Re-visit the question: What is bitcoin's value backed by?

[johnyj]

The definitive answer: Nothing, it is unbacked.

In a market based economy, anything's value is backed by the power between the buyers and sellers

For example, if everyone takes out their gold and sell them in the market to exchange for USD, the gold price will immediately crash more than 90%, because the seller's power is much stronger than buyer's power

But, if you take one Picasso's paint and sell it in the market, it will always have a high price, since the supply is only 1, seller's power can be ignored

[polarhei]

What is bitcoin backed by?

Bitcoin the currency is backed by blockchain the ledger, with everyone's holdings. The blockchain is in turn is backed by decentralized replication, consensus, advanced cryptography and enormous computing power.

Result: virtual gold.

Sorry, I missed one word, it should be "What is bitcoin's value backed by?" Already corrected in the OP. Value is decided by demand and supply, it is less related to technology. Even if you have most advanced technology in the world, if no one want it, it worth nothing. There are some other maybe more advanced coin designs, but since the demand has all been attracted to bitcoin, they did not succeed

The value backed by trust. There are many ways to modify the demand and supply. It is not easy to follow but it is.

[Epicurus]

Originally, Bitcoin had a value of zero. But then, a while back someone bought 2 pizzas for 10,000 BTC. This put the value of 2 pizzas into the overall system. It was a tiny amount but it still counted. Others have bought drugs and other contraband with BTC. Some have exchanged work for BTC. Some people bought electronics. All of these tiny amounts add up until a currency that is worth essentially zero begins to have value. A while back, a single BTC only traded for a penny but the "intrinsic" value was in there and it grew.

You are misunderstanding what intrinsic value is. You're talking about market value. There is no intrinsic value to bitcoin, only market value. Intrinsic value is typically calculated in finance by looking at the sum of the future income that's generated by that asset, in terms of discounted present value.

What you describe in your post is entirely about market value, which is the only value an unbacked currency has.

[bitrebel]

Backed by one thing, and one thing only.....

FUCK THE BANKERS!!!!

I will support that any day, that means..... it's backed by my full faith and credit I give it.

[bitfromit]

While one is at it, one might also ask "What is email's value backed by?", well we are now a world based on digital information.

Also I would argue that Bitcoin is actually physically backed - by hard disks.

Found this : http://www.whyisntbitcoinworthless.com/

[johnyj]

Originally, Bitcoin had a value of zero. But then, a while back someone bought 2 pizzas for 10,000 BTC. This put the value of 2 pizzas into the overall system. It was a tiny amount but it still counted. Others have bought drugs and other contraband with BTC. Some have exchanged work for BTC. Some people bought electronics. All of these tiny amounts add up until a currency that is worth essentially zero begins to have value. A while back, a single BTC only traded for a penny but the "intrinsic" value was in there and it grew.

You are misunderstanding what intrinsic value is. You're talking about market value. There is no intrinsic value to bitcoin, only market value. Intrinsic value is typically calculated in finance by looking at the sum of the future income that's generated by that asset, in terms of discounted present value.

What you describe in your post is entirely about market value, which is the only value an unbacked currency has.

Based on your definition, it is a calculation based on future income, how would you know the future if you are not an oracle?  The calculation about the future typically based on an assumption that the current environment do not change, and it only works very short term

There is no such thing as intrinsic value, in most of the today's economics the value is only decided by supply and demand.

Maybe some food/shelter that satisfy the basic requirement of living have intrinsic value, but obviously gold is not among this kind of things but still have intrinsic value

[countryfree]

Bitcoin is backed by the number of people who host the blockchain on their PCs at their home, or some other kind of bitcoin software. Ultimately, everyone who has a wallet is a bitcoin backer.

It's a bit like a religion. If many people believe in something, that thing just gets real.

[NewLiberty]

Bitcoin is backed by the number of people who host the blockchain on their PCs at their home, or some other kind of bitcoin software. Ultimately, everyone who has a wallet is a bitcoin backer.

It's a bit like a religion. If many people believe in something, that thing just gets real.

That might be more supported than backed though.

http://en.wikipedia.org/wiki/Private_currency#Currency_backing

[Elmore ASIC]

~code writers , mathematicians and lawyers !  

[CoinDiver]

What is gold's value backed by? Utility. Bitcoin is no different. What if everyone stops using bitcoin? Who cares. What if everyone stops using gold?

[NewLiberty]

What is gold's value backed by? Utility. Bitcoin is no different. What if everyone stops using bitcoin? Who cares. What if everyone stops using gold?

Gold is the "backing".  It is different.  Is the difference not obvious?
Bitcoin has an exchange value.  It has value based on the value folks give it, what they will exchange for it, but it is not a thing on its own. 
Gold is a thing, substantial, with elemental properties.  Perhaps the difference is less subtle when you walk away from your computer.

[keelba]

Gold is the "backing".  It is different.  Is the difference not obvious?
Bitcoin has an exchange value.  It has value based on the value folks give it, what they will exchange for it, but it is not a thing on its own. 
Gold is a thing, substantial, with elemental properties.  Perhaps the difference is less subtle when you walk away from your computer.

OK then by that rationale, what is the US dollar backed by? Do you think it is a thing, substantial, with elemental properties? The US dollar is a mostly digital currency already today. It is backed by....well....it's simply worth something because the US government says it is. The paper that dollars floating around are made from are worth as much as the value of wiping your ass with them...not much. Likewise, gold has some utility for use in jewelry and sometimes expensive electronics but it's value as a commodity is far less than what it is trading for right now. The biggest and most substantial difference between Bitcoin and the US Dollar is not the fact that you can hold one in your hand and not the other, it is the fact that one's supply is controlled by a single entity with ultimate power while the other's supply is limited and controlled by no one.

[Elmore ASIC]

The definitive answer: Nothing, it is unbacked.

Heh, I'll back it.

One ounce of silver for every bitcoin.  I have my 21,000,000 ounces here.  Redemption on demand.

pics? 

[bigbeninlondon]

Fiat is backed by the power of the government.  Bitcoins are backed by nothing.

Just like bitcoin, the value of fiat is not backed by government, it is backed by a consensus. Government can not give you anything in return if you bring fiat to government, you can only pay tax with fiat

Requiring tax be paid in a currency creates a demand for that currency.

[NewLiberty]

The definitive answer: Nothing, it is unbacked.

Heh, I'll back it.

One ounce of silver for every bitcoin.  I have my 21,000,000 ounces here.  Redemption on demand.

pics? 

Pics are in the link in my sig.

But, as it happens, since I have been asked to do so, I will be announcing a new silver and gold set designed uniquely to appeal to the Bitcoin community.
Many elements of the new piece were suggested by some members here, and along with our expert numismatic designers, we will have a piece (hopefully in time for delivery to retailers before the 5th anniversary of the Satoshi White Paper in Oct).

[Elmore ASIC]

What is gold's value backed by? Utility. Bitcoin is no different. What if everyone stops using bitcoin? Who cares. What if everyone stops using gold?

lmao have you ever hears of the rainmaker? 

[Elmore ASIC]

One ounce of silver for every bitcoin.  I have my 21,000,000 ounces here.  Redemption on demand.

http://newlibertydollar.com/



^^^^^^^^^^^^^^^^^^

my bad I don't see any photograohs there especially of 21,000,000 ounces of silver like you said! 

[johnyj]

The definitive answer: Nothing, it is unbacked.

Heh, I'll back it.

One ounce of silver for every bitcoin.  I have my 21,000,000 ounces here.  Redemption on demand.

Ha, that's the point!

I think actually everyone who did a little bit research on bitcoin will back it with their own labour/wealth, since it is transparently generated and have fixed limited supply, you know how much exactly it will cost you to back the system

No one dares to back a fiat currency with their labour/products, since you never know how much more fiat the central banks will print and the fact that they could buy everything from you with printed money just sounds ridiculous

[codesuela]

bitcoin is backed into a corner at the local prison shower area as bernanke and his friends enter the premises.

[NewLiberty]

Gold is the "backing".  It is different.  Is the difference not obvious?
Bitcoin has an exchange value.  It has value based on the value folks give it, what they will exchange for it, but it is not a thing on its own. 
Gold is a thing, substantial, with elemental properties.  Perhaps the difference is less subtle when you walk away from your computer.

OK then by that rationale, what is the US dollar backed by? Do you think it is a thing, substantial, with elemental properties? The US dollar is a mostly digital currency already today. It is backed by....well....it's simply worth something because the US government says it is. The paper that dollars floating around are made from are worth as much as the value of wiping your ass with them...not much. Likewise, gold has some utility for use in jewelry and sometimes expensive electronics but it's value as a commodity is far less than what it is trading for right now.

Yes. the US Federal Reserve Note Dollar is backed by.. US Dollars. (or full faith and credit if you prefer)
FRN Dollars is an unbacked fiat currency.
Do not mistake the idea of a currency being unbacked with it being valueless.

For a bit of history, the US used to have a backed currency, redeemable for gold and silver.  When the Federal Reserve was misbegotten, it did the wondrous thing of creating these Federal Reserve Notes that looked almost exactly like the silver and gold backed notes, and they circulated side by side in the biggest con game of the 20th century.

The biggest and most substantial difference between Bitcoin and the US Dollar is not the fact that you can hold one in your hand and not the other, it is the fact that one's supply is controlled by a single entity with ultimate power while the other's supply is limited and controlled by no one.

We agree on this. (Though I might swap "ultimate power" with "the claim on the monopoly of the right to kill within its geography" the two are close enough)