Bitcoin Forum

I just saw the Félix Moreno de la Cova interview with James Turk, and both of them keep repeating this meme that there is nothing backing Bitcoin.

To me, this is completely wrong. Bitcoin could be seen as a public ledger that tracks ownership of a digital good. In this light, what backs Bitcoin is the collective consensus, plus the physical copies of the blockchain.

I reject the notion that Bitcoin is intangible.

BITCOIN GOT BACK!

I'm sure they mean that like gold there is no asset backing, insurance, etc. But I agree with you that they have some backing by bitcoin users. We back bitcoin! :D

Well this nonsensical "GoldMoney" product isn't backed either, except by the legal system.

I run into this too when I try to explain modern fiat dollars to people. They don't understand that there is a incredibly limited amount of paper dollars printed in physical form. The rest is simply digital 0's entered into a computer. At least bitcoins are limited in their creation. Central banks simply need to add a few zero's and create unlimited amounts of money if they feel like it.

Cognitive dissonance is too strong and often causes unhealthy fixations on some specific aspects of Bitcoin.

Most of critique of Bitcoin that  I've heard to date is based on ignorance.

It is not exchanged at a set rate for anything else. Thus it is not backed.

The US dollar is not backed either.

I don't know about "Goldmoney."

This is not exactly correct. I would say that USD is backed by US armed forces. One could say that USD and most other fiat currencies are backed by future tax revenues to be confiscated from enslaved population of corresponding country or political block.

I would also say that Bitcoin is backed by The People, i.e. you and me and everyone else who accepts and pays in Bitcoin.

And by the mighty hand of vigilante hackers -- the big guns of online world.

It's one thing when the average joe doesn't get it but we're talking about both Moreno de la Cova interview and James Turk spouting complete nonsense.

How many US armed forces or future tax revenues can I get in exchange for a dollar?

And how many people can I get in exchange for a Bitcoin?

The answer is none, because they are not backed by anything unless you are going way into the metaphorical sense.

Bitcoin is backed by all the advantages that other currencies don't have.

Bitcoins aren't backed by a commodity but they are a commodity money in their own right, the commodity essentially consisting of the network, blockchain, hashing power and so on. CASASCIUS "bitcoins" and their ilk are physical coins backed by the digital commodity, which is an interesting twist!

I would not assert the GoldMoney product is 'nonsensical'. It does have meaning and does make sense. Goldgrams are tangible just not corporeal because, as you point out, they are based on the legal system which is less tangible than maths.


Usually, Mr. Turk does a decent job at crafting logical arguments. But in this interview, it is plain that Mr. Turk's logic is twisted. From his analysis, the issue is whether a good has to be corporeal to be tangible.

In Turk's own argument he asserts that a good, goldgrams, can be non-corporeal and still be tangible. By using the same logic he applies to goldgrams one has to conclude that bitcoins are tangible even though non-corporeal. We will assume he has made the logical error inadvertently and not deliberately despite bias.

Perhaps the two of them should take a course in logic (http://www.youtube.com/watch?v=I3EANbhRQao)? But then again you can't fix stupid thinking (http://www.youtube.com/watch?v=fL6wbsGx9qw).

Although counterintuitive, bitcoins are more tangible than gold just like math is more tangible than chemistry because humanity's knowledge of math is more complete than their knowledge of chemistry. For a being that can perceive maths Mr. Turk's fetish for something he can pet is quaint and his lack of ability to pet bitcoins makes them no less tangible to a being that can perceive maths than a being that could not perceive maths. For example, are prime numbers intangible to elephants because they cannot perceive numbers? Just because an elephant cannot perceive numbers does not mean numbers are not tangible. Can an elephant proclaim numbers are fictitious because the elephant cannot perceive numbers? No, the problem is with the elephant's inability to perceive not with the numbers. So likewise the problem is with Mr. Turk not with bitcoins' tangbility.

Yeah, when folks typically talk about "backing", they're referring to a metal, commodity, or government. This is clearly a legacy of the gold standard, when the word "backed" meant something specific (gold, silver). It's expanded a little to potentially include things like oil or the "faith and credit of the united states of america" (whatever that means).

The hard thing is getting people to realize that bitcoin is just as fundamental as gold, and both are fit (bitcoin more so, in my opinion) to *be* the backing underlying higher-level systems.

The issue of physical tangibility is just stupid. But it is, unfortunately, a huge mental block for lots of people.

They believe that gold and dollars are backed by something.

In the case of gold, well, it sort of is.  But when push comes to shove, it won't be worth as much as they think it will be.

Well gold and silver coins have the advantage that they can be spent without requiring electricity or an Internet connection. I think an appropriate "doomsday portfolio" would of course include a sizable portion of Bitcoin but also some precious metal bullion.

What ever happened to the argument that BTC was backed by the hashing power of the miners?

It was bunk, so people stopped repeating it.

Well, it's sort of accurate, in the metaphorical sense.  No modern currency is "backed" in the literal sense.  And the ones that try to be, like the oil-producing states, are just backed by other currencies.

But holding those currencies gets you access to certain services.  Holding US dollars gets you access to the US military, and to the oil market.  Holding "commodity" currencies like the Canadian and Australian dollars gets you access to the commodities produced by those countries.

Holding Bitcoins gets you access to the transaction services provided by miners.

It is backed by mathematics and networks

Since math and science has become the new religion in modern people's life, it is backed by these religion, much stronger than any kind of FIAT currency, which is only backed by one entity

Bitcoin is backed by cryotographic utility and the userbase advantages it provides in competing against other currencies?

 :)

But you could not back that up by reality.
Tangibility, it seems to me, is a pretty well defined word.
So please enlighten us and show us where the tangibility of bitcoin resides.

All currencies are backed by the faith that you will be able to exchange it for goods and services of greater value (to you) than your own goods and/or services that you exchanged for it.

I don't care if it's baked or not.. Fiat are, by definition "not backed by anything that trust in govt"

Do you trust world govts ?

In numeris I trust !

That's what I always say.

People who bring up the "not backed" point usually refer to backing as of a gold backed currency.

We should not care about that.
The whole gold backed currencies are historically nothing more than fraud. This was done with the argument of securety and convinience while in reality it was done to inflate the gold supply. In that respect "backed" currencies are worse than bitcoin.

The whole concept of tangible versus intangible when it comes to currencies is flawed. After all, tangible asset holdings are very different when you have say a fluffy pillow versus a banana tree (which also holds different value if you live/don't live where they can actually grow) versus gold versus copper versus farm land versus a mickey mouse alarm clock, etc etc. There's this really great quote from Warren Buffett in an interview where he dives into this:

Warren Buffet: "….Well, I just don’t know. I don’t know whether cotton’s going to go up. I mean, we use a lot of cotton. I’ve watched it go from 80 cents to $1.90. You know, we use a lot of copper and I’ve watched it go from $2 to $4-plus, so I mean there’s all kinds of things in this world that are going to go up and down in price. You know, maybe hamburgers will tomorrow. And— but I— I’m— I don’t know how to judge that.

I do know how to judge to some extent the earning power of some businesses. And the real test of whether you would like it as an investment is whether you would be happy if it never got quoted again, and just in terms of what the asset did for you. But that doesn’t—

I will say this about gold, if you took all of the gold in the world it would roughly make a cube 67 feet on a side. So if you took all the gold in the world, we could have a cube that went down there 67 feet high and that would be the whole thing. Now for that same cube of gold it would be worth at today’s market prices about $7 trillion. That’s probably about a third of the value of all the stocks in the United States.

So you could have a choice of owning a third of all the stocks in the United States or you could have a choice of owning that little block of gold, which can’t do anything but kind of shine there and make you feel like Midas or Croesus or something of the sort.

Now, for $7 trillion, there are roughly a billion of farm— acres of farmland in the United States. They’re valued at about $2 1/2 trillion. It’s about half the continental United States, this farmland. You could have all the farmland in the United States, you could have about seven ExxonMobiles, and you could have $1 trillion of walking around money.

And if you offered me the choice of looking at some 67-foot cube of gold and looking at it all day, you know, I mean touching it and fondling it occasionally, you know, and then saying, you know, `Do something for me,’ and it says, `I don’t do anything. I just stand here and look pretty.’ And the alternative to that was to have all the farmland of the country, everything, cotton, corn, soybeans, seven ExxonMobiles. Just think of that. Add $1 trillion of walking around money.

I, you know, maybe call me crazy but I’ll take the farmland and the ExxonMobiles….."

So yes, Bitcoins are intangible as they are digital. So yes, Bitcoins are tangible because it's backed by a physical network of people and computers, and math. But really, the concept of intangible and tangible when it comes to "backed" currencies is flawed because people lose sight of what actually has real value from a tangible sense of investing.

Tangible and intangible are a philosophical debate anyway as much as liberalism and realism are in the philosophical debate. The key really comes into how we collectively agree to value both terms to see relevance.

(sourced from my own site: http://coincollectingenterprises.com/investment/warren-buffett-gold-useful-vs-useless-investments (http://coincollectingenterprises.com/investment/warren-buffett-gold-useful-vs-useless-investments))

Put in that situation, I'd choose the farmland and the ExxonMobils, and $1 trillion in gold rather than $1 trillion in cash.

What this interview forgets to mention is the cost of guarding the investment. That is also where the term backing usually comes from:

Historically currency was a receipt for an amount of grain, and that grain had to be guarded by an army. The value the receipt had was affected by the amount and the power of the army guarding the grain.
Ownership means nothing without power.

You should generalize this to something like "Ownership means nothing without a way to protect it."
I don't think that power is the only way to protect something altho historically it was just the easiest way. One of the better things about protecting something with an army is that you show off your army. That deters potential attackers.
So this relation of protecting the heap is not so easily defined in terms of just power.
I could pretend that i was protecting something with an army but in actuality i have the thing of value in another place. In this case i protect my ownership with misinformation, not power.

Of course you're right.  
But you can't hide farmland, at least not practically. And when it comes down to it that is the one asset which constitudes the ultimate wealth.

Just because it intangible - doesn't mean it isn't valuable.

See: God

Just because it isn't back by anything doesn't make it worthless.

See: Feelings

So bicoin is like God and Feelings?

Oh my...

Backing is a promise. Bitcoin = no promise. That's why I want them. It's not a flaw.

Well, you're obviously having trouble explaining it to  a certain segment of society who aren't... shall we say... well educated on technology. Using these words makes reassures them... without them even knowing.

Next time someone tells you bitcoins are worthless, ask them to mine one for you.
Only once they've spent the time and resources mining one will they understand it's value.

As for fiat being backed by nothing.
It's a debt note and it's backed by someones need to earn the debt note to pay down their debts.
As long as there is still debt you hold a unit of human labour time. (some might even call then slavery units) ::)

Mining has a very strange relation to bitcoin.
Realistically speaking, no matter how much energy you expend on mining the amount of coin created per time unit is constant.
I'm not sure that maps one to one to other things.
I think it is difficult to understand bitcoins value by just looking at mining.

That's a poor example. That is called the "labor theory of value" and it is no longer generally accepted. It's not the mining that gives it value. You can argue that if mining cost nothing, then the supply of bitcoins would be infinite (and its value would be 0), but that is still not what it derives its value from. One day, you will no longer be able to mine bitcoins at all. Will its value then become infinite (or 0)?

The value of a bitcoin is simply what someone will trade for it, just like everything else.

As are all currencies and dieties.  They are all based and backed by faith.

Gold is backed by Bitcoin because i will always buy 1 once of gold for 1 satoshi.
The question is not what back up bitcoin but what is backed by bitcoin.
Bitcoin is fundamental and backed by FAITH.

Taking total gold estimate from here, which is just an estimate (http://www.usagold.com/reference/properties.html), and using the total ever bitcoin amount of 21 million, there is about 0.004 bitcoins per.

If gold and bitcoin were backing each other (trading at that price, 4 mBTC per ounce gold) the price of bitcoins would be about 430 000 USD.

To say you will buy gold at 1 satoshi per ounce, you would need about 52 btc to back up the entire world supply of gold.