Bitcoin Forum

So, here's a whimsical thought I had.

When the dollar was backed by gold, there was an inherent separation between the two.  Gold was still gold and paper was still paper.  How many of these currencies are still backed by gold?

Well, my idea involves the idea that you can back BTC with something tangible and integral to bitcoin itself while also recognizing that BTC is too young to be independent of the dollar.

The idea is to start a company that will sort of be like the BTC reserve (a fort knox of BTC?).  How many GPUs have fallen victim to mining?  How many NVIDIA cards are used that are worth far more in value than the hash rate they produce?  How many cheaper-model ATI cards are used that achieve few mining results at current difficulty?

People will be able to donate their used rigs or used/burnt out GPUs to this company.  Thus, the value of the total sum of material donated will play the largest role in backing BTC.  

I was also thinking this company can serve a triple role as a mining rig and GPU manufacturing company AND a mining pool in addition to being a reserve.  Here's what the model would look like:

1)  People donate rigs and GPUs to company
2)  Company either uses working parts or refabricates broken parts to create it's own massive mining rig
3)  Those who donate rigs and and gpus will be given a share in the pool
4)  As the company mines, those who donated will be given a proportional distribution of mined BTC
5)  The company can qualify legally as a business because they will also be manufacturing and selling gpus and rigs.  This creates a cycle      wherein consumers can continue purchasing new gpus/rigs and then donate them again for additional shares.
6)  As a business, the company will have a company value in USD.  This value is really what would determine BTC value.

This could be kinda cool since as this company grew, it could get an invitation for the stock market.  Then, everyone might want to come on board, and we might actually have enough interest/capital in the market to build a real economy off of it.

Edit:  This could also provide a way for BTC to be insured indirectly...

Problem with the idea is that in lots of jurisdiction, depreciation of computers and parts are nearly 100% amortized over say 5 years.  There won't be any tangibles left.

But that's why there's manufacturing/selling/buying/donating cycle.  It's not like they'd have the same old crappy rigs and gpus for 5 years.

Yeap I get a clear picture of what you mean, I think the tangibles are more into services, GPU renting, recycling etc.  Not an impossible idea :)

Ever since 1973, none of the worlds currencies are backed by anything other than a consensus.
The consensus is about the capacity of the currency-issuing State to tax the economy under its rule.
When the State debt is increasing and the tax rate reaches the peak of the Laffer curve, the consensus starts to become shaky.

So why on earth would you want BTCs to be backed by SOMETHING other than the consensus of the miners ?

The point I was suggesting was that backing currency to something that wasn't integral to it has failed.

BTC will always need computers.  After all, the computers are what are doing the work, so why not give linkage between that work and BTC value?  Besides, it's really the consensus of computers that confirms BTC value anyway.  Without computers running the client, you cant confirm transactions, and so BTC instantly lose value without computers.

So, it seems fine to link the value of BTC to computers or GPUs because BTC can't even exist without them.  If we were to lose all computers, BTC value would go with it.  It's not like we're just gonna lose computers all of a sudden, and if we do, oh well, BTC wouldnt've worked anyway.

Good idea, Bitcoin really need a reserve to stabilize its value.

 A reserve defeats the whole purpose of bitcoins, its decentralized for a reason, the network would be at the will of this super company assume people would adopt it.

what would be the purpose of backing bitcoins with anything?

Because goods/services back any currency and computer goods/services are integral to Bitcoin.  It's backing it with something that it absolutely needs to survive.

but what would be the point?

It's already backed by something and will always be backed by something as long as it exists, so I don't get the point of the question.  It seems irrelevant.  Whatever gives Bitcoin value is what backs it, and the most fundamental thing that backs it is other computers confirming value in transaction.

fiat currencies are backed with goods/services

Bitcoin has often been described as similar to gold, the value is supposed to be in the Bitcoin itself somehow

Well, I guess it depends how one looks at value, but regardless, without computers mining for BTC, no transactions are confirmed and thus no value is confirmed.

True, to be precise, any currency are backed by the fact that they can fulfill some people's desire, without that ability, it worth nothing. And people's desire changes, the more they get, the less they want, so it is an art to balance the money supply

I'm not sure I get the point.

I understand fiat is backed by peoples' desires.  But the nature of desire is that it breeds more desire.  And I think that's why fiat currency is completely floundering.  Inflationary currencies allow for currency to be continuously printed to match the level of desire, and this is part of why they fail.

So, this is why I don't recommend that Bitcoin should follow suit.