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Author Topic: What is bitcoin backed by? My favorite answers  (Read 5035 times)
BoardGameCoin
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January 19, 2013, 10:39:54 PM
 #1

1) A lack of faith in central banks and their long-term control over government currencies

2) A desire to hold currency that has positive expected value when more efficient means of production are discovered.

That is all.

-bgc

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January 19, 2013, 10:59:46 PM
 #2

I say it's backed by math not gold and math is better then gold because:

  • Smiling lying bastards in silk suits can't deceive you about the amount of your math in the vault
  • The Govt can't reach up it's ass and pull out tons of math to give to the pigs on Wall Street, thereby debasing your math.
  • Burglars can't swipe your math while you're at the movies.
  • The 'we buy your math' creeps won't offer you peanuts for your math
  • Your math really is math and not tungsten with a math coating
  • And most important - The Govt can't send men with guns to take your math

Annona ad! Please keep in mind that there is nothing wrong with Bitcoin itself. All it's scandals are caused by wonky websites and sleazy people exploiting it. The light attracts bugs.

When all this bullshit drys up and blows away, Bitcoin will be stronger than ever.
Jutarul
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January 19, 2013, 11:29:14 PM
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The question is misleading. Bitcoin doesn't have backing. But other things may be backed by bitcoin.

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January 19, 2013, 11:31:23 PM
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The question is misleading. Bitcoin doesn't have backing. But other things may be backed by bitcoin.

Exactly. My favorite answer is: The same thing gold is backed by.

My personality type: INTJ - please forgive my weaknesses (Not naturally in tune with others feelings; may be insensitive at times, tend to respond to conflict with logic and reason, tend to believe I'm always right)

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January 20, 2013, 01:02:00 AM
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Same as gold, is backed by the people.

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January 20, 2013, 01:31:22 AM
 #6

Bitcoin is backed by demand from greedy geeks.  If you think the world will ever run out of greedy geeks - then you might want to steer clear of Bitcoin.

haha.. only serious Wink


Still.. even if a currency were 'backed' by a gold standard - it's only a political decision away from not being backed by gold... so even such 'backing' is hardly worth much.

Bitcoin's properties, whilst theoretically modifiable via mass consensus, are less fickle than the so-called backing of any other currency system.


So, in my mind, Bitcoin is backed by self-interest and its own inertia.  That could also be said of fiat currencies - but the big difference is who the 'self' is.

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January 20, 2013, 02:24:11 AM
 #7

The question is misleading. Bitcoin doesn't have backing. But other things may be backed by bitcoin.

Exactly. My favorite answer is: The same thing gold is backed by.

Not exactly.

Bitcoin and gold are both backed by the same thing - their unparalleled utility as a medium of exchange satisfying Aristotle's prerequisites:

Quote
Aristotle's Qualities of a Good Money
By Gold Investing 101

About 2000 years ago Aristotle defined the characteristics of a good form of money. They were as follows:

1.) It must be durable. Meaning it must stand the test of time and the elements. Money is a medium of exchange and a store of wealth so whatever form it takes, it must be able to handle the wear and tear of constant trading and transactions.

2.) It must be portable. Meaning it should be practical in the sense that it holds a high amount of 'worth' relative to it's weight and size. In other words, it's "worth" must be very dense. Imagine if money was in the form of lead bricks, these bricks would be very dense, but it would be a nightmare and near impossible to constantly exchange large amounts. And you can forget about carrying them around in your pockets.

3.) It must be divisible and consistent. Meaning it should be relatively easy to separate and distribute in smaller forms without affecting it's fundamental characteristics. This concept also works in reverse in that it should be relatively easy to re-combine several divided pieces of the money into a larger, single piece. This makes houses and paintings and cars unpractical as forms of money because taking them apart would affect their fundamental characteristics. An extension of this idea is that the item should be 'fungible'. Dictionary.com describes fungible as:

"(esp. of goods) being of such nature or kind as to be freely exchangeable or replaceable, in whole or in part, for another of like nature or kind."

4.) It must have intrinsic value. This characteristic carries a bit of a subjective quality in that everyone views the world through a different lens and what I view as valuable may not necessarily be valuable to my neighbor, but for the sake of argument let's just say that there is a consensus of value given to a certain material. The basic understanding behind intrinsic value is that the material carries 'worth' in and of itself. It does not derive it's value from anything else. It just sits there and is valuable. This is why paper currencies with no backing will not stand the test of time. Paper currencies only derive their "value" from what is known as legal tender laws, which are in essence a threat of legal prosecution, and or force, if they are not accepted as money for payment.

This fourth point brings up the point of scarcity, which is in essence a matter of intrinsic value. Paper currencies in circulation today, such as the dollar, euro, yen, swiss francs, zimbabwe dollars, etc... they are all now purely fiat instruments. (by fiat, I mean that their use is declared by decree and usually by threat of force. Definition of fiat.) The governments that sponsor them have essentially unlimited power in their ability to create new supplies. Because of technology, it is now simply a matter of typing something into a computer and the amounts are instantly credited somewhere. So in theory the supply of dollars for instance is infinite, and it seems like lately the wizards in Washington are trying to see whether this theoretical limit can be reached. Take Zimbabwe as a practical real world example. It now takes trillions of Zimbabwe dollars to buy a roll of toilet paper.
http://www.gold-speculator.com/gold-investing-101/4476-aristotles-qualities-good-money.html

"Current payment systems simply can’t compete with bitcoin’s fees, security and convenience.  Why spend hundreds of thousands of dollars on bank fees per year and lose hair as money transfers bounce from bank to bank during a wire transfer sometimes taking days to reach its destination, when it can clear within minutes and for mere pennies?  As a currency, no sovereign can match it.  As a payment system, no financial institution can compete with it.  As a distributed network, no government can stop it."     -Chris Horlacher
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January 20, 2013, 02:46:07 AM
 #8

Bitcoin is literally backed by silver and gold.  I can show you several places where you can exchange it for either.
iCEBREAKER
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January 20, 2013, 03:30:26 AM
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Bitcoin is literally backed by silver and gold.  I can show you several places where you can exchange it for either.

'Backed by' is not the same thing as 'exchangeable for.' 

If all the PMs exchangeable for (available for purchase with) Bitcoin were taken off the market, Bitcoin would still be backed by its intrinsic value as a good Aristotelian monetary unit.

Likewise, the US dollar is no longer backed by PMs, despite being constantly exchanged for them.

"Current payment systems simply can’t compete with bitcoin’s fees, security and convenience.  Why spend hundreds of thousands of dollars on bank fees per year and lose hair as money transfers bounce from bank to bank during a wire transfer sometimes taking days to reach its destination, when it can clear within minutes and for mere pennies?  As a currency, no sovereign can match it.  As a payment system, no financial institution can compete with it.  As a distributed network, no government can stop it."     -Chris Horlacher
Matthew N. Wright
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January 20, 2013, 03:36:09 AM
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Isn't bitcoin backed by speculation?

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January 20, 2013, 03:41:06 AM
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Bitcoin seems to work like a benevolent ponzi scheme. It is backed by math and the greed of all of us.
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January 20, 2013, 04:03:15 AM
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Me.

In Cryptography we trust.
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January 20, 2013, 04:49:16 AM
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Isn't bitcoin backed by speculation?

Don't reify a process into a thing.  Consider the basis for the speculation.

"Current payment systems simply can’t compete with bitcoin’s fees, security and convenience.  Why spend hundreds of thousands of dollars on bank fees per year and lose hair as money transfers bounce from bank to bank during a wire transfer sometimes taking days to reach its destination, when it can clear within minutes and for mere pennies?  As a currency, no sovereign can match it.  As a payment system, no financial institution can compete with it.  As a distributed network, no government can stop it."     -Chris Horlacher
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January 20, 2013, 05:18:50 AM
 #14

Bitcoin isn't "backed" by anything, but what gives it value is the same thing that gives all forms of money their value...its utility for exchange.  Paper currencies became popular and valuable because they were more convenient for exchange than physical gold and silver.  Digital currencies (prior to Bitcoin and including digital forms of USD and other national currencies) became popular and valuable because they were more convenient than physical paper.  Bitcoin is becoming popular and valuable because it too is more convenient, but it also enables a true two party exchange (other digital currencies all require a third party in an exchange), doesn't rely on a single, central issuer, and its supply can't be manipulated.  To use any of these currencies for exchange, you obviously need to possess the currency.  That is the source of demand and what gives all of these currencies value.  Speculative demand regarding the future value of a currency is only secondary.  Without the primary demand stemming from the utility for exchange, there would be no speculative demand (at least not any sustainable speculative demand).

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January 20, 2013, 05:47:08 AM
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Quote
[...]
It now takes trillions of Zimbabwe dollars to buy a roll of toilet paper.
I don't think that is a good example.  Surely you can use the dollars?
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January 20, 2013, 05:51:56 AM
 #16

It's backed by other people with FIAT currency willing to buy.

No different then anything else in life....

the value of the radeon cards you mine with is what someone is willing to pay for it. Sometimes it can be unreasonably low or high, depending on what the market is feeling or where you are on the supply/demand curve.

if people suddenly decided that gold was only worth $5/oz then thats what it would be worth, doesnt matter how shiny it is.


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iCEBREAKER
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January 20, 2013, 05:59:18 AM
 #17

It's backed by other people with FIAT currency willing to buy.

No different then anything else in life....

I don't think that's correct.  For one thing, Bitcoins are different than "anything else in life."

Nothing else in life 1) solves the Byzantine Generals' Problem and 2) meets Aristotle's criteria for good money.

The correct answer is:

[insert Joel Katz response here].

"Current payment systems simply can’t compete with bitcoin’s fees, security and convenience.  Why spend hundreds of thousands of dollars on bank fees per year and lose hair as money transfers bounce from bank to bank during a wire transfer sometimes taking days to reach its destination, when it can clear within minutes and for mere pennies?  As a currency, no sovereign can match it.  As a payment system, no financial institution can compete with it.  As a distributed network, no government can stop it."     -Chris Horlacher
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January 20, 2013, 07:35:07 AM
 #18

I will answer with counter question:What is HTML backed by?

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January 20, 2013, 08:10:27 AM
 #19

Same as gold, but modern, like "electronic gold"

IMO, it's better than gold..  few years ago, I would pur all my savings in gold, but after discovering BTC, I'm quite happy to have been patient,... now, I'm all in BTC !!!!  Cheesy


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January 20, 2013, 10:44:11 AM
 #20

The question is misleading. Bitcoin doesn't have backing. But other things may be backed by bitcoin.

Exactly. My favorite answer is: The same thing gold is backed by.

Not exactly.

Bitcoin and gold are both backed by the same thing - their unparalleled utility as a medium of exchange satisfying Aristotle's prerequisites:

So you tell me "not exactly" and then you repeat my words? Huh?

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