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January 22, 2016, 06:55:16 AM |
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Well, philosophically, everything is backed by something. The trick is to make the "further" connections, and use those connection to see further into the future than anyone else.
The problem with something that is "not backed" by something... is that it's usually "backed" by some small group of people's beliefs and ideas about the future - and most people are greedy and only think about themselves, and as such their ideas about what something should do, only includes prosperity for themselves or their world view - history has shown many, many times over how a minority group uplifted themselves on the backs of a majority. Part of the reason Democracy leads to greater peace is because if you look after the majority first, the minority can take care of itself in most instances. It has almost never happened the other way around... power corrupts, is as if it's an inescapable part of our DNA.
So tangibly seeing or understanding what something is backed by, gives something legitimacy - especially if that "backing thing" is something that is fundamentally necessary.
So we used to use gold as a currency. Then the paper represented the gold... but when people could no longer see the gold, and when banks realized that not everyone comes to ask for their gold at the same time, the banks realized that they can just print as much paper as they like. But they made rules... but there was no way to prove that someone stuck to the rules until Bitcoin arrived.
So eventually, gold got replaced by oil... and because nobody knows *exactly* how much oil there is in the world, even with the strictest rules, banks managed to wangle things to get away with printing even more money.
In principle, not having something tangibly backed by something - ie. restrained by something - sets in motion a slippery slope. If I can print 1 extra bill, why not 2? But if I can do 2, why not 2 000 000 000 000 000 00 000 00 0 0 0 0 0 0 00 .... You get my point? So all the countries in the world are in a race to see who can print the most paper money, without causing an outright crash.
So what is "restraining" bitcoin? Well, it's easy: Processing power, Electricity and Connectivity. All things that we need in our modern economy... so Bitcoin has a barometer to measure itself against. If half the world's processing power gets destroyed, less Bitcoins will be minted... and people will have an incentive to rebuild that... but in rebuilding that, they will also rebuild many other things that has lead to our modern society. They will build power plants and computers... which will allow them do much more than just mint Bitcoin.
So why was oil a good idea? Because oil still is the lifeblood of our economy. If a country runs out of oil, chaos ensues. A handful of countries find themselves in this state - no food in the shops, no fuel at the stations, month-long power blackouts, raids by warlords, civil war. Just remove oil (or coal) and most of the world that we know descends into chaos.
So please... everyone saying "it doesn't need to be backed by anything"... lots of people have said that, but no arguments?! What's the point in saying something if you don't know why you're saying it, or if you're not willing to explain why you're saying it?
There are patterns in nature... if you look at the natural world - what is the closest thing that it has to a currency? ...I'd say it's water. Too much, or too little, causes destruction. Just like banks, water has dams, and just like QE, water has rain... The trick is to have the right balance... and if something is "backed" by the right thing, it has a way to see if it is in touch and has the right balance, to instead of messing things up more, actually making everything better.
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