Do Bitcoins need something REAL to back them?

[evgonoba]

The following blog by a PhD of Economics says Bitcoin could be improved by backing them with something "real". Anyone care to explain why he's wrong? Sounds smart to me.

http://www.capitalasmoney.com/

[teriaki]

The author doesn't give any reasoning except to say that it should be backed by something.  Not even a hint as to why it's important, what difference it would make, nothing.

Waste of time.  Here's my counter argument: it shouldn't be backed by anything.  Just as sound as the author's post.

[Mike Christ]

Does gold have something backing it?

Yes: people who believe it has value. 

[ramune]

Software isn't "real" but it provides utility just like bitcoin.

[baddesttrader]

Does gold have something backing it?

Yes: people who believe it has value. 

Well said friend

[Mike Christ]

To expand on my last post, having Bitcoin "backed" by something would only remove its credibility as something which can work on its own.  Bitcoin is perfectly fine as-is.  If it's pegged to a commodity, it implies Bitcoin was worthless before it was pegged to said commodity.  This is wrong.  Bitcoin has many uses that nothing else can do; Bitcoin is the very first of its kind.  It's valuable because these traits are non-existent in any other commodity, especially if you realize what the banks are about nowadays.

[HeRetiK]

Does gold have something backing it?

Yes: people who believe it has value. 

exactly. and the same is true for bitcoins. it's just that the one thing can be touched, while the other is an abstract piece of data. but seeing how other abstract pieces of data are already given value (such as media, software, games) it's not so far fetched to give a digital currency value as well.

[1krona]

"The bitcoin is backed by math argument" is kinda silly if you ask me. It´s backed by people who belive in it, but it have no other use than a medium of exchange, therefor it will fail.. In the long run, or short run. It could even be tommorow who knows. The problem is that the source code of bitcoin can be copied to infinity and create infinite new eCoins, you cant do that with physical things like gold.
You can also do something else with physical things like gold rather than use it as a medium of exchange, you cant do that with bitcoin.

[Saka]

I would say yes.

If the only thing you can buy with Bitcoins is more Bitcoins, the the value of the currency is completely speculatory. However, once you start to regularly tie other real-world objects to it like food/drink/etc., Bitcoin actually becomes valuable as a medium between end-goods, which is what a currency is for.

Currently, since Bitcoin's value is so volatile though, nobody really likes trading it for anything other than speculation reasons, which hurts it as a currency. Maybe one day the coin will be easy enough to get into and the value stable enough that it becomes widely adopted.

Although, the system and infrastructure to support transactions in general might find some use in small mini-economies immediately without worry of speculation/legal issues... like a forum currency or something.

[Kruncha]

Modern money has no value, just trust. Bitcoins are no different, except, you don't need trust as it's secured by every user, not a central authority who can change things as they please.

K.

[Kennji]

I don't think so.

[Mike Christ]

Confidence isn't real?

Not physically, no, but people are real.

[ReCat]

What backs up gold?

Gold is hardly useful. All we use it for is jewelry, and plating our connectors.

The only thing that backs up gold is scarcity and the fact that people have all agreed it has value. Something that bitcoins have achieved, perfectly.

Same with diamonds.

Up to 100-ish years ago, diamonds were, to people, perceived as worthless shiny rocks. Just like any other worthless shiny rock. They only have value now because we agree they have value. Diamonds aren't even rare.

[Lauda]

Maybe if it was backed up by something like gold (which backs up everything else non digital), the exchange rate would be more stable.
Nevertheless it's backed up by merchants who accept bitcoin, so don't worry about it, it's tehnically backed up by that

[mitsanaga]

If anything backs bitcoin other than the math that makes up the work... its the power supply. currently for most people, thats the energy companies. thats what gives it value, not to mention the amount of work put into mining them in the first place. actually the two coincide pretty much. but even then, that is a speculative backing, because who is to say that like 1/3 of all the bitcoins created were powered by one of those companies. it wouldnt take much for a person to build a self sufficent solar powered bitfarm. so i guess the best backing the bitcoin has is the people who hold them. we give the coin its true value, the value being whatever the people willing to trade them, are willing to trade them for.
before i wrote this i just recently watched the mt.gox ticker go from 86/bitcoin to 103/bitcoin, just because two people agreed upon a value for it. volume went from 1300~ish to 23000~ish.  

[Mike Christ]

Maybe if it was backed up by something like gold (which backs up everything else non digital), the exchange rate would be more stable.
Nevertheless it's backed up by merchants who accept bitcoin, so don't worry about it, it's tehnically backed up by that

Stability is good, but gold hasn't been doing so hot lately, and has been going down in price pretty consistently.  The downside would be, wherever gold goes, Bitcoin would have to follow; plus, there's no way to peg it without any legal fiction to back it, which would mean government would get involved.  If a bank-owned government actually wanted to do this, I'd say:

[Serjster]

Everything material that has value in this universe ONLY has value because people agree that it has value, that is all. If anyone tells you differently, they are either ignorant or are trying to sell you something.

[Lauda]

Maybe if it was backed up by something like gold (which backs up everything else non digital), the exchange rate would be more stable.
Nevertheless it's backed up by merchants who accept bitcoin, so don't worry about it, it's tehnically backed up by that

Stability is good, but gold hasn't been doing so hot lately, and has been going down in price pretty consistently.  The downside would be, wherever gold goes, Bitcoin would have to follow; plus, there's no way to peg it without any legal fiction to back it, which would mean government would get involved.  If a bank-owned government actually wanted to do this, I'd say:

Yeah no-ty to goverments.
I mean bitcoin has a lot of potentional, and backing it up with something that is let's say "real" (since the currency is digital), would just destroy it's own itention.
It should remain at planned conditions from the start till the end.

Maybe we could see even better digital currencies someday .

[BitcoinBoss]

What backs up gold?

Gold is hardly useful. All we use it for is jewelry, and plating our connectors.

The only thing that backs up gold is scarcity and the fact that people have all agreed it has value. Something that bitcoins have achieved, perfectly.

Same with diamonds.

Up to 100-ish years ago, diamonds were, to people, perceived as worthless shiny rocks. Just like any other worthless shiny rock. They only have value now because we agree they have value. Diamonds aren't even rare.

Gold is a very useful element especially for things like the development of technologies of space travel

[kokjo]

Does gold have something backing it?

Yes: people who believe it has value. 

wrong, gold have uses: cables(stuff that is useful) and jewellery(which is just people thinking its pretty).