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Title: Crypto vs Fiat? Post by: precrime3 on February 28, 2014, 12:47:36 AM Just bouncing ideas off you guys, feel free to chip in. So I'm talking to someone about bitcoins, and they stumped me with a question, bitcoins aren't backed up by gold. He rattles off that the US dollar is backed up by gold (which it's not, 1971 Nixon shock ended that) so they have intrinsic value. Since the dollar is backed by " the faith of the US government" or "In god we trust" that means it's no different than crypto besides the fact that crypto is digital? What do you guys think? Would love to know! Thanks!
Title: Re: Crypto vs Fiat? Post by: odolvlobo on February 28, 2014, 05:16:10 AM You are right. The dollar is not backed by gold. Anyway, you need to be clear on what "backed by" means. The meaning of "backed by gold" is completely different than "backed by the full faith and credit ...", or "backed by the economy" or "backed by the Federal Reserve", or "backed by the taxing authority" or "backed by the military". In all these cases, "backed by" means something completely different.
Also, it can be helpful to remember that nothing backs the value of gold and there is no such thing as intrinsic value. Title: Re: Crypto vs Fiat? Post by: BitcoinAshley on February 28, 2014, 05:36:13 AM Quote Myth: Bitcoins have no intrinsic value (unlike some other things) This is simply not true. Each bitcoin gives the holder the ability to embed a large number of short in-transaction messages in a globally distributed and timestamped permanent data store, namely the bitcoin blockchain. There is no other similar datastore which is so widely distributed. There is a tradeoff between the exact number of messages and how quickly they can be embedded. But as of December 2013, it's fair to say that one bitcoin allows around 1000 such messages to be embedded, each within about 10 minutes of being sent, since a fee of 0.001 BTC is enough to get transactions confirmed quickly. This message embedding certainly has intrinsic value since it can be used to prove ownership of a document at a certain time, by including a one-way hash of that document in a transaction. Considering that electronic notarization services charge something like $10/document, this would give an intrinsic value of around $10,000 per bitcoin. While some other tangible commodities do have intrinsic value, that value is generally much less than its trading price. Consider for example that gold, if it were not used as an inflation-proof store of value, but rather only for its industrial uses, would certainly not be worth what it is today, since the industrial requirements for gold are far smaller than the available supply thereof. In any event, while historically intrinsic value, as well as other attributes like divisibility, fungibility, scarcity, durability, helped establish certain commodities as mediums of exchange, it is certainly not a prerequisite. While bitcoins are accused of lacking 'intrinsic value' in this sense, they make up for it in spades by possessing the other qualities necessary to make it a good medium of exchange, equal to or better than commodity money. Another way to think about this is to consider the value of bitcoin the global network, rather than each bitcoin in isolation. The value of an individual telephone is derived from the network it is connected to. If there was no phone network, a telephone would be useless. Similarly the value of an individual bitcoin derives from the global network of bitcoin-enabled merchants, exchanges, wallets, etc... Just like a phone is necessary to transmit vocal information through the network, a bitcoin is necessary to transmit economic information through the network. Value is ultimately determined by what people are willing to trade for - by supply and demand. From https://en.bitcoin.it/wiki/Myths#Bitcoins_have_no_intrinsic_value_.28unlike_some_other_things.29 Title: Re: Crypto vs Fiat? Post by: CrashX on February 28, 2014, 06:04:25 AM Most governments currencies are back up by Minerals or something else. Gold, Silver, Water, Food, Fruits, ect, at least in theory.
Title: Re: Crypto vs Fiat? Post by: CalibrataBG on February 28, 2014, 08:53:57 AM Yeah... you are correct ... your privately owned us dollar is worth nothing and keeps going down
Title: Re: Crypto vs Fiat? Post by: knightcoin on February 28, 2014, 10:17:45 AM BTC backed by maths ;)
Title: Re: Crypto vs Fiat? Post by: precrime3 on February 28, 2014, 11:36:27 AM You are right. The dollar is not backed by gold. Anyway, you need to be clear on what "backed by" means. The meaning of "backed by gold" is completely different than "backed by the full faith and credit ...", or "backed by the economy" or "backed by the Federal Reserve", or "backed by the taxing authority" or "backed by the military". In all these cases, "backed by" means something completely different. Also, it can be helpful to remember that nothing backs the value of gold and there is no such thing as intrinsic value. can you explain what you mean by gold has no intristic value? Also, how is the terms backed up by federal reserve different? Are you saying the dollar is indeed backed up by something? Just would like some clarification please xD Title: Re: Crypto vs Fiat? Post by: Sindelar1938 on February 28, 2014, 12:03:19 PM Bitcoin is backed by mathematics and logic
Title: Re: Crypto vs Fiat? Post by: odolvlobo on February 28, 2014, 12:11:41 PM You are right. The dollar is not backed by gold. Anyway, you need to be clear on what "backed by" means. The meaning of "backed by gold" is completely different than "backed by the full faith and credit ...", or "backed by the economy" or "backed by the Federal Reserve", or "backed by the taxing authority" or "backed by the military". In all these cases, "backed by" means something completely different. Also, it can be helpful to remember that nothing backs the value of gold and there is no such thing as intrinsic value. can you explain what you mean by gold has no intristic value? Also, how is the terms backed up by federal reserve different? Are you saying the dollar is indeed backed up by something? Just would like some clarification please xD Value is completely subjective. "Intrinsic" value implies an absolute value. Value cannot be both subjective and absolute, so "intrinsic" value cannot exist. On a gold standard, a dollar can be exchanged for a fixed amount of gold. A dollar is "backed by" the gold that can be exchanged for it, but nothing backs gold in the same way. Again, the meaning of "backed by" is ambiguous.
The ambiguity is problem because the inferences and comparisons that you can make depend on which meaning of "backed by" is being used. Title: Re: Crypto vs Fiat? Post by: FelixOliver on February 28, 2014, 12:33:53 PM Bitcoin is backed by mathematics and logic This, and also the World's most Powerful Computer Network Title: Re: Crypto vs Fiat? Post by: precrime3 on February 28, 2014, 05:08:29 PM ALright thanks guys I have what I need to disprove a guy, but also learned quite a lot! Side note, do you think bitcoin can recover from the news surrounding them, including the beginning of US and Japan investigations, and when main stream adoption will occur?
Title: Re: Crypto vs Fiat? Post by: pening on February 28, 2014, 11:12:38 PM Bitcoin is backed by mathematics and logic I do find this point of view confused and misguided: the Bitcoin protocol is backed by mathematics. The economic value isn't. I don't understand why people can't accept Bitcoin isn't backed by anything other than faith in it. It doesn't matter, all value is the same in the end, even the value of gold. As a poster above says, the "intrinsic" value of anything isn't real, its not a tangible thing, people confuse this because gold itself is tangible and considered to have intrinsic properties one of which is value. But value here doesn't *mean* money per se. Title: Re: Crypto vs Fiat? Post by: precrime3 on March 01, 2014, 01:37:32 AM I'm learning that myself, as all value in this world is subjective, and have found some good ways to prove it. Usually at times of hyperinflation. For example Germany after WWI, 100 billion mark = USD (something like that) and so the most valuable commodity? Food.
Title: Re: Crypto vs Fiat? Post by: ShakyhandsBTCer on June 15, 2014, 12:38:33 AM The US dollar is based on the faith in the US economy.
bitcoin is based on the faith of the security of the network. Title: Re: Crypto vs Fiat? Post by: Yakamoto on June 15, 2014, 01:05:01 AM Bitcoin is backed by mathematics and logic This, and also the World's most Powerful Computer Network Unless you want to back Bitcoin with all the commodities you can purchase, it's backed by logic, mathematics, and a super-powerful computer network. Title: Re: Crypto vs Fiat? Post by: Ikaros on June 15, 2014, 02:38:06 AM Most governments currencies are back up by Minerals or something else. Gold, Silver, Water, Food, Fruits, ect, at least in theory. They are back up with military. Title: Re: Crypto vs Fiat? Post by: ShakyhandsBTCer on June 15, 2014, 03:23:38 AM Most governments currencies are back up by Minerals or something else. Gold, Silver, Water, Food, Fruits, ect, at least in theory. They are back up with military. Most governments use neither. Most governments will either back their currency by their economy (when they do this they have control over their money supply) or have their currency pegged to the US Dollar (when they do this they essentially are forced to adapt to us monetary policy but get the stability of the dollar). Title: Re: Crypto vs Fiat? Post by: Erdogan on June 15, 2014, 04:47:40 PM Just bouncing ideas off you guys, feel free to chip in. So I'm talking to someone about bitcoins, and they stumped me with a question, bitcoins aren't backed up by gold. He rattles off that the US dollar is backed up by gold (which it's not, 1971 Nixon shock ended that) so they have intrinsic value. Since the dollar is backed by " the faith of the US government" or "In god we trust" that means it's no different than crypto besides the fact that crypto is digital? What do you guys think? Would love to know! Thanks! You are correct. All the worlds fiat currencies have been unbacked since 1971. Bitcoin is also unbacked. That is how we like bitcoin to be. The problem with fiat money is not that it is unbacked, but that it is unrestrained. Backing schemes from earlier times had the purpose to restrain the money issuance, but they failed. |