Bitcoin Forum

i dont understand why bitcoin has to be just base on people perceive value of it. and for someone to just artrarily fix the supply of them at 21 million doesn't make any sense. it should be able to contract and expand the # of bitcoins in existence. but because bitcoin is design very simplistically it is kind of like monopoly money. not backed up by anything.


i'm not saying bitcoin doesn't do that. but bitcoin has weaknesses. you can't deny that. the main weakness being that it is not backed up by something like gold. gold could then be used to measure the value of bitcoin. and gold has real world use. people wear it. it gets used in all kinds of electronics. bitcoin doesn't get used anywhere for any purpose. it's just imaginary.


ok well, the topic belongs somewhere.

Money does not need to be "backed up" by something. In fact no money in the world is backed up by anything. Take US dollar for example, it is not backed up by anything except a stupid faith 70 years ago. So the real question you need to be answering first is why should bitcoin be different from other currencies?

Bitcoin is not imaginary. It's real.

It's information.

Would you say a photo encoded in a computer is not real? Bitcoin is even better than that because you cannot duplicate it, like you can with the digital photo.

What's the value of that photo?, well, it depends on many factors, but it can have a value if it's useful or desirable by people. Also scarcity increases the value. An exclusive photograph that no one else has can have a great value. A common photo has less value. And so on.

Bitcoin is way better than gold because it has similar properties without having to have all the negatives like difficulty to transport, verification, divisibility, etc.

Think about it — how can you have bitcoin backed by literally anything physical, but still remain decentralized and trustless? Being backed by something physical automatically invites counterparty risk.

If you can figure out how to trustlessly back a coin with some physical entity, you will have accomplished something that nobody else has ever been able to do.

But, let's suppose you figure out how to trustlessly back bitcoin with something. Now, the question becomes, "what is that something backed by?" In the end, you can be backed by nothing but economic utility. So, just make it simple and let the value of a bitcoin be backed by its economic utility -- which it is.

Op is missing on a fact that bitcoin as a production cost as well. The mining rigs are expensive. Electricity requirement is real and maintenance requirements are there! We are not living in 2009 anymore where our laptops are able to produce bitcoins. So when OP is saying perceived value - it's fundamentally incorrect!

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.

The value of things is always subjective; it may vary significantly from one person to another. Some people don't value bitcoin at all, claiming that spending energy on its mining is a waste of resources, whereas others may value bitcoin because it allows them to make unstoppable transactions, which can be settled in seconds without the participation of any trusted intermediaries. A fixed total supply is one of the main features that make bitcoin valuable to some people simply because these people understand that no other assets in the world have similar peculiarities.


If it is imaginary, then you can use your imagination to make yourself rich by imagining thousands of imaginary bitcoins. If you can't do that, then there is something wrong with your conclusions.


Production cost doesn't invest in bitcoin value at all, miners produce bitcoins because they are valuable, not the other way around. If you invest your time and labor in something no one needs, this thing will have zero price despite production costs.

First of all, Bitcoin is a technology. No reason why it should be backed by something, and If you want it to back, that will remove the whole point of decentralization.
It is backed by miners around the world processing the transactions of the users on the network. It's more than an asset.  ;)

Well, let's look at Fiat currencies....

All Fiat currencies has perceived value, because it is backed by a promise from a government to honor the value that are printed or minted on the note or coin.

If you really look at Bank notes, you find that it is made from cotton paper and linen (The same material used in the manufacturing of say aprons, bags, towels, napkins, bed linens, tablecloths) ...... and the only value linked to it, is the signature of the government official that promise to honor the value that are printed on that.  ::)

How many people still believe that governments have the best interest in mind for their fellow citizens? How many corrupt governments are looting and stealing tax payers money?

I will rather support a currency that do not use politicians to manipulate it's value to suite their hidden political agendas.   ;)  (Bitcoin's value is based on supply and demand from people globally... not government officials)

I guess OP didn't understand how financial market works, as @pooya87 explained fiat is not back by something, not even by gold (if that is what you think of).

In fact:

https://corporatefinanceinstitute.com/resources/knowledge/economics/fiat-money-currency/

So there is no flaw in bitcoin system, and it was created just like that.

Things that are valuable are backed by the belief that they are valuable. Coins used to be backed by gold, but gold also has quite a bit of faith in the belief that it is valuable, although it can be argued that with gold you can make durable objects but to analyze this would be to enter into a long debate that would divert us from the main issue.

In this case the Bitcoin is worth because many people give it value, and if you wonder why they give it value it is because of its intrinsic properties, but as I said before in value attribution there is always a part of shared belief that it is valuable.

Note that in ancient Rome, salt was considered much more valuable than it is today:

Did you know the word 'salary' has nothing to do with money, and everything to do with salt? (https://www.indiatoday.in/education-today/grammar-vocabulary/story/word-origin-salary-1025118-2017-07-20)

In ancient Rome, it was salt and not money that was used for commerce or trading. The soldiers who worked for the Roman empire got a handful of salt in return as their payment each day.

What was the salt backed by? On the belief that it was valuable. You could argue that it was used to salt food, as in the case of gold, which is used to make objects, but that property seems ridiculous today to give it the value it was given in ancient times.

I don't see any reason that will encourage backing bitcoin with something, the backup may need another backup and it goes on. The value of bitcoin is open for everyone to see. The price, mathematical solving, and blockchain technology stays with bitcoin. It can be said that it's backed by its value because bitcoin can't be tagged valueless, just that people have less confident in bitcoin unlike the Fiat currency. An attribute that will grow, given time and multiple personal experiences about the usage of bitcoin.

this article said something relavant (https://decrypt.co/resources/what-is-bitcoin-backed-by)

Won't disagree! But why someone will invest their time and money into something which no one wants? When a global community invests their time and money into something, it means it has value and demand. A production cost must be factored in while calculating the value of bitcoin, otherwise it doesn't makes sense!

If the market price of bitcoin goes below its production cost, the entire network will be doomed as new supply will stop. Everything goes hand in hand here!

Where do you get that from? For years BTC was mined at a loss by people who found it interesting.
Even now there are people mining with older inefficient miners who loose money every day even at $50k or $60k per BTC.
As people stop mining difficulty drops so the remaining miners make more. If the price drops even more, more people may drop out and the remaining people will get more BTC
That's the way the system works. That's the way it's supposed to work.

As an altcoin example it looks like that as of the next difficulty change (tomorrow) LTC will have a 25% drop in difficulty since the beginning of June when it's price plummeted.
Would take a bit longer due to the 14 day adjustment of BTC but if miners dropped out the same will happen. But looking at the BTC difficulty, miners are not dropping out.


-Dave

bitcoin is NOT just some random value people choose as their value. which then becomes the price.
bitcoins value is not based on the random whim of the day of speculators

stop imagining the price as a single line that also represents value.

instead imagine 2 lines

the base line is the store of value. (VALUE backing it (its more stable and doesnt move in a volatile manner)
above that is the price. (the 'premium' that is speculative and random and unbacked by most fundementals0

the value line is not build on the whims of random speculation of peoples random thoughts of price of a random number they choose at any given time.. but instead its based on alot of fundamental economic costs.

EG if X% percent bought below $17k and Y% bought above $17k. they have actual costs and values they wont sell below or want to buy above.

also mining costs where even the most efficient asics at the cheapest wholesale asic hardware cost using the cheapest electric available on the planet.. have a base cost that no one can mine for less than.. meaning everyone else with higher costs wont be able to mine for that amount and would happily buy at that amount or more.

you can gauge some value support by looking at the LONG TERM lows of a 2-4 year period where the price refuses to drop below. this becomes the bottom value..

the amounts above that where the price moves hourly-dayly-monthly at a more volatile speculative price. is the speculative stuff above value

..
take gold. its base value is about $900 and that is the value store amount. then when you look at the markets swinging from $1.2k-$1.9k. thats the speculative unbacked area
(golds 20year low=$300.. golds 15year low=$600.. golds 10year low=$900.. )

the prices(speculative random) above these lows are the random stuff you think is the unbacked thing.
.. your just missing that there is a backed value line hidden below/within the price

It was designed to be that way. The power consumption on mining it is already sufficient to backed its value. Its not come from thin air like fiat which has unlimited supply and only trust backing it.

Imagine how much power and it cost that Bitcoin miners already consumed for a relentless Bitcoin mining until to this point. The current design is working since Bitcoin was created. I don't need why we need to change on something that needs centralization for holding all those collateral.

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.

With Proof of Work, no more Bitcoin can be mined if there is no miner, no hashrate to mine it. Miners need to have mining rigs (computer, GPU in the past and ASICs now), electricty and more. There is cost to mine Bitcoin and it is another basement for its price.

Bitcoin doesn't have production cost, because if miners stop mining, the difficulty drops, so the production cost drops too, and it could drop so low that you could mine it alone on an old laptop, basically sustain the whole network with nearly zero investment, just like Satoshi was doing in early days. So, the costs of mining have no influence on Bitcoin's price - they are miner's problems to figure out.

Bitcoin very clearly has a production cost. That leads it to be “backed” by electricity, which is arguably an extremely valuable resource. If you know how to produce Bitcoin without paying any cost, please let me know. I’d love to have some free Bitcoin. This argument also completely ignores the value of securing the blockchain for immutable payments. If you know, you know…

if i should emphasis on how Bitcoin is different from other currencies. My suggestion goes this way. The difference between bitcoin and other currencies is that Bitcoin a valuable asset that have different method of regulations and automatically base on its regulations because of it's decentralized kind of life, other currencies that's known and also popular to the society centralized currency which can be monitored and controlled by a specific sector. So the different is very clear from my perspective.

Op, your argument is indirectly pegging to value. The reason you are talking about the tangibility of bitcoin is it's value. Your question is the kind of questions that came when bitcoin was newly introduced to the world. For me, I would say that bitcoin has grown above this type of question. There are many tangible things that are of great and there are some tangible things that does not have value.
When we talk of fiat, you believe it because it's in the form of paper? If yes, is the value of dollar in the paper it's printed on? No! The value of dollar is abstract just like bitcoin.
The recent rise in the government adoption of CBDCs should fault your claim of bitcoin being pegged to another assets in order to have value.

Electricity has value, doesn't it? If it costs x Watts to mine a bitcoin it's going to be worth something close to the value of that power. Currently it appears that the production cost of 1 bitcoin is above 21k USD so that's where the value should be at the very least.

You say that bitcoin is based on people's perception of value. Isn't hat with all things? How do you know what your apartment or a house is worth? You know you paid some money for it, you know your neighbor sold a similar apartment for certain amount of money, you know that if you rent it out you can make that much money every year. This allows you to put a price tag on it but if people won't buy you will probably lower it.

If people were buying my bitcoin for 60k USD it means that was a real price or a price in a given range. Now thy're ready to pay 20k so we know the price is somewhere between those numbers.

Because one component of money is being a store of value, and for this it needs relative scarcity compared to other goods. Money that isn’t scarce just looses more and more value over time, everything around you gets more expensive and your money worth less, a bad situation to be in.

Humans are too bad at predicting the future to be able to handle this correctly. We see it right now, where inflation gets out of hand and all they can do is manipulate statistics, so it looks better than it actually is, instead of actually fighting inflation. The problem is human decision making will mess the supply up, so a fixed one is better, apart from also making it a better store of value.

This is a feature not a bug, it might sound unintuitive at first, but being backed up by an inferior form of money is a disadvantage. It doesn’t bring any benefits, and no one would need have the need to use the currency that needs backing, because they could just use the asset that it’s backed by directly. Why buy a crypto that’s backed by gold, instead of buying gold directly, it just doesn’t make sense. I say this overly simplistic to get the point across, because there’s reasons why gold fails as a medium of exchange, most people use crypto as a store of value at the moment, that’s why i won’t get in deeper now.

Bitcoin is something complete in itself, it doesn’t need other bs that’s inferior to it.

First of all, this is not a weakness, money isn’t an economic resource, it’s there to facilitate trade, it doesn’t make sense to make products out of money.

For the simple reason of fungibility, another function of money, each unit should be exactly the same as the other. This is not the case with jewellery and gold coins, they’re different so they’re desired differently, which is bad for money. No person that used gold as money, will use it to make a product out of it. Even gold coins have different desirabilities depending on when they were made and by who, this is bad for fungibility. Pure money doesn’t need another use to be desirable, just like no football club wouldnt hire messi, because he isn’t good at basketball.

I’ve seen this mixing between money and economic resource many times now, i think some people have a hard time separating this. But don’t forget the market can separate between the two pretty well and made Bitcoin the most successful asset of the last decade(outperformed gold and everything), doesn’t seem like a weakness to me, this wouldn’t be possible by being tied to gold.

Being backed by something also opens up a whole new array of attack vectors and market manipulations, as a side note.

So I understand what everyone is saying here, I read through all the comments. But here is where I stand on the issue. Just so everyone knows.

I think bitcoin is not stepping up to the plate when it just says to people to "figure out what I'm worth, I can't tell you". So of course a system like that will never have any issues with any type of real world asset. I mean the way bitcoin is set up right now, it could run inside someone's brain if they had enough mental capacity. But it wouldn't really mean anything.

Now lets say one day there comes a bitcoin 2. This bitcoin 2 is backed up by a real world asset. And people agree on the value of that asset. Not everyone uses that asset but they don't have to. But then can if they want to. that is, convert their bitcoin2 into that asset if they want to. Or they can sell their bitcoin2 to someone else on an exchange much like they do with legacy bitcoin. Bitcoin2 just provides more uses for the coin. The good thing about it is that if this asset is stable in price then bitcoin2 will not have wild price fluctuations and will be a better store of value than bitcoin1. People will be able to put their money into it without having to worry that the price of it will go down or up too much.

Thus my conclusion is that if this bitcoin2 could ever come into existence then it would make legacy bitcoin obsolete. No one would want to use the old bitcoin anymore.

Nope it's not going to make Bitcoin obsolete, there will just be a split of the community. But together they'd still be using Bitcoin.

BTC is not just a perceived value. Bitcoin is backed by the community. The miner's machine had to make all its effort to mine them. That's a real value, you can compare it to a worker who worked his day job which an employee pays for his day.

This is the market man, the degree of adoption is still low, you gotta pioneer trough it. Taking shortcuts gets back to you many times in life and bitcoin didnt take them yet. It all depends on the degree of adoption, if it reaches closer to 100% in the future, then it becomes the worlds unit off account and you can divide all worlds assets(400 trillion) by 21 million and then you know what it can be worth. So it’s up to you to speculate how many people it can reach in what timeframe, i just showed you the max potential, it will be somewhere between this and where we’ve already been, if we already knew we would be there already.

This would play out differently in practice, tying yourself to an asset also means you can never outperform it. So Bitcoin 2 would just be a worse version of the real world asset and not outperform it. If it can’t even outperform the asset it’s backed by, then it won’t be able to outperform bitcoin too.

The price fluctuations of bitcoin will become less and less anyways as the degree of adoption rises, pure money doesn’t need bs tied to it, like i said. The fluctuation will be zero once the unit of account phase sets in, so bitcoin 2 didnt actually solve something that wasn’t already being accounted for and actually limits it’s potential for some temporary price stability.

There’s a saying nothing good in life comes easy, if the market gave you a stable asset, it also means it will stay in the place where it’s at, you can’t have both at the same time here. So if Bitcoin 2 is just a worse version of gold for example, why should someone use it over gold? Comfort is never free, it means you’ll be giving up something else, everyone would love something that never bears a risk, but to win you gotta beat the competition and not bow to them for some temporary comfort and stability.

Essentially bitcoin 2 would just stick a different label to an asset and bitcoin, but is neither of the two. Sure i could name my son lionel ronaldo in the future, but it doesn’t mean he would perform like them. This is the catch here.

golds price is about $1700.. its value is about $900
but i bet in al your years you never looked at the $900 number or thought about gold even having a number below the price..

but then now knowing both figures.. what is gold worth to you.
are you able to start a gold mine to get gold nearer the $900 level. or is it not worth the investment effort. is it more worthy to you to buy now at the market price. or are you not really needing gold right now and think it might be worth it later to buy if it comes down closer to the $900 amount.

see even gold. thousands of years being traded and still people cant categorically say a whats worthy to them amount, as each person has a speculative different thought on it, but all thoughts are on amounts at $900+

...
as for your other comment.. not stepping upto the plate and creating a bitcoin 2 stablecoin:
an asset backed by another asset!?. is not as much of an asset as you think. its just a convertible note of a asset..
a real asset has value in of itself.

bitcoins asset value is derived from its mining cost.. the actual cost of acquiring it. into existence thats not due to any asset that done the actual work.

meaning. if a fresh token can be created for a penny. but then is pegged as priced at $$$ because of some other asset that actually had cost/work required to bring the actual asset to existence. then the fresh token is not valued as an asset..  its just a convertible token/note.
(ots why bank notes are not assets. but even in the goldbacked era of last century. bank notes were just convertible notes that cost penny to make but were not the asset. the gold backing it last century was the asset.)

these days a dime costs more then a dime to create a dime. so a dime is a more valued asset than a bank note.
...
take the difference between PoS and PoW
ethereeum when it detonates to PoS will change from being worth over $1k value to being worth only a few dollars value. and any price above value is speculative emotion.

bitcoins main value is the baseline mining costs that actually does cost many many thousands of dollars per coin right now.

golds base value is derived from the diesel and sluice machines that are paid for to mine it. its base value is over $900 right now.

if you are just wanting to create a new coin that has no cost in its creation but just magically gains $XXXX due to it somehow representing another asset.. then that new coin is not itself the asset.

i know you want to only look at the PRICE and think its volatility is not backed.. you are right. but you then talk about it as if the price is the value. which it isnt

EG
take real estate.
if you look at any region and look at the base sq metre prices of many homes.. and look at the base line that no one is selling below. thats the true value..
then when you look at the real estate prices of the home as as a whole you can then look at which homes are selling closest to that value or are exceedingly expensive at a premium.

house prices are not stable. and houses PRICES are not their VALUE. you have to find the value below the price to then see how good or bad the price is. to then work out if that house is worth it.

if you just want a stable coin that never changes. heck you dont even need to back it with a reserve(legally and morally you should. but its not needed). you just form an exchange where you only offer swaps at 1 for 1 and never deviate. never offer premiums or discounts. never have a orderbook of varying prices. never change the price. and boom you have created a stablecoin.

if you just want a coin thats backed by a real world rare mineral or something you can lock up in a vault as a reserve. thats possible too. but that rare mineral may adjust in price AND value meaning you then have to adjust the value/price of the coin. which then comes with risks of it detaching its backed 'value' if you are not careful.

however..
if you ignore the bitcoin PRICE. and stop thinking of the PRICE as the value. and instead realise the VALUE is a lower number. then you might start seeing bitcoins VALUE is not volatile and unstable. but just like other things in all markets. assets that have underlying value. also then ontop have the speculative discount/premium price

same as gold same as real estate

If Bitcoin is backed up with gold, does it mean that it is already better off? Or does it actually make it worse?

What if Bitcoin is backed with gold? And then the supply of which is rising and rising and the source is also getting wider and wider with the outer space also contributing greatly no end. Bitcoin would then devalue. Or what if the hundreds or thousands of tons of gold back up were bombed because of a stupid war? Would Bitcoin suddenly turn to 0 overnight? Or is it better this way, that Bitcoin is backed with codes etched in stone?

You are focusing on other aspects of bitcoin and you are right but the point was to focus on the "currency" aspect of bitcoin and as a medium of exchange it is the same as any other medium of exchange namely fiat.

You are naive if you think any "asset" exist in the world that has a stable price! For example gold that people think is stable, is not stable at all. It's just that gold that existed for thousands of years is not not as volatile as bitcoin that existed only 13 years. Otherwise gold has gotten dumped hard and pumped hard. They also recently found a massive amount of gold that they are going to extract and enter circulation that could dump gold price in the following years to come!

Again you didn't answer my question, fiat is not backed by anything so why should bitcoin?

It's not backed by "something", but it is really useful in the Dark Markets to buy Heroine from Mr. Drug Dealer. It's very useful to go around a government's oppressive policies, like capital controls imposed on Chinese citizens. Did you know that only $50,000 is allowed to be sent per year outside of China per person? Bitcoin can break down political strongholds ser. It has a bigger role to play than Gold, and we don't know what it really is yet. The cat is out of the bag though.

Ideally bitcoin would be a medium of exchange and not something that people obtain just to speculate on its price. They would just use bitcoin as a tool to buy things. Kind of like they use fiat. Now I do realize there are people that speculate on usd/euro but that's a very niche group. that's not the purpose of us dollar for people to sit around speculating on its relative value vs some other currency.

Well in the last 11 years, it's more stable than bitcoin's price. Alot more stable. Bitcoin has much wilder price fluctuations. That's not a good thing for a store of value.

So maybe that's why gold has had fluctuations in its price in the past for similar reasons? But again as I pointed out to you, bitcoin is more volatile than gold. when it comes to price.

fiat used to be backed by gold in the united states. that's how it should have stayed. by the way you pose your question, you seem to be suggesting that fiat not being backed by anything is ok. that's right bitcoin is backed by absolutely nothing except peoples' belief that it has value. if one day they decided it didn't have any value anymore, bitcoin's price could plummet. and that would harm alot of people.

I just used gold as a convenient example of an asset. Gold is not necessarily an ideal asset to back up a digital coin with though. The ideal thing to use would be something that you didn't have to trust was stored in a vault somewhere.
If each individual user was able to create the asset, store the asset and consume the asset so much the better. Then it would not be centralized. Something like that is a bit more complicated than standard bitcoin it is more highly advanced. But if it ever came into existence I think people would be excited about it.

But I do realize that it wouldn't necessarily mean the end of legacy bitcoin. But it would usher in a new era of cryptocurrencies which did not rely upon people just trusting that something has value when it is not backed up by any real asset. That's why people invest in real estate because you can see it, use it and touch it. your money is secured by it. So it's not going to zero.

Just as an example. Say an asteroid was going to hit the earth in a year. Or 5 years or whatever. What do you think would happen to the price of bitcoin? What do you think would happen to the price of gold? What do you think would happen to any type of cryptocurrency that was not backed up by a real asset that they could use without having to sell the cryptocurrency for fiat in order to use it?

Then what is ForEx used for?
People are already speculating on all fiat currency values. The more volatile they are the more they will be speculated on.

It's about age and maturity. As I said, gold has existed for thousands of years and have been considered valuable for a long time but bitcoin is a toddler in comparison.

"Used to be".

People's belief doesn't come blindly, it is based on the utility that medium of exchange provides them and its supply. If bitcoin, like any other form of money, stopped providing utilities that gives it value then it will lose that value and could even become worthless.

It depends on the size, it could be an extinction level event in which case who cares about price of x and y because humanity will no longer exist :D

First of all, decentralization and backing are two things that are almost incompatible with each other, because who is the central entity you will be redeeming from? How will you verify the reserves? What about the fungibility issues of gold? Who stores the gold and keeps it safe?

Second of all, you would have to tie the value of bitcoin to a fixed amount of gold, you would need to create a fixed exchange rate, which brings in new economic problems and attacks.

Third of all, this will always fail and makes 0 sense, it makes the primary asset useless. It just becomes a servant for gold, it will never become worth more than gold, because the fixed exchange rate. Why should we spend all this energy to mirror the gold price, when this can already be done more easily. It doesn’t actually help Bitcoin and we gotta go trough these huge fluctuations in the beginning, shortcuts won’t help.
 
Bitcoin is better money than gold or fiat.

That's why a cryptocurrency can't be backed by gold and be decentralized. But there should be something that can backup a cryptocurrency and still allow it to be decentralized. That's really the best type of situation because then the cryptocurrency has an objective value which is whatever the value of the underlying asset is. With bitcoin since it is backup by nothing, then it has no objective value. So nothing is really stopping it from going to zero except peoples faith and trust in it.

Now alternatively, consider oil. Oil has uses. it makes gasoline which runs cars. It has an objective value and people are willing to pay for it. If they lost faith in gasoline due to high prices then they can buy an electric car but that doesn't meant that gas price goes to 0. Likewise, a cryptocurrency that was backup by a decentralized asset should be able to maintain its value no matter what people thought about it whether it was too high price or not. Whether they used an alternative or not.

Except that bitcoin requires computers and the internet. Fiat and gold don't depend on any of that. And until people can buy everything they buy with fiat using bitcoin then "I don't think so".


You seem to agree with fiat being not backed up by anything. not sure why. you do realize that when fiat is backed up by nothing they can just print it at will, further devaluing it and thus your paycheck. everything you buy will cost more. because prices will go higher to compensate for the reduction in purchasing power of the dollar. your paycheck though won't get bigger to the same degree. so you might need to gamble some of your money in the crypto markets maybe buy some bitcoin and hope it goes "up".

The problem with backing is that you need to introduce a fixed exchange rate and always need an entity from which you can redeem your assets from. This leads to two problems:

1. You’re limiting the potential of the actual asset(e.g. 1 Tether will never be worth more than 1 usd, 1 backed bitcoin would never be worth more than the backed asset itself), this becomes a problem, because there’s no reason that someone should replace all their usd with tether for example, it just never makes sense to primarily use this asset over the actual backed asset. You can’t use another assets value and discover your own at the same time. You have two give up one of the two. A Bitcoin that is a cheap copy of another asset serves no purpose, so the answer which one to pick is clear.

2. It requires trust, because you will always need to trust an entity to hold enough of the backed assets and redeem them. Even with a digital backing, we saw how well that worked for Luna. This would give up decentralization and would defeat what Bitcoin actually is, and thus make it useless.

Bitcoin is a really cleverly designed system, there’s reason why it is like it this, you can’t just change the properties without changing what made it successful in the first place.

Your backed currency can go to 0 too, that’s what you keep forgetting. Centralized systems are easy to stop by the government, they can lie about their reserves, they can refuse to redeem the backed assets, they can give out more currency than backing exists, they can run away with the money. The list goes on. Everything falls apart with this asset, if someone inside the central entity doesn’t work honestly just once in all its lifetime.

Now you have another asset that is decentralized and doesn’t have the problems i mentioned above. Is designed by computer science, cryptography, math, economics, game theory, psychology and a strong community. Has no need to have something else attached to it. Is the first currency that works trustlessly on the internet. Most successful asset of the last decade. Triggers people worldwide but can’t be stopped. That doesn’t need anyones approval, and is strong in reality and not just with words. Is an actual alternative to the current failing money system, and the only alternative there’s ever been that doesn’t require a central entity to work. Is gaining more and more people every day. Gives you full ownership over your wealth. Hardest asset to confiscate.

Which one of the two do you need to have more faith in to not go to 0? Which one of the two requires less trust of you to work? What you mentioned above is a far worse situation.

This point is redundant with what i mentioned above, Bitcoin is the most decentralized asset there is, so how would the other „decentralized asset“ gain its value then, and be so superior that Bitcoin needs it? There is a logical flaw here. There’s no shortcut to letting people find Bitcoins value themselves, why is this so hard to accept?


Fiat and gold depend on the internet the same as almost anything else does on this planet now. We can’t expect an asset that came out in 08/09 to have the same acceptability, as gold or fiat yet. But over time this will fix itself and we can see this trend already happening. How was the internet used in the 90s and how is it used now? The Unit of account phase comes last and isn’t relevant for the initial adoption stages. Because Fiat is a terrible store of value, and Bitcoin will be adopted as hard money first.

I hope it became clear now why it can’t be backed by anything else but itself.

I can say that we are still early these days, still, the majority of the people don't know what Bitcoin is and don't know how it works.
For me, I can consider Bitcoin as digital gold, as you can see there are a lot of people using gold as store value or investment, not the one we saw physically like wearing it for accessories or jewelry.
Bitcoin is also created as mode of payment, that's the real world use for me of Bitcoin, using for payment.

Since you can't just print bitcoin and the supply has a cap, then your arguments here are moot.

That is irrelevant. There are always people who are gambling on anything including the direction wind is going to blow! That doesn't change the fact that bitcoin as a currency provides many utilities that gives it value and it doesn't need to be backed by anything.

There is no need for trying to control the exchange rate assuming you mean what the asset can be bought and sold for. Its price should be determined by the market. That means it can go up and down. We're not talking about it having to be some type of stable coin. I dont see why you need a central entity to redeem the asset either. it just depends on what the asset is. Some assets might not need a central entity. Some might.
tether is a stablecoin that's its goal is to be worth exactly 1 usd. so tether's backed asset is supposedly us dollars. people replace their usd all day long with tether. why? so they can buy cryptocurrencies with it. or invest it into interest earning platforms (gamble). you can't use 1 usd to do anything digitally. that's why tether exists to turn it into a digital form. you seem to have the notion in your head that the goal of a cryptocurrency is to go up in value. i say it's to perform a useful utility to people.

no one is forcing people to invest in ponzi schemes. those will always be with us. but i do agree with the point that in order to be useful it needs to not rely on a central organization or entity. you can't have centralization for a backed asset it just leads to problems.




Why are you assuming that I would want my cryptocurrency being backed by some fiat currency? It can be backed by some non-fiat asset. You can't back it with fiat anyway because guess what. The government controls fiat and the government is a central entity. Centralization.

that's why centralized systems are useless in this context.

Let me guess. You're talking about bitcoin. All of that sounds nice in theory. But guess what I do need peoples approval to buy bitcoin. I have to depend on my bank to allow me to send money to coinbase. Then I have to trust coinbase to not freeze my funds once I send them there. Then I have to trust coinbase again when I buy bitcoin to let me send my bitcoin off their platform. I need their permission to do all of these things. And then they will report me to the government too maybe. Then if I ever want to cash out my bitcoin I need to send back to coinbase and hope they don't freeze my bitcoin and allow me to sell it. Once I sell it i have to trust them to not steal my money but to honor my instructions to send it to my bank account then i have to trust my bank not to freeze those funds once they get in the bank account.
Bitcoin is not trustless in practice. As this example shows. It requires depending on multiple central authorities for the average person.

Why is bitcoin only selling for $20,000 now when it used to be 3 times that? Did it become 3 times less value for some reason?

Me wondering how gold and fiat existed prior to the 1990s. I guess they didnt.

Fiat is a great store of value. I can buy almost anything I want with it. Including things that I can't buy using bitcoin or any other crypto for that matter. I've yet to find a use case for bitcoin myself. Do I need to look harder?

ponzi scheme.
But does it really have a cap? that could be changed via consensus.


but everything needs to be backed up by something. even fiat is backed up by the us government.

now, people that bought into bitcoin when it was $60,000. they've lost a good chunk of change. so they'll need to hodl to get back to break even. but as long as it has a utility for them i guess their fine right? is that what you're saying?

Fiat isn't backed by anything either. It just has value because people think it has value. In the case of Bitcoin, its value comes from its decentralized and censorship-resistance design. Even though it's not issued by a reputable entity such as a central bank, the mere fact that it's sound money no one can shut down makes it an extremely-valuable cryptocurrency. Unlike Fiat, people are the ones who determine Bitcoin's price on the market. I'd say the max supply of 21 million coins is perfect for Bitcoin. No more coins will be mined, meaning there should be no inflation in the long term (which translates into higher market prices).

Ultimately, it's all about utility (not the price). As long as Bitcoin works as intended, nothing else matters. Just my opinion :)

Is Bitcoin really not backed by anything of "value"? Really? So those miners needed for mining Bitcoin are worth nothing? The internet costs nothing? What about the electricity? Is it free too?

Bitcoin is very much backed by diverse sources of "value". Even though those sources are backed by a fiat value as well as production costs and so on. If electricity were to double in price tomorrow, don't you think that this would have an effect on the price of Bitcoin?

Bitcoin is backed by tradition value, but its most valuable property is being the next generation of money. If you can't see that then have fun with your fiat. Im sure scraps of paper with a value which is decided by corrupt and clueless politicians is going to stay around forever...

K let me give you an example.

Let’s say 1 litre of oil is 1$.

If you want Bitcoin to be „backed“ by another asset you need to introduce something that says 1 Bitcoin = 1 litre of oil(or whatever other asset you’re thinking of) for example. This already gives it a fixed value, it won’t ever be worth more than 1 litre of oil, because if it reaches higher prices than oil(Lets say 1 Bitcoin was 2$), people just can redeem their oil for Bitcoin and sell it right away, they essentially bought a Bitcoin for 1$ and sold it for 2$ in this example, making the price of 1 Bitcoin go back to 1$ over time, because there will always be new people coming, buying oil for Bitcoin and then selling it for profit, it would be free money from a flawed system. This system doesn’t work. That’s why it becomes fixed exchange rate, even if you try to let the market find a price. When Bitcoin would be under 1$ you could get oil for cheaper than its market price, making the market price always hover around the backed asset.

Then theres the problem of storage.

Who stores your oil? This doesn’t work in a decentralized way, because then you need to trust random people to keep reserves and redeem them for you. So a central entity is needed. In both ways it requires trust to work, with random people or central entity.

There’s no asset that can do this in a decentralized way that doesn’t require trust, and apart from this, i outlined above how it’s a dumb decision to be backed by something, because then there’s a limit on success, it could never hold more value than its reserves and thus not become universally accepted money, because it needs to be able to hold more value than 1 asset class can offer. If Bitcoin succeeds, it backs the world, not the other way around.

I hope you get this part now.

This is something so many people are preaching since so long against,

don’t
use
centralized
services
to
buy
Bitcoin(especially not Coinbase),

There is decentralized alternatives, there is decentralized exchanges, there is p2p ways, you can buy and sell Bitcoin for cash and so on. You don’t need anyones permission to do this, it’s completely legal.

There is too many factors working in the market to understand this fully, it’s traded 24/7/365 worldwide, any tiny impact can influence the price, this happens fast. Then there’s other factors from centralized services giving out more paper Bitcoin than they have in their reserves, to unregulated banks overleveraging into Bitcoin with billions and then almost getting liquidated. Prices can’t be predicted accurately, it will stay volatile for quite some time, that’s the only thing that’s sure.

In 2020 there was buying opportunities for 5000$ still, only consistency and patience get rewarded here, but no one can guarantee you a profit.

This is about buying Bitcoin, because you understand what it offers, because you believe it will succeed, because you want the money system to be fixed, because you want control over your money back, this is no free painless money. It’s a wild ride, it takes time to get, it means a lot of studying, it means taking responsibility, but it’s also fun tho.


Im not saying it cant work without the internet again, but im saying the internet isn’t leaving anytime soon, so it won’t.

Maybe we’re living in different universes, where fiat was a good store of value once, but nowadays it’s working against the working class and they’re too unaware of what inflation means. They don’t question why they can barely afford anything anymore and less and less over time, this has nothing to do with going trough bad times or not whining, that’s what older generations don’t get, this is caused by economic decision making by the system, the outcome is already determined beforehand. Money will flow to the top automatically over time and concentrate there, this is the predetermined constant that won’t ever change in fiat, which makes it a terrible store of value for regular people. Sounds more like a ponzi scheme to me, where everyone else but a few people get left with nothing over time.

So what can you use Bitcoin for?

The first stage of Bitcoin will mean it will become established as a store of value, this is the most popular use case now. You can already use it as a medium of exchange, you can already use it as a unit of account, and this will increase over time. You can become your own bank, custody ur own funds, work when banks don’t, become resistant against censorship, transact permissionlessly worldwide, have a fixed supply which means your relative Bitcoin amount will never decrease in relation to the to total supply(no inflation), which means the money you worked 30 years for, can’t loose 10% every year, because someone at the top decides so. So you better want Bitcoin to succeed, except if you enjoy working for free and gifting that money to someone, who already has too much at the top.


I’ll give you time to read this part.

if it depend on something what is the special of bitcoin??? adoption is all. psycology makes adoption.

i think what the summarised answer(in question form analogy) to what the topic creator is asking is:

why arnt house prices fixed a stable square metre amount that all houses are backed by

totally forgetting the features and utility of what a house is and does and forgetting that people in different regions have different supply or demand. even if a house ultimately on the market does show houses do have value and when comparing the square metre 'comps' per year shows a more stable value rate than the volatile market price of houses sold each hour of the day

in short the market price of each house sold hourly is not the same as the average/minimum comps. but that does not mean that houses have no underlying value

a house does not need to be backed by gold or pegged to something else.
its intrinsic underlying value is the 'comps'
bitcoins underlying value is the mining costs (asics and electric)
golds intrinsic underlying value is its mining costs (diesel, digger and sluice machines)

the price is then the speculative buffer/layer of cheap or premium volatility amount above this underlying value that backs it

I think OP is spreading misinformation or he isn't aware of Bitcoin technology at all. Bitcoin is a decentralized cryptocurrency backed by the community. A decentralized currency how will backed by a centralized organization? You are the owner of your Bitcoin, so who can backed it without you? Haven't you already backed it when you bought it? Think about it deeply. You are paying for Bitcoin. That's how it's backed by the community and holders.

I agree with you generally, Franky, but I don't think speculation is the right term here. I'd use supply and demand. If at any point in time there are more sellers than buyers, the price drops. But as you said the price is not linked to value and as educated investors and traders we should make a clear difference between the two.

think about it more deeper then that.
as what you say sounds like people have just come up with a random number they are willing to pay, and paid that. meaning bitcoins value is just random number..

this is wrong.
the market PRICE is random. no one can predict what its going to be tomorrow..
no one pays the exact same amount as another person..
but this is the PRICE.. not the VALUE

so think deeper.. not at the price.. but at the actual value backing it underneath.

same with houses its not the random house market price of whatever house is being sold at any given minute.. its value is based on an underlying minimum value no one would sell their house for less in the region/planet more long term.. (the comps bottomline)

if the minimum comp for the entire planet is 10 hours min wage/sq foot.. then all houses on the planet are above that in price.. so the underlying minimum value backing all houses is atleast 10 hours min wage labour/sq foot

yes some people might personally value the coin more but the overall min value of the entire economy. that number that no one can sell below.. that is the whole economy value amount that backs it all.

above that is the speculative more volatile extra amount added on

I think that the reason for this is the very essence of bitcoin. It should be understood that the bitcoin model is completely different and the price of this cryptocurrency does not depend on anything specific.

What is the worlds reserve currency, the United States Dollar backed by? Absolutely nothing! (Well other than the “full faith and credit” of the United States government).  It’s no longer backed by gold.

You also don’t seem to understand the importance of having a finite amount ever made. If you keep allowing something to be printed (or minted) it dilutes the other dollars/coins and makes them less valuable. Bitcoin can be broken down to a very small amount, which allows for this to work and work long term.

Why should bitcoin be backed up? why should gold or any other valuable form of investments stand in for bitcoin? There are somethings that were better left unsaid than saying falasy, the fact remains that bitcoin stands on it own and that's one of the reasons why it remains decentralized, other form of assets are centralized while bitcoin is self dependent on its own, when we go by using another asset to back bitcoin is as saying its value isn't worth it and can't stand without being dependent, this is one of the reasons why bitcoin is a good source of an investment asset and store of value that is incomparable to other digital currency or physical assets.

If you don't understand why the limit is fixed at 21 million, then maybe you should step away from Bitcoin because it is part of the foundation and contributes massively to the price. People who hold it are more comfortable because the supply is restricted and rather low. It also helps that it is a relatively low number, because it helps to beat inflation and there is a natural attrition rate of lost coins which will help. Why does anything have value in life? Because people have agreed to trade a good or service, in return for another good or service - it is how currency works. Instead of finding someone who wants your good or service, you convert it into a unit which can be traded in a general market.

The value itself is created on the premise of decentralization and putting the financial power back in the hands of ordinary people. Isn't that value? I mean, it can be based on gold, but what's gold's value based on? Value is not something universal nor is it one thing. The beauty of it is that the social interactions and the promise of a different financial future are of value.

Yes, so that would mean each bitcoin is secured by 1 liter of oil.

What exactly about it doesn't work? You've just illustrated how there is a built in corrective feeback loop to keep the price of bitcoin no higher than that of oil because if it goes above oil's price, profit takers come in and fix that. so that entire scenario of bitcoin selling for $2 while 1 liter of oil was $1 is not going to happen.

if bitcoin fell under $1 and oil was $1 then bitcoin holders would certainly consider redeeming it for oil and then selling that oil for $1. that can't go on forever though because at some point the market price of oil is going to be affected. and bring it into alignment with the price of bitcoin.

when it comes to asset-backed crypto though, this is what you want though. a corrective feedback mechanism that keeps things pegged to each other and not artificially. an artificial peg could be attempted with something like oil but that would have larger ramifications than just on the crypto that it was backing. the world in general won't let some oil producer just set an arbitrary price on oil.


That's easy. You store your own oil. When you want to sell it, you put the word out and buyers come and inspect it and if it meet their quality guidelines they pay you in bitcoin. And they take possession of the oil and responsibility for its storage.

There is but you aren't paying attention. I already gave oil as an example. Now not everyone can put up their own oil drilling well but if they wanted to they could. It just might cost money. Same as bitcoin mining. not everyone can do that since it costs alot but if they really wanted to, they could.

I don't look at it that way at all. I look at it as a guarantee of success. When something is backed up by a valuable asset which is a commodity in the world useful to its operation, you can't go wrong. You don't even know if bitcoin might go to zero one day and yet you're talking about placing limits on high high up it can go. smh.


According to a recent report from IBISWorld, the global oil and gas industry generates over US$2 trillion in revenue a year


How much revenue are people making in bitcoin right now? I bet not more than that. Bitcoin's entire marketcap isn't even $1 trillion.


it's
not
as
easy
as you
make it
out
to be

how do you get money onto decentralized exchanges? oh right, you have to first get bitcoin somehow. and so you have to use something like coinbase. meeting in dark alleys aint my thing. plus, then you have to try and sell it to someone p2p which requires meeting up in a dark alley again. and then reporting the entire thing to the irs. plus buying things p2p is probably like a 30% markup over somewhere like coinbase. so while it may be completely legal its probably completely dumb too. but if someone doesn't have any other choice so be it. you also have to either hide your money under your mattress once you sell it p2p or explain to your bank where the money came from and they might file a SAR against you or close your account. Then you WILL be storing your money under your mattress but don't forget to check the box that says you sold crypto on your irs tax return anyway.


Those type of abuses of bitcoin are kind of surprising. But just like the banking system can loan out money created out of thin air, I guess we shouldn't be surprised that industries try and mimic that type of behavior with bitcoin.

I don't want to make a profit. I just want a stable store of value which is decentralized and trustless. something where I put in $1 and 10 years later I know it will be worth the same exact amount. No more no less. But I want it to be digital cryptocurrency, not fiat. The problem is, you can't have that. Not exactly but maybe you can come close. that's the whole idea behind backing up a cryptocurrency with a physical asset. You're pretty confident the price will be somewhat stable. There is the risk the value of the asset can go down but it's a risk you have to take.

Bitcoin as an investment does not make sense to me. Even at $20,000 say someone put in $500. Bitcoin would have to go up to $40,000 for them to double their money. For bitcoin to double its marketcap is not easy and takes time. To go up by 5x, it would have to increase higher than it ever has before. the higher bitcoin's price is, the less attractive it is to me from an investment standpoint. what i cannot accept is putting money in and just watching it go down and down. if bitcoin is supposed to be valuable and has value then that should not be happening but i think it does happen. i understand why it goes up but they should fix it so it doesn't go down. and only goes up or stays at the same price. then it would be a better store of value for someone like me.

I believe you're giving OP too much credit. His post-history is very revealing that he likes trolling in the forum. Probably because the crash made him lose money in trading, OR he's holding coins bought near ATH and he trolls to relieve him from the stress of HODLing.

BUT to take the topic seriously, OP is asking the WRONG question. He didn't consider the actual history of Money, and how things without value, became items of value, https://nakamotoinstitute.org/shelling-out/

The problem becomes the reserves, the worth will be based on how much oil Bitcoin would have in its possession, not on how much oil there is. The problem starts in this example, when Bitcoin falls under 1$, then the oil reserves would start to deplete, making it go to 0. And this would happen in this scenario, because it would be easy to start an attack like this for big capital holders.

Backed currencies always had this problem, they start to fall apart when the reserves start to get depleted.

Backed currencies value = amount of reserves in possession

You almost got it, but Bitcoin would run out of oil, making it backed by nothing again.

You’re drifting into fantasy land, you gotta catch up on some things. In theory everything works, but we always gotta take real life effects into account. Properties/ purpose of money and where oil exists.

Because i rather have a system architected well beforehand, than to repeat economic foolishness of the past. Im willing to take the risk for something better, im okay with it being able to fail, and i rather work on making something promising work, than to clinch onto some nonexistent security, that just doesn’t exist in this world. And even if it fails, it doesn’t mean anything. New doors will open itself, and everyone who was into this made a lot of experiences and gained a lot more knowledge. Equipping them well for the future. Plant the seeds you wanna harvest in this world, if no one plant seeds anymore, there wont be anything to harvest anymore. This is my personal mindset, not an attack on anyone.

Money needs to able to hold more than 2 trillion $, and like i said, it depends on the reserves in possession, not the yearly oil supply. The usd alone has 22 trillion $ in circulation. And this is just one fiat currency.

Now you outed yourself as biased larry, because you obviously didn’t try or ever wanted to. You don’t have to get Bitcoin first. You can send money with ur bank, by mail, by giftcards, in person. You choose, and there’s probably even more ways.

Nah, there’s decentralized exchanges, that make this process easy and online, with protection against scams. Some require security deposits from both sides, for example. The process is similar to Coinbase, a little less convenient, but you’re gaining privacy and control in return. This will become relevant in the future.


Idk how this works in the us, here it’s sufficient to just archive everything in a simple way, and you don’t gotta report anything, until asked.

For this the trick is to open ur own offer, you choose your buying price, someone will accept it, if you choose an markup similar to a fee on Coinbase. 1-2% for example.

Too much comfort got us into this situation in the first place. Jk.

I get that larry and it’s completely fine to want this. There might be a day where Bitcoin will be stable, but this depends on too many variables, right now and in the near future it won’t fit this requirement. And there probably won’t be any trustworthy backed-digital asset in the near future. If you want stability i wouldn’t even recommend you Bitcoin at the moment. It might be hard to find anything for this purpose at the moment.

There’s no fix for not going down, this should always be considered before going into Bitcoin with any amount. To be able to afford to be down for months or even years, both mentally and financially. There’s no shame for anyone to say, that they can’t do or want it right now, or that Bitcoin isn’t for them. Bitcoin means signing up for a fight, it can’t get more uncomfortable than this.

The price that derives the value of BTC is the law of demand and supply. In addition, with its inflationary and limited supply, the price is something that increases as more supply is being mined. Though many investors have frowned upon the lack of intrinsic value BTC has compared to gold (which is considered as a precious and non-renewable resource), the price of BTC is what many have took advantage in order to invest either for long-term or short-term.

Though I do understand where you are coming from OP, I guess it's better if you just focus on the investment aspect of it.

i'm actually a big fan of the history of money and one of my big ideas is if bitcoin could have a physical representation without needing verification digitally. so you could just hand a bitcoin to someone as a payment without any government or central entity backing. but that's a separate topic for another thread sometime. perhaps if you know so much about money and how it evolved over human history you could contribute to this idea of mine. we need to keep this thread on topic though...



Maybe we got things slightly mixed up bringing the us dollar into this hypothetical 1 btc backed by 1 liter of oil example In reality, the us dollar should not be in the discussion whatsoever. it is meaningless. the only thing that matters is people agree to 1btc=1 L oil. now you might say that's a very arbitrary thing to agree on but if it's set up so that bitcoin is backed 1:1 with oil then it is stable with respect to oil. now oil prices can go up and down yeah but that's a different story. you can't control that so much. but oil price dictates what the bitcoin is worth in us dollars not the other way around.

now before anyone points out what they think are the issues with this scenario, I'll tell you what it is. when someone consumes 1 L of oil, what happens to the 1btc that was backing it? what's supposed to happen to it? how do you ensure that's what actually happens to it?


That's why i decided it's not the best investment for me. that doesn't mean i don't like it or dont want to own some someday just not right now.

Some things have value because people trust in them as a medium of exchange or store of value. Even though Bitcoin is often described as "Magic Internet Money", its value is based on the rules of supply and demand. That, and also the fact that Bitcoin is the most decentralized and censorship-resistant kind of money in the world, makes it an extremely valuable cryptocurrency. If the OP is asking why Bitcoin can't be based on something that has value, then he/she doesn't understand Bitcoin is all about. It's something commonly expressed by people who either hate Bitcoin or lack knowledge of it.

Bitcoin's been doing well on its own (despite the ups and downs in Fiat terms), so I'd say it doesn't need to be backed by anything to hold its value for a very long time. 21 million coins will ever be mined, making the pioneer cryptocurrency a truly scarce digital asset. If you believe in Bitcoin, then I'd suggest you "hodl" it no matter what. Otherwise, Bitcoin is not for you. With how far Bitcoin has gone since day one, it's unlikely it'll disappear (or go to zero) anytime soon. Just my thoughts ;D

Well maybe a better title to my posting would be "why can't a cryptocurrency be backed 1:1 by a physical asset?" that's really what I'm getting at, not that I expect bitcoin to change into something like that. but i do want to see something backed 1:1 by a physical asset similar to bitcoin except that it has that feature. the problem is i think it would be a much more complicated thing than bitcoin. we've seen that doing it with assets like oil or gold is somewhat problematic and awkward but if you could quantify some electronic thing of value then you could maybe base the asset on that. it could be a certain amount of disc space or a certain amount of cpu processing. As long as it can be quantified and has value then it could serve as a potential asset to back up the crypto 1:1.


you maybe right that it doesn't need to be backed up by anything to hold its value indefinitely but how do you really know? i think that all depends on what else is out there competing with bitcoin. also keep in mind there's probably only a limited supply of bored apes but they could go to 0 one day too. limited supply doesn't guarantee demand. it depends on the marketplace and what else is out there and what the competition is. i don't want bitcoin to go to 0 but i don't think 21 million has anything to do with that. look at eth. it doesn't have a limited supply and its price seems to mirror bitcoin's as far as ups and downs.

oh and as long as people are in control of bitcoin then nothing is really set in stone guaranteed. to do that you have to have a smart contract.

Bitcoin is a currency for crypto, for blockchain mining industry. It is backed by blockchains. The value it derives is from the expanding applications and  its potential in future tech industry. However it has found application in many conventional markets as well. Thus it gained value against FIAT. In 10 years from now every industry in one way or other will be using blockchains and bitcoin will most probably become the default cryptocurrency for these organizations.

It's actually not. You were debating if Bitcoin's "value" should be based on something backing it, "that has value". If you got the context why I was bringing up the history of money, it's because the properties that Bitcoin already has is in fact of value, with censorship-resistance as one of Bitcoin's main value propositions. But we also have to acknowledge that the true nature of Bitcoin might not be priced in yet, and it might be illustrated by a sanctioned-Russia.

so larry not only wants bitcoin to be backed by gold. because he doesnt understand bitcoin is backed by its own cost and utility..
but now he also wants bitcoin to lose its digital utility and be something physical he can physically pass to someone..
..
ok larry does not understand the purpose function, utility, supply, creation,cost features of bitcoin so wants to take it all away.
..
if you want something physical thats backed by something physical that you can physically give away.. then get off your computer and go find physical things.
maybe have a kid where the kids nationality is backed up by your own as parents. and with your backing pass him off to someone else as payment for rent..
after all it fits all your idea parameters.. right?
.. but maybe your kid is lazy, ugly an an unachiever. so no one wants him.. now how good are you as his backup thats legally registered on his birth certificate. .. not much

how about you then have another kid. but this one has utility. he can do something worthwhile. people wont care about his nationality or who his parents are, they just see his work effort and hardworking ability and think he is worthy of becoming something..
is who his parents are as important? or is his value of his own work effort worth more
..
anyway lets continue about digital stuff that larry wanted backed by something else..
here is one for you larry..
imagine we called bitcoin "luna" and backed luna by something.. ... .. wait for it....... the peg breaks. and boom luna is dead
the item its backed by didnt die. but the peg to it did..

luna is a token created at no cost in of itself and is only given value by being pegged to something. and when that peg breaks the value breaks
much like how the dollar has lost 95% of all its value it had last century when it broke its gold peg.
yep it does not actually cost $10 to make $10 bank note. and more and more people are realising that $10 doesnt buy them what it used to buy them..
..
like having a spoiled brat kid who thinks he is worth alot because his parents are rich. he does nothing himself and earned nothing himself. .. and then his parents dis-own him and cut him off from his inheritance.. how much is that kid worth now..
..

bitcoins value is its own cost. its not free to create bitcoin. its not printed for a penny worth of labour and sold for multiple hours of labour.. it actually takes alot of work effort to make bitcoin

bitcoins value is actually much higher then you think. it doesnt need something else to give it value, because it already has value by itself.

what you need to realise as a stepping stone into backed value, firstly its not the market price being the value. but its ultimate bottom line cost of acquisition where no one can make/mine/print/acquire/buy/swap it for any less, that is the value.

that bottom line amount is the backed value that is in-of-itself.

take gold.. the market price is $1.7k but this is just temporary it can go up and down unpredictably in the short term. yes its function, features etc push the underlying value below the market price upwards which then push the market price up in the long term.. but thats another aspect you need to learn about

golds value, the underlying bottom amount no one can buy acquire make or mine gold for is actually around $900 right now.
golds store of value (remember not the price) the value is $900 not $1700
gold does not need to be backed by something else worth $900+ because its own mining costs back it by that.

get it yet?

dont confuse the market price with a backed value/intrinsic value.
even houses have a different measure for house value vs house price.

get it yet?

yes similar to the opendime yet not digital/electronic. what's so bad about wanting that?


no, we're talking about something digital (similar to bitcoin) that's backed up by something physical. not sure where you got this idea of backing up something physical with another thing that is physical.


one of the main concepts of a cryptocurrency, and you should know this, is fungability. that means every coin is the same. you can't discriminate one vs the other based on their transaction history. bitcoin itself does not meet the strict requirements of fungability. neither does your kind of strange example above. i think monero is an example of a fungible currency. the us dollar is fungible since when someone hands you $1, you can't know what it's history is of who owned it before you. all $1 bills are the same. in that sense.

in the sense that you could burn 1 ust token (no matter what it was worth) and get $1 worth of luna we can say that luna was backed up by ust which was backed up by nothing. and we all saw how that played out. when something is backed up by nothing it can easily go to 0, as is what happenend to the ust token. The current price is $0.01272 per UST. that's pretty close to 0, right? so i'd say ust is about as "dead" as the item it was backing up which was luna.

so what was the purpose of luna in the first place? why not just have ust and that's it? why introduce something else based on ust because that thing can never be better or stronger than the thing that backs it, which would be ust in this case. and as i had said, the real issue was that the ust was not legitimate. it was a scam all along. it was not backed 1:1 with the us dollar. so anything that it backed was also a scam. on the other hand for the sake of argument, lets say you took usdc and used it to back luna. well that would be a different story right? then luna would not have any issues. because usdc really is backed 1:1 with us dollar (i know some people would disagree with that statement but just for the sake of argument, lets assume it to be the case).

but here's the thing: no one would ever create a luna and back it with usdc. why? because what sense would it make? you would just be creating another "stablecoin". you already have usdc. how is this luna going to be any different. it can't be any better than usdc. so why not just use usdc in the first place?

the reason it takes alot of effort is because there's alot of people trying to "create" it. creation is a byproduct of mining though. at some point bitcoin will no longer be created. so if you're basing bitcoin's value on the cost to create it then you won't be able to assign a value to it once all the bitcoins have been mined.

Well gold and bitcoin are different. gold is fungible for instance. since it can be melted down and reused. bitcoins can become tainted.
another thing about gold. lets say it was only located very deep down in the ground so much so that it costed $90,000 per ounce to extract it instead of $900. what do you think would happen then? would that make gold worth $90,000 to me automatically? no it wouldn't. i wouldn't pay to put it on a chain around my neck in that case. few people would. so it's not going to be worth its mining costs in that scenario.
 

I would guess that if the "true nature" of bitcoin gets priced in, I would guess that it would be at least as valuable as gold, and would have about the same marketcap as that. I know that it is a bit difficult because gold has been around for thousands and thousands of years and humanity has used that after barter was done and money was printed, but that is still something that should be considered as a risky thing to just let bitcoin be there already.

I believe that the best thing we could do right now would be to not give up on bitcoin but also do not expect the worlds from it right away, just be patient and it will come around and it will get to a high price, but until then, do not get hyped every time it goes up, and do not lose faith every time it drops.

gold has existed long before bitcoin ever came around and will exist longer after bitcoin is over and done with for whatever reason. i think we can all agree on that. bitcoin is not a precious metal but gold is. if you have a gold bar, it is something you can take out and look at and touch and appreciate its beauty.

BTC is used based on value with UG organizations - the underworld. I think so

Limited supply of Bitcoin derives the value of bitcoin and nothing else.

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.

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.

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.

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? ::)

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.

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.

"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".

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

---

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

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?

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.

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.

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.

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...

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?

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.

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!

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?

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.

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.

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

Take this as a good criticism, I honestly think you should do more in finding knowledge about Bitcoin, from your post OP you don’t know the history of Bitcoin or even worse you don’t have an idea how it even works, the total amount of Bitcoin available to the world is 21 million, this was what the widely accepted creator of bitcoin Satoshi nakamoto created, and yes like most prices of goods and services it can be affected by demand and supply, it’s this simple.

I would even say more. It's more likely that something will be pegged to Bitcoin in the future as money was pegged to gold during the gold standard than Bitcoin have anything to be pegged to. As I already said before and explained, Bitcoin is the only and best sound money known to man kind! There's not much more to say about it!

Okay if we are talking about backings of various currencies or assets which currency do you think has a backing? All the fiats around the world have no backing except for the promise that the government is giving you and in situation such as wars etc. This promise is worth nothing at all. Talking about other asset such as gold as well all the demand it has is merely created by the hype or demand that everyone has for it and nothing else. Even if we talk about companies as well their backing is the revenues or earnings they do which too they are doing in fiat only so technically it's more or less the same. So which asset do you think really has any value?

This is something that we can be I do know about cryptocurrency and you know in time coming beachcomb will be something everyone will value and people that is using it now will be the leaders because they have many currencies they used before Kashmir became the universal money for universal currency so in time coming Bitcoin will be generalized

This idea has been talked about and it is a stupid idea. We do not want it to be based on anything, we just want a free market that is not tied to anyone or anything and that's it. Is bitcoin decentralized? Yes, it is. Are we the only ones who can decide on the price? Yes we are, then it's fine. Sure, if some powerful people come out and say something good or bad about it, then the price could go up or down.

But the important thing is, we are the ones buying or selling based on that news, and we can decide to ignore it as well. There is a huge difference between influencing something, and controlling something. Bitcoin can be influenced, but not controlled. That's the power of bitcoin.

it's not a stupid idea for a cryptocurrency to be backed up by a decentralized asset. that doesn't exist right now. but it's not a stupid idea.

But with that said, having bitcoin based on "nothing" and letting the market decide what it is worth does have a simplicity to it and so that is fine. that's how bitcoin is. any other way would be much more complicated. but as i said, i don't think the idea of a crytocurrency being backed up by a decentralized asset is a stupid idea. it just hasn't been done yet. that's because of its complexity.

so why don't we just agree that bitcoin should stay like it is but maybe someday a new class of coins will come along that are based on a decentralized asset. but its hard to know how because as i said, it's a much more complicated situation than just making something not have to depend on anything and be based on "nothing". the minute you try and base something on something else, if something bad happens to that something else then something bad happens to the thing that is baseing off of it. bitcoin, by virtue of being based off of "nothing" doesn't suffer if the us dollar goes to 0. or if the euro goes to 0. or anything.

First of all Bitcoin is really hard to understand, that is the reality when someone enters this kind of Digital currency industry.
Also, let’s just remember that Bitcoin will remain as long as there are big whale investors who believe in this crypto.
Now that these Investors are gone whether they are big or not, it just means that there is no chance for Bitcoin to survive
in this kind of industry in the Digital world.

Bitcoin is not a physical asset. Unlike gold, which we use.  But bitcoin is unique in its own way. It is a form of information. You can’t duplicate it. Moreover, if it were backed up by something, it would become centralised, which would defy its whole meaning and its existence.

Likewise, everyone has a different concept of the market. Some believe in bitcoin and some don’t. That doesn’t mean it doesn’t have value or isn’t real. It is. You can get rich if you make the right investment plans. That is all it takes, study of the market and research.

Why would it be? That's the good approach and I like it.
I personally do not think that things that we have as "based on" are not really based on it neither.

Like gold is not just based on gold if you ask me, it is just the market decided to play with it, and wealthy people are playing with it, you could give them literally manure, and they will make a huge market out of manure and act as if it is something super valuable and buy and sell accordingly.

Doesn't mean that it shouldn't be something special, it just means that they could take anything, say it's "backed", and then do whatever they want with it and leverage it 100 times over to make money from it.

ever heard of commodities? manure is a commodity just like oil or natural gas. or hay. its tangible product that people will pay for.
ever heard of pork bellies?

Exactly, I think everything depends on the stock and demand.
We are the ones who are naming the price of things or even currency on this world.
The market decides the price of everything based on the demand.

the goal is for transactions to be transparent. going back to the basics like fiat or gold or physical transactions will negate that aspect.
Bitcoin is backed by MATH and POW which the hashrate increased so much that if the power is converted to money is really huge. that's what backed BTC.

if you back something with manure then its a shit, maybe a community of farmers will find the manure useful for organic farming but its for the farming community not for all.

Hi maybe there is another person in here who talks the same as i do, do you think the Dollar right now backing by something that has value like gold  :-X in fact, The U.S. dollar has lost 86% its value since 1971.

The inflation is creepy as f* imagine people saving from 90's and right now have lose its value. that is why we need something to fight againts the inflation

I'm sure everyone at some stage has come across the phrase "In God Code we Trust" That what Bitcoin is backed by.


That is the most basic backing of Bitcoin, its what it runs on.


and they are the benefits and features which Bitcoin provide.


The thing with manure is, we all produce it, sometimes twice per day,
and there is so much of in farming that it doesnt have any real value. 

On the Gold subject, do you have Gold in your back yard that you can just bend down
and pick up? can you run a simple program on your PC and get a Bitcoin in the first
10 minutes you try it? no! Gold is scarce, the same as all other precious metals....

and so is Bitcoin.

gold sits on 2 markets.. commodities and assets.

the commodity features are the electronics and jewellery stuff it can create
the assets features are the underlying mining cost, scarcity equalling the store of value aspects

bitcoin fits the asset category. not the commodity category

atleast try to not confuse the two markets and their different features/utilities they are used for

..
yes some say that bitcoin is becoming more of a commodity(raw item that makes other items) due to the whole 'sidechain' tokenisation thing.
but bitcoin as just bitcoin was/has been more of the asset class.

yes bitcoin is not physical. so its not "tangible". but tangible is not a synonym of intrinsic. they mean totally different things

---

lets take 3 other things..
a patent, a mortgage agreement, and a brand trademark

these 3 things do not have to be tangible themselves. (paper) they can be digital.
these 3 things do not have to be backed by tangible things
yes a mortgage agreement is backed by the collateral of the physical house.
but a patent is just a agreement, an idea. whereby it comes with the emotion that it permits the owner licence to do something or not do something where there is emotion that makes others fear being sued if they tresspass the idea, use the idea without the owners permission
a brand does not need to be physically stolen. (steal the contract put in a vault) it can be stolen via being used maliciously in slander or in copyright/counterfeit/phishing

these 3 things have value and can be traded electronically as they have value. all for different reasons.
its not all based on all having value based on something tangible.

EG a mortgage might have some intrinsic value based on the physical collateral. but most of the institutional derivatives trading of mortgage debt is based on the analysis of likelyhood of people defaulting/not paying. which is not about the house itself but about the emotional and cost/repayment risk of the person with debt. and how much some other institution values their own risk/reward to buy that debt at pennies on the dollar to pursue the debt.

when you start to look passed the narrow mind of "tangible" and seek out what other things are built into the underlying features of things of value. you might start to realise its not all about tangible, especially in the digital age where people can own digital property like a electronically signed patent/contract or a website brand

The market is based on the purchase and sale of bitcoin and when the whales buy a value is generated, this has to do with the fact that there are 21 million BTC, this generates a deflationary economy, which allows it to be valued much more, then it makes no sense that it is backed by something else, it is decentralized, it is the best that can be had, for me it is the best investment of man in terms of the economic system.

Even gold isn't backed up by anything, right?  ;D
So why do people trust it and want to pay with expensive value? Because people believe Gold is valuable. The main thing here is people's trust. It is the same as Bitcoin, it doesn't need to be backed up by something because people trust it. People believe Bitcoin is something valuable and useful for human life. In this matter, something like Gold and Bitcoin is acceptable although it is not guaranteed by anything.

Bitcoin is software. Gold is an element that cannot be created by man. It has to be mined. And obviously there is a limited supply of it available here on earth. Gold is a precious metal that has many applications and uses. Bitcoin is just software. You can copy software and rename it. You can't do that with gold.

You cant actually with Bitcoin, if you run the same software you will just connect to the same network with the same rules, if you change rules your instance will split into another altcoin into its new network, with no users and be worthless and not be Bitcoin anymore. Bitcoin is unique, even as a software.

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

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

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

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

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

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

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

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

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

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

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

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

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


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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

have a nice day

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


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

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

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

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

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

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

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

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

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

larry
you are now PUREPOSEFULLY
mixing up the word PRICE with value

people have their own individual decisions about the PRICE. correct(both agree)

but the underlying VALUE is where you are getting confused and purposefully ignoring and not understanding

take some time to read the gold example i made in previous post. actually sit back and understand it. like probably step back from the keyboard, have a cup of coffee and truly think about it.
and you will understand better

if everyone could mine gold in their back yard for under $2.. no one would be buying gold on the market for $1.7k
truly think about that


bitcoins bottomline(cheapest mining on planet) cost of 2022 is 13k mining costs which is the underlying VALUE. the lowest people can get bitcoin for any source on the planet.
yes in previous years like in 2009 the costs were under 1 cent.
but understand that the costs have gone up over the decade

now separate that..

and ABOVE that. is the speculative PRICE(dont confuse with value)
the speculative PRICE is more variant and volatile ABOVE value. because of speculation

get it yet

it may only cost a farmer 40cents to produce milk and thats the good value.
however super markets sell milk for $1-$3
thats the speculative PRICE

notice the difference
milk would be free if there were no costs to produce it. .. like oxygen
but its the costs that become the bases of then forming a market price above the underlying value cost

get it yet

once you understand there is a real life cost in creating bitcoin. you might start to see the other layers and umber at play that build up and back the price.
where yes sometimes the price is overly priced way way way above value. where its at such a premium. all the buyers dry up and stop buying which causes the price to max out and then correct down.

understand the real life costs from the cheapest on the planet to the most expensive mining costs of the planet and you start to see the window in which the PRICE plays around inbetween

Bitcoin is not real , It is imaginary. You cannot touch it because it is digitally located somewhere but u can see it ... Bitcoin is like assets of future like lots of money you have in your hand.

You question presupposes that bitcoin exists. How did you even came to an idea that bitcoin is real? Have you ever saw bitcoin? I never did. When I ask people where are bitcoins that they supposedly bought, they show me just their applications that say: "xx BTC". Then I say back: if I send you, electronically, via some communication system that I came up with,  the following text: "5 Porsche", does that mean that you own 5 spot cars made by German automobile manufacturer? They respond: no. I conclude with this question: so, why do you think that you own xx bitcoins, just because someone electronically send you this text: "xx BTC", via communication system of an anonymous Nakamoto person or group?  They say nothing back.

Yes, Bitcoin and fiat are two different currencies. Fiat is regulative while Bitcoin is decentralized. They have different characteristics as well. Fiat is stable while Bitcoin is volatile. The only thing that connects them is when we convert our Bitcoin into fiat when we're withdrawing our funds or purchasing something. Both have different roles and functions but both are important.

ok yes, maybe i didn't understand the distinction you're trying to make.



i have thought about it and come to the conclusion that "bitcoin mining" is not an appropriate terminology if we are going to try and equate that in anyway with "mining gold".


I don't know how you are coming up with this $13,000 estimate of the cost to mine one bitcoin but presumably you're taking the total hash rate of the entire network, figuring out what the power consumption of that is in kilowatt-hours, then seeing how much that costs for doing 10 minutes of hashing based on some average cost of electricity per kilowatt-hour. i don't have a problem with that type of estimate procedure but you have to realize something. you can't just mine as many bitcoins as you want to. there are artificial limitations in place that prevent you from doing that. there's no artificial limitations on mining gold out of the ground.

over 90% of the bitcoins that will ever exist have already been mined. so mining isn't really a viable way to obtain bitcoins anymore. you have to buy them on the open market. now with gold, i doubt that's the case. there will always be gold mining. not so with bitcoin.



After looking into it a bit, i came across some information that said this:

"Across the 198 countries included in the dataset, the average cost to mine bitcoin sat at $35,404.03, more than bitcoin’s value of $20,863.69 on July 15, 2022."

So if that statement is true then it kind of casts your theory into doubt.

that's how tangible goods work like gold and milk. physical things.

that's definitely how it works for physical things. but bitcoin is different. they're not really making much bitcoin anymore. and oneday they won't be making anymore of it. none. nada zilch. but they'll still be making milk and gold.



well it's not like we NEED more bitcoin. we would perfectly fine to not mine anymore bitcoin since over 90% of the total supply is already in existence. once 100% of it is in existence, what's there going to be to back up the price then? because there won't be any "mining cost" for bitcoin because you won't be able to mine it then.


i would imagine that the price to "mine bitcoin" varies throghout different parts of the world due to electricity costs, hardware costs, maybe even human labor costs, real estate costs, the list is endless. but as i said already, somewhere around 2037 none of that is going to matter at all because there won't be anymore bitcoins being "mined". and then what will people use to base bitcoin's price on? their feelings?

That type of situation created a bit trust wave where you have to trust a nation that the money has some value, and that means we will have a ton of nations that will fail. At the end of the day if you can't trust that nation then the price will go bonkers. We haven't seen that with USD just yet, even though it did lose a lot of value, it didn't lose that much of a value, and that means we are seeing something that is risky with other fiats instead.

Look at south America, Africa, middle east and even in Asia where fiat currencies became so much less valuable. That’s the risk you take when you base it on nothing at all. But crypto is not the same, because it's limited, not printable.

but what if the asset is able to move along with the cryptocurrency? unlike gold.

firstly your again mixing words

i said CHEAPEST..  but you then say "average"
i said value is the lowest cost(cheapest) and YOU then use a stat that says the PRICE(july15ths $20k) being again wrongly called "value"

stop thinking of the market PRICE as "value"

here is the thing..

if you work out the cheapest mining on the planet. the most efficient asic using the cheapest available electric cost that alot can use. and calculate the cheapest mining cost on the planet..
thats the ultimate bottom of TODAYS cost of mining bitcoin today (no need to distract with the costs of last year or 2009)
its todays best acquisition cost anyone can find of getting bitcoin today..
thus bitcoins underlying value

this is not PRICE.. this is the underlying value

you can also do the same for the most expensive of the recent gen asics and expensive regional cost. and find the top amount. that line where if the price reached it. then everyone on the planet could acquire bitcoin via other means cheaper then the price and thus people give up wanting to buy at the market price if everyone can mine or buy form miners off-market cheaper then the market price

yes you can play games with "average" and mis represent words. but if you understand that there are true costs of acquiring todays allotment of bitcoin. then you can work out the underlying value of todays allotment.
which then shows what todays value is.. and then see that its different to the PRICE

If only we had such an asset that could be moved trustlessly and cheaply across borders, that is, in a peer-to-peer manner without having to have intermediaries or trusted third parties, an asset that would have a provably limited and completely auditable supply, that asset perhaps could be said to be an ideal backing tool to provide some value to a cryptocurrency such as Bitcoin. But. On the other hand, we wouldn't need cryptocurrencies at all since all financial transactions and exchanges could be made using this magical asset. The fact that we obviously have no such asset, let alone that we can't even conceive of a physical commodity that would behave like a digital one, makes "unbacked" bitcoin an important and inevitable thing. In the information age, data or information itself should be used to transfer value between individuals and businesses. The information that is scarce by design is a special class and should be used as money since this kind of information has credible monetary characteristics that will provide efficient and comprehensive economic relations.

we both know that's not really true though. most bitcoin that is acquired today is acquired by purchasing it at the market price. It's not like if I want to acquire 40 bitcoins I can do that by setting up a mining rig and just pay $13,000 per bitcoin. There's no way of knowing how long it would take for me to accumulate that many bitcoin and it might not ever happen. Fast forward to the next block halving and it just makes it even harder to do any "acquiring" as you define it.


So 90% of the bitcoins that can be mined are already mined. But you want to base bitcoins value on the other remaining unminded 10%. Good luck.
Are you gonna say the same thing when we get to 99% already mined that the value of bitcoin is what it costs to get ahold of the unmined 1% ? does that really make any sense?

you keep on trying to push the thought of the value being the price to explain the price..

please separate them as 2 different numbers

forget the price for one moment.

the value is the bottomline. the underpinning. the base. the number no one can get any lower than..
so on the whole planet right now the cheapest someone can acquire bitcoin for .. is the value line
and only a few lucky people get to acquire bitcoin for that.

no one can get bitcoin for less right now. and thus thats the value line right now..
emphasising the underlined words above. they are important and the point

the point of the lack of people able to get bitcoin for less. becomes the very thing that sets the line that no one can get for less. thus becomes the safety zone.the security blanket,  the lock. the bottom. the deadend. the wall.. the metal fence. that keeps all other users above and thus. its the thing that people see as the security assurance and backing bitcoin value because if no one can get it for less. then the risk of it going less is negligible

above that is all the random speculations, the volatility. where different people have different costs of acquiring coin. where by in japan if they wanted to mine. it would be about $90k a coin. so they prefer to buy at anything below $90k..
some lucky people with good contacts with miners at the cheap end dont have to mine themselves to get btc nearer to $13k they just buy asic farms daily/weekly allotment of reward at a agreed/negotiated amount close to $13k that they can both accept off-market. and others buy at the whims of the volatile market depending on the speculative circumstance of whatever the price is (right now between 13k to $9k window) the price is ~$24k

in short the current price is in that speculative area above value. and below the premium

now when you look at the 4 year cycle of bitcoin. where the price moves crazy up and down in random zig-zag
you will see that the value(not seen on a market price graph) has a more steady incremental rise
..
as for the whole 'circulation is 90% complete..
bitcoins price and value is not based on all coins in circulation.
bitcoins price is not based on the 19m coin.
its not even based on 5m coins
the price is based on a small subset of coins that are deposited into an exchange. where by even the deposited coins are not all attributing to the market price because some coins are just balance in a custodian..
a smaller subset of the deposited coins that actually sit on the market order book of active orders attribute to the market price. not the entire 19m circulation

as for the value
i personally have coins from 2012 acquired for about $6 each.
yet as time goes on and i shift coins around or spend them . due to the price and value changes over time. i no longer consider my old coins valued at $6 still. because as i spend or move them i am seeing the current values along the time change, and the price change where i can get more for my coin or it costs me more to acquire more coin which changes the value of them

there are many charts around not based on the cost at mining where it keeps the value at the mining cost of the coins creation throughout. but instead it alters the 'realised value' each time a utxo is spent because logic and economics shows and proves that when funds are moved peoples valuation of that spend/receipt move. as time passes value and price change

EG
imagine you(if old enough or your parent earned $10 for 3 hours work in 1981 (min wage $3.35/hour)
and it could buy them 377 loaves of bread at that time..
now imagine its 2022 and he found that same bank note under a sofa cushion. that exact same physical bank note

is that bank note still valued as 3 hours of labour, if they were to pay some landscaper to mow his lawn.. nope
they might only get 10minutes of freelance professional lawn mowed or a hour of minimum wage guy

can they still buy 37 loaves of bread with it if they went to a grocery store, nope

and so although that physical bank note was worth 3hours labour/37 loaves.. today its not

so if only a few lucky people can acquire bitcoin for that then it's not really the true value of bitcoin. say part of the bitcoin protocol was to send 1 bitcoin every block to some random person's bitcoin address. so they acquired it for free. would the value of bitcoin then be zero since one lucky person got to acquire bitcoin for free?

so i asked this question previously but no one answered so i'll ask it again. once the block reward goes to 0, and all bitcoins have been mined, what's the value of bitcoin going to be based on then? how will you determine the "value line"?

i do understand all the things you're saying but i don't necessarily know that the miner's cost to acquire bitcoin is always below the market price. for example:

The market price has only fallen below the average mining cost on three occasions — in 2016 to 2017, end 2018 to May 2019, and early 2020, each for less than half a year at a time. Each time, the Bitcoin price rallied strongly, sending it to a temporary peak where market price is several multiples of the mining cost.

can you explain why this happens?

in that situation. a currency that does that would have a 'zero-bottom-value'

thankfully bitcoin doesnt give away coin which is why people know and trust bitcoin cant just fall to zero via a market sell, which is why people deem it a good store of value because its value isnt zero



not all miners are below..
there is a speculative range.. a window that is recently between $13k-$75k
where different people in different places have different price points in between

but in all economics. the VALUE is at the bottom of all that stuff
(its where the mindset if when something is really cheap its good value)

your using "average" cost!! (facepalm)


now hopefully you get the concept that there are some lucky people on the planet that can mine real cheap and some unlucky people ~(hawaii/japan) that have really high mining costs
and then there are people inbetween

maybe this will explain it better.. and yes there are pictures
https://bitcointalk.org/index.php?topic=5382937.msg59075174#msg59075174

its basically when the price moves above or below a certain regions cost that region change their speculative minset about the price. where by if the price goes up they realsie they can mine locally thus stop buying and instead acquire coin via mining or off market . and then become sellers on market.
and if the price is below their regional cost then they become on market buyers

where as because no one can acquire coin via any means below the planetary lowest cost.. EVERYONE  is then a buyer
which protects the price from falling below the value line because no one wants to sell at a loss and everyone wants to buy coins cheaper then they can mine for.

again protecting the value from going to zero. thus ensuring bitcoin has a non-zero value

I am so tired of people claiming that Bitcoin has no intrinsic value.

Some people seem to think that things like electricity, rented room, mining rigs, internet costs and so on are provided for free by some socialist government entity or something? All those things cost money. You can't mine Bitcoin for free. If you want to mine Bitcoin, it will cost you money.

That potential cost of mining Bitcoin is what gives Bitcoin its minimal, base value.

Unless you steal your neighbors electricity. But in that case your neighbor would be paying for your Bitcoin mining.

But thats a short term solution.

although bitcoin is really just software and only works when there is an internet connection, but look back 13 years, many altcoins have been created and have you seen one that is similar to bitcoin or is there any better than bitcoin that you have seen?

whatever it is, their value will be determined by people's beliefs, once we lose faith in it, they will become useless
gold is no exception, its value is also determined by people's beliefs

There is one thing. Bitcoin is a blockchain based secure programe that allows you to securely share data over internet. It is a smart contract. Blockchain is a secure tech that can be used for different purposes, like saving users data. Etc. In Bitcoin case it is being used for as an advanced financial tool, for transactions. Thus it  becomes equivalent to money. So you can never back it up by anything, because it is a computer program and will remain that always. Yes it is super secure shareable and thus can be used as transaction token.

Bitcoin is based on something that has value -- energy, or the energy that proof-of-work requires.

All currencies are based on the value of energy production more than anything else. All civilizations develop according to the energy that they have available.

Gold is a metallic substance that has shape ‍and existence which can also be seen in use. Gold and Bitcoin cannot be compared in real terms. There are two different things. One exists and the other has no existence in reality. But if I compare the potential and the price as well as the asset, then the value of bitcoin is definitely higher than gold. It must be accepted that people of this age prefer the digital form of their wealth. Bitcoin has quite a few advantages in this aspect.

You've said it yourself. Bitcoin is backed by the energy spent mining it using specialized hardware (called ASICs). It's not really made out of thin air, as some would say. Most people don't understand how Bitcoin can have value on its own, because they've never taken the time to do their own research. They're just following someone else's opinion about it (what wealthy people and big banks say against Bitcoin).

There's no need to back Bitcoin's value with Gold or any other precious metal, because it can do well on its own. With no central authority, people like you and me are the ones who dictate how much a Bitcoin is worth on the market. It's all based on the rules of supply and demand. Bitcoin is portable, censorship-resistant, decentralized, scarce, and pseudonymous. What more would you want? Fiat is losing its value anyways (it's only backed by debt), so investing into Bitcoin would be the wisest decision you'll ever make. Who knows if someday Bitcoin becomes the standard unit of account? Just my thoughts ;D

Well I don't know about that. Gold is a big business. In every town all over the world there is going to be pawn shops that will buy your gold. they not might not be interested in your bitcoin though.

Gold for some people serves as a status symbol. you can wear it and display it if you have enough money to buy a gold chain. or you can buy a gold bar and admire its beauty. you can't do that with a bitcoin. so no, i don't think people of this age all prefer bitcoin. there will always be gold collectors and people that wear gold as a status symbol. they won't care about btc at all. just how it is.

Gold is often appreciated by mainstream investors due to its tangibility and versatility. You can use Gold for many things in the real world like manufacturing jewelry, using it for semiconductor components, etc. But you can't do that with Bitcoin because it doesn't exist in physical form (even the physical coins you see around are not really Bitcoin, they're just wallets with public/private keypairs on them). Despite this, BTC has value because it's backed by real world resources (energy spent during the mining process). Not only that, but the cryptocurrency itself has a limited supply of 21m coins and there's no central authority behind it. The decentralized and censorship-resistant properties is what has made Bitcoin an extremely-valuable cryptocurrency to this date.

If I'd were to invest into a store of value to help protect myself against inflation, I'd choose both Bitcoin and Gold for complete peace of mind. But not everyone is willing to hold both types of assets/commodities. As long as you don't invest all of your life savings into them, there should be nothing to worry about. Just my opinion :)

For obvious reasons the supply of bitcoin is limited and you can't "contract" or "expand" the supply. Imagine "contracting" the supply of bitcoin and your coins vanishing from your wallet. How would you feel?

Why does it have to be based on something that has value? Bitcoin has it's own value. We, the people determine the value of bitcoin. Fiat currency isn't based on something that has value and is printed out of thin air whenever the government wants. At least bitcoin isn't controlled by government or centralized organization where they can fix, add or remove supply.

you can't do that with bitcoin because bitcoin isn't backed up by any asset that has a stable price. but imagine how you could do it if it was. make sense now? consume the asset, your bitcoin is burned. buy the asset, you just minted a bitcoin. maybe i should call it something else other than bitcoin because people here seem to think i'm suggesting bitcoin has to be changed over to working that way.

will never happen.

well that's one of the weaknesses of bitcoin but that's how bitcoin works and it works so until something better comes along we're stuck with it. not like it's a huge problem but the ford model t got replaced eventually with better cars. same thing could happen to bitcoin.

People are not necessarily the best judge of something. That's why bitcoin's price fluctuates wildly over the years. Because people can't make up their minds what bitcoin is worth is what I think.

Yes, bitcoin is certainly an improvement over the government just printing money out of thin air. Does that mean bitcoin is the ultimate solution to that problem? No. probably not. thus this thread  >:(

To many experts, this limited supply, or scarcity, is a big contributor to Bitcoin's value. Cannot be copied: Because Bitcoin operates on a blockchain ledger, no one can counterfeit a Bitcoin.  The scarity is what Bitcoin's value based on. https://xtrading.com/financial-questions/what-makes-bitcoin-valuable/

Very good question. First, I was thinking like you and then tried to understand the nature of the money and the economic system what the Bretton Wood  X and X group has created after the second World War. 

You need to understand what is value and how you determine the economic value system in the financial medium of exchange ? Currency cannot be based on economic value, as many economists thought that all the fiat currency should be  based on gold value.

The fact is gold does not have any economic value but there is an ornamental value of gold, which is much lower than the gold price. Gold value was imposed by a monopoly system by the bankers that was top of the goldsmith's ornamental value.

So Bitcoin is not actually a currency like that of fiat  curgency that is tendered by the government and it has a monopoly currency value according to the Foreign Exchange Regime.

Bitcoin is different and Bitcoin directly valued by the market demand instead of gold value or fiat currency value.

Bitcoin value seems to rise and fall but it has two different fundamental elements involved, first the market demand of Bitcoin and fiat currency devaluation. Both is working together to determined the Bitcoin value in the Foreign Exchange Market.

 

ok so let's break down the gist of that article.

Bitcoin Value is Partly Determined by Bitcoin Scarcity

Not all cryptocurrencies have a maximum supply like bitcoin but some do. Does that mean they are valuable?

What Gives Bitcoin Value? Difficult To Take, Yet Simple To Move

Well again, most cryptocurrencies rely upon public key cryptography for their security and such. So that makes them difficult to take if you don't know the private key but simple to move if you do know the private key. So that means all cryptocurrencies are then valuable?

Or is bitcoin somehow unique in that it has value while some of the others don't yet they function essentially equivalent to bitcoin. Maybe bitcoin is just treated as more valuable because it is more popular thus more people use it than some other cryptocurrency? Is that the basis underpinning bitcoin's true value proposition because if so, that could change. All it would take is people to start using some other cryptocurrency in place of bitcoin and then bitcoin would be less valuable?

First off btc has definite utility in the power sector.

It also can be used to create demand and build larger solar arrays.

Lets explain the demand concept.

Warehouse owner has a 2 acre flat roof not in use.
He is a dry goods warehouse. Means he uses no refrigerators and very little power.

He wants to creat a solar array. His demand is very low. Maybe 10kwatts an hour day 240 kwatts a day or 7200 kwatts a month.

A two acre solar array can have 400  400 watt panels which is about 160 kwatts peak per hour.

that is about 800 maybe 900 kwatts a day.

so lets put a 400 panel array on the roof. Nope why daily demand is only 240 kwatts not 800-900

So maybe only 100 panels are allowed maybe 120.

you waste the space on the roof  and can not do the 400 panels.

Well bitcoin fixes this.
Put in enough gear to make 40kwatts an hour vs your current 10 kwatts an hour.

that is about 10 s19 miners.

do it for six months maybe one year you now have the demand to allow 400 panels. vs 100-120 panels

This is real utility. you created 900 kwatts a day worth of power vs 240 kwatts a day of power

and you mined btc.

That is real value. commerical power is at least 5 cents a kwatt

900-240= 660 times 5 cents is $33 a day in extra power created by those miners

that is over 11000 a year in extra power create.

thus real utility

so the argument you post should be deleted or altered to say besides demand utility (which i clearly show is real) what worth does btc have.

I have a second one btc due to pow mining can allow for excess power production to not be wasted.

Yeah power plants have over capacity and shut down if coal or oil but if the plant is hydro it can not be shut down. btc mining allows that excess power to not be wasted.


that is  two real examples of why btc has true value.

third since i proved that btc has real value it means a real value item can be moved out of a country in case of a war.

ie you live in ukraine and escape you can easily recover your coins in another country.

so three real true reasons that can not be erased or dismissed as fake value.


and as the op what you got to shut that down?

World world three and complete loss of the civilized world 🌎 world be one valid argument
Complete world agreement to outlaw btc  also works that would mean no internet.

Maybe you have a third one?

Each of these assets has its own value, its own advantages and disadvantages. What determines the price of gold? It needs to be found, mined, for this you need a lot of equipment, then processed, transported and stored. All this affects its final cost, as in the case of bitcoin, in order to get it you need equipment, electricity, equipment maintenance. But the amount of bitcoin is limited compared to gold, and the more people want to own some part of bitcoin, the more expensive it will become.

$11,000 income per year to install 400 solar panels and a bunch of bitcoin miners ?  I don't see how that would make financial sense. Hopefully this person would have some other use for those solar panels if he couldn't make a profit from mining bitcoin.

it depends what type of hydro electric generation is being used. if it's pumped storage then they can store the excess energy into a reservoir for later use. so it's not being wasted in that case. it just gets used later during periods of peak demand. try this example instead: https://www.marketplace.org/2022/03/25/crypto-miners-use-natural-gas-stranded-in-wells-to-power-energy-hungry-rigs/



that's an extreme example but ok i wouldn't argue that bitcoin (or any other cryptocurrency) makes it easy to move your money. but it's not maybe as simple as just packing up a few bags and memorizing your brainwallet passphrase. what if you own alot of physical assets like real estate and houses? first you have to sell them, get the money, convert it into bitcoin. in an emergency, you might not have all the time in the world to do all those things.


the third one is that something better comes along that people prefer it and bitcoin takes a back seat to it. so far that hasn't really happened.

This is the best answer that suit op request because I still haven't seen currency been backed by something which keeps me contemplating. Bitcoin is a peer to peer currency and it existence had prompted many altcoins that we see in the market now.
 Many altcoins now that are in the market seem to be backed by something which is nit ways read and most time it is users to decieve investors to keep investing in n such project. Bitcoin is still doing what it promised and I am happy that many adopters of it has no regret so far.

Just like Gold, time and energy is spent to mine Bitcoins. It's safe to say that cryptocurrency's value doesn't come out of thin air. Most people can't believe how something intangible as Bitcoin can be more valuable than Gold. That's because they truly don't understand how Bitcoin works. The general public only believes what the government says about Bitcoin, so they will say Bitcoin doesn't have value without taking the time to do their own research. It shouldn't matter since ultimately the market decides how much Bitcoin is worth in Fiat terms. As long as there's demand for BTC, it won't be going anywhere soon. Just my thoughts ;D

Electricity has value you dummy ! lol.

 It breaks the whole concept of decentralization and cryptography that is built VIRTUALLY. Bitcoin was created for this, to create a coin that "does not exist".

BTC is backed by electricity, that is a scarce good. The reason to have a limit of 21 one million units is to add even more scarcity to the currency. It could have been any limit. It could have been just 1 unit and it would haven’t been the most convenient, but it would have worked. In any case, it seems to me that what you don’t understand is the concept of money.

Start with this interview to Saifedean Ammous: https://podverse.fm/es/episode/m3jJcVzOl.

Try to understand this concept also: all and any currency used as money, based on multiplication of its fundamental unit, over the time and independently on how long it takes to reach the mathematical limit, its value tends to cero. This is the pathetic case of fiat currencies (include ETH on this type of currencies). On the contrary, all and any currency used as money, based on the subdivision of its fundamental unit, over the time and independently on how long it takes to reach the mathematical limit, its value tends to infinite (this is hypothetically and meanwhile nobody demonstrates this statement to be false, where wealth created by humans tends to).

If you understand the mathematical concept of limit, you’ll understand this. If not, maybe you should also study this concept first.

You can also download Ludwig Von Mises “The Theory of Money and Credit” from this link: https://mises.org/library/theory-money-and-credit.

Bitcoin is pretty ok with the fact that it is independent and don't need a backup, or let's come in again from this aspect, what should be the back up for bitcoin? Is it gold, or what? I don't see anything worth the standard to back a decentralized currency like bitcoin, it obviously make no sense and needles, the network is self protected with it value embedded within.

Question to you specifically. What is gold backed by? Nothing. It has value because it meets the 5 monetary properties. It backs itself. It takes a great amount of work and energy to mine gold. So does Bitcoin. Bitcoin also meets 7 monetary properties. It also takes an extreme amount of computational work and energy to create it. Thats why it is called a Bearer Asset, Base layer, apex property. Its the properties that it meets for monetary value, not backing.

just because something takes a huge amount of energy to obtain does not necessarily make it valuable i would think.  for example someone could clone bitcoin and modify it so that the difficulty target had more leading 0s. meaning its harder to mine takes more energy. does that make it more valuable?


You mean these? I'd say bitcoin meets most of them pretty well but not all of them sufficiently for example fungibility. bitcoin is not fungible. because bitcoin is not private and anonymous. the "storability" one is also a bit suspect since to get to the point of being able to store your own bitcoin, most people are going to be relying upon banks and financial institutions, if that wasn't the case bitcoin wouldn't be anywhere near the price it is today.

Bitcoin’s monetary properties include:

Transferability — The ability of an item to be transferred anywhere in the world with the highest possible speed and at the lowest possible cost
Divisibility — The ability of an item to be divided conveniently and reliably into smaller pieces, thereby accommodating any transaction size
Storability — The ability to be self-custodied by anyone, without relying on a bank or financial institution
Durability — The ability to be as resistant to degradation as the medium in which it is stored
Verifiability — The ability of an item to be reliably verified as real by its users
Fungibility — The ability of each item unit to be equivalent to any other item unit
Scarcity — An item’s resistance to increasing its supply
Censorship Resistance — The ability for anyone to use a form of money without fear of the money being confiscated or frozen.

something having value (economic number)
someones values(desires, emotions, sentiments of features and benefits)
something valuable(value + values)

there are 3 different words of different meaning you are not quite grasping

let alone the previous lessons of the different of price vs value


banks ?
no bank has offered a bank account to put your bitcoins in

if you mean exchanges used as custodians.

you dont store your own bitcoin in a custodian. .. once you transfer your coin to a custodian address, they are no longer "your own"

bitcoins never leave the blockchain. EVER
if they are not on your keys they are not yours.

peoples decision to give up ownership rights to property they feel is theirs by deciding to transfer ownership over to a custodian is not a bitcoin flaw.. its a human flaw

once the transfer is complete where you no longer have ownership control using bitcoin. you are then no longer using bitcoin. but using the human world of trust and business law

(much like handing bank notes to a bank. doing so you lose the privilege of bank note utility, and now entered the realm of business law of their service terms and conditions of their limits and access restrictions if you were to request some bank notes back)
....

bitcoin stores bitcoins perfectly. using the cryptographic keys to secure ownership access vis transaction signing as proof of ownership

if someone seen a banana/necklace/bank note on the open street. can you prove it was your banknote.. nope

everyone can see bitcoin on the blockchain. but no one else can grab it and take it. only the owner can move it/claim it.

bitcoin is stored very very well

bitcoin solves many many flaws of previous versions of money.
but nothing can solve the many flaws of human

it requires us humans to know and learn and protect what is ours. it requires us to change our ways

well in this context i thought we were narrowing down the focus to something that takes alot of energy and that's what supposedly gives it "value" which i disagree. you can expend alot of energy on something but does that automatically give it value?



How do you think most people obtain bitcoin? They transfer fiat from their bank to a centralized exchange and hope the exchange gives them some bitcoin that they can then transfer it into their own wallet to be able to self-custody but they are relying upon banks and financial institutions for the entire procedure, as I mentioned above. And that's the problem. When you want to cash out, you have to go through the entire procedure IN REVERSE. Most people do anyway. People that follow the status quo. So in reality, bitcoin is heavily tied into banks and other financial outfits like it or not. Heavily dependent upon them for its current price.

you are yet again forgetting the layering affect. and the different wording

something that people find desirable and useful (their sentiment(values)).. turns a liability(cost) into a asset(value)

values(sentiment)+value(cost)=valuable
combining the values and value = something "becomes valuable"
valuable=able to have value

costing alot doesnt "give value" on its own
but its that underlying cost thats the financial value amount underlying the price of an item that has values

EG bitcoin jan2009-feb2010 had values(sentiment desire/need) but didnt have a value(economic number)
bitcoin did not become valuable until ~march 2010


just concentrating on the words "backed by value" (not values/valuable))
is the backed by a underlying cost no one wants to sell below thus its backed by a minimal amount everyone refuses to go below. backing a minimal amount(value)
bitcoins is backed by a value of $15k. no one wants to sell below this right now. thus its backed and supported.
the price is higher due to the speculative part of sentiments of individuals

but underlying the random whims of individuals. is the ultimate bottom cost no one sells below buy everyone is willing to pay that or more.. thus backed by that value


banks dont store/offer bitcoin.BANKS ill repeat BANKS do not. they offer FIAT services

people can use banks to service their FIAT transfers. but BANKS dont service bitcoin custody.

as for other businesses (exchanges) well if the bitcoin is not on your key the coin is not yours. you have no legal rights to the coin, you are stuck with whatever rights the service whichs to offer in its terms and coditions to privilige of access to balance at whatever rate they may decide..

yes good honourable exchanges do offer 1:1 but thats something you need to check a businesses terms and conditions for.

 exchanges. under their business practice and service T&C may decide to allow users to do things with balance the business stores in its databases. where the business decides to honour a 1:1 swap of their mysql balance for a coins deposit/withdrawal. but that can easily change by them change their business terms and conditions..

do not confuse a crypto exchange for the BITCOIN protocol/rules

you see this happen with fiat. banks change there terms of service about fiat. its where they change interest rates or monthly charges, or rates, or fee's or other messy things where people dont always get back what they handed to a bank

do not confuse a bank with a bank note. once you hand abank note to a bank. you lose rights over the bank note. they can and do limit your access to the bank notes you deposited(handed to them)

do not confuse the bitcoin networks storage.. with businesses terms and conditions of users membership of balance on their database..

do not trust a exchange.. use them by all means for quick activity. but dont think of exchanges as wallets or the bitcoin network rules