Do Bitcoins need something REAL to back them?

[AlphaWolf]

So that affects banking as well. Also if a blackout happened you just wait until the power turned back on. I was actually at a restaurant during that. They had to write people's credit card numbers down, and hope that the credits card weren't decline. What would be different then giving them a bitcoin address to pay later with, most people would pay it later when they can.

Sorry, I was adding to my post as you posted this...   I added:

With fiat, there exists the possibility that you could drive to another city with power, and extract some paper money from a bank.  Bitcoin needs an easier way to transact physically, in person, even when the network if offline or inaccessible.  Pretty big challenge.. given that the strength of Bitcoin *is* the network.

That being said, I don't disagree with you... mostly.  Like I said in my original post:

We are close to this being an issue already with fiat being exchanged almost exclusively electronically, of course.  I believe the smart course of action is "diversify".

There are other slight differences between writing down credit card numbers and writing down Bitcoin addresses....  I can make up Bitcoin address on the spot, out of random numbers and letters.  I cannot fabricate a plastic card (not very easily, anyway, and not with the power out).  That gives *some* assurance that the card could valid, as it is *issued* by largely trusted entity.  And, writing down the bitcoin address isn't enough -- I have to prove that I own the private key to that address by signing the transaction.  How does one cryptographically sign a transaction on a piece of paper?

[PlutoPetery]

Quite frankly, I do not expect bitcoin to last long, unless there is a serious force behind it, who recognizes the revolutionary power and behavioural-model dissolving power of bitcoin.

Not only is it freedom beyond which many vast institutions are perturbed practicably ad nauseam by, but it is also an excellent form of breaking the current cyclical system that tears apart the large lower class and middle class from the 1% who own 90% of the wealth in the USA. It also happens to scare the living gut-flora out of the entire banking complex, and subsequently (through tied interests) pharmaceutical industry and the media complex (also through shared ties).

Just imagine. First they will try to tax it, because it is a legitimate candidate for a component of tax evasion, in all forms. Choose to not be paid at work, and instead have your boss wire you the money in BTC, saving you I-T. This concept can be applied to other services as well, and can be used to circumvent much of the carefully laid out rules of the current economy that allow so much profit to be funneled into the pockets of few, and into the projects of the mad and evil.

Bitcoin stands a chance in changing the world with extreme magnitude, even magnitude greater than the change in our world resulting from the internet.

Bitcoin is feared, believe that shiatsoup my friend-o's.

[1krona]

I always get the answer "You just dont understand", but I have studied currencies, economics, finance a lot.. And when youre saying that we will be using it 50 years from now I see your total lack of understanding from my subjective view. 50 years from now I think there is a much greater chance that we will be using some kind of money measured in energy. It is portable, durable, fungible, and you can do shit with it. So no I dont think cryptos like Bitcoin, Litecoin will stand much more than 5-10 maximum 15 years. But I could be wrong, but I have a bunch of ideas that would serve a much better purpose as a medium of exchange than Bitcoin.

I also have big issues with the asymmetric distribution of bitcoin. Some entities are sitting on 1 - 10 % of all Bitcoins just for them self, thats even worse than the Fiat distribution, although this is not an argument for that bitcoin is bad and will fail, I just dont like the asymmetric distribution. Read this: http://eprint.iacr.org/2012/584.pdf Check pg 8 and 9 for distribution of the coins.

Energy I can only use it for one thing, to power something.

That is the fairest way, early adopters had to have a lot of faith in the system so it is only natural they be rewarded the most.

Energy I can only use it for one thing... Are you kidding me?

And yeah bitcoin is mostly based on faith and have only a value as a medium of exchange, you can use dollar, gold, potatos, kittens, stones or energy for that to.
There is nothing that makes bitcoin better than terracoin else than it have more "Belivers".. Actually cryptos kinda remind me of religion and other political views; get enough people to belive in it and value what you offer and you´ll win!

You have big faith in Bitcoin and you will probably go on claiming that it´s the best thing ever like religious and political people. So I dont expect you do change your mind although I like the debate

Bitcoin is based on math, which is not faith it is prove to be the truth. A value of a medium of exchange is what 100% of currencies are. Comparing bitcoin and terracoins is like comparing the Euro and Dollar, the same thing but one of them is stronger. It isn't a religion just cause I am defending it, cause I researched it and believe in math, doesn't mean I am part of a cult where my mind can't be changed. It is just that bitcoin is currently the best currency I think out there and many others do the same. It is cool that you don't we need people like that in the community to keep the debate fresh and keep us on our toes. Who knows maybe you will discover a huge flaw no one saw and bitcoin will be worthless. But until then I put my money into math which can never be wrong.

Yeah I´m no big fan of Euro and Dollar either so I kinda agree with that comparison. I think that a transition from Fiat to Cryptos would be a transition from one crappy system to another "little less?" crappy system.
I want a medium of exchange that I can do something else with than exchange. I also think that the big guns in the cryptosphere gets unfair amount of financial power rather than the users of the currency, kinda like banks and fiat-related issues.

But I explained how you can buy a lot of things with bitcoins, so how is that not more? What more do you want to do with bitcoins you can't do in any other currency? How do people get more power, if you think Gavin is doning something wrong or unethical with the software, you can fork it and if people agree they will join you, cutting the Gavin's version out of the blockchain.

Lol do you seriously dont get my point?
For me to OWN a bitcoin I have to put my faith in it that some other person would value it as much as I did, otherwise I loose. Lets say a bitcoin 2.0 gets online with much better properties making your bitcoin 1.0 worthless. If I own Stored energy, I can USE it to something like powering my computer, TV, cooking plate, powering ASICs performing protein folding, (not useless shit like double SHA-256 hashing )..

Do you still dont get it??

[1krona]

I´m having really hard deciding what is best to own right now gold, fiat or cryptos they all have their shortfalls. A energybased currency would be one of the best alternatives if you asked me, but thats my point of view.
Fiat could stand this storm and then the gold and cryptos just will be seen as big bubbles, so right now I´m just passively observing. I´m actually still not comfortable putting my savings into a highly speculative currency based on a software that is far from flawless.

If a organization would like to shut down the cryptos they would only have to invest about 20$ millions(this a piss in the sea for a government or bank) into ASICs and then kill it with a 51%-attack. It´s probably not gonna happen, but it isnt totally unlikely either.

Cryptos will always be see a bubble cause that what people want to believe. It is young it is going to move up and down fast.
The software has yet to be hacked so to say it is far from flawless is not correct. You do know most software ship with ~ 50,000 Bugs known. Bitcoin software is probably one of the most well written pieces of software I have seen.

It would be a lot more than $20 million, if that was true then NSA would have done it a long time ago. NSA does know about bitcoin, the CIA invited Gavin to talk about it so it is on there radar.

Nah it wouldnt take more than $20 million I´m surprise to see that you seems to know so little although it looks like you have been into bitcoin for a while.
The total tH/s of the bitcoin network is 64 terahashes/s right now. And a minirig from BFL costed $30 000 and produced 1,5 tH/s so to get up over 64 tH/s I would have to get 43 minirigs and that would cost me about 1.3$ million so I was being generous when I said 20$ million, calculating that the hashrate would increase a lot and that goverments usually are cost ineffective.  

I could make alot of money if I had the capital to perform a 51 %-attack because I could short the bitcoin-market before, Actually a big organization dont really have anything to loose in a investment like that. Because they could make a lot of money shorting the market and in the same way getting rid of competition, and if they failed a 51%-attack they still would control a huge amount of the bitcoin market.
I think the bitcoin far from flawless, but that´s just me and I like you to prove me wrong.

That isn't how it works, but ok, you also didn't take into account the difficultly rising there so many variables, that $20 million is not equal to a 51%.

I have proved you wrong and answer everyone of your questions so I am guessing your cult mind will not change. But I think you will never see the light of bitcoin and that is ok. I hope you stick around and helps us to move bitcoin into a places where we have a lot of criticism, I feel too safe on this forum.

Okay lets say someone had invested 1,5$ millions in 45 minirigs that were offline right now and then they put all that 67,5 tH/s of power onto the network controlling over 50%... Why wouldn´t that someone be able to perform a 51%-attack?

Explain.

If a 51% attack was actually to happen, where it is on purpose, we would probably fork to a new mining process that rendered those ASIC machines out.

Dont you think the trust in Bitcoin would get hit really hard in a 51%-attack making it hard to restore.
Is it easy to fork a new mining process for bitcoin and who decides if that should be done?

[drakahn]

so much newbie fail today...

there is no bitcoin 1.0 yet

securing the network is not "useless shit"

you can use crypto's for other things, provably fair voting, file timestamping, namecoin has even built a domain name system that exists in a blockchain...

lurk moar

[gweedo]

Lol do you seriously dont get my point?
For me to OWN a bitcoin I have to put my faith in it that some other person would value it as much as I did, otherwise I loose. Lets say a bitcoin 2.0 gets online with much better properties making your bitcoin 1.0 worthless. If I own Stored energy, I can USE it to something like powering my computer, TV, cooking plate, powering ASICs performing protein folding, (not useless shit like double SHA-256 hashing )..

Do you still dont get it??

So for me own a dollar the same would have to be true, that is true in any currency. Your energy currency theory is still under the same law. What if one computer requires X energy to be powered. Yet computer 2 requires X+1 energy.

[drakahn]

Lol do you seriously dont get my point?
For me to OWN a bitcoin I have to put my faith in it that some other person would value it as much as I did, otherwise I loose. Lets say a bitcoin 2.0 gets online with much better properties making your bitcoin 1.0 worthless. If I own Stored energy, I can USE it to something like powering my computer, TV, cooking plate, powering ASICs performing protein folding, (not useless shit like double SHA-256 hashing )..

Do you still dont get it??

So for me own a dollar the same would have to be true, that is true in any currency. Your energy currency theory is still under the same law. What if one computer requires X energy to be powered. Yet computer 2 requires X+1 energy.

for you to own a dollar you also have to trust the government not to devalue that dollar :p

[1krona]

so much newbie fail today...

there is no bitcoin 1.0 yet

securing the network is not "useless shit"

you can use crypto's for other things, provably fair voting, file timestamping, namecoin has even built a domain name system that exists in a blockchain...

lurk moar

Oouuf, dont you get my point with the 1.0, 2.0 analogy that you can do a BETTER cryptocurrency making the previous obsolete and worth muchmuch less. Making the holders of the currency to loose purchasing power.
And Securing the network is useless is not totally useless for a virtual currency but in regards to real p2p transaction where you could see the transaction physically taking place it´s useless. Not just in a virtual environment.
"newbie fail".. lol, so smug!

What is best,
Using FLOP/s-power to perform proteinfolding to understand dieases like Alhzemiers or Securing a imaginary currency network that only have subjective value?

[AlphaWolf]

Gold/fiat do have one advantage over bitcoin...  you can still trade with them when the lights go out.  Don't get me wrong, I think Bitcoin is superior in many ways... but imagine a world that trades exclusively in Bitcoin, and then imagine an EMP strike anywhere.  We are close to this being an issue already with fiat being exchanged almost exclusively electronically, of course.  I believe the smart course of action is "diversify".

There is also nothing that "backs" gold, it can be easily counterfeited (plated tungsten) and it too, even like oil, began it's path to becoming a symbol of wealth as a "pyramid scheme". The Bilderberg Gold Pharaohs of Liechtenstein still wield their monopoly over it as their fiat authority to own and enslave us all and our nations though the mechanisms of their exclusive proprietary ownerships of our national mediums of labour exchange currencies today.  When the "lights go out" fuels, ammunition, weapons and food will all have far more value than gold.

A Bitcoin is simply a derivative that only represents the LOOT or SERVICES that the guy that you got it off, got out of you for it, and made off with. It is a fiat "futures derivative contract" that arguably has some but really has no certain inherent added-value, other than as a virtual digital sort of an encrypted GM ignition key, that you can move, swap and store electronically.

Like a "gold contract' or "mortgage backed security' (I love that last word) derivative it is a "BTC -securitized Future Derivative Contract" that merely allows you to keep, transfer it around or transfer it somewhere else to resell it there for whatever it may seem to be worth to the next guy, a minimum of an hour from now.

The suicidal crisis with Fiat Bitcoins is that there is no convention nor systematic mechanism of well-regulation to stabilize nor assure users the stable Fiat "value" of them, relative to anything else practical. These means that they are doomed to being a totally unsuitable, unreliable, non dependable and useless Medium of Labour Exchange Currency.

I said nothing about gold being "backed" or that it couldn't be counterfeited.  I said it had one advantage over Bitcoin (no more, no less)... It can be traded when there is no power.  No power doesn't have to equate to anarchy or some post-apocalyptic world you saw in a movie.  It can be simply "the power went out, and will be out for the next X days".  Even in your post-apocalyptic world, people will still want to trade in a currency -- the relative value of that currency to other commodities is irrelevant.  So what if gold is less valuable than food?  If I have food to trade, and you have fuel that I don't need, then we're going to have a tough time trading.  I can carry more "value" of gold than I can gallons of fuel... unless fuel *becomes* the new "gold" (it's value "density" being quite high).  That's the problem that currency solves.  That is not a problem that Bitcoin can currently solve unless one has both electricity and working connection to the network.  The rest of your ramblings are irrelevant.

[1krona]

Lol do you seriously dont get my point?
For me to OWN a bitcoin I have to put my faith in it that some other person would value it as much as I did, otherwise I loose. Lets say a bitcoin 2.0 gets online with much better properties making your bitcoin 1.0 worthless. If I own Stored energy, I can USE it to something like powering my computer, TV, cooking plate, powering ASICs performing protein folding, (not useless shit like double SHA-256 hashing )..

Do you still dont get it??

So for me own a dollar the same would have to be true, that is true in any currency. Your energy currency theory is still under the same law. What if one computer requires X energy to be powered. Yet computer 2 requires X+1 energy.

Then I would like to offer a Service or a Product to get hold of "1" more energy if I wanted to power computer 2..

I still want to know who decides to change the mining process!

[FinShaggy]

No, they already have the drug trade behind them.

[1krona]

Lol do you seriously dont get my point?
For me to OWN a bitcoin I have to put my faith in it that some other person would value it as much as I did, otherwise I loose. Lets say a bitcoin 2.0 gets online with much better properties making your bitcoin 1.0 worthless. If I own Stored energy, I can USE it to something like powering my computer, TV, cooking plate, powering ASICs performing protein folding, (not useless shit like double SHA-256 hashing )..

Do you still dont get it??

So for me own a dollar the same would have to be true, that is true in any currency. Your energy currency theory is still under the same law. What if one computer requires X energy to be powered. Yet computer 2 requires X+1 energy.

Then I would like to offer a Service or a Product to get hold of "1" more energy if I wanted to power computer 2..

I still want to know who decides to change the mining process!

The people... Gavin would create the software to change the mining process, we would all upgrade to that, and the miners would start using that, and then the blockchain would fork and as the fork gets longer, then that software would be the only one that would be able to create the valid transactions.

That sounds kinda centralized if you ask me. Could you please explain the forking process and what effect it have on othe holders of bitcoin and bitcoin softwarer? And you say that the fork have to get long before you can validate transaction.. So that 51% holder would still be able to reverse transaction during that time, how long would it take to get the fork long enough?

The more I read about cryptos I actually starting to feel safer holding crappy currencies like fiat, Swedish Krona to be exact

[agentbluescreen]

Gold/fiat do have one advantage over bitcoin...  you can still trade with them when the lights go out.  Don't get me wrong, I think Bitcoin is superior in many ways... but imagine a world that trades exclusively in Bitcoin, and then imagine an EMP strike anywhere.  We are close to this being an issue already with fiat being exchanged almost exclusively electronically, of course.  I believe the smart course of action is "diversify".

There is also nothing that "backs" gold, it can be easily counterfeited (plated tungsten) and it too, even like oil, began it's path to becoming a symbol of wealth as a "pyramid scheme". The Bilderberg Gold Pharaohs of Liechtenstein still wield their monopoly over it as their fiat authority to own and enslave us all and our nations though the mechanisms of their exclusive proprietary ownerships of our national mediums of labour exchange currencies today.  When the "lights go out" fuels, ammunition, weapons and food will all have far more value than gold.

A Bitcoin is simply a derivative that only represents the LOOT or SERVICES that the guy that you got it off, got out of you for it, and made off with. It is a fiat "futures derivative contract" that arguably has some but really has no certain inherent added-value, other than as a virtual digital sort of an encrypted GM ignition key, that you can move, swap and store electronically.

Like a "gold contract' or "mortgage backed security' (I love that last word) derivative it is a "BTC -securitized Future Derivative Contract" that merely allows you to keep, transfer it around or transfer it somewhere else to resell it there for whatever it may seem to be worth to the next guy, a minimum of an hour from now.

The suicidal crisis with Fiat Bitcoins is that there is no convention nor systematic mechanism of well-regulation to stabilize nor assure users the stable Fiat "value" of them, relative to anything else practical. These means that they are doomed to being a totally unsuitable, unreliable, non dependable and useless Medium of Labour Exchange Currency.

I said nothing about gold being "backed" or that it couldn't be counterfeited.  I said it had one advantage over Bitcoin (no more, no less)... It can be traded when there is no power.  No power doesn't have to equate to anarchy or some post-apocalyptic world you saw in a movie.  It can be simply "the power went out, and will be out for the next X days".  Even in your post-apocalyptic world, people will still want to trade in a currency -- the relative value of that currency to other commodities is irrelevant.  So what if gold is less valuable than food?  If I have food to trade, and you have fuel that I don't need, then we're going to have a tough time trading.  I can carry more "value" of gold than I can gallons of fuel... unless fuel *becomes* the new "gold" (it's value "density" being quite high).  That's the problem that currency solves.  That is not a problem that Bitcoin can currently solve unless one has both electricity and working connection to the network.  The rest of your ramblings are irrelevant.

The rest of my "ramblings" were with regard to the subject of this discussion:

Do Bitcoins need something REAL to back them?

not to do with the "ramblings" of yours.  

The relatively assured stable value over time of a Medium of Labour Exchange Currency is it's most critically important and indispensable feature, eclipsing even it's portability and immunity to counterfeiting!

In Economics, Labour alone is the Prime Commodity-Resource, without it, nothing happens, period!

It doesn't matter if it's scratching a nose at an auction, hitting a key, doing a heart transplant, changing a tire, wiring a house, curing a disease, buying or selling a share, paying a bill, inventing a Bitcoin or taking out the garbage.

The Prime Commodity Resource of the Fruits of all Labours is the hopefully ever-expanding (growing) Wealths of all Nations. The wealth of a nation's exports is what "backs" the "relative to other currencies" day to day value of it's people's Labour Exchange "currency" in the global marketplace.

Finite, precious resources like fine art, antiques, collectables and to a lesser extent second rate finite commodity resources like platinum, gold, gems and other generic junk are "deflationary" Mediums of Savings simply because they are finite as the fruits of all labours cannot be.

All other commodity resources are mere Mediums of Investment that can go up or down like toilet seats depending on a myriad of esoteric elements of technological chance, adaptations or happenstance.

No contractor, entrepreneur not merchant can price a contract to do anything or hire others to do them in an unstable supposed "Medium of Labour Exchange Currency" that may be $80 one day $100 the next, $260 the next and then $50 two hours after that, nor one that changes 15%-70% of it's value any time of any day like a toilet seat.

Nobody could risk the time it takes to get or spend it.

BTW gold and oil have had a totally consistent relative value to one another for a hundred years, and you cannot really trade gold unless you have a battery operated drill and assaying equipment.

[Melonhead]

There is also nothing that "backs" gold, it can be easily counterfeited (plated tungsten) and it too, even like oil, began it's path to becoming a symbol of wealth as a "pyramid scheme".

Gold was never a pyramid scheme. But it was at the top of the pyramid of acceptable commodity monies. And everybody used and accepted it.

The Bilderberg Gold Pharaohs of Liechtenstein still wield their monopoly over it as their fiat authority to own and enslave us all and our nations though the mechanisms of their exclusive proprietary ownerships of our national mediums of labour exchange currencies today.

Translation: Central bankers control the world because they control the money supply.

When the "lights go out" fuels, ammunition, weapons and food will all have far more value than gold.

True that.

A Bitcoin is simply a derivative that only represents the LOOT or SERVICES that the guy that you got it off, got out of you for it, and made off with. It is a fiat "futures derivative contract" that arguably has some but really has no certain inherent added-value, other than as a virtual digital sort of a much fancier kind of an encrypted GM ignition key, that you can move, swap and store electronically.

Bitcoin is not a derivative of anything. Neither is gold. And neither has any inherent value.

Like a "gold contract' or "mortgage backed security' (I love that last word) derivative it is a "BTC -securitized Future Derivative Contract" that merely allows you to keep, transfer it around or transfer it somewhere else to resell it there for whatever it may seem to be worth to the next guy, a minimum of an hour from now.

Securitized Future Derivative Contract. Really? What are the terms of this contract? What is "securing" this contract? Are you just trying to say that holding Bitcoins is bit of a gamble?

The suicidal crisis with Fiat Bitcoins is that there is no convention nor systematic mechanism of well-regulation to stabilize nor assure users the stable Fiat "value" of them, relative to anything else practical. This means that they are doomed to being totally unsuitable, unreliable, non dependable and useless as a Medium of Labour Exchange Currency.

Translation: Bitcoins will never be good money because their value will never be dependable. Maybe, but not for lack of convention, systematic mechanism or well-regulation.

I enjoy parsing circumlocutory prose as much as the next guy, but seriously, that was a lot of work.

[AlphaWolf]

The rest of my "ramblings" were with regard to the subject of this discussion:

Do Bitcoins need something REAL to back them?

not to do with the "ramblings" of yours.  

Fair enough.  I just assume people are talking to me when they start by quoting me. Sorry for the misunderstanding

I would like to reverse the question:  Does fiat need to be backed by Bitcoin instead of "full faith and credit of the State"?  I would say, wholeheartedly YES.  I doubt this would happen... but if we could get governments to be open again about how much money they have in circulation, and this was tied to the balance a specific Bitcoin address, this would solve the single problem I have with Bitcoin (how difficult it is to trade, especially with no power), and ALL the problems of government-issued currencies.  Or am I completely wrong?

[evgonoba]

Very interesting question. The answer is no. Bitcoin does not need and should not be "backed" by anything. To really understand the issue, however, we need a little history lesson. Gold used to "back" paper money because everyone knew that gold was money and paper money was just a money substitute. Gold was perfectly good money for thousands of years. Paper money was originally (starting in the middle ages for the sake of argument) just a warehouse receipt given to the owner of gold who chose to store his gold in the goldsmith's safe. The goldsmith gave the customer a receipt. That was the first paper money. That receipt was redeemable on demand for the quantity of gold printed on the receipt. In other words - gold backed the paper.

Over the years, people got used to carrying around and trading paper receipts (which were more convenient than gold) and would use them as a substitute for actual gold. But everyone was acutely aware that the paper was not the money. The gold that backed it was the money. In those days (and before that as well), gold's value was overwhelmingly based on its ability to be money. See my post https://bitcointalk.org/index.php?topic=169517.msg1871316#msg1871316 on inflation and the properties of money. As time went on, people started to forget about gold and started to believe that the paper receipts were money. The problem with paper money is that it is much easier to debase (inflate) than gold. Governments hate gold (as they will hate bitcoin) because then cannot simple "print it" to fund their welfare/warfare states. There are numerous examples in history of governments (in bed with the goldsmiths) creating paper currency (out of thin air) divorced from any real gold and thereby destroying their own economies. (I include all modern electronic versions of official currency when I say "paper money".)

The reason history and common sense says that paper money needs to be backed by gold is that gold is the market winner (over thousands of years) in the contest of what is the best money. Its money properties were almost single-handedly responsible for the advancement of civilization from barbarism to the modern world.

So, when x backs y, x is money and y is the money substitute. As long as people honor the one-to-one relationship between x and y, it's perfectly ok for gold to back paper money or even for bitcoins to back paper money. So, nothing should back gold because gold is (or was) money. Sadly, society has been so far removed from gold for so long, that gold no longer really qualifies as money. And while Bitcoin doesn't quite qualify as money yet, it may someday, and as such it might back something else (even informally). Something as simple as an IOU on the back of an envelope that says IOU 4BTC qualifies as paper money backed by bitcoin.

Final thought on gold. I read a few years ago that if gold were still commonly understood to be money it would be worth over $20,000 per ounce. The reason for this is that the nominal value of all the goods and services in the world divided by the weight of all the gold in the world comes out to about $20K. I could be way off here, but you get the point.

I think you might find the professor's book http://www.amazon.com/Capital-As-Money-ebook/dp/B009AP9ZG6 interesting. The Kindle version is free right now. He proposes the idea that money is better when backed, but that how it's backed is tricky. It SHOULD be backed by the value of the economy. A reasonable approximation of 'the economy' is the largest publicly traded corporations....using something like S&P500 ETF shares. To purchase Bitcoin, for example, you should have to put 1 or 10 shares of SPY on deposit.

I think it has potential.

[phazedoubt]

"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.

What can you personaly do with gold besides trade it for money? The answer for someone without a smelter is not much. Most money today is fiat currency and backed by the economy it represnts. In other words currency is moving in the bit coin direction.

[Melonhead]

I would like to reverse the question:  Does fiat need to be backed by Bitcoin instead of "full faith and credit of the State"?  I would say, wholeheartedly YES.  I doubt this would happen... but if we could get governments to be open again about how much money they have in circulation, and this was tied to the balance a specific Bitcoin address, this would solve the single problem I have with Bitcoin (how difficult it is to trade, especially with no power), and ALL the problems of government-issued currencies.  Or am I completely wrong?

Backing fiat money with bitcoin (or gold or anything else) would convert the fiat money into an honest money substitute (and no longer fiat) again. Fiat money is "money by decree". It is in a very real sense fake. The only things which gives it value are the cultural memory of "dollar-ness" coupled with the legal tender laws which make it illegal to issue private competing currency.

Bitcoin has most of the properties necessary to make it money. If and when it is widely considered to be money, then it could conceivably be "kept" in a safe place (e.g. the distributed network in which it currently exists) as backing for some unspecified, more transportable surrogate. In the heyday of private and state banking, the checks cross-written against groups of banks were cleared every day at a clearing house. The differences at the end of the clearing calculations were then settled between the banks by physical gold transfers. This was done continually all over the world in a local, regional, national layered fashion with the final clearing done in London. Only the interbank differences were settled in gold.

The days of the gold standard did not mean that everybody carried gold around in their pockets. It only meant that their "paper money" was fully backed by gold. And "at the end of the day", all accounts were settled. It worked beautifully. This may be a good model to think about with respect to Bitcoins. We don't all have to deal directly with Bitcoins, as long as the accounts are settled in Bitcoin periodically. This leaves us free to invent an honest bitcoin substitute that may be more convenient to use, but is backed by Bitcoin (like gold used to back bank drafts).

[ohreally]

Yes. They should have something of economic value (besides their own utility) on deposit. It needs to be difficult to produce (like mining gold or bitcoins), but able to expand dynamically (unlike gold or bitcoins), and able to shrink rather than hang around in surplus (unlike gold or bitcoins), and completely liquid (unlike gold).

That's why the professor's idea of Capital as Money has potential.

A person should have to put a share of an Exchange Traded Fund that represents all publicly traded stocks of a certain size. The shares (not the price of the shares) represent true value with a limited ability to be created (starting a profitable company of that size is much harder than mining for bitcoins). Their appearance and disappearance is not magic (like fiat money and fractional reserve banking) but it is not contrived either (like Bitcoins).

The rest of the process of creating more stable money should evolve along a natural path in the open source manner that Bitcoin is.

[phazedoubt]

Backing fiat money with bitcoin (or gold or anything else) would convert the fiat money into an honest money substitute (and no longer fiat) again. Fiat money is "money by decree". It is in a very real sense fake. The only things which gives it value are the cultural memory of "dollar-ness" coupled with the legal tender laws which make it illegal to issue private competing currency.

Bitcoin has most of the properties necessary to make it money. If and when it is widely considered to be money, then it could conceivably be "kept" in a safe place (e.g. the distributed network in which it currently exists) as backing for some unspecified, more transportable surrogate. In the heyday of private and state banking, the checks cross-written against groups of banks were cleared every day at a clearing house. The differences at the end of the clearing calculations were then settled between the banks by physical gold transfers. This was done continually all over the world in a local, regional, national layered fashion with the final clearing done in London. Only the interbank differences were settled in gold.

The days of the gold standard did not mean that everybody carried gold around in their pockets. It only meant that their "paper money" was fully backed by gold. And "at the end of the day", all accounts were settled. It worked beautifully. This may be a good model to think about with respect to Bitcoins. We don't all have to deal directly with Bitcoins, as long as the accounts are settled in Bitcoin periodically. This leaves us free to invent an honest bitcoin substitute that may be more convenient to use, but is backed by Bitcoin (like gold used to back bank drafts).

The problem with that is the same as whast the creator of the liberty dollar came up against; when you create currency to be used to pay debts, the government tends to frown upon that. As long as bit coin stays in the realm of the virtual, I believe it will be able to survive long enough to gain the traction it needs to survive the direct pressure a government can bring to bear. Plus with it being internationally traded as long as one coumtry gives it Safe harbor if it comes under regulation we should see a long term sustainable sitation.