg1832923#msg1832923

Close? See what happens when the power is out. People can't user their credit cards, ATMs, etc. Euros and dollars become just as useless in this scenario as Bitcoin.

It actually happened a while ago - people getting in tons of trouble cause they couldn't pay for their fuel anymore, had to walk home, etc. Chaos all over the place. So our dependency on electricity and internet is already a fact, regardless of Bitcoin.

Actually bitcoin is much better if electricity goes away

Grab a generator, use a satellite internet connection and ta-dah, it works.

Meanwhile the whole traditional banking system, atm, credit cards and the other electronic idiocies are unable to work due to their fail centralization.

I agree that bitcoin needs to be backed by something... an economy.

The definition of a 'fiat' currency is one that can be used to pay taxes.

One day perhaps it could happen (who knows!) but the same principle applies regardless. You have to be able to buy stuff with it. And you can. So that way it is 'backed' by very real capital.

The only thing we need to get the bitcoin economy moving is price stability.

Things that I think would help improve price stability are:

• Broader distribution of the coins in circulation (more consumers, fewer speculators).
• A higher value in exchange for fiat currencies (harder to move the market).

So everything seems on track, it's just going to take time.

Yes, metric tons of mining equipment...

Also most people have no idea that their dry loop (or normal phone) line provides a free 48VDC@.25amp of battery power (handy for recharging things, especially if you have just dry loop DSL and it never 130V-pulse-"rings") and the phone networks batteries are not only fully UPSed and totally independent of any grid-utility AC power, their internet service continues to work to all major backbones, unlike local cable/fibre which is all local grid-utility AC powered. Telephone systems inherited their ubiquitous battery mode of power operation because despite going tone and digital they've always still needed to ring bells and latch "hook" relays. Even if you have a 1913-15 candlestick phone (I do) it still works just fine.

So if you have even a small UPS, and/or a 12V battery for your DSL modem and/or just a tablet or laptop (not a power hog desktop) you're still pretty well set for a long power outage with internet connectivity, even without any generator.

Excellent point, since it is the mining network infrastructure that  actually backs the securitized network "token" transfers and supports their cryptographic transaction journals. It is actually the vast majority of the "arguably some value" of each Bitcoin token.

Digital currency creation is directly linked to electricity usage. I don't know this as fact but Bitcoins seem to be the oldest and most mined crypto-currency to date. They have used up the most resources (electricity) so far and continue to do so as more miners join the game.

I believe this contributes a lot to their current monetary value. Now with ASICs joining the game which are more energy efficient it might change the current situation.

agentbluescreen,

I have struggled mightily through several of your posts, both here and elsewhere on this site, and I humbly request that you drop down your 165 IQ a few notches for us mere mortals. Your poetic prose seriously obscures your (presumably) intended topics of discourse, namely, "pyramid schemes", "slavery", "equivalence of  labor and value", "securitization", "stability of the value of money", "speculation", and on and on.

Maybe you could provide a "TL;DR" for each of your posts. It would be really helpful.

The problem I have is that you are right about many things, but wrong about others, and you mix them all together and then salt them with such arcane and charming phrases as "The Bilderberg Gold Pharaohs of Liechtenstein", "National Economic Labour-Exchange Currency Token", "BTC-securitized Future Derivative Contract", and "private Tory-Bilderberg Trotskyite Menshevik gang of wealthy boardroom(or stock market)-socialist Pharaohs". It's just damned hard to sort it all out and respond to any of it. But I'll try. First, what I agree with (I will try to dumb this down to 140 IQ levels):

1. Yes. Many commodities were experimented with as money over the centuries. What's your point again? They all became pyramid schemes? No.

2. Yes. Bitcoin is just a speculative oddity at the moment. It won't be money until it is relatively stable.

3. Fiat currency is bad. Duh. It allows some of us to eventually own everything (when enforced by the state). I hope we have the same definition of "fiat".

Now, my disagreements:

1. Gold was never a tool of the elites. It evolved as money slowly (and widely), thus making it very egalitarian. There is nothing wrong (and everything right) about a "physically" limited (but widely dispersed) money supply. In fact, the elites hated gold because it was honest and widely used money (society didn't need the state). They only enslave us when they "take away" (physically, psychologically, or legally) our ability to use it as money. They do this by forcing us to use their fiat money instead. The real enemy is our belief in political authority (but that is a very big and separate topic).

2. You make the same mistake that Marx made in his "Labor Theory of Value" by assuming some inherent relationship between labor and the value of money. The labor of one person or the labor of a nation cannot give money any inherent value. The value of money is completely subjective (just as is the value of anything). You may value $1000 a lot or a little. It all depends. It's the relative rank of your valuation of $1000 that matters. I once paid three or four of guys $400 to shovel two feet of snow off of my roof. At that moment I valued their 45 minutes of labor more than I valued my $400. That same group of guys River Dancing for my entertainment for 45 minutes would be worthless to me. Each is 45 minute of labor, but very different values (to me). All value is subjective. The only thing that "stabilizes" the economic value of anything is the historical record of what other people pay for things. When you want to buy or sell some used item on Ebay or though the local paper, you look to see what others are paying. But every transaction is independent and subjective. The stabilized value is a constantly changing historical aggregate. I agree that the "price" of money should not change much. But that is a consequence of its ever-widening use as money (as opposed to a speculated commodity) and millions of independent, voluntary, free-market transactions, and not some decreed system of fees to dampen speculation. Speculation will either level out over time or it won't. There is nothing we can (or should) do to control it.

3. You use "security" incorrectly. Security for a loan or contract is collateral not something that "guarantees and certifies provenance and unforgeability".

I discuss Bitcoin's and gold's money properties elsewhere, so I won't repeat myself here. I will just summarize by saying that gold was money once, but is unlikely to be so again. Bitcoin is not money now, and is unlikely to be so in the future. One major difference between them is that gold was "always there", whereas Bitcoin just popped into existence. This explains why gold was never a speculated commodity (while it was money), and why Bitcoin IS currently a speculated commodity. The only way for either of them to become money (again in the case of gold), is for fiat currencies (and states) to "get out of the way". That will require the dissolution of state power (and a major paradigm shift about the imaginary nature of political power) around the world. Maybe someday, but probably not in my lifetime.

Thanks Melonhead I really appreciate your well considered dissents and i will gladly struggle mightily in kind to answer them to your satisfaction, unless, of course, if and where I have erred  :-[

above I have highlighted everything with which I totally or largely disagree, (and bolded indisputable points) so here go my responses:

First it is a huge generality that turned out to be generally quite wrong (in the latter 20th century days of gold's final demise as a useful "money") that "gold was never a tool of the elites". In fact it was THE TOOL, most largely, though not solely because it was, has been, is, and always will be a chronically far too "limited 'money' supply".

Today, even at best, gold is only a second rate Medium of Savings wealth. If you own more than nearly an ounce of it, you have more than your share of it's "egalitarian" global supply-wealth, which is still ever-shrinking compared to population (and labour wealth's) growths. Gold's egalitarian usefulness as a widely dispersed utility of exchange vanished, along with the broader-based demise of mercantilist "communal-nomic" warfares back in the late 1700's.

Mercantilists chronically kept beating their heads against it's limiting walls by hoarding it through foreign trade surplus only to be faced with the toxin of it's inevitable domestic over-supply, that would reverse the precious trade surpluses they'd hoped would make them wealthier. It took a long time for comparative advantage and the utilities of endogenous money supplies to take hold, and most of that also was, has been and still is quite wrong-headed.

Back in the day while there were still more widely dispersed clutters of gold than there were "labour exchanging" people who needed it's utility as a labour exchange currency it was, as you have pointed out, the most honest, egalitarian and durable triple-use medium of labour exchange value and savings wealth, while also being a commodity in the production of rarely-artistic added-valued luxury goods. But, as the various labour exchanging populations of the planet grew and the economic straight-jackets of it's limited supplies and dispersions did not, things drastically changed.

The first notable exception to your generality is the "local fools-gold" Basic Economics-Arithmetic lesson of Genesis. A "winning", ruthlessly price-gouging grain-monopolist Tory-Menshevik entrepreneur elite dude named Joseph convinces his lord he should exploit their grain business. Subsequent end of the ice-age dry spell crop failures and famine in Egypt then allow Pharaoh (and his elite Menshevik pal) to enslave his entire populance through the tool of their all too foolishly chosen limited resources of gold as their labour exchange currency. Joseph parlays Pharaohs grain monopoly into a labour monopoly (slavery) through the monopoly on gold the grain exchanges "earned" them.

Although gouging is clearly foul I'm not judging the fairness, just pointing out the implications of the broad false assumptions of a finite public labour exchange currency (that is also an entirely separate easily monopolized commodity) and the inevitably poor results of the inevitably terminal-exchange slavery it ultimately always leads people into. Unfortunately people stubbornly refused to learn a basic understanding of the inherently zero-sum counter-economic arithmetic of that fundamental example. Wiki "Endogenous money"...

Meanwhile in the future-past...

Later the elite Sadducee enslavers parlay their monopoly on the false idol of the "Ten Book of the Dead Mosaic Law stone-engravings" that their post-ice age liberator, the ex-Crown Prince thut-Moses left to them, into a desolationist's Soul Wash™ Business Temple monopoly. By cleverly imprisoning their Ark of their Covenant false-idol, containing it's imprisoned stone idolatries within, in an elite "sanctuary prison", they claim to own all proprietary access to Our Parentage Whom are Heaven and the All Itself, and demand silver "half shekel of the sanctuary" "fiat tokens" (that they alone mint) to run their "imprisoned god visiting" Soul Wash™ machine with optional grimy underbody spray.

Since the only way to obtain a much needed Soul Wash™ to impress your (likely rather outraged) neighbors is to trade real assets of true labour-exchange value like gold etc. for worthless 'fiat half shekels" at a Sadducee's convenient "money changers" bank-MTM booth outside their god-prison, the Tory Menshevik Trotskyite Sadducee's once again enslaved their own people. We all know how the evil fiat silver Sadducee Money Changers getting the gold from the residents of Augustus and Tiberius's occupied territories story went and ultimately ended 40 or so years later. Note that/how the cheap silver Temple Shekel is a "special silver coin-token receipt" (derivative) for another, completely separate store of value that it only "represents".

Meanwhile back in Rome...

Back in 50 B.C., the Pontifex Maximus turned Emperor Julius Caesar took back the power to coin Roman labour exchange currency from the private bankstering smithy-coiners and money changers and minted public coins for the public benefit of all. It's important to note the clear inference that the "soul-detergent reserve" bankstering of "temple shekel tokenage" for sporting and/or other commercially monopolized economic activities was obviously a more widespread phenomenon than just in the Soul Wash™ business.

With the profits on selling and renting this new and plentiful public supply of publicly owned and issued labour exchange currency, and standardizing his new calendar for temporal labour-contractual order, Julius was able to complete huge public works projects of unprecedented scale. By making standard public labour exchange currency tokens of assured value plentiful Caesar won the loyalty and admiration of his citizenry, but the still powerful former private local smithy-bankstering coiners and their money changer crony-monopolists hated him. Economic experts believe this was a major motive behind his assassination. With Julius Caesars death came the demise of Roman prosperity. Taxes increased and so did political corruption. Debt usury and debased reserve-derivative coinage became the rule again. Eventually the public labour exchange currency supply of the Roman economy was reduced by 90%, and thus people lost their wealth, lands and enterprises to the smithy banksterers and Rome sewered into the dark ages.

The first paper labour exchange currency was a new "printed paper" receipt for gold (or silver) that was left in a metal/coin smith's vault.

Coin smith receipts (private coin) had long been the norm because they were way better than hauling around, concealing and securing heavier and/or more valuable gems, gold and silver. The coin-smiths banks had always known that only a small fraction of people return to demand their actual gold (or silver) at any one time. Fiat paper was simply a new and even cheaper way to continue conduct their parasitic gold-hoarding frauds. They continued defrauding the public by printing/coining more "fiat counterfeit" labour exchange currency receipts than they had gold or silver to back. They would then loan out "fiat counterfeit" deposit receipts, (cheaper "coin" or paper token) and collect interest on them, paying squat to depositors.

These paper receipts are often falsely cited as the birth of "fiat" Fractional Reserve Bankstering, but it had long been done with other bronze, brass and silver (etc) low "bullion" content token-coinages before it. It is usually defined as defrauding the value of the fruits of all other people's productive labours by parasitically loaning out many times more counterfeit "fiat" labour exchange currency receipts at a profit than there were genuinely conserved assets of labour exchanging value "reserved" to back them with. Fractional Reserve banksterers had for years earlier already long been minting "Fiat Token Coinage" of silver or other more-worthless "fractional" Fiat Coin-Token Receipts foreshadowing their Fiat Paper-Token Receipt scams.

If a metalsmith bankster-parasite had 1000 in resource-asset deposits, he would draw up 10,000 in fiat counterfeit receipt  "money", and lend out this 90% more of fiat-counterfeit receipts to both depositors and non depositors at an even more-parasitic profit. Elite bankstering parasites thus accumulated themselves all of everyone's gold and silver through various (private) fiat counterfeiting reserve-storage schemes.

The issue has always been and still is WHO OWNS AND PROFITS FROM a well moderated and regulated industry of reserve-bankstering (reserve-usury) - not necessarily the honesty or dishonesty of providing for an economy the flexible monetary utilities of it. When our congress (national governments) own, rent-out and control Our Public Labour Exchange Currencies our nations (and thereby us) profit from it. When others own and control it we are all constantly doomed to lose, to "them".

Fortunately or unfortunately, Fiat-valued/devalued Bitcoin poses a really horrific barrier not only to contractors, merchants and entrepreneurs, but to any form of usury and usurers period. It is impossibly Byzantine to even begin to arrange a temporal contract to loan bitcoins in terms of bitcoins. Currently I could loan you a bitcoin with interest in bitcoin today and you could end up paying me back a quarter of my value or owing me three times it's worth tomorrow. My loaning labours might be a total bust or a boon by virtue of random "Physiocratic" chance at any time of any day. Bitcoin such as it is "traded" is a receipt-derivative token that every greedy, self respecting smith would assassinate the purveyors of, melt down and sell off for coffin nails.


You have obviously noted my revulsion at using the lazy epithet 'money' to describe a National Economy's Public's Labour Exchange Currency Tokens. I do so because the term 'money' is a grotesquely imprecise generality that can describe a multiplicity of different subjective "substances" with which people can exchange their savings, efforts and wares.

The inherent relationships between the current values of labourers labours (the only asset we all have to trade/exchange) and the value of their Medium of Labour Exchange Currency are legally binding and irrefutable contractually-temporal obligations, they are not and cannot be cavalierly disregarded as dismissible "assumptions"!

Marx's antique misperceptions that the value of 8 hours of street sweeping work is equivalent to the value of 8 hours of heart surgery work are obviously obsolete Bolshevik-power nonsense. Streets would be paved with dead bodies (as we occasionally still hear tell of in Red China) if such presumptions had had any merit. Marx moronically insisted that the "substance of value was labour," which, in his view, was not a commodity though democidal "labour power" was.

The many old, agrarian Labour Theories of Value (LTV) mistakenly argue the value of a commodity is only related to the labor needed to produce or obtain that commodity and not to other factors except as those other elements can also be regarded as "embodied labour". It's often associated with Marxian economics, but Locke's Theory is also a foundation to earlier classical economic theories from Adam Smith to David Ricardo. The impacts of revolutions, politics, modern automated industrialization, finite resource limits and scientific common sense all disprove the production side of LTV argument, but indisputably uphold the absolute certainty of the current labour-exchange-medium's "obtaining current value" side of it.

Even Adam Smith noted that at the core of the mercantile system (he largely opposed for populist reasons) was the "popular folly of confusing wealth with money," bullion was much the same as many other rarer (savings) commodities, most of which (diamonds he exampled) were superior to it.

John Locke's Labour Theory of Exchange-Value still transcends and resides stubbornly within both the Kleptocratic doctrines of pessimistic Gold-Primitive Malthusian Zero Sum Economics (Mercantilism, Colbertism) and the more altruistic Physiocratic Classical and (progressively more or less nonsensical) Neo-Classical Economics (from Smith and Riccardo to Marxism and Keynesianism) with regard to the concept of a standard, stable media of labour-exchange-value, necessary to conduct economic activities. We can all argue until we are blue faced about what, when, where, why or how what creates or destroys the values of things, even including wealth assets but the current and foreseeably ongoing value of a decent "money" should not rightfully belong among them.

Labour is the only (prime) "commodity" not (directly) sold by capitalists but rather sold by all workers, (including capitalists,) themselves, whose income tends to a minimum unless they are (better situated or) more talented. Even their surplus product is appropriated by the labours of the capitalists. Alan Freeman argues: "This is of course true of other commodities [than labours] also; but other commodities do not walk around the market disposing of their income on an equal basis with their owners or purchasers (nor do so using other mediums to exchange their worths). The cost of labour is determined independently of its capacity to make money for its (owner or) purchaser. This, and no other reason, is (how and) why profits exist.

Einstein argues similarly: "It is important to understand that even in theory the payment of the worker is not determined by the value of his product."

I prefer to avoid the notion of "labour power" due to it's democidal double-meaning and prefer the "prime commodity resource" description of it's engine-like, all motivational economic natures.




Well in the case of the Bitcoin-system securitized-token futures contract, security itself is the "encrypted crypto-collateral" that is the material substance of the digital trading contract it represents. I used the physical example of an encoded car key (of a chain of similar but all-different proprietary car keys) as a physical comparison to it to illustrate the different sense in which our(my) use of the term "security" is meant. Like serial numbers on Fed-Res-Co's private paper You-Owe-Us-Notes that they rent to us, they are a "security" feature that makes each debt to them unique. The only problem is the insecurity that many counterfeit debt notes could exist and be used with the same debt number on them.

Far better than that, Bitcoins each have an updated home "block" provenance "securitized codeplace" at their point of origin in the single encrypted digital chain that holds it's own records of it's negotiation, making even the use of any other attempted-duplicate impossible.

Once again we return to Locke and Smith's three distinctly separated concepts of the loose-term "value". These are differentiated as utilitarian-value, exchange value and intrinsic value. If we consider water and emeralds as examples, you can see where each can end up in any category depending entirely upon conditions of chance. In a long drought or desert water has all three wealths, emeralds only one. At a feast next to the fountains of a palace garden emeralds have all three wealths and water only maybe one.

In both cases above the Prime Resource of labour alone retains at least two if not all three of the natures of value, as it usually does in most all scenarios.

Gold has always been a "speculated commodity" before, during and since it has been a medium of labour exchange and is still today as a second-rate, bulk Medium of Savings. The entire pre-classical Mercantile Economic System was almost entirely based upon nations speculating about the future wealth and exchange value of their jealously hoarded gold. Before and during the Spanish/French/English empire's unfortunate blundering upon the New World, Euro-Asian-African Economics was entirely an exercise in Mercantile national gold-wealth hoarding for the purpose of speculation.

The hallmarks of Mercantilism are:

• That all raw materials found in a country be used in domestic manufacture, since finished goods have a higher value than raw materials.
  
  
• That a large, working population be encouraged.
  
  
• That all export of gold and silver be prohibited and all domestic money be kept in circulation.
  
  
• That all imports of foreign goods be discouraged as much as possible.
  
  
• That where certain imports are indispensable they be obtained at first hand, in exchange for other domestic goods instead of gold and silver.
  
  
• That as much as possible, imports be confined to raw materials that can be finished [in the home country].
  
  
• That opportunities be constantly sought for selling a country's surplus manufactures to foreigners, so far as necessary, for gold and silver.
  
  
• That no importation be allowed if such goods are sufficiently and suitably supplied at home.

Unfortunately all that Mercantile speculated gold hoarding ended up putting most all of it into the vaults of the ennobled Rothschild bankster Gold Pharaohs, and their Royal cronies. And, so much for the theory that a nation's Medium of Labour Exchange Currency is not related to nor the product of the value of it's exports.

By the 1800's the Rothschilds alone had already defrauded the rest of the planet of half of it's wealth by reserve-usury bankstering coupled to Tory Trotskyite Mercantilism, mostly profiting them in speculative hoards of gold holdings (as savings-wealth, not money).

Even up until America's "neo-Josephs" 1913 reconstruction/WWI war-communism debt sell-out debacle to the Rothschild/Morgan Gold Pharaohs at the ex-African slave importing depot of Jekyll Island and beyond it while the rented-receipt debt note "price"of gold was supposedly "fixed", the bankster speculators continued to hoard it, understanding it's limited deflationary-value (intrinsic) Medium of Savings relationship to economic growth, and leverage as a war-communism financing asset/security, that could also be employed fruitfully (for them) as "backing" for worthless tokens they could rent to those enslaved to them by it.

I totally agree with you and fear that our failing will be in knowing (or understanding) not what it is that we as a new Global-Bitcoin Nation are actually finally trying to on real terms between only us for the benefit of ourselves alone.

there is only one backing currancy ever has... the knowledge that people will accept them.

thats it...

backing bitcoins with gold... would only help.. becuase you can get USD for gold... or euros for gold... and people know you can get almost anything with USD.


thats the only backing money has... the knoledge other people with accept them.. thats it.

the USD used to be backed by gold.. now its just backed by confidence... (and i think you have to pay ur taxes in usd)

bitcoins are backed by confidence that other people want them and will be willing to give you stuff for it... mainly USD dollars for them.

thats also the problem with bitcoins becoming accepted as real money....  when asked "how much can you get for 1 bitcoin" people run to look up how many dollars bitcoins are trading for, as USD can get you anything and is peged to its self.

Actually OPEC-pegged oil-prices denominated in current terms of the private Federal Reserve Corporation's private They-Owe-Us Debt-Receipt Notes (FRNs) is the only grand and stable commodity-resource value of importance that supports their value.

The value of the U.Z.S.R.s "dollar" really doesn't have anything to do with the US balance of trade wealth nor any reserved property nor gold wealth nor US wealth nor "good faith" in anything else but trust the fact that the Tory-Bilderberg Trotskyite-Feds Pentagon Communists won't attack their Tory-Trotskyite Saudi Sheikhdoms even if their enraged fanatic populance make hell boil over.

Just that of user value and supply, but no, not really.

To have a floor valuation, yes, ideally. But, to simply exist (as an easy way to transfer money online) no. If you simply want to send your friend in Russia $100USD it doesn't technically matter what the BTC/USD exchange rate is - he will receive and convert.

Of course, the volatility in the exchange rate makes people (and businesses) hesitant to do those types of transactions.

the worth of bitcoin is peged to the usd.

what can you get for 1 bitcoin?... in general you wont know unless you look up the price of USD per bitcoin.

the usd value is peged to its self... you know what you can get for 1 dollar... .becuase you know what is worth 1 dollar

the value bitcoin is peged to the dollar.. the value of the dollar is peged to its self.

we are not talking economist theroy here... just common sense.

The 1 USD costs about 2 cents or more to make.  The rest of the value is based on the full faith of the USA.
Bitcoins are generated by spending electricity about 10% of its "value" is the cost to generate it. (my estimates - i can be wrong)
The rest is faith.
The economist in question should explain what the US dollar will and can do.

You should definitely back up your bitcoins :)

The only thing that has to be "real" is the trust that people will value BitCoins higher than other currencies.

The way I see it is Bitcoin is backed by Electricity, Processing Power and Connectivity.

Which is arguably as good a measure of economic potential as oil, if not a better one, considering our modern economy.

Conversely... there are in fact electricity generators, chip-makers and connectivity providers... who are backed by... Bitcoin! Funny, right?!

Perhaps Bitcoin will find its natural place backing technology and services... while oil and minerals can "back" actual products and infrastructure.

I think it doesnt need anything real, simply because there is a limited quantity of it. Just like gold.

Aren't all the hashing power and mining farms something very real and tangible?

The network is more powerful than any known supercomputer

Different people generally mean different things when they write "backed by". You need to be careful to explain what you mean when you use the words "backed by".

For example, the words "backed by" mean something different in each of these:

• The dollar is no longer backed by gold and Bitcoin is backed by nothing.
• The dollar is backed by the full faith and credit of the U.S. government.
• The dollar is backed by the U.S. military.
• The dollar is backed by banks.
• Bitcoin is backed by math.
• Bitcoin is backed by the processing power of the network.
• Bitcoin is backed by electricity.

Before seeing this thread I had the same question. Now I understand the true meaning and value of bitcoin!

Not sure why this thread got necrobumped, but I do like seeing these old ones. 

Bitcoin doesn't need anything backing it, and it's the same thing with other currencies in the world.  Yeah it used to be the case that each dollar had an ounce of silver behind it, but that turned out to be unnecessary.  If people decide something represents the fruit of their labors (that's what's behind it), it's money.

Bitcoin doesn't need to be backed by anything. The only reason anything has value is because people are willing to pay said amount for the product. People is what gives real value to something. Look at how long we've used fiat without anything backing it.

Bitcoin is independent of all. It doesnot need to be backed up by anything materialistic.

It is mainly backed up by the ongoing transactions which are validated and added into a block by miners, solving special mathematical notations.
I hope this brief explanation helps ;)

Well, philosophically, everything is backed by something. The trick is to make the "further" connections, and use those connection to see further into the future than anyone else.

The problem with something that is "not backed" by something... is that it's usually "backed" by some small group of people's beliefs and ideas about the future - and most people are greedy and only think about themselves, and as such their ideas about what something should do, only includes prosperity for themselves or their world view - history has shown many, many times over how a minority group uplifted themselves on the backs of a majority. Part of the reason Democracy leads to greater peace is because if you look after the majority first, the minority can take care of itself in most instances. It has almost never happened the other way around... power corrupts, is as if it's an inescapable part of our DNA. 

So tangibly seeing or understanding what something is backed by, gives something legitimacy - especially if that "backing thing" is something that is fundamentally necessary.

So we used to use gold as a currency. Then the paper represented the gold... but when people could no longer see the gold, and when banks realized that not everyone comes to ask for their gold at the same time, the banks realized that they can just print as much paper as they like. But they made rules... but there was no way to prove that someone stuck to the rules until Bitcoin arrived.

So eventually, gold got replaced by oil... and because nobody knows *exactly* how much oil there is in the world, even with the strictest rules, banks managed to wangle things to get away with printing even more money.

In principle, not having something tangibly backed by something - ie. restrained by something - sets in motion a slippery slope. If I can print 1 extra bill, why not 2? But if I can do 2, why not 2 000 000 000 000 000 00 000 00 0 0 0 0 0 0 00 .... You get my point? So all the countries in the world are in a race to see who can print the most paper money, without causing an outright crash.

So what is "restraining" bitcoin? Well, it's easy: Processing power, Electricity and Connectivity. All things that we need in our modern economy... so Bitcoin has a barometer to measure itself against. If half the world's processing power gets destroyed, less Bitcoins will be minted... and people will have an incentive to rebuild that... but in rebuilding that, they will also rebuild many other things that has lead to our modern society. They will build power plants and computers... which will allow them do much more than just mint Bitcoin.

So why was oil a good idea? Because oil still is the lifeblood of our economy. If a country runs out of oil, chaos ensues. A handful of countries find themselves in this state - no food in the shops, no fuel at the stations, month-long power blackouts, raids by warlords, civil war. Just remove oil (or coal) and most of the world that we know descends into chaos.

So please... everyone saying "it doesn't need to be backed by anything"... lots of people have said that, but no arguments?! What's the point in saying something if you don't know why you're saying it, or if you're not willing to explain why you're saying it?

There are patterns in nature... if you look at the natural world - what is the closest thing that it has to a currency? ...I'd say it's water. Too much, or too little, causes destruction. Just like banks, water has dams, and just like QE, water has rain... The trick is to have the right balance... and if something is "backed" by the right thing, it has a way to see if it is in touch and has the right balance, to instead of messing things up more, actually making everything better.