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

[NewLiberty]

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

Bernanke is a prison thug?  Who knew?

[cryptoanarchist]

HARDWARE

[johnyj]

Value,  to its root is decided by the desire. A sustainable and fast price appreciation definitely will call out the biggest desire inside every human

[Technologov]

Short Answer:
Backed by "the block chain"

Long answer(s):
http://www.runtogold.com/2012/12/during-2012-fiat-currencies-and-gold-collapse-against-bitcoin/
and
https://docs.google.com/document/d/18MCw4nuKZ9rZpXMFfh_lypJQVNbJwzVAg2Us5IaR-XM/edit

-Technologov

[solex]

Short Answer:
Backed by "the block chain"

Long answer(s):
http://www.runtogold.com/2012/12/during-2012-fiat-currencies-and-gold-collapse-against-bitcoin/
and
https://docs.google.com/document/d/18MCw4nuKZ9rZpXMFfh_lypJQVNbJwzVAg2Us5IaR-XM/edit

-Technologov

YES. I can't understand why this is a mystery to most bitcoiners

[Impaler]

It's valuation in USD is backed by the willingness of USD holders to continually exchange USD for newly minted Bitcoins.  
If people ever stop or even slowdown in their buying then the valuation falls, it's as simple as that.

[cryptoanarchist]

It blows my mind that no one seems to understand that its the hashing HARDWARE backing bitcoin.

If everyone stopped mining today, how much would bitcoin be worth?

[NewLiberty]

It blows my mind that no one seems to understand that its the hashing HARDWARE backing bitcoin.

If everyone stopped mining today, how much would bitcoin be worth?

Backing generally means that the currency is redeemable on demand for a specific quantity of the backing asset.

I might more readily say the price is supported by the mining, and supported by the desire.

Though mining hardware is generally priced in BTC, the prices are not static.

[superresistant]

Still arguing about that ?




D   r   u   g   s

[Keldel]

The ultimate value of bitcoin is the bitcoin payment system. If you have 1000 mBTC, you have the right to send someone 1000 mBTC.

[Boussac]

The debate around this topic is often distorted by a fundamental misunderstanding of what is a natural commodity in statements like:
"Bitcoin is not linked to anything physical."

Bitcoin is linked to something physical, namely numbers.
Prime numbers are a commodity in unlimited supply (although the greater the prime number, the harder it is to find).
Bitcoins are a commodity in limited supply.
The fact that you cannot see a number (one can only see a representation of it when writing it down or looking at an enumerable set - if its an integer ) does not make a number any less physical.

Just like the force of gravitation is an invisible yet very real, physical force: one can describe it with formulas.
Note that a gold coin value is derived form its substance (gold) AND its weight..

In short, Bitcoin is a representative money system, backed by cryptographic formulas.

[Carlton Banks]

Well, there's at least half a dozen suggestion in this thread, and I'm inclined to agree with most of them. So, Bitcoin has a multitude of backings:

- Market value (supply v.s. demand)
- Utility/Acceptance
- Design
- Infrastructure
- The most common commodity that it is used to purchase (the consensus appears to be marijuana, but that's just a straw poll!)


Sounds like some fairly powerful winds in our sails! Just need to improve the utility/acceptance factor that little bit more...

[NewLiberty]

Well, there's at least half a dozen suggestion in this thread, and I'm inclined to agree with most of them. So, Bitcoin has a multitude of backings:

- Market value (supply v.s. demand)
- Utility/Acceptance
- Design
- Infrastructure
- The most common commodity that it is used to purchase (the consensus appears to be marijuana, but that's just a straw poll!)

Sounds like some fairly powerful winds in our sails! Just need to improve the utility/acceptance factor that little bit more...

These are all examples of elements supporting bitcoin value, none of these are backing.
Backing is for redeemable currencies.  If a currency is a promise from an institution that issued it, that the institution would give the holder of the currency a specific amount of a specific good from the institution's stockpile, then it is redeemable, and backed by that quantity of goods.

[Carlton Banks]

Well, there's at least half a dozen suggestion in this thread, and I'm inclined to agree with most of them. So, Bitcoin has a multitude of backings:

- Market value (supply v.s. demand)
- Utility/Acceptance
- Design
- Infrastructure
- The most common commodity that it is used to purchase (the consensus appears to be marijuana, but that's just a straw poll!)

Sounds like some fairly powerful winds in our sails! Just need to improve the utility/acceptance factor that little bit more...

These are all examples of elements supporting bitcoin value, none of these are backing.
Backing is for redeemable currencies.  If a currency is a promise from an institution that issued it, that the institution would give the holder of the currency a specific amount of a specific good from the institution's stockpile, then it is redeemable, and backed by that quantity of goods.

So, when someone claims that modern fiat is "backed by the legislation of the issuer", or "backed by state coercion", these are false statements. Redeeming the equivalent quantity of legislation or coercion in exchange for your fiat is also a physical/logical impossibility. Does any modern state run a redeemable fiat system these days?

[smscotten]

Someone said much earlier in the thread that Bitcoin is backed by "proof of work" which I think is closest to true but not very illuminating. Rather than being backed by a good such as gold, Bitcoin is backed by a set of services: authentication, transmission, and confirmation of financial transactions. If you don't think those services are worth anything, walk into a bank and see how much they'll charge you to wire money to another country in a way that can't be intercepted or lost.

It's not backed by the hardware, it's backed by the work that the hardware does. Maybe I'm splitting hairs there but I think the distinction is important.

Now, the above services are what Bitcoin does so the benefit may seem invisible. But the benefit is intrinsic—that's why it's less visible. Saying "yeah, but bitcoin already does that, so what is it backed by?" is a bit like looking at a gold coin and saying, "yeah, I can see it's round, but is it backed by gold?" So I'll amend my statement: Bitcoin isn't backed by extrinsic value; it's value is intrinsic.

You don't go around asking whether the price of steel is backed by gold, do you? No, you just build buildings and cars and bicycles and other things with it. Like steel, whose value is dependent on how many people want to build stuff with it, Bitcoin's value is in what can be done with it.

[NewLiberty]

So, when someone claims that modern fiat is "backed by the legislation of the issuer", or "backed by state coercion", these are false statements. Redeeming the equivalent quantity of legislation or coercion in exchange for your fiat is also a physical/logical impossibility. Does any modern state run a redeemable fiat system these days?

No, none are backed by anything more than debt  (full faith and credit).  The US$ was the last and ended with Nixon.
Arguably there are some nations that could... maybe...
http://www.businessinsider.com/are-there-any-currencies-backed-by-gold-2012-3

But BASEL III takes us  further away rather than closer.  (It classifies the best risk-free asset as other countries money and reduces the ranking of physical assets)

[Carlton Banks]

So, when someone claims that modern fiat is "backed by the legislation of the issuer", or "backed by state coercion", these are false statements. Redeeming the equivalent quantity of legislation or coercion in exchange for your fiat is also a physical/logical impossibility. Does any modern state run a redeemable fiat system these days?

No, none are backed by anything more than debt  (full faith and credit).  The US$ was the last and ended with Nixon.

Yes, so by the proper definition of "backing" as you described, modern fiat does not fulfill it. There is no way to exchange the units for the debt "backing" (the units effectively are the debt itself). Christ, the value really is completely imaginary, and I knew that already but this way of looking at it really drives that home. It's like a circular argument to define the value of something that is inherently worthless.

[manfred]

It blows my mind that no one seems to understand that its the hashing HARDWARE backing bitcoin.

If everyone stopped mining today, how much would bitcoin be worth?

It would be worth almost double the price. Instead of 21M only 11M would exist, so much scarier.

[smscotten]

It blows my mind that no one seems to understand that its the hashing HARDWARE backing bitcoin.

If everyone stopped mining today, how much would bitcoin be worth?

It would be worth almost double the price. Instead of 21M only 11M would exist, so much scarier.

Actually, if no one mined, how would new transactions get recorded and confirmed?

And of course, if there is just one miner running (ignoring the "51% problem" so maybe lets say seven miners running) the number of Bitcoin would increase at exactly the same rate as it does now.

[Impaler]

Well, there's at least half a dozen suggestion in this thread, and I'm inclined to agree with most of them. So, Bitcoin has a multitude of backings:

- Market value (supply v.s. demand)
- Utility/Acceptance
- Design
- Infrastructure
- The most common commodity that it is used to purchase (the consensus appears to be marijuana, but that's just a straw poll!)

Sounds like some fairly powerful winds in our sails! Just need to improve the utility/acceptance factor that little bit more...

These are all examples of elements supporting bitcoin value, none of these are backing.
Backing is for redeemable currencies.  If a currency is a promise from an institution that issued it, that the institution would give the holder of the currency a specific amount of a specific good from the institution's stockpile, then it is redeemable, and backed by that quantity of goods.

So, when someone claims that modern fiat is "backed by the legislation of the issuer", or "backed by state coercion", these are false statements. Redeeming the equivalent quantity of legislation or coercion in exchange for your fiat is also a physical/logical impossibility. Does any modern state run a redeemable fiat system these days?

1 US Dollar is redeemable for 1 US Dollar worth of Tax burden fulfillment, in fact it's the ONLY thing that can be used to fulfill tax burdens.  So while this is not 'backing' in the traditional sense of it is a key reason why fiat currency has value.  Instances of states that try to issue fiat currency but fail to tax (The Confederacy in the American Civil war is a prime example) invariably have a collapse in their currencies valuation.