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Author Topic: What is bitcoin backed by? My favorite answers  (Read 9923 times)
herzmeister
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January 20, 2013, 01:44:03 PM
 #21

ah always those Americans with their gold.

On an island without any gold, should we suspend all economic activity and starve just because there just isn't any shiny rocks around? No, we can set up a LETS where we keep a ledger, and the unit of accounting is work hours. What is this backed by?

So no, money is not gold. Money does not have to be anything material or durable.

Money is information. That's all it is. Who contributed how much to the needs of a society, giving them the right to consume goods and services from this society.

So why this mania about gold? Well, money has always been a trust problem. Who or what to entrust with this information? Commodities like gold and silver coins have always been good tools to store and transport this information, nothing more. They're not money themselves. A common fallacy. They're tools.

Today we trust governments to administer this information, unfortunately. Ultimately, money today is backed by force. And also, as history shows, governments don't last forever, so it becomes obvious it's good to have something that does not rely on them.

So, to the OP, Bitcoin is not really backed by anything tangible, why not explaining it faithfully according to its actual technical foundation? It's an accounting system, just like the mentioned LETS, but without a central administrator who keeps the ledger and who must be trusted. And instead of work hours, its units of accounting are free-floating, determined by supply and demand. They're debt-free because the initial work is done by computers. Even in a LETS you can imagine that the administrators of the ledger could be compensated by their own currency.

Long story short, if we really have to come up with something about its backing, then Bitcoin is backed by the common effort of the world-wide community, its incentive to keep the system running, and the passion to build upon its unique features. Unlike money today, Bitcoin is not backed by force, it's backed by love.  Kiss

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January 20, 2013, 02:00:51 PM
 #22

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?


Zimbabwean dollars have intrinsic value... as toilet paper! Thats golden!
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January 20, 2013, 02:46:24 PM
 #23

No, we can set up a LETS where we keep a ledger, and the unit of accounting is work hours.

Work hours would make a terrible currency since they are not at all consistent.

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January 20, 2013, 03:06:44 PM
 #24

Bitcoin is backed by math.

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January 20, 2013, 03:14:20 PM
 #25

Bitcoin is backed by math.

So I can cash 1 BTC and get some amount of math?

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January 20, 2013, 03:40:08 PM
 #26

Bitcoin is backed by math.

Just like gold is backed by...  Grin


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herzmeister
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January 20, 2013, 03:58:47 PM
 #27

Work hours would make a terrible currency since they are not at all consistent.

That was not the point of my post, but yeah well, such systems do exist, if they would scale up is another question. Also supply and demand still applies, a specialist doesn't have to trade their hours 1:1, if that is what you mean.

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January 20, 2013, 04:09:34 PM
 #28

1. Drugz
2. Ponzis
3. Gambling
4. Other scams
5. Money laundering
6. Asset protection / "System D"
7. Fear / Quasi-apocalyptic expectations

I'd say that's quite enough to be confident in its exchange value
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January 20, 2013, 04:28:33 PM
 #29

ah always those Americans with their gold.

Right, because Europeans, Chinese and Indian people (especially those last two) all hate gold....  Huh
herzmeister
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January 20, 2013, 04:42:41 PM
 #30

Right, because Europeans, Chinese and Indian people (especially those last two) all hate gold....  Huh

we're just not as obsessed as you  Tongue

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January 20, 2013, 04:47:20 PM
 #31

short answer: its backed by production costs
EG gold miners sell gold to cover their costs of production and a profit to cover their livelihood. gold is getting more expensive to produce a gold bar, hence the high prices.

long answer: its backed by productions costs and profit dependant on demand
EG if an individual gold miners costs were $1500 to make a weeks worth of gold bar the minimal they would sale for is $1500 plus a weeks wages. that's if their was not much demand and the miner was desperate to sell it just to break even.
but if the demand is high, the miner can sell for higher prices and rake in the profit.

same with bitcoin,  its electricity and computer components mainly, as oppose to excavators and 'washer' machines. bitcoins are getting harder to mine a block hence the higher price. then add on the costs of a few grands worth of rigs the miner has pre-paid for they will want more buck for their BTC. the amount of profit ontop of costs varies depending on the demand for it.

so just wait till ASICS hit the majority. at first there will be a flash flood of BTC hitting the market which may cause a drop, due to too much supply and not enough demand. but once the difficulty changes a few days later the supply amounts will decrease, demand will then increase again which would cause a rise.






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January 20, 2013, 04:52:49 PM
 #32

Right, because Europeans, Chinese and Indian people (especially those last two) all hate gold....  Huh

we're just not as obsessed as you  Tongue

Who said I am American?
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January 20, 2013, 06:26:42 PM
 #33

I will answer with counter question:What is HTML backed by?
For a split second, I thought this post was stupid. Then I realized the ingenuity in the comparison. HTML and Bitcoin are valuable because they are useful if people agree to use them...otherwise, they're not.

Hardfork aren't that hard.
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franky1
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January 20, 2013, 06:59:05 PM
 #34


No. You have it backwards. No one would be mining for anything if it didn't have value in the first place.

wrong. in 2009 bitcoin had 0 value..  and you cant use bitcoin to do anything else. you cant bend it or melt it to make jewellery out of it, you cant eat it or drink it so it has no commodity value. it wasnt till months later that people started putting a monetary value to it making it become an ASSET.

bitcoin is not like gold (commodity) at all. it is more like van Gough art (asset) but instead of a dozen paintings theres a few quadrilian satoshis.
it wasn't till months later that people started putting a monetary value to it making it become an asset.

in 2009 it had no value, but because some people started selling alpaca socks and pizza for it, it created a demand. and the production costs set the price accordingly increasing due to difficulty changes(supply) which then increased the costs of electricity and hardware to continue mining. move on 4 years and the price is now linked to production costs + miners profits.

500 years ago water was free, anyone can have it. no one seen monetary value in it. but then water companies created value. how you may ask.
by making it easier to get hold of instead of the people gathering it themselves (supply) and by setting a cost based on water pipes and treatment facilities (production costs) and now they are making huge profit due to the demand for it increasing.

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Don't take any information given on this forum on face value. Please do your own due diligence & respect what is written here as both opinion & information gleaned from experience. If you wish to seek legal FACTUAL advice, then seek the guidance of a LEGAL specialist.
johnyj
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January 20, 2013, 08:50:20 PM
 #35

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.


Greedy Geeks!!! This is by far the best answer for this question  Grin Grin Grin

Anon136
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January 20, 2013, 10:22:15 PM
 #36

bitcoin is backed by weed. everyone knows that.

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If one can not confer upon another a right which he does not himself first possess, by what means does the state derive the right to engage in behaviors from which the public is prohibited?
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January 20, 2013, 10:26:11 PM
 #37

short answer: its backed by production costs

No. You have it backwards. No one would be mining for anything if it didn't have value in the first place.


hear hear

(I would add something of substance to this discussion, but the quoted explanation is obvious enough for me...)
FreeMoney
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January 20, 2013, 11:45:23 PM
 #38

short answer: its backed by production costs
EG gold miners sell gold to cover their costs of production and a profit to cover their livelihood. gold is getting more expensive to produce a gold bar, hence the high prices.

long answer: its backed by productions costs and profit dependant on demand
EG if an individual gold miners costs were $1500 to make a weeks worth of gold bar the minimal they would sale for is $1500 plus a weeks wages. that's if their was not much demand and the miner was desperate to sell it just to break even.
but if the demand is high, the miner can sell for higher prices and rake in the profit.

same with bitcoin,  its electricity and computer components mainly, as oppose to excavators and 'washer' machines. bitcoins are getting harder to mine a block hence the higher price. then add on the costs of a few grands worth of rigs the miner has pre-paid for they will want more buck for their BTC. the amount of profit ontop of costs varies depending on the demand for it.

so just wait till ASICS hit the majority. at first there will be a flash flood of BTC hitting the market which may cause a drop, due to too much supply and not enough demand. but once the difficulty changes a few days later the supply amounts will decrease, demand will then increase again which would cause a rise.



This is easily one of the longest most wrong economic fallacies of all time. Things are not worth their input costs. That isn't real, that isn't what happens. Laptop + milk = fail.

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Stephen Gornick
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January 21, 2013, 12:07:15 AM
 #39

Aristotle's prerequisites:

Even back in Aristotle's time theft and confiscation of assets were risks anyone holding money was exposed to.  The more durable and portable the money the easier it is to hide (from all manner of thieves, including the tax collectors).

Bitcoin excels not just as a form of money whose value, once acquired, can be kept hidden well, but it also excels because it can be used during the process of creating wealth as well.  The blockchain doesn't reveal how much in revenues a particular merchant sees.

Anonymity is a property that nearly all money in Aristotle's time had but with today's ubiquitous electronic transaction (and reporting to the state), Bitcoin's user-definable anonymity is something that is relatively unique to Bitcoin.

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January 21, 2013, 02:15:17 AM
 #40

Bitcoin is backed by ... magic.

http://www.youtube.com/watch?v=HqhDHznbLVE

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