"Backing" - what does this actually MEAN?

[Nancarrow]

The perennial accusation against Bitcoin is that it's 'not backed by anything'. Fiat money is backed by the government, and I would say that Bitcoin is backed by cryptography. But that's only because I've formed an 'implicit definition' of that word - I hear how other people use it.

But is there an explicit definition, and if so what is it? If I think that X is a good thing because "X is backed by Y", what am I actually saying?

If this is the sort of question that's easily answered in Econ 101, please provide a link - I've never learned any economics formally.

[1714050746]

1714050746

[hilariousandco]

I'd say we, the people, are backing it.

[I_bitcoin]

Every good or service that is provided backs bitcoins (in other words people will exchange it for as one of the other posters mentioned).   This includes fiat.    Scary eh?   Except not so scary.   When large crowds move they move in very predictable ways.   With enough adoption the crowds will be easy to predict and this will further stabilize the price of bitcoin as adoption increases.

Try to do as much as possible in bitcoin and we will realize the dream faster .

[RodeoX]

The only thing backing any currency system is faith. Gold is just a shinny rock, fiat is just fancy paper. Bitcoin has more faith behind it than ever, and perhaps the opposite could be said of fiat.

[Ibian]

It's something people who don't understand the technology, basic market economics, politics, psychology, or their combined interplay say to avoid admitting that they are deeply, deeply confused.

[deisik]

The perennial accusation against Bitcoin is that it's 'not backed by anything'. Fiat money is backed by the government, and I would say that Bitcoin is backed by cryptography. But that's only because I've formed an 'implicit definition' of that word - I hear how other people use it.

But is there an explicit definition, and if so what is it? If I think that X is a good thing because "X is backed by Y", what am I actually saying?

I don't use any specific definition for this, but the correct answer to your question can be logically derived from the subjective theory of value. Bitcoin (or anything for that matter) is backed up by its properties that are useful in achieving an individual's personal ends (even if it is pure speculation). So when you say that X is backed by Y, it usually means that people either find Y directly useful (positive feedback as in security of Bitcoin) or the possession of X is useful for preventing some undesirable effect from Y (negative feedback as in taxes)...

This is an ad hoc explanation, but its logic is correct nevertheless

[zimmah]

From what I've seen, the meaning is invented on the spot by the person trying to justify (or condemn) the value of a currency. I think this practice started in 1971, when the dollar became completely fiat. It was no longer backed by gold, but it couldn't be backed by nothing.

In more legitimate usage, "backed by" generally means "can be exchanged for a fixed amount of".

so the dollar can be exchanged for a fixed amount of government now?

seems about right, the government is being sold for a couple of millions to the bankers. 

[Carlton Banks]

Basically, 2 meanings:

Pro-rata: where assets are kept by the currency issuer at a some rate comparable to the value of the money supply

Ephemeral: where intangible but valuable capabilities of the issuer confer value to the money supply (e.g. use this money system or you'll find a jackboot moving rapidly towards your face)

[hieroglyph]

for me this means there is nothing tangible a person can point to or hold and say this equals this amount of Bitcoin.  A poor argument that Bitcoin isn't real and and based on fantasy.  So far form the truth it leaves me speechless.

[deisik]

for me this means there is nothing tangible a person can point to or hold and say this equals this amount of Bitcoin.  A poor argument that Bitcoin isn't real and and based on fantasy.  So far form the truth it leaves me speechless.

When you are drawn to court and thrown in jail for alleged tax evasion, you will quickly understand what it actually means being backed up by something intangible like power and force that you can't point to or hold in your hands...

[johnyj]

Bitcoin is backed by fiat money, as long as FED keep printing fiat money like there is no tomorrow, part of those printed money will be used to back bitcoin

FED print lots of money daily, but since those money could not find any place that is worth investing, QE's efficiency is extremely low, maybe 1 out of 100 dollars they printed get invested. But if they stop printing, the whole economy will collapse due to higher and higher debt

[Zangelbert Bingledack]

The term "backing" is completely meaningless in the context of Bitcoin. Backing means that a FIAT currency CAN BE REDEEMED for some commodity, since that fiat currency is nothing more than a promise not to inflate too much.

Bitcoin is not fiat, it can't be inflated, and it doesn't rely on promises, so it is meaningless to ask what it is "backed" by.

Backing is about people pathetically pleading to their government to please not destroy the value of the pieces of paper they are forced to use as legal tender, to please ostensibly allow people to trade it for gold or some other store of value in order to build more TRUST. It has absolutely nothing to do with Bitcoin, and that's GOOD.

[chriswilmer]

The term "backing" is completely meaningless in the context of Bitcoin. Backing means that a FIAT currency CAN BE REDEEMED for some commodity, since that fiat currency is nothing more than a promise not to inflate too much.

Bitcoin is not fiat, it can't be inflated, and it doesn't rely on promises, so it is meaningless to ask what it is "backed" by.

Backing is about people pathetically pleading to their government to please not destroy the value of the pieces of paper they are forced to use as legal tender, to please ostensibly allow people to trade it for gold or some other store of value in order to build more TRUST. It has absolutely nothing to do with Bitcoin, and that's GOOD.

+1

[Cryddit]

Somebody could, in theory, start a cryptocoin "SilverOunce", limiting the number of coins issued to the number of ounces of (say) one-ounce silver coin blanks in his safe, and give a standing offer to swap of the cryptocoins for a one-ounce silver coin.

That cryptocoin would be backed by silver.  But it would also be centralized because he'd be the only one who could make new coins, he'd be paying for each coin by buying silver, and he'd be the only one offering to redeem them. 

Anyway, until someone does exactly that, it won't matter.  These aren't backed, they're merely rare.

[Sukrim]

Somebody could, in theory, start a cryptocoin "SilverOunce", limiting the number of coins issued to the number of ounces of (say) one-ounce silver coin blanks in his safe, and give a standing offer to swap of the cryptocoins for a one-ounce silver coin.

That cryptocoin would be backed by silver.  But it would also be centralized because he'd be the only one who could make new coins, he'd be paying for each coin by buying silver, and he'd be the only one offering to redeem them. 

Anyway, until someone does exactly that, it won't matter.  These aren't backed, they're merely rare.

Someone did (nearly exactly) that, already months ago:
https://bitcointalk.org/index.php?topic=149533.0

[deepceleron]

Fiat currency is backed by the threat that if you don't have some to give to the government when they want it, you go to jail.

The US dollar is a promise that you can redeem it - for dollars.

[kjj]

Bitcoin is not backed by anything.  Neither is the dollar.  Neither is gold.  Etc.

"backed" does not mean "can be used in trade".  If it did, then they would all be "backed" by their markets.

"backed" means "is a token for".  Once upon a time, a dollar was a silver coin.  Then it was a paper slip that could be redeemed for a silver coin or, in quantity, for a gold coin.  Those slips were "backed by" the metal reserves.  Now it is just a paper slip, not redeemable for anything.  But observe that all three iterations of the dollar could, and still can, be traded for various things, including the silver or gold coins they once represented.

[Cryddit]

 

  Somebody could, in theory, start a cryptocoin "SilverOunce", limiting the number of coins issued to the number
  of ounces   of (say) one-ounce silver coin blanks in his safe, and give a standing offer to swap of the cryptocoins
  for a one-ounce silver coin.

Someone did (nearly exactly) that, already months ago:
https://bitcointalk.org/index.php?topic=149533.0

Huh.  I hadn't noticed those were tied to silver dimes.  I yam surprised.  Historically, though, Internet payment processing systems that involve someone holding precious metal have usually resulted in charges being filed -- everything from money laundering to fraud to failure to report to accounting irregularities to trading metal without appropriate state licensing, to etc etc etc.

Hope he manages to buck the trend.

[deepceleron]

Somebody could, in theory, start a cryptocoin "SilverOunce", limiting the number of coins issued to the number of ounces of (say) one-ounce silver coin blanks in his safe, and give a standing offer to swap of the cryptocoins for a one-ounce silver coin.

That cryptocoin would be backed by silver.  But it would also be centralized because he'd be the only one who could make new coins, he'd be paying for each coin by buying silver, and he'd be the only one offering to redeem them. 

Anyway, until someone does exactly that, it won't matter.  These aren't backed, they're merely rare.

Someone did (nearly exactly) that, already months ago:
https://bitcointalk.org/index.php?topic=149533.0

Someone did (nearly exactly) that, already years ago:
http://www.nytimes.com/2012/10/25/us/liberty-dollar-creator-awaits-his-fate-behind-bars.html?_r=0

[pjviitas]

The perennial accusation against Bitcoin is that it's 'not backed by anything'. Fiat money is backed by the government, and I would say that Bitcoin is backed by cryptography. But that's only because I've formed an 'implicit definition' of that word - I hear how other people use it.

But is there an explicit definition, and if so what is it? If I think that X is a good thing because "X is backed by Y", what am I actually saying?

If this is the sort of question that's easily answered in Econ 101, please provide a link - I've never learned any economics formally.

Total confidence game nothing more...nothing less.  Some people would say its a con-game of the highest form.

If you are confident that digital bits or paper bits or metal bits is a fair trade for your goods or services then that's all that matters...period...end of story.

[pand70]

All that backed by cryptography or mathematics are just slogans. Actually bitcoin it is backed only by the community and the people that are using it. Hopefully that community will be the entire world at some time  

[Impaler]

Fiat currency is backed by the threat that if you don't have some to give to the government when they want it, you go to jail.

The US dollar is a promise that you can redeem it - for dollars.

Exactly, a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.  Instead all they do is try to provide limited security against theft, and prevent counterfeiting.  So while users can have some assurance they will still posses their BTCs in the future and that BTC will still be rare, theirs no guarantee they will be high priced in the future.

Also in response to an earlier statement that 'all goods exchanged or offered for sale for BTC' are a backing, this wrong for two reasons.  First all such merchants are free to remove these offers at any time, and second not one single merchant on Earth actually sets prices IN BTC itself, they always make use of the exchange rate and thus they do not act to fix a value for BTC because you can have no confidence that any quantity of coins will ever buy any amount of merchandise.

[codeneis]

I have a golden coin burried. A can divide this coin to the number of satoshis that can be mined. But you guys don't know where my coin is and I am to lazy to dig it again.

If someone asks, bitcoin is backed by gold. This sole coin that no one knows where it is.

[deisik]

All that backed by cryptography or mathematics are just slogans. Actually bitcoin it is backed only by the community and the people that are using it. Hopefully that community will be the entire world at some time  

Community doesn't stick to bitcoin just for the fun of it (though some may actually, but their number is small and economics is about rational decisions at that). They use it because they find bitcoin useful in some way, right? If so, what qualities provide that usefulness to them? 

[deisik]

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.  Instead all they do is try to provide limited security against theft, and prevent counterfeiting.  So while users can have some assurance they will still posses their BTCs in the future and that BTC will still be rare, theirs no guarantee they will be high priced in the future.

It is not the BTC computer network or the cryptographic code of BTC as such that contribute or constitute backing for bitcoin (I think you refer here to our debate over this issue). It is usefulness (utility) they provide that influences subjective valuation. If you don't agree with this, it means that you don't consider these qualities of bitcoin useful, that's all. You just can't have it two opposite ways around at the same time...

[ToTheZeroth]

Fiat currency is backed by the threat that if you don't have some to give to the government when they want it, you go to jail.

The US dollar is a promise that you can redeem it - for dollars.

Exactly, a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

It might be added that in most jurisdictions, it's only the cash form of the currency that is legal tender. Most debts, of course, will be settled by other means, such as bank transfers, if the creditor and the debtor agree to this, but if they can't agree on a transfer medium, the debtor always retains the right to pay in cash. As most fiat currency nowadays is electronic, it's quite reasonable to say that the money in our bank accounts became backed by banknotes in much the same way that banknotes were once backed by gold or silver. And it has led to exactly the same result: since the new, "backed" medium is easier to work with, there is seldom any reason to exchange it back to the old, "backing" medium—at least not in large amounts. Knowing that it theoretically could be turned into something that others must accept is enough. And as it turns out in the end, the "backing" is subtly lost along the way.

This could happen with bitcoin as well (people having bank accounts denominated in BTC but not actually knowing that they will be able to withdraw to actual bitcoin), but bitcoin is different: first, it's easier for those who want to actually be their own bank, and second, it would be possible for a bank to prove that it holds the bitcoin to "back" the accounts. The real fear is that neither the government nor the customers would demand this of the banks.

[deisik]

Also in response to an earlier statement that 'all goods exchanged or offered for sale for BTC' are a backing, this wrong for two reasons.  First all such merchants are free to remove these offers at any time, and second not one single merchant on Earth actually sets prices IN BTC itself, they always make use of the exchange rate and thus they do not act to fix a value for BTC because you can have no confidence that any quantity of coins will ever buy any amount of merchandise.

What matters here are actual purchases made in Bitcoin, It doesn't matter whether merchants are free to remove these offers at any time (as if they couldn't do just the same at will in the case they decided to tag their prices in dollars) or they don't set prices in Bitcoin itself. Price is determined by actual exchange taking place between people and not by what they ask for or bid on (an example showing falseness of such logic)...

[teukon]

Bitcoin is not issued therefore it is not backed.  Bitcoin's lack of central authority is a strength, not a weakness.

For an established currency, a backing is a liability.  The backing tells us that some part of the value or stability of the currency is dependent on the promise of some entity.  What would happen if that entity were to break the promise? (see: Nixon Shock)

If Bitcoin can establish value and stability without a backing, more power to it.  If Bitcoin can be taken seriously without a central authority, so much the better.  We should not be shoe-horning Bitcoin into the model of centrally issued tokens to gain approval; we should be celebrating Bitcoin's potential to provide a viable alternative to centrally issued tokens as a means of exchange.

[guybrushthreepwood]

What's 'backing'? Isn't it this stuff:

[deisik]

Bitcoin is not issued therefore it is not backed.  Bitcoin's lack of central authority is a strength, not a weakness.

For an established currency, a backing is a liability.  The backing tells us that some part of the value or stability of the currency is dependent on the promise of some entity.  What would happen if that entity were to break the promise? (see: Nixon Shock)

Backing is what gives Bitcoin value. State issued fiat currency is backed by taxes which make possession of tokens of this currency a must, and by the goods you can exchange it for. Ultimately, this can be reduced to utility a currency provides to its holder. If it ceases to provide any, it loses its value through losing usefulness, as is the case with any example of hyperinflation in history...

[Ibian]

Fiat currency is backed by the threat that if you don't have some to give to the government when they want it, you go to jail.

The US dollar is a promise that you can redeem it - for dollars.

Exactly, a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.  Instead all they do is try to provide limited security against theft, and prevent counterfeiting.  So while users can have some assurance they will still posses their BTCs in the future and that BTC will still be rare, theirs no guarantee they will be high priced in the future.

Also in response to an earlier statement that 'all goods exchanged or offered for sale for BTC' are a backing, this wrong for two reasons.  First all such merchants are free to remove these offers at any time, and second not one single merchant on Earth actually sets prices IN BTC itself, they always make use of the exchange rate and thus they do not act to fix a value for BTC because you can have no confidence that any quantity of coins will ever buy any amount of merchandise.

Welcome to a new paradigm. All your economical fiat theory is useless with and does not apply to something like bitcoin. You are dinosaur.

[deisik]

The term "backing" is completely meaningless in the context of Bitcoin. Backing means that a FIAT currency CAN BE REDEEMED for some commodity, since that fiat currency is nothing more than a promise not to inflate too much.

Bitcoin is not fiat, it can't be inflated, and it doesn't rely on promises, so it is meaningless to ask what it is "backed" by.

Backing is about people pathetically pleading to their government to please not destroy the value of the pieces of paper they are forced to use as legal tender, to please ostensibly allow people to trade it for gold or some other store of value in order to build more TRUST. It has absolutely nothing to do with Bitcoin, and that's GOOD.

By backing people usually mean something that gives money real value (beyond just face-value), thus making it useful for them to hold it. If you agree to this definition, then backing is not meaningless even in the context of Bitcoin. And yes, you redeem a token of fiat currency when you exchange it for goods, so it is backed up by the commodities that are denominated in that currency...

[deisik]

Fiat currency is backed by the threat that if you don't have some to give to the government when they want it, you go to jail.

The US dollar is a promise that you can redeem it - for dollars.

Exactly, a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.  Instead all they do is try to provide limited security against theft, and prevent counterfeiting.  So while users can have some assurance they will still posses their BTCs in the future and that BTC will still be rare, theirs no guarantee they will be high priced in the future.

Also in response to an earlier statement that 'all goods exchanged or offered for sale for BTC' are a backing, this wrong for two reasons.  First all such merchants are free to remove these offers at any time, and second not one single merchant on Earth actually sets prices IN BTC itself, they always make use of the exchange rate and thus they do not act to fix a value for BTC because you can have no confidence that any quantity of coins will ever buy any amount of merchandise.

Welcome to a new paradigm. All your economical fiat theory is useless with and does not apply to something like bitcoin. You are dinosaur.

No, he is not a dinosaur. He just happens to not properly understand what that "economical fiat theory" is about. Neither is it a new paradigm really (at least in this aspect)...

[Ibian]

Fiat currency is backed by the threat that if you don't have some to give to the government when they want it, you go to jail.

The US dollar is a promise that you can redeem it - for dollars.

Exactly, a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.  Instead all they do is try to provide limited security against theft, and prevent counterfeiting.  So while users can have some assurance they will still posses their BTCs in the future and that BTC will still be rare, theirs no guarantee they will be high priced in the future.

Also in response to an earlier statement that 'all goods exchanged or offered for sale for BTC' are a backing, this wrong for two reasons.  First all such merchants are free to remove these offers at any time, and second not one single merchant on Earth actually sets prices IN BTC itself, they always make use of the exchange rate and thus they do not act to fix a value for BTC because you can have no confidence that any quantity of coins will ever buy any amount of merchandise.

Welcome to a new paradigm. All your economical fiat theory is useless with and does not apply to something like bitcoin. You are dinosaur.

No, he is not a dinosaur. He just happens to no properly understand well enough what "economical fiat theory" is about. Neither it is a new paradigm really...

I'm not convinced he doesn't understand any specific thing. Everything in this thread has been gone over with him before. He keeps saying the same things.

[andrewboy44]

Started a thread similar to this a few weeks ago. Users posted some good info. https://bitcointalk.org/index.php?topic=350536.msg3754199#msg3754199

[CMMPro]

Fiat currency is backed by the threat that if you don't have some to give to the government when they want it, you go to jail.

The US dollar is a promise that you can redeem it - for dollars.

Exactly, a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.  Instead all they do is try to provide limited security against theft, and prevent counterfeiting.  So while users can have some assurance they will still posses their BTCs in the future and that BTC will still be rare, theirs no guarantee they will be high priced in the future.

Also in response to an earlier statement that 'all goods exchanged or offered for sale for BTC' are a backing, this wrong for two reasons.  First all such merchants are free to remove these offers at any time, and second not one single merchant on Earth actually sets prices IN BTC itself, they always make use of the exchange rate and thus they do not act to fix a value for BTC because you can have no confidence that any quantity of coins will ever buy any amount of merchandise.

Welcome to a new paradigm. All your economical fiat theory is useless with and does not apply to something like bitcoin. You are dinosaur.

No, he is not a dinosaur. He just happens to no properly understand well enough what "economical fiat theory" is about. Neither it is a new paradigm really...

I'm not convinced he doesn't understand any specific thing. Everything in this thread has been gone over with him before. He keeps saying the same things.

Bitcoin is not a debt based currency so most of his arguments are comparing apples (fiat/debt based) to oranges (XBT/possession based). In XBT there is no debt to be exchanged or extinguished...one would argue one of the most important features of bitcoin itself. 

[johnyj]

Bitcoin is not a debt based currency so most of his arguments are comparing apples (fiat/debt based) to oranges (XBT/possession based). In XBT there is no debt to be exchanged or extinguished...one would argue one of the most important features of bitcoin itself. 

Exactly, just like gold, for every mined bitcoin, the cost is already paid, it is debt free, thus do not need anything to back it. It has a base  value, which is the cost, and its future value depend on its usefulness

On the other hand, if bitcoin do not have any demand, even it cost millions to make a coin, its future value is limited

Another point of view: Millions of distributed central bankers want to compete with existing central bankers, and their biggest advantage is limited money supply, while the existing central bankers' biggest advantage is price stability

[godislove]

There are 3 elements to the correct answer to "What is bitcoin's backing?" (aka "value"):

1) It's new.  Cryptocurrencies are new and important because a) they are fast, all digital, and cheap to transfer and b) because the world can't trust most of the governments who are printing money to make sure their currency keeps a constant value as defined by a basket of commodities.

2) By convention. By convention people have decided bitcoin is going to be the first and biggest, since the alternatives do not provide anything substantially better.  They are not going to give similar options the same value because then all coins will lose value.  That is why MtGox, Bitstamp, and BTCChina have not yet fully supported litecoin and others.  It all falls apart if the leaders recommend all good alt coins.  "bitcoin" is the flag under which the future is being created.  It needs to get established by convention.  I expect litecoin announcements from at least MtGox and BTCChina this month or next.

3) Its miners are a threat to alt coins. Smaller alt coins with a similar proof-of-work scheme are not going to be as secure if the profits from their mining and transaction fees wear thin relative to their value.  Proof-of-work alt coins can come under attack from excess or outdated bitcoin and litecoin mining equipment. So alt coins can't have a value per mining/node expense that exceeds bitcoin's value per mining/node expense.  I mean to say the payout to the smaller coin's miners has to be larger than bitcoin's which devalues the coin relative to bitcoin.  This known as the monopoly advantage where the biggest is not necessarily the best.  This has happened because there is no government to keep the monopoly power in check and allow the free market mechanism to work (assuming you think monopolies being regulated is part of the definition of a free market).  

"Free market" meant to classical economists the using of the power of democratic government to keep the economy free from monopolists, landlords, and others who used wealth to extract more wealth without increasing society's useful productive power.  Milton Friedman, in the most ingenious and powerful use of rhetoric the world has ever known, bastardized the term "free  market" to mean "free from government oppression" which was thoroughly adopted by banks, Republicans, Ayn Rand lovers, new-age Austrians (nutty with religious fervor), and Libertarians. At least libertarians are honest about wanting all poor and stupid people to be wiped off the face of the Earth.  Who can argue against that goal?  Well, um, all the poor and stupid people who make up half of all democracies, that's who.

[deisik]

This thread is a great example of people inventing a new meaning of "backing" on the spot. Obviously, a discussion of what backs bitcoin, or a fiat currency, or gold, or beer is worthless if nobody even agrees on what "backing" or 'backed by" means.

I stick to very simple and cogent definition of what backing is or what being backed by actually means, i.e. an inherent property or quality that makes something useful in reaching an individual's aims and ends or preventing the occurrence of some adverse consequences... Your take?

[johnyj]

People are searching for "Backing" because they are afraid of a crisis when everyone are selling their coin (in such a case if no one is backing bitcoin its value could drop to zero)

Fiat money does not need such "Backing" since you normally can not sell your fiat money (Forex is a place that you can sell one fiat for another, so typically you have central banks intervention in Forex market) , most of the time it is the only medium of exchange and accepted everywhere domestically. If you remove all the fiat money, the economy activities will come to a halt

If bitcoins are accepted everywhere, then it will be backed by merchants who accept bitcoin payment

[kjj]

This thread is a great example of people inventing a new meaning of "backing" on the spot. Obviously, a discussion of what backs bitcoin, or a fiat currency, or gold, or beer is worthless if nobody even agrees on what "backing" or 'backed by" means.

I stick to very simple and cogent definition of what backing is or what being backed by actually means, i.e. an inherent property or quality that makes something useful in reaching an individual's aims and ends or preventing the occurrence of some adverse consequences... Your take?

This is one of the two bizarro definitions of "backed" that people use when they get into a scramble.  The other is trade, and neither is a useful definition unless your brain is stuck.

These are perfectly circular definitions that apply to literally everything in the world.  It boils down to: X is backed by the value of X because (X is useful | X can be traded).  Also, "can be traded" is a special form of "is useful", so these are really a single circle.

We already have a word for value.  Why would we want to define backed to mean "has value"?  Simple and cogent, sure, but also pointless.

"Backed by" means "is a token redeemable for", as I described in an earlier post in this thread.

Bitcoin isn't backed by anything.  Neither is the dollar.  Neither is gold.  Abandon the incorrect notion that backing is necessary for value.

(This is where the regression theory comes up.  Either the chain of regression has been broken, or regression applies to the evolution of money in general, not to specific instances of money.)

[pjviitas]

I can't believe how much airtime this whole backing topic is getting.

Backing is an "idea" that has been sold to you.

When Farmer Jack traded bartered with Farmer Joe the only backing they had was an idea that it was a good deal.

You guys are making this way too complicated.

[Rassah]

a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.

But being a universal extinguisher of all debts does not establish any price or valuation for USD either. Nothing that's backed by anything else does, because all price is arbitrary. A gold-backed currency could be backed by an ounce of gold, or a gram of gold, and could be numbered 1, or 5, or anything else. Likewise, the government backing, or the extinguishing of debt backing, could back a dollar that can buy you a burger, or a dollar that you would need 1,000 of to buy a burger, and the mechanism would be the same. So backing isn't even "propping up."

Personally, I see backing as an IOU - a liability - where the thing that is backed has a promise from someone else that they will give you something in return. A gold backed currency is just an IOU with a promise to exchange it for some arbitrary amount of gold, and a government backed currency is just a promise that the government will forgive your debts if you exchange it with them. This is why non-backed things, like land, oil, gold, or bitcoin is so much more powerful - there is no one that needs to make you any promises. The land will let you build on, the oil will burn, the gold will be yellow, shiny, and highly conductive, and the bitcoin will work on the blockchain, without anyone promising or allowing it to happen.

[pand70]

Proof-of-work alt coins can come under attack from excess or outdated bitcoin and litecoin mining equipment.

Even if asics come out for litecoin you will not be able to mine all other scrypt coins with those because of the parameters that are used from the scrypt algorithm that litecoin uses.

[deisik]

This thread is a great example of people inventing a new meaning of "backing" on the spot. Obviously, a discussion of what backs bitcoin, or a fiat currency, or gold, or beer is worthless if nobody even agrees on what "backing" or 'backed by" means.

I stick to very simple and cogent definition of what backing is or what being backed by actually means, i.e. an inherent property or quality that makes something useful in reaching an individual's aims and ends or preventing the occurrence of some adverse consequences... Your take?

This is one of the two bizarro definitions of "backed" that people use when they get into a scramble.  The other is trade, and neither is a useful definition unless your brain is stuck.

These are perfectly circular definitions that apply to literally everything in the world.  It boils down to: X is backed by the value of X because (X is useful | X can be traded).  Also, "can be traded" is a special form of "is useful", so these are really a single circle.

You are neither the only one nor the first one here who is at first trying to impute to me some assumption and then trying to refute it as if it were my point. I specifically mentioned about inherent properties or qualities that make something useful. Trading is not inherent, so don't try to play this trick about circular definitions again...

[deisik]

We already have a word for value.  Why would we want to define backed to mean "has value"?  Simple and cogent, sure, but also pointless.

For a day-trader, bitcoin volatility may be useful, thus giving bitcoin value as a means of reaching his aims, right? Is volatility inherent to it? Certainly not, since bitcoin would still be bitcoin, even if it wasn't that volatile. If gold somehow lost its indestructibility, would it remain gold as we know it? The difference is evident, so value is not the same thing as backing...

I hope this clarifies the issue a bit

[teukon]

Personally, I see backing as an IOU - a liability - where the thing that is backed has a promise from someone else that they will give you something in return.

Precisely!  Thank you.

It's true that gold and oil have value but are expensive to store and transport.  Paper and database entries are much more efficient as media of exchange but lack sufficient value density and stability.  Certainly, being backed by the former imbues the latter with some value and stability, but the newly forged currency can only be as reliable as the backer itself.

Bitcoin is still very young and is far less reliable as a store of wealth than practically every alternative.  However, if Bitcoin (or any crypto-currency) continues to grow in value and stability, it will eventually establish a reputation greater than any group of people can muster, becoming more reliable than any gold-backed currency can ever be (but still less reliable than physical gold).  That is, of course, unless someone can invent a currency backer which is not, at bottom, a group of people.

[godislove]

"Backed" in the traditional meaning depends on a central authority to be the one "redeeming it" for something.    Since their is no central authority, maybe the "backed" can't be applied to bitcoin and the question should be changed to "what is it's inherent value".  Value is not a meaningless word.  A "hard" definition might be "enables humans to survive" which is why commodities are a good "backing" for a currency.  People tried to think of ways for governments to stockpile a basket of commodities to back their currency, but it always failed as too cumbersome due to spoilage of food and "softs", so precious metals prevailed.  A less strict definition would be "improves human life" or "has utility".  Lots of fuzziness in that, with perception built into it, but certainly "value" is not strictly a matter of perception. It is a matter of society's perception of its utility, relative to other available currencies. 

[kjj]

This thread is a great example of people inventing a new meaning of "backing" on the spot. Obviously, a discussion of what backs bitcoin, or a fiat currency, or gold, or beer is worthless if nobody even agrees on what "backing" or 'backed by" means.

I stick to very simple and cogent definition of what backing is or what being backed by actually means, i.e. an inherent property or quality that makes something useful in reaching an individual's aims and ends or preventing the occurrence of some adverse consequences... Your take?

This is one of the two bizarro definitions of "backed" that people use when they get into a scramble.  The other is trade, and neither is a useful definition unless your brain is stuck.

These are perfectly circular definitions that apply to literally everything in the world.  It boils down to: X is backed by the value of X because (X is useful | X can be traded).  Also, "can be traded" is a special form of "is useful", so these are really a single circle.

You are neither the only one nor the first one here who is at first trying to impute to me some assumption and then trying to refute it as if it were my point. I specifically mentioned about inherent properties or qualities that make something useful. Trading is not inherent, so don't try to play this trick about circular definitions again...

Try reading?  I refuted your circular claims about usefulness, plus the parallel claim of trade, which are circular in exactly the same way.

We already have a word for value.  Why would we want to define backed to mean "has value"?  Simple and cogent, sure, but also pointless.

For a day-trader, bitcoin volatility may be useful, thus giving bitcoin value as a means of reaching his aims, right? Is volatility inherent to it? Certainly not, since bitcoin would still be bitcoin, even if it wasn't that volatile. If gold somehow lost its indestructibility, would it remain gold as we know it? The difference is evident, so value is not the same thing as backing...

I hope this clarifies the issue a bit

The problem with your argument isn't that it is unclear.

As already pointed out, you made up your own ad hoc definition, and I pointed out that it forms a perfect pointless circle.  Water has inherent properties that make it useful, so by your definition, "Water is backed by the value of water because water is useful."  Feel free to stuff "inherent" in there wherever you feel it will do the most good, if it offends you that I left it out.  It still forms a circle, and it still applies to literally everything in the world, making it pointless.

[deisik]

As already pointed out, you made up your own ad hoc definition, and I pointed out that it forms a perfect pointless circle.  Water has inherent properties that make it useful, so by your definition, "Water is backed by the value of water because water is useful."  Feel free to stuff "inherent" in there wherever you feel it will do the most good, if it offends you that I left it out.  It still forms a circle, and it still applies to literally everything in the world, making it pointless.

I see that you went wild trying to confuse matters instead of giving a reasonable argument against my stance (if you have any in the first place). Water value is backed (read provided) by its usefulness to people due to its properties which satisfy a need (thirst). If water wasn't necessary for survival it would lose a good deal of its value. Seawater is not valued (as high) since it can't satisfy that need. Backing is not value, backing is an aggregate of inherent qualities that provide value...

Try reading?  I refuted your circular claims about usefulness, plus the parallel claim of trade, which are circular in exactly the same way.

I don't see any refutation. There are properties in things some of which are useful while others are useless. What is circular here?

[Erdogan]

Backing means that the bank issuing notes and token coins have a corresponding amount of gold in its valults. For that to be sensical, there have to be a defined mass of gold for each unit of the backed money unit. For instance, one dollar eqauals 1/20 ounce of gold. The notes have to be redeemable, that is you can go to the bank with your dollars and retrieve the specified amount of gold.

The notes can be redeemable even if they are not fully backed, because, as long as the bank is trusted, people will normally not redeem them. This is the normal situation. It can start creepingly, for instance notes can be issued for gold that is coming in surely in the near future. Eventually the redeemablility is impossible to support, and the fiat unit will be devalued. The indirect reference to the gold via the dollar unit seems to be designed to enable devaluation. If the unit of the note were not one dollar, but rather 1/20 ounce of gold, they could not be devaluable. They could still go ad undas due to printing, of course.

From this, it is obvious that the dollar, or any other modern fiat, is not backed, and not redeemable. We would not care, as long as the supply is limited in the same way as gold, but in case of fiat, the supply is of course not limited.

The bitcoin is not redeemable or backed, but the supply is totally unelastic.

Bitcoin and fiat are both unbacked, the difference is the supply.

[deisik]

From this, it is obvious that the dollar, or any other modern fiat, is not backed, and not redeemable. We would not care, as long as the supply is limited in the same way as gold, but in case of fiat, the supply is of course not limited.

The bitcoin is not redeemable or backed, but the supply is totally unelastic.

Bitcoin and fiat are both unbacked, the difference is the supply.

This doesn't reply the question why dollars (or anything for that matter) have value. When people ask what is backing dollar (bitcoin), by backing they usually mean what gives it value...

[kjj]

From this, it is obvious that the dollar, or any other modern fiat, is not backed, and not redeemable. We would not care, as long as the supply is limited in the same way as gold, but in case of fiat, the supply is of course not limited.

The bitcoin is not redeemable or backed, but the supply is totally unelastic.

Bitcoin and fiat are both unbacked, the difference is the supply.

This doesn't reply the question why dollars (or anything for that matter) have value. When people ask what is backing dollar (bitcoin), by backing they usually mean what gives it value...

This is why this thread is pointless.

Things have value because people want them.  Why they want them is not important to the notion of value.  This is a very difficult concept for many people to understand, including you.  They (you) cannot accept that value doesn't have to "come from" anything, so they (you) scramble to invent post hoc rationalizations and torture the common language until it fits their biases.  If carried too far, as you have done, you end up with a pointless definition.

Your argument is that something is "backed" by it's properties.  Philosophers care greatly about the distinction between a thing and the properties of the thing, but for the most part, ordinary people do not.  Most of us see "X is backed by X" to be of the same essence as "X is backed by the properties of X", and we recognize that we've been led around in a circle.

The non-circular definition is that "backed by" means "redeemable for", as in "Before 1971, the dollar was backed by gold" meaning "Before 1971, the dollar was redeemable for gold".  Of course, accepting this means accepting that most value is not "backed" by anything at all...

[Erdogan]

From this, it is obvious that the dollar, or any other modern fiat, is not backed, and not redeemable. We would not care, as long as the supply is limited in the same way as gold, but in case of fiat, the supply is of course not limited.

The bitcoin is not redeemable or backed, but the supply is totally unelastic.

Bitcoin and fiat are both unbacked, the difference is the supply.

This doesn't reply the question why dollars (or anything for that matter) have value. When people ask what is backing dollar (bitcoin), by backing they usually mean what gives it value...

The question was Re: "Backing" - what does this actually MEAN?

Another question is the one you state. The answer is whatever you, me and anyone else values, i.e what you want. It is in the mind of the participants. This will be revealed in the market, where everyone trades what he have with what he wants, according to his own valuations.

In the market, the most sellable goods will gain an extra value called exchange value, or the money component of the value of something, as opposed to its use value. Gold has some direct use value, fiat and bitcoin does not.

Why something can have only exchange value, and no direct use value, is for some a puzzle. It has value because you can trade it for something of value, but what about the receiver of the money? For him, there is also only exchange value. The reason for the value is a circular argument. Still, it exists, the value is real and appearant.

[deisik]

Things have value because people want them.  Why they want them is not important to the notion of value.  This is a very difficult concept for many people to understand, including you.  They (you) cannot accept that value doesn't have to "come from" anything, so they (you) scramble to invent post hoc rationalizations and torture the common language until it fits their biases.  If carried too far, as you have done, you end up with a pointless definition.

You are trying to rephrase what subjective theory of value tells us, but since you don't understand it properly well and have only nodding acquaintance with it as it appears to be, you can't see that what I say directly follows from this theory. Value comes from usefulness (or utility), i.e. the ability of things to help people reach their ends, but this core usefulness (which is what people mean by backing) cannot simply exist beyond some inherent properties of things...

Why people want something may not be important to the notion of value (actually, you are wrong here too), but to people it IS

[deisik]

Your argument is that something is "backed" by it's properties.  Philosophers care greatly about the distinction between a thing and the properties of the thing, but for the most part, ordinary people do not.  Most of us see "X is backed by X" to be of the same essence as "X is backed by the properties of X", and we recognize that we've been led around in a circle.

All your "refutation" boils down to saying that I am wrong because my reasoning is circular, but you don't give neither factual evidence nor logical argument why it is circular. Since you tried to level down my understanding of backing with "value by trading" (which is wrong), I can beforehand tell that it is your reasoning (whatever it might be) which is false...

[deisik]

From this, it is obvious that the dollar, or any other modern fiat, is not backed, and not redeemable. We would not care, as long as the supply is limited in the same way as gold, but in case of fiat, the supply is of course not limited.

The bitcoin is not redeemable or backed, but the supply is totally unelastic.

Bitcoin and fiat are both unbacked, the difference is the supply.

This doesn't reply the question why dollars (or anything for that matter) have value. When people ask what is backing dollar (bitcoin), by backing they usually mean what gives it value...

The question was Re: "Backing" - what does this actually MEAN?

Another question is the one you state. The answer is whatever you, me and anyone else values, i.e what you want. It is in the mind of the participants. This will be revealed in the market, where everyone trades what he have with what he wants, according to his own valuations.

I think we are well past all those times when backing meant nothing else but just something that you redeem your dollar for. I don't think that the OP didn't know that answer himself when he started this thread, but probably wanted to get beyond just that simple but rather superficial answer...

[Erdogan]

From this, it is obvious that the dollar, or any other modern fiat, is not backed, and not redeemable. We would not care, as long as the supply is limited in the same way as gold, but in case of fiat, the supply is of course not limited.

The bitcoin is not redeemable or backed, but the supply is totally unelastic.

Bitcoin and fiat are both unbacked, the difference is the supply.

This doesn't reply the question why dollars (or anything for that matter) have value. When people ask what is backing dollar (bitcoin), by backing they usually mean what gives it value...

The question was Re: "Backing" - what does this actually MEAN?

Another question is the one you state. The answer is whatever you, me and anyone else values, i.e what you want. It is in the mind of the participants. This will be revealed in the market, where everyone trades what he have with what he wants, according to his own valuations.

I think we are well past those times when backing meant nothing else but just something that you redeem your dollar for. I don't think that the OP didn't know that answer himself when he started this thread, but probably wanted to get beyond just that simple but rather superficial answer...

The OP stated a question, and I supplied an answer. Sometimes the world is uncomplicated.

If you did not like the answer, you are of course free to supply your own. To me, your ranting sounds like newspeak, popular among politicians and propagandists like the Fed. I prefer to keep my words stable, backed by history, redeemable from the old heros like Mises.

[deisik]

The OP stated a question, and I supplied an answer. Sometimes the world is uncomplicated.

If you did not like the answer, you are of course free to supply your own. To me, your ranting sounds like newspeak, popular among politicians and propagandists like the Fed. I prefer to keep my words stable, backed by history, redeemable from the old heros like Mises.

Goldbug detected?

Update: When I read Mises, I at first thought about Midas. Sorry for that...

[Erdogan]

The OP stated a question, and I supplied an answer. Sometimes the world is uncomplicated.

If you did not like the answer, you are of course free to supply your own. To me, your ranting sounds like newspeak, popular among politicians and propagandists like the Fed. I prefer to keep my words stable, backed by history, redeemable from the old heros like Mises.

Goldbug detected?

Update: When I read Mises, I at first thought about Midas. Sorry for that...

Not goldbug in fact. Many libertarians have problems with the fact that bitcoin does not have direct use value, they think that bitcoin can not be money excactly due to this. Mises stated the regression theorem to prove that money has to have direct use value. Appearantly, the gliding conversion from gold to gold backed paper money, to devalued gold backed money, to unbacked fiat money, can support fiat as money, but bitcoin not. There was no gliding conversion from fiat to bitcoin. Anyway, Mises could be wrong on that point, but he is still a hero.

Bitcoin obvously has value, the value is just as real as gold, steel, copper, rice or potatoes. The proof is that you can exchange bitcoin for any of those. Makes me a not-goldbug.

[deisik]

Goldbug detected?

Update: When I read Mises, I at first thought about Midas. Sorry for that...

Not goldbug in fact. Many libertarians have problems with the fact that bitcoin does not have direct use value, they think that bitcoin can not be money excactly due to this. Mises stated the regression theorem to prove that money has to have direct use value. Appearantly, the gliding conversion from gold to gold backed paper money, to devalued gold backed money, to unbacked fiat money, can support fiat as money, but bitcoin not. There was no gliding conversion from fiat to bitcoin. Anyway, Mises could be wrong on that point, but he is still a hero.

Bitcoin obvously has value, the value is just as real as gold, steel, copper, rice or potatoes. The proof is that you can exchange bitcoin for any of those. Makes me a not-goldbug.

If bitcoin does actually have value, couldn't we trace the reasons or roots as to why it has value? If value means an individual's assessment of usefulness (that's what economic theory tells us), could we as well track down bitcoin's properties that contribute to its usefulness and then tell between them which are inherent to it (i.e. without which it will no longer be bitcoin as we know it) and which are just attached to it?

[Erdogan]

Goldbug detected?

Update: When I read Mises, I at first thought about Midas. Sorry for that...

Not goldbug in fact. Many libertarians have problems with the fact that bitcoin does not have direct use value, they think that bitcoin can not be money excactly due to this. Mises stated the regression theorem to prove that money has to have direct use value. Appearantly, the gliding conversion from gold to gold backed paper money, to devalued gold backed money, to unbacked fiat money, can support fiat as money, but bitcoin not. There was no gliding conversion from fiat to bitcoin. Anyway, Mises could be wrong on that point, but he is still a hero.

Bitcoin obvously has value, the value is just as real as gold, steel, copper, rice or potatoes. The proof is that you can exchange bitcoin for any of those. Makes me a not-goldbug.

If bitcoin does actually have value, couldn't we trace the reasons or roots as to why it has value? If value means an individual's assessment of usefulness (that's what economic theory tells us), could we as well track down bitcoin's properties that contribute to its usefulness and then tell between them which are inherent to it (i.e. without which it will no longer be bitcoin as we know it) and which are just attached to it?

No, the value started out with zero at genesis, and the curent value is appearantly magical.

The regression theorem has been discussed here on bitcointalk numerous times, I don't want to repeat it all. Maybe others.

[kjj]

Your argument is that something is "backed" by it's properties.  Philosophers care greatly about the distinction between a thing and the properties of the thing, but for the most part, ordinary people do not.  Most of us see "X is backed by X" to be of the same essence as "X is backed by the properties of X", and we recognize that we've been led around in a circle.

All your "refutation" boils down to saying that I am wrong because my reasoning is circular, but you don't give neither factual evidence nor logical argument why it is circular. Since you tried to level down my understanding of backing with "value by trading" (which is wrong), I can beforehand tell that it is your reasoning (whatever it might be) which is false...

When your argument is "X because X" or "X because Y because X", you've formed a circle.  The evidence is that you ended up in the same place you started.

but this core usefulness (which is what people mean by backing) cannot simply exist beyond some inherent properties of things...

No one* means that when they ask what backs bitcoin.  Generally, when someone asks "What backs bitcoin?" they really mean "I'm under the mistaken impression that the dollar is redeemable for something.  What is bitcoin redeemable for?".  Go read some of the dozens of threads on that topic if you don't believe it.

* I'm using "no one" approximately here, since you are an obvious counterexample.

[shawshankinmate37927]

From what I've seen, the meaning is invented on the spot by the person trying to justify (or condemn) the value of a currency. I think this practice started in 1971, when the dollar became completely fiat. It was no longer backed by gold, but it couldn't be backed by nothing.

In more legitimate usage, "backed by" generally means "can be exchanged for a fixed amount of".

Yes, the scammers have tried to redefine what "backing" means in an effort to makie things more confusing than they should be.  They've also tried to redefine terms like "inflation/deflation" and "money/currency".

It's important to also note that "backing" is a bad idea because it introduces counterparty risk.

Gold and silver are good forms of money.  Pieces of paper "backed" by gold and silver are not.  History proves that the concept of "backing" is not a viable option.

[deisik]

When your argument is "X because X" or "X because Y because X", you've formed a circle.  The evidence is that you ended up in the same place you started.

This is not my argument. I never said anything of the kind. It seems that it is you who is clinging to circular reasoning here...

[deisik]

No one* means that when they ask what backs bitcoin.  Generally, when someone asks "What backs bitcoin?" they really mean "I'm under the mistaken impression that the dollar is redeemable for something.  What is bitcoin redeemable for?".  Go read some of the dozens of threads on that topic if you don't believe it.

* I'm using "no one" approximately here, since you are an obvious counterexample.

I think the question which this thread is titled with says the opposite. It is surely not along the lines what you redeem for bitcoins (or anything for that matter). As I said before, I don't think that the OP came here to hear (no pun) what he obviously already knows about backing as being what you might get if you could redeem dollars or bitcoins...

[Ibian]

Why is this such a difficult question for you lot? Bitcoin is backed by exactly the same thing as any other kind of money: People who are able to enforce its use. That would be governments (not the US government, plural) for fiat, and the collective group of people running mining nodes for bitcoin. It's not more complicated than that.

[porc]

"Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a "claim on society"; it is not a guarantee of a fixed price level. It is simply a commodity. It differs from other commodities in being demanded mainly as a medium of exchange."

MURRAY ROTHBARD

[deisik]

"Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a "claim on society"; it is not a guarantee of a fixed price level. It is simply a commodity. It differs from other commodities in being demanded mainly as a medium of exchange."

MURRAY ROTHBARD

Porc, I asked you twice before (this is the third time already) but you didn't answer my question, that is, if someone (say, a trader) could use bitcoin to earn some money "by dumping it on the next guy" (as you would say), would it be useful to him? I hope you will deign an answer...

[Zangelbert Bingledack]

The term "backing" is completely meaningless in the context of Bitcoin. Backing means that a FIAT currency CAN BE REDEEMED for some commodity, since that fiat currency is nothing more than a promise not to inflate too much.

Bitcoin is not fiat, it can't be inflated, and it doesn't rely on promises, so it is meaningless to ask what it is "backed" by.

Backing is about people pathetically pleading to their government to please not destroy the value of the pieces of paper they are forced to use as legal tender, to please ostensibly allow people to trade it for gold or some other store of value in order to build more TRUST. It has absolutely nothing to do with Bitcoin, and that's GOOD.

By backing people usually mean something that gives money real value (beyond just face-value), thus making it useful for them to hold it. If you agree to this definition, then backing is not meaningless even in the context of Bitcoin. And yes, you redeem a token of fiat currency when you exchange it for goods, so it is backed up by the commodities that are denominated in that currency...

I don't think that's a useful definition of "backing," because it just means utility. If people mean utility they should just say utility. If there are people who use "backing" to mean simply utility, they are either using an ahistorical/nonstandard definition for something much simpler, or they are confused by analogy with centralized currencies.

[deisik]

By backing people usually mean something that gives money real value (beyond just face-value), thus making it useful for them to hold it. If you agree to this definition, then backing is not meaningless even in the context of Bitcoin. And yes, you redeem a token of fiat currency when you exchange it for goods, so it is backed up by the commodities that are denominated in that currency...

I don't think that's a useful definition of "backing," because it just means utility. If people mean utility they should just say uutility. If there are people who use "backing" to mean simply utility, they are either using an ahistorical/nonstandard definition for something much simpler, or they are confused by analogy with centralized currencies.

No, it doesn't mean utility because it would mean value (since value is an individual's assessment of utility). And this would indeed be circular. Read all my posts in this thread and you will see that I'm not talking about utility. Utility doesn't come out of thin air, it is subjective valuation of objective properties or qualities of things in respect to their usefulness in helping an individual reach his ends...

[godislove]

The dollar is indeed backed by something:  the ability to keep our wealth and keep us out of jail by paying our taxes with it.  It's backed by legal threats.  On a yearly basis, it's required to be redeemed in exchange for your freedom.  Just ask Peter's Schiff's father.

"Here, Mr. U.S. government. I have some dollars for you."
"Oh, thanks. That's so sweet.  Oooo, and what such a nice and generous surprise. I'm so excited. You know how we're here to help, representing your interests.  You may have access to your bank accounts, keep your house, and retain your freedom for 12 more months.  Would you like to donate to a presidential campaign?"

[porc]

The dollar is indeed backed by something:  the ability to keep our wealth and keep us out of jail by paying our taxes with it.  It's backed by legal threats.  On a yearly basis, it's required to be redeemed in exchange for your freedom.  Just ask Peter's Schiff's father.

"Here, Mr. U.S. government. I have some dollars for you."
"Oh, thanks. That's so sweet.  Oooo, and what such a nice and generous surprise. I'm so excited. You know how we're here to help, representing your interests.  You may have access to your bank accounts, keep your house, and retain your freedom for 12 more months.  Would you like to donate to a presidential campaign?"

The dollar is not only required to pay taxes and thus to keep out of jail. It is also legal tender, thus any debt can be extinguished with dollars. It is forced upon us and any alternatives are outlawed (capital gains taxes, prohibition ala liberty gold). The state makes sure, the dollar is accepted as a medium of exchange within its borders.

[Impaler]

a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.

But being a universal extinguisher of all debts does not establish any price or valuation for USD either. Nothing that's backed by anything else does, because all price is arbitrary. A gold-backed currency could be backed by an ounce of gold, or a gram of gold, and could be numbered 1, or 5, or anything else. Likewise, the government backing, or the extinguishing of debt backing, could back a dollar that can buy you a burger, or a dollar that you would need 1,000 of to buy a burger, and the mechanism would be the same. So backing isn't even "propping up."

Personally, I see backing as an IOU - a liability - where the thing that is backed has a promise from someone else that they will give you something in return. A gold backed currency is just an IOU with a promise to exchange it for some arbitrary amount of gold, and a government backed currency is just a promise that the government will forgive your debts if you exchange it with them. This is why non-backed things, like land, oil, gold, or bitcoin is so much more powerful - there is no one that needs to make you any promises. The land will let you build on, the oil will burn, the gold will be yellow, shiny, and highly conductive, and the bitcoin will work on the blockchain, without anyone promising or allowing it to happen.

In a sense yes the 'universal' nature of the dollar isn't establishing a value either, BUT nominal price stickiness and size of the US economy create a lot of stability in the value of the dollar, not to mention a central bank which acts to keep inflation (price inflation) to low levels (yes you can have as much or as little faith in them as you like).  I've never said that the 'backing' of the US dollar is perfect, heck it might not even be considered 'good', you can disparage the quality of the backing as much as you like but you can't say it's not backed.

It simply HAS a backing is all I'm saying, their exists a structure that tries to guarantee a future exchange value, BTC doesn't have any kind of guarantee it just has an exchange market that can go to incredible extremes (bubbles or total collapse) with no brakes on it.  If their were even something like a group of people with large wealth that were publicly pledging they wouldn't let BTC drop below some floor price that would be a backing but we don't even have that.

[porc]

a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.

But being a universal extinguisher of all debts does not establish any price or valuation for USD either. Nothing that's backed by anything else does, because all price is arbitrary. A gold-backed currency could be backed by an ounce of gold, or a gram of gold, and could be numbered 1, or 5, or anything else. Likewise, the government backing, or the extinguishing of debt backing, could back a dollar that can buy you a burger, or a dollar that you would need 1,000 of to buy a burger, and the mechanism would be the same. So backing isn't even "propping up."

Personally, I see backing as an IOU - a liability - where the thing that is backed has a promise from someone else that they will give you something in return. A gold backed currency is just an IOU with a promise to exchange it for some arbitrary amount of gold, and a government backed currency is just a promise that the government will forgive your debts if you exchange it with them. This is why non-backed things, like land, oil, gold, or bitcoin is so much more powerful - there is no one that needs to make you any promises. The land will let you build on, the oil will burn, the gold will be yellow, shiny, and highly conductive, and the bitcoin will work on the blockchain, without anyone promising or allowing it to happen.

In a sense yes the 'universal' nature of the dollar isn't establishing a value either, BUT nominal price stickiness and size of the US economy create a lot of stability in the value of the dollar, not to mention a central bank which acts to keep inflation (price inflation) to low levels (yes you can have as much or as little faith in them as you like).  I've never said that the 'backing' of the US dollar is perfect, heck it might not even be considered 'good', you can disparage the quality of the backing as much as you like but you can't say it's not backed.

It simply HAS a backing is all I'm saying, their exists a structure that tries to guarantee a future exchange value, BTC doesn't have any kind of guarantee it just has an exchange market that can go to incredible extremes (bubbles or total collapse) with no brakes on it.  If their were even something like a group of people with large wealth that were publicly pledging they wouldn't let BTC drop below some floor price that would be a backing but we don't even have that.

Plain and simple: Bitcoin is backed by absolutely nothing. Let that sink in.

[Ibian]

a dollar is a bearer bond that can extinguish a Dollar of DEBT, debt in the form of taxation is a big part of that, but also legal tender laws mean ANY private debt can also be extinguished by the dollar.  So the dollar is the universal extinguisher of all debts in the U.S. and that is it's backing.

I've argue in other threads that the BTC computer network or even the cryptographic code of BTC dose not constitute backing for BTC, because it dose not establish any price or valuation for BTCs.

But being a universal extinguisher of all debts does not establish any price or valuation for USD either. Nothing that's backed by anything else does, because all price is arbitrary. A gold-backed currency could be backed by an ounce of gold, or a gram of gold, and could be numbered 1, or 5, or anything else. Likewise, the government backing, or the extinguishing of debt backing, could back a dollar that can buy you a burger, or a dollar that you would need 1,000 of to buy a burger, and the mechanism would be the same. So backing isn't even "propping up."

Personally, I see backing as an IOU - a liability - where the thing that is backed has a promise from someone else that they will give you something in return. A gold backed currency is just an IOU with a promise to exchange it for some arbitrary amount of gold, and a government backed currency is just a promise that the government will forgive your debts if you exchange it with them. This is why non-backed things, like land, oil, gold, or bitcoin is so much more powerful - there is no one that needs to make you any promises. The land will let you build on, the oil will burn, the gold will be yellow, shiny, and highly conductive, and the bitcoin will work on the blockchain, without anyone promising or allowing it to happen.

In a sense yes the 'universal' nature of the dollar isn't establishing a value either, BUT nominal price stickiness and size of the US economy create a lot of stability in the value of the dollar, not to mention a central bank which acts to keep inflation (price inflation) to low levels (yes you can have as much or as little faith in them as you like).  I've never said that the 'backing' of the US dollar is perfect, heck it might not even be considered 'good', you can disparage the quality of the backing as much as you like but you can't say it's not backed.

It simply HAS a backing is all I'm saying, their exists a structure that tries to guarantee a future exchange value, BTC doesn't have any kind of guarantee it just has an exchange market that can go to incredible extremes (bubbles or total collapse) with no brakes on it.  If their were even something like a group of people with large wealth that were publicly pledging they wouldn't let BTC drop below some floor price that would be a backing but we don't even have that.

Plain and simple: Bitcoin is backed by absolutely nothing. Let that sink in.

Is that to say that both of you guys consider bitcoin worthless? Cause if so, I got this public address...

[johnyj]

Why something can have only exchange value, and no direct use value, is for some a puzzle. It has value because you can trade it for something of value, but what about the receiver of the money? For him, there is also only exchange value. The reason for the value is a circular argument. Still, it exists, the value is real and appearant.

This is a slow progress: First all those paper that have exchange value can be redeemed for gold from the central bank, and then the gold backing them is removed. Due to most of the people ignore how money works, the value of those paper does not disappear, because now all the merchants already accept them as a payment medium. Transaction demand has taken over to decide the value of those paper: When people are running out of money for transaction, the money's value will rise

Another important fact is that people do not have any choice other than one single currency. If there are 2-3 types of competing currency, then one of them will become more accepted depends on their credibility

[JoelKatz]

"Backing" is a solution to a problem that Bitcoin doesn't have. The reason you want a currency to be backed by someone or something is to ensure its scarcity.  Otherwise, the value can be stolen from you by supply expansion.

But backing is an imperfect solution because the backer can always either fail to meet its obligations or can structure its obligations so vaguely that it can technically meet them while still devaluing the currency and robbing those who hold it. Even physical scarcity, which is what gold has, is still imperfect -- we might one day find an asteroid full of gold and gold might become as cheap as aluminum.

Bitcoin's scarcity is guaranteed by mathematics. It's as close to perfectly guaranteed as we humans are capable of. So long as there is demand, its value will be assured because its supply is known. (Of course, there's no guarantee of demand.)

[johnyj]

Value to its root, comes from demand. And demand comes from desire, if people have no desire or negative desire (hate) for something, then it has no value. Many people think bitcoin does not have any value because they hate it

[shawshankinmate37927]

"Backing" is a solution to a problem that Bitcoin doesn't have. The reason you want a currency to be backed by someone or something is to ensure its scarcity.  Otherwise, the value can be stolen from you by supply expansion.

But backing is an imperfect solution because the backer can always either fail to meet its obligations or can structure its obligations so vaguely that it can technically meet them while still devaluing the currency and robbing those who hold it. Even physical scarcity, which is what gold has, is still imperfect -- we might one day find an asteroid full of gold and gold might become as cheap as aluminum.

Bitcoin's scarcity is guaranteed by mathematics. It's as close to perfectly guaranteed as we humans are capable of. So long as there is demand, its value will be assured because its supply is known. (Of course, there's no guarantee of demand.)

Ding, ding, ding, ding, ding, ding.....we have a winner!!!!

[porc]

"Backing" is a solution to a problem that Bitcoin doesn't have. The reason you want a currency to be backed by someone or something is to ensure its scarcity.  

False.

[jonat3]

To illustrate the need for backing, one must first understand why gold itself needs no backing. Gold doesn't need backing, because it has so called "intrinsic value". However, intrinsic value itself is contradictory, because when goldbugs mention intrinsic value, they mean to imply that intrinsic value is value that can be objectively determined and is thus value that can NEVER be stripped away. Hence, this is why gold needs no backing (according to them).

The notion that intrinsic value can be objectively determined is conflating two issues, namely that of intrinsic PROPERTIES and intrinsic VALUE. Intrinsic properties can indeed be objectively determined and much of the intrinsic value that gold has is derived from its intrinsic properties. Even if the entire human species dies out today, the intrinsic properties of gold will always remain. However, if the human species dies out, gold will automatically lose all its value, because only humans can determine value. Hence, ALL value is subjective in nature. There's no such thing as objective value (= intrinsic value). It's a MYTH.

Thus, gold is also subjectively valued. What people call intrinsic value is merely subjective value that is extremely hard to strip away. Why does gold nonetheless have such strong subjective value? Because it has UTILITY under the most diverse circumstances and it has proven that it has the ability to retain this utility over a span of 5000 years. Even so, it's still possible for gold to lose its intrinsic value. If I dropped an atomic bomb on the entire gold supply, it would lose any intrinsic value it had (thus demonstrating that there's no such thing as value that cannot be stripped away). However, the scenarios under which gold can lose its utility are extremely unlikely and it's because of LOW PROBABILITY of these scenarios that gold itself needs no backing.

So does Bitcoin need backing? Depends on the probabilities of the scenarios that Bitcoin can lose its utility. Bitcoin has MASSIVE utility greater than gold and it's this utility that gives it its so called intrinsic value (which is subjective value that is extremely hard to strip away according to my new definition). Some examples that can compromise Bitcoin's utility: 51% attack, encryption hacked, electricty/internet down for extended periods of time, governments banning bitcoin, fatal bugs. IMO, each of these scenarios are unlikely, but they are still far more likely than someone dropping an atomic bomb on the entire gold supply. IMO, gold still wins as a secure store of value because of this (the only place gold can compete with bitcoin), but as technology progresses, the security and robustness of bitcoin (or another alternate currency) to survive under any known circumstances will be improved that the scenarios under which it can fail will be as remote as the scenarios under which gold can fail. Should crypto gain this amount of security, it will wipe the floor with any existing asset, including gold. Gold will then be permanently supplanted as the number one store of value and the death of government currencies is then pretty much a matter of time.

[Erdogan]

"Backing" is a solution to a problem that Bitcoin doesn't have. The reason you want a currency to be backed by someone or something is to ensure its scarcity.  

False.

You did not back your opinion here! It is not false, it is in fact spot on, and his claim is well backed by his arguments.

[shawshankinmate37927]

"Backing" is a solution to a problem that Bitcoin doesn't have. The reason you want a currency to be backed by someone or something is to ensure its scarcity.  

False.

You did not back your opinion here! It is not false, it is in fact spot on, and his claim is well backed by his arguments.

He has a very deeply held belief that he's clinging to.  He's not going to let logic or reason come between him and his beliefs.

[Erdogan]

To illustrate the need for backing, one must first understand why gold itself needs no backing. Gold doesn't need backing, because it has so called "intrinsic value". However, intrinsic value itself is contradictory, because when goldbugs mention intrinsic value, they mean to imply that intrinsic value is value that can be objectively determined and is thus value that can NEVER be stripped away. Hence, this is why gold needs no backing (according to them).

The notion that intrinsic value can be objectively determined is conflating two issues, namely that of intrinsic PROPERTIES and intrinsic VALUE. Intrinsic properties can indeed be objectively determined and much of the intrinsic value that gold has is derived from its intrinsic properties. Even if the entire human species dies out today, the intrinsic properties of gold will always remain. However, if the human species dies out, gold will automatically lose all its value, because only humans can determine value. Hence, ALL value is subjective in nature. There's no such thing as objective value (= intrinsic value). It's a MYTH.

Thus, gold is also subjectively valued. What people call intrinsic value is merely subjective value that is extremely hard to strip away. Why does gold nonetheless have such strong subjective value? Because it has UTILITY under the most diverse circumstances and it has proven that it has the ability to retain this utility over a span of 5000 years. Even so, it's still possible for gold to lose its intrinsic value. If I dropped an atomic bomb on the entire gold supply, it would lose any intrinsic value it had (thus demonstrating that there's no such thing as value that cannot be stripped away). However, the scenarios under which gold can lose its utility are extremely unlikely and it's because of LOW PROBABILITY of these scenarios that gold itself needs no backing.

So does Bitcoin need backing? Depends on the probabilities of the scenarios that Bitcoin can lose its utility. Bitcoin has MASSIVE utility greater than gold and it's this utility that gives it its so called intrinsic value (which is subjective value that is extremely hard to strip away according to my new definition). Some examples that can compromise Bitcoin's utility: 51% attack, encryption hacked, electricty/internet down for extended periods of time, governments banning bitcoin, fatal bugs. IMO, each of these scenarios are unlikely, but they are still far more likely than someone dropping an atomic bomb on the entire gold supply. IMO, gold still wins as a secure store of value because of this (the only place gold can compete with bitcoin), but as technology progresses, the security and robustness of bitcoin (or another alternate currency) to survive under any known circumstances will be improved that the scenarios under which it can fail will be as remote as the scenarios under which gold can fail. Should crypto gain this amount of security, it will wipe the floor with any existing asset, including gold. Gold will then be permanently supplanted as the number one store of value and the death of government currencies is then pretty much a matter of time.

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

The fact that gold has use value, guarantees that its value will not fall to zero. If it is not used as money, its value will fall to it's direct use value.

So what? It will not protect your savings. When you save in gold, you depend on its money value, or exchange value, the same as the value for bitcoin. Conclusin: Forget about the intrinsic value of gold, it is not important.

[porc]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

You are being willfully ignorant. Gold has been desired for thousands of years because it looks beautiful.

[jonat3]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

Umm, I think you should read my post again. I do agree that I started out with a misleading note.

[Erdogan]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

You are being willfully ignorant. Gold has been desired for thousands of years because it looks beautiful.

Not ignorant. That is just another trait that is a part of its use value. I did not mention electrical uses, and the fact that you can drum it out to a sheet the thickness of a single atom. I am sure there are hundreds of uses. Still, nobody knows what the use value is. It will be revealed when its exchange value disappears. With the culture surrounding gold, probably never.

[porc]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

You are being willfully ignorant. Gold has been desired for thousands of years because it looks beautiful.

Not ignorant. That is just another trait that is a part of its use value. I did not mention electrical uses, and the fact that you can drum it out to a sheet the thickness of a single atom. I am sure there are hundreds of uses. Still, nobody knows what the use value is. It will be revealed when its exchange value disappears. With the culture surrounding gold, probably never.

Point taken.

However, you have to understand that golds money value is entirely dependent on golds beauty.

[Erdogan]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

Umm, I think you should read my post again. I do agree that I started out with a misleading note.

I read it. There is confusion about what is intrinsic value, objective value (there is none) and subjective value, and about the value of a unit of money as opposed to the value of the system. A good money system like bitcoin is of unmeasurable value to society, but that is aside the point. Backing? There is nothing that needs or not needs backing. Either it is backed by something else, or it is not. Gold is unbacked, bitcoin is unbacked, the dollar was backed by gold once, but is now unbacked.

[jonat3]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

Umm, I think you should read my post again. I do agree that I started out with a misleading note.

I read it. There is confusion about what is intrinsic value, objective value (there is none) and subjective value, and about the value of a unit of money as opposed to the value of the system. A good money system like bitcoin is of unmeasurable value to society, but that is aside the point. Backing? There is nothing that needs or not needs backing. Either it is backed by something else, or it is not. Gold is unbacked, bitcoin is unbacked, the dollar was backed by gold once, but is now unbacked.

Just for clarification, are you claiming that I said that objective value exists or that BC needs backing? Because I get the impression you really didn't grasp my post even if you read it.

[porc]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

Umm, I think you should read my post again. I do agree that I started out with a misleading note.

I read it. There is confusion about what is intrinsic value, objective value (there is none) and subjective value, and about the value of a unit of money as opposed to the value of the system. A good money system like bitcoin is of unmeasurable value to society, but that is aside the point. Backing? There is nothing that needs or not needs backing. Either it is backed by something else, or it is not. Gold is unbacked, bitcoin is unbacked, the dollar was backed by gold once, but is now unbacked.

You are confused.

Backing is a guarantee of future exchange value.

Gold and dollar have backing. Bitcoin has no backing.

[Ibian]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

You are being willfully ignorant. Gold has been desired for thousands of years because it looks beautiful.

Not ignorant. That is just another trait that is a part of its use value. I did not mention electrical uses, and the fact that you can drum it out to a sheet the thickness of a single atom. I am sure there are hundreds of uses. Still, nobody knows what the use value is. It will be revealed when its exchange value disappears. With the culture surrounding gold, probably never.

Point taken.

However, you have to understand that golds money value is entirely dependent on golds beauty.

Someone linked an article the other day. The reason gold was used as money for a long time is that there are like five elements that have the proper properties for a medium of exchange. Gold just happens to be the most distinctive looking of the bunch while at the same time not being much use for anything else. It was a practical consideration in ancient times, nothing more.

[Erdogan]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

Umm, I think you should read my post again. I do agree that I started out with a misleading note.

I read it. There is confusion about what is intrinsic value, objective value (there is none) and subjective value, and about the value of a unit of money as opposed to the value of the system. A good money system like bitcoin is of unmeasurable value to society, but that is aside the point. Backing? There is nothing that needs or not needs backing. Either it is backed by something else, or it is not. Gold is unbacked, bitcoin is unbacked, the dollar was backed by gold once, but is now unbacked.

Just for clarification, are you claiming that I said that objective value exists or that BC needs backing? Because I get the impression you really didn't grasp my post even if you read it.

Objective value does not exist, all value is subjective and it comes from the minds of the individuals on the market.

Nothing needs backing. It either has, or has not. Bitcoin has no backing.

[Ibian]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

Umm, I think you should read my post again. I do agree that I started out with a misleading note.

I read it. There is confusion about what is intrinsic value, objective value (there is none) and subjective value, and about the value of a unit of money as opposed to the value of the system. A good money system like bitcoin is of unmeasurable value to society, but that is aside the point. Backing? There is nothing that needs or not needs backing. Either it is backed by something else, or it is not. Gold is unbacked, bitcoin is unbacked, the dollar was backed by gold once, but is now unbacked.

You are confused.

Backing is a guarantee of future exchange value.

Gold and dollar have backing. Bitcoin has no backing.

Let's pretend for a moment then. The guarantee has been broken. Constantly through inflation, and in events such as the Cyprus confiscation.

[porc]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

Umm, I think you should read my post again. I do agree that I started out with a misleading note.

I read it. There is confusion about what is intrinsic value, objective value (there is none) and subjective value, and about the value of a unit of money as opposed to the value of the system. A good money system like bitcoin is of unmeasurable value to society, but that is aside the point. Backing? There is nothing that needs or not needs backing. Either it is backed by something else, or it is not. Gold is unbacked, bitcoin is unbacked, the dollar was backed by gold once, but is now unbacked.

You are confused.

Backing is a guarantee of future exchange value.

Gold and dollar have backing. Bitcoin has no backing.

Let's pretend for a moment then. The guarantee has been broken. Constantly through inflation, and in events such as the Cyprus confiscation.

Yes, Dollars backing is weak. Golds backing is strong.

However Bitcoin has no backing and thus is not suitable money. Sry to break it to you.

[jonat3]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

Umm, I think you should read my post again. I do agree that I started out with a misleading note.

I read it. There is confusion about what is intrinsic value, objective value (there is none) and subjective value, and about the value of a unit of money as opposed to the value of the system. A good money system like bitcoin is of unmeasurable value to society, but that is aside the point. Backing? There is nothing that needs or not needs backing. Either it is backed by something else, or it is not. Gold is unbacked, bitcoin is unbacked, the dollar was backed by gold once, but is now unbacked.

Just for clarification, are you claiming that I said that objective value exists or that BC needs backing? Because I get the impression you really didn't grasp my post even if you read it.

Objective value does not exist, all value is subjective and it comes from the minds of the individuals on the market.

Nothing needs backing. It either has, or has not. Bitcoin has no backing.

You didn't answer my question and your replies reveal that you only skimmed my post. But whatever. I'm on your side. I'll summarize.

TL;DR  Bitcoin's security probably needs some work, but it (or another cryptocurrency) will eventually supplant gold and all other government currencies.

[Erdogan]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

You are being willfully ignorant. Gold has been desired for thousands of years because it looks beautiful.

Not ignorant. That is just another trait that is a part of its use value. I did not mention electrical uses, and the fact that you can drum it out to a sheet the thickness of a single atom. I am sure there are hundreds of uses. Still, nobody knows what the use value is. It will be revealed when its exchange value disappears. With the culture surrounding gold, probably never.

Point taken.

However, you have to understand that golds money value is entirely dependent on golds beauty.

Someone linked an article the other day. The reason gold was used as money for a long time is that there are like five elements that have the proper properties for a medium of exchange. Gold just happens to be the most distinctive looking of the bunch. It was a practical consideration in ancient times, nothing more.

Five elements? No, anything can be money, it is always the most sellable good on the market. In the end, that came to be gold. You can speculate why, and that has been done, but eventually it was the actors on the market who decided.

[Erdogan]

Here we go again. The subject was well dissected and argued for, now we are back to square one. Anyway...

The intrinsic value of gold, which is the same as its value for direct use, we all agree on. But what is the intrinsic value? Nobody knows, gold has been money for thousands of years, so it is impossible to say. Gold is now at about 1200 USD per ounce. Could the intrinsic value be 100 USD? 1 USD? Can it be used to build aircrafts? No, too heavy. Can it be used to build ships or support the cement in buildings? No, to soft. Can it be used as an offer anode on a ship? No, too hostile to the ions, don't want to connect. It has some uses, but we do not know the value for direct use.

Umm, I think you should read my post again. I do agree that I started out with a misleading note.

I read it. There is confusion about what is intrinsic value, objective value (there is none) and subjective value, and about the value of a unit of money as opposed to the value of the system. A good money system like bitcoin is of unmeasurable value to society, but that is aside the point. Backing? There is nothing that needs or not needs backing. Either it is backed by something else, or it is not. Gold is unbacked, bitcoin is unbacked, the dollar was backed by gold once, but is now unbacked.

Just for clarification, are you claiming that I said that objective value exists or that BC needs backing? Because I get the impression you really didn't grasp my post even if you read it.

Objective value does not exist, all value is subjective and it comes from the minds of the individuals on the market.

Nothing needs backing. It either has, or has not. Bitcoin has no backing.

You didn't answer my question and your replies reveal that you only skimmed my post. But whatever. I'm on your side. I'll summarize.

TL;DR  Bitcoin's security probably needs some work, but it (or another cryptocurrency) will eventually supplant gold and all other government currencies.

I won't speculate on what you claim other than what you wrote. If you think we talk past each other, try stating your opinion again, or ask me to clarify my view.

[jonat3]

My opinion is that Bitcoin (or another cryptocurrency) could probably still use some work on its security, but that it will eventually rival gold (and supplant it) where it needs no backing . Even in its current state it could probably do without backing, though I would still reccommend improving the security (which they are working on now).

As for your opinion, I'm pretty much sure you agree that BC needs no backing.

[porc]

My opinion is that Bitcoin (or another cryptocurrency) could probably still use some work on its security, but that it will eventually rival gold (and supplant it) where it needs no backing . Even in its current state it could probably do without backing, though I would still reccommend improving the security (which they are working on now).

As for your opinion, I'm pretty much sure you agree that BC needs no backing.

Backing= guarantee of future exchange value

BC, needs a guarantee of its future exchange value.

As it has none, it cant be money.

[Erdogan]

My opinion is that Bitcoin (or another cryptocurrency) could probably still use some work on its security, but that it will eventually rival gold (and supplant it) where it needs no backing . Even in its current state it could probably do without backing, though I would still reccommend improving the security (which they are working on now).

As for your opinion, I'm pretty much sure you agree that BC needs no backing.

This is all fine, except the bolded part. There is no backing, backing bitcoin with anything would completely destroy the purpose of bitcoin, and who could possibly be the party responsible for the backing? Makes no sense.

[jonat3]

My opinion is that Bitcoin (or another cryptocurrency) could probably still use some work on its security, but that it will eventually rival gold (and supplant it) where it needs no backing . Even in its current state it could probably do without backing, though I would still reccommend improving the security (which they are working on now).

As for your opinion, I'm pretty much sure you agree that BC needs no backing.

Backing= guarantee of future exchange value

BC, needs a guarantee of its future exchange value.

As it has none, it cant be money.

All BTC needs are secure measures to protect utility. If BTC can retain utility under nearly ALL circumstances, it needs no backing.

[Ibian]

Backing= guarantee of future exchange value

This is bullshit by the way. Or if we pretend (which is all it will be from my side) it isn't, then fiat has no backing.

[Erdogan]

My opinion is that Bitcoin (or another cryptocurrency) could probably still use some work on its security, but that it will eventually rival gold (and supplant it) where it needs no backing . Even in its current state it could probably do without backing, though I would still reccommend improving the security (which they are working on now).

As for your opinion, I'm pretty much sure you agree that BC needs no backing.

Backing= guarantee of future exchange value

BC, needs a guarantee of its future exchange value.

As it has none, it cant be money.

My gawd. Why am I not in bed now? Someone wrote something wrong on the internet! Well, somebody else is free to hammer this flat. I'm outa here.

[jonat3]

My opinion is that Bitcoin (or another cryptocurrency) could probably still use some work on its security, but that it will eventually rival gold (and supplant it) where it needs no backing . Even in its current state it could probably do without backing, though I would still reccommend improving the security (which they are working on now).

As for your opinion, I'm pretty much sure you agree that BC needs no backing.

This is all fine, except the bolded part. There is no backing, backing bitcoin with anything would completely destroy the purpose of bitcoin, and who could possibly be the party responsible for the backing? Makes no sense.

Man, I'm not sure if we are watching the same screen. Where did I say that BTC needs backing? The bolded part doesn't say that at all. I KNOW that backing would create counterparty risk.

[porc]

Backing= guarantee of future exchange value

This is bullshit by the way. Or if we pretend (which is all it will be from my side) it isn't, then fiat has no backing.

We have gone over why fiat has backing. The quality of that backing is a different matter.

[Ibian]

Backing= guarantee of future exchange value

This is bullshit by the way. Or if we pretend (which is all it will be from my side) it isn't, then fiat has no backing.

We have gone over why fiat has backing. The quality of that backing is a different matter.

No, you have repeated absurdities. Back (heh) it up with logic and reason if you can.

[porc]

Backing= guarantee of future exchange value

This is bullshit by the way. Or if we pretend (which is all it will be from my side) it isn't, then fiat has no backing.

We have gone over why fiat has backing. The quality of that backing is a different matter.

No, you have repeated absurdities. Back (heh) it up with logic and reason if you can.

I wont educate you on the difference between a dollar and a piece of paper.

[shawshankinmate37927]

Backing= guarantee of future exchange value

This is bullshit by the way. Or if we pretend (which is all it will be from my side) it isn't, then fiat has no backing.

We have gone over why fiat has backing. The quality of that backing is a different matter.

Backing has been tried before.  It didn't work.

www.youtube.com/watch?v=iRzr1QU6K1o

There is no magical way to make backing work.  It's time to do away with the whole concept of backing.

[JoelKatz]

Backing= guarantee of future exchange value

BC, needs a guarantee of its future exchange value.

As it has none, it cant be money.

How likely must something be in order to be a "guarantee"? Absolute certainty? What guarantee of future exchange value do US dollars have? (And how do I enforce that guarantee?)

This notion of "backing" as an absolute (or near absolute) guarantee of future value is simply not useful. Nobody can ensure future demand. They can, however, back the supply or promise to exchange for something else of value. (Though that is not an absolute guarantee, of course. It's only relative.) Those notions of "backing" *are* useful.

I would point out that the US dollar has no backing of this sort, other than a vague, unenforceable promise not to inflate the supply "excessively". There is no guarantee of future demand by anyone, though of course future demand is nearly certain.

On its abstract, technical merits, Bitcoin is vastly superior to US dollars as a means of exchange. However, there are many practical ways in which the US dollar is superior to Bitcoins. For example, demand for Bitcoins is much more likely to drop drastically in a short time than demand for US dollars. The value of a Bitcoin is much more subject to manipulation and is much more unstable than the value of US dollars.

[Rassah]

It simply HAS a backing is all I'm saying, their exists a structure that tries to guarantee a future exchange value, BTC doesn't have any kind of guarantee it just has an exchange market that can go to incredible extremes (bubbles or total collapse) with no brakes on it.  If their were even something like a group of people with large wealth that were publicly pledging they wouldn't let BTC drop below some floor price that would be a backing but we don't even have that.

Dollars don't have such a group of people, either. Both bitcoin and USD have wealthy people, who are essentially backers, who support the currency through various legal and technical means, but those wealthy people would not be stupid enough to start buying up a crashing currency just to prop up its price, if they see it doesn't have a future. So each currency's future, and thus true backing, comes right back to how much you trust the system that's managing it.

By the way, gold has massive use value as an insulator of magnetic fields, insulating them in the same way that plastic can insulate electric fields in a wire? If you were to insulate a magnetic material with gold, it essentially forces the magnetism of that material to stay compressed inside that material, instead of escaping into the surroundings, and causes that material to become super magnetized, similar to a superconductor. But at room temperature. Uses could be frictionless bearings and magnetic levitation. But with society so hellbent on using gold as a store of value, and jacking up its price to many times its industrial value, I guess we will have to forego that technology for a while.

[pjviitas]

Backing= guarantee of future exchange value

This is bullshit by the way. Or if we pretend (which is all it will be from my side) it isn't, then fiat has no backing.

We have gone over why fiat has backing. The quality of that backing is a different matter.

Backing has been tried before.  It didn't work.

www.youtube.com/watch?v=iRzr1QU6K1o

There is no magical way to make backing work.  It's time to do away with the whole concept of backing.

+1

[Impaler]

"Backing" is a solution to a problem that Bitcoin doesn't have. The reason you want a currency to be backed by someone or something is to ensure its scarcity.  Otherwise, the value can be stolen from you by supply expansion.

But backing is an imperfect solution because the backer can always either fail to meet its obligations or can structure its obligations so vaguely that it can technically meet them while still devaluing the currency and robbing those who hold it. Even physical scarcity, which is what gold has, is still imperfect -- we might one day find an asteroid full of gold and gold might become as cheap as aluminum.

Bitcoin's scarcity is guaranteed by mathematics. It's as close to perfectly guaranteed as we humans are capable of. So long as there is demand, its value will be assured because its supply is known. (Of course, there's no guarantee of demand.)

JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement.  The mining pools and exchanges have not chosen to edit that line of code on their software, but that choice is all to is guaranteeing BTC rarity, you can argue about how hard/unlikely/self-defeating it would be for them to do that, but it is NOT a cryptographically secured part of the Protocol.

[Impaler]

It simply HAS a backing is all I'm saying, their exists a structure that tries to guarantee a future exchange value, BTC doesn't have any kind of guarantee it just has an exchange market that can go to incredible extremes (bubbles or total collapse) with no brakes on it.  If their were even something like a group of people with large wealth that were publicly pledging they wouldn't let BTC drop below some floor price that would be a backing but we don't even have that.

Dollars don't have such a group of people, either. Both bitcoin and USD have wealthy people, who are essentially backers, who support the currency through various legal and technical means, but those wealthy people would not be stupid enough to start buying up a crashing currency just to prop up its price, if they see it doesn't have a future. So each currency's future, and thus true backing, comes right back to how much you trust the system that's managing it.

Actually yes it dose have thouse people in the Treasury department and the Federal Reserve, the former collects taxes in the Dollar and the later holds bonds and other assets.  As I said you may not believe them or trust them but they exist and are backing the US dollar, you can't simply say that your doubt in these agencies means the dollar is not backed. 

That is paramount to saying that because you doubt the bravery of a nations army that the nation is undefended.

[Snowfire]

The reason for the confusion has to do with the fact that "backing" has been used to mean more than one thing over the years.

The oldest sense is that one unit of a currency is guaranteed (by some central authority) to be physically redeemable for X amount of commodity Y. This archaic meaning has little relevance today and it is hard to see how it could apply to a cryptocurrency anyway.

A derivative of this meaning is that a central authority agrees to retain X  amount of commodity Y in its physical possession for every unit of currency issued into circulation. Few currencies work this way any more, and again, a cryptocurrency cannot work this way if no central authority exists.

There are other, more abstract uses of the term as well. "Backing" can mean a central authority's conferring legal tender status, i.e. requiring that a currency be accepted for the payment of all debts, and requiring that certain liabilities (e.g. taxes) be payable purely in that currency. As the users of a cryptocurrency do not have any authority to confer such status upon it, this has limited relevance as well. There are vaguer notions, such as "backed by the full faith and credit of", whose meaning is debated back and forth by scholars; is it the full faith and credit of the user community, the issuing authority, the underlying economy, or some ineffable combination of all three? I would argue that the answer is not of much practical importance.

People get wound up about the notion of "backing" because of its perceived connection with unit value; yet the connection is often tenuous and ill-defined in real life. A currency has value when a community trusts that it can reliably entoken value in a predictable, quantifiable manner--it is as simple as that. This typically requires that the system be designed such that the average person cannot casually tamper with the supply by casually creating/forging new units. Thus, pebbles of gravel make poor currency units, because anyone can just take a rock and a hammer and create more, whereas elaborate paper notes printed by a central authority fare much better; there is a controlled supply. The original "backing" systems were stratagems to prevent the issuing authority itself from unduly tampering with the supply; that is their main importance. It was believed by some (and is still believed by a few) that such stratagems are necessary to preserve a community consensus that the currency is functional (the real bottom line here.) As cryptocurrencies have no central authority, and their supply is controlled by preset algorithms, "backing" in the older sense has no relevance to value.

One could argue that a cryptocurrency system is, in some vague manner, backed by the value of other funds invested in it, or by the value of goods available for purchase by it; but this verges on metaphysical speculation and I leave this question to philosophers. I also think that arguments that a unit of currency reflects the value of resources expended to "mine" it, or that it otherwise represents a unit of energy or some such, are badly misguided. Value is set by the community, the average community member does not even have access to such information, and he or she would not really care even if he or she did.

[JoelKatz]

JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement.  The mining pools and exchanges have not chosen to edit that line of code on their software, but that choice is all to is guaranteeing BTC rarity, you can argue about how hard/unlikely/self-defeating it would be for them to do that, but it is NOT a cryptographically secured part of the Protocol.

If you accept this reasoning, then gold is not scarce. Everyone but you could agree to consider aluminum to be the same as gold and now your gold is no more valuable than aluminum. This is not that unrealistic. Fractional reserve gold notes could actually do this if the market considers them "close enough" to gold.

[kjj]

The problem with this thread, and the many others like it, is that definitions get pulled out of asses, and it turns into a fight over which rectal definition is right.

I urge you all to read some actual published works from proper economists that have worked on this problem and see how they use the term.

[JoelKatz]

The problem with this thread, and the many others like it, is that definitions get pulled out of asses, and it turns into a fight over which rectal definition is right.

I agree. Rather than arguing over whether Bitcoin is "backed", when we all agree on its properties, let's instead talk about what the consequences of those properties are.

[pand70]

Backing= guarantee of future exchange value

BC, needs a guarantee of its future exchange value.

As it has none, it cant be money.

Obviously you mean guarantee by a central authority. That's not going to happen ever because bitcoin don't wants that to happen.
You see bitcoin with fiat currency standards thats why you can't understand basic things.

[Ibian]

That is paramount to saying that because you doubt the bravery of a nations army that the nation is undefended.

You could totally say that. Reasonably so. And people have, countless times throughout history.

[teukon]

JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement.  The mining pools and exchanges have not chosen to edit that line of code on their software, but that choice is all to is guaranteeing BTC rarity, you can argue about how hard/unlikely/self-defeating it would be for them to do that, but it is NOT a cryptographically secured part of the Protocol.

Agreed!  Indeed, we could all decide to redifine the word "bitcoin" to mean 1 ounce of cheese.  As cheese is not limited to 21 million ounces we must conclude the possibility of inflating the supply of bitcoin without defeating any cryptography whatsoever.

JoelKatz is usually pretty sharp but can't always be expected to keep pace with the likes of us.  Fortunately, he's not in charge of anything of tantamount importance.

[teukon]

The problem with this thread, and the many others like it, is that definitions get pulled out of asses, and it turns into a fight over which rectal definition is right.

I agree. Rather than arguing over whether Bitcoin is "backed", when we all agree on its properties, let's instead talk about what the consequences of those properties are.

I'm with both of you in spirit but have a fondness for trolling trolls that all too often bests me.  Does that make me a bad person?

[deisik]

JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement.  The mining pools and exchanges have not chosen to edit that line of code on their software, but that choice is all to is guaranteeing BTC rarity, you can argue about how hard/unlikely/self-defeating it would be for them to do that, but it is NOT a cryptographically secured part of the Protocol.

Though I agree on the point that cryptography has nothing to do with keeping bitcoin scarce, but are matters with fiat currency much different from that? Isn't what sets apart a limited supply of fiat from unlimited debasement of that fiat even more arbitrary than that?

[Erdogan]

JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement.  The mining pools and exchanges have not chosen to edit that line of code on their software, but that choice is all to is guaranteeing BTC rarity, you can argue about how hard/unlikely/self-defeating it would be for them to do that, but it is NOT a cryptographically secured part of the Protocol.

Though I agree on the point that cryptography has nothing to do with keeping bitcoin scarce, but are matters with fiat currency much different from that? Isn't what sets apart a limited supply of fiat from unlimited debasement of that fiat even more arbitrary than that?

In fiat, there is no if statement.

[deisik]

JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement.  The mining pools and exchanges have not chosen to edit that line of code on their software, but that choice is all to is guaranteeing BTC rarity, you can argue about how hard/unlikely/self-defeating it would be for them to do that, but it is NOT a cryptographically secured part of the Protocol.

Though I agree on the point that cryptography has nothing to do with keeping bitcoin scarce, but are matters with fiat currency much different from that? Isn't what sets apart a limited supply of fiat from unlimited debasement of that fiat even more arbitrary than that?

In fiat, there is no if statement.

But this by no means makes it less arbitrary, right? Nothing that could ultimately prevent a fiat currency turning into a Zimbabwean dollar (unlike gold backed money)... Oh, wait, Zimbabwean dollar is just a fiat currency themselves!

[Erdogan]

JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement.  The mining pools and exchanges have not chosen to edit that line of code on their software, but that choice is all to is guaranteeing BTC rarity, you can argue about how hard/unlikely/self-defeating it would be for them to do that, but it is NOT a cryptographically secured part of the Protocol.

Though I agree on the point that cryptography has nothing to do with keeping bitcoin scarce, but are matters with fiat currency much different from that? Isn't what sets apart a limited supply of fiat from unlimited debasement of that fiat even more arbitrary than that?

In fiat, there is no if statement.

But this by no means makes it less arbitrary, right? Nothing that could ultimately prevent a fiat currency turning into a Zimbabwean dollar... Oh, wait, Zimbabwean dollar is just a fiat currency themselves!

Hehe. The question to the coming expansion of QE is: Will they tell us before it happens this time?

[cczarek123]

The only thing backing any currency system is faith. Gold is just a shinny rock, fiat is just fancy paper. Bitcoin has more faith behind it than ever, and perhaps the opposite could be said of fiat.

[pjviitas]

The only thing backing any currency system is faith. Gold is just a shinny rock, fiat is just fancy paper. Bitcoin has more faith behind it than ever, and perhaps the opposite could be said of fiat.

+1

[deisik]

The only thing backing any currency system is faith. Gold is just a shinny rock, fiat is just fancy paper. Bitcoin has more faith behind it than ever, and perhaps the opposite could be said of fiat.

What you refer to as faith is called subjective value in economics, lol

[porc]

Backing= guarantee of future exchange value

BC, needs a guarantee of its future exchange value.

As it has none, it cant be money.

Obviously you mean guarantee by a central authority. That's not going to happen ever because bitcoin don't wants that to happen.
You see bitcoin with fiat currency standards thats why you can't understand basic things.

No. Thats one form of backing (dollar).

Gold/Silver have backing (inherent).

Bitcoin has NO backing.

[Rassah]

JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement.

That actually won't change the scarcity, as there are two things standing between finite supply and unlimited debasement. First one is that IF statement, second one is people's personal choice. If other people and exchanges choose to change that IF statement, and I along with a few of my friends choose not to, then we will still continue to use Bitcoin, along with its finite supply, while those other people and exchanges will be effectively creating an alt-coin through a hard fork. As long as there are enough people that refuse to change the IF statement, and enough miners to support their refusal to change, bitcoin will remain scarse.

If their were even something like a group of people with large wealth that were publicly pledging they wouldn't let BTC drop below some floor price that would be a backing but we don't even have that.

Dollars don't have such a group of people, either. Both bitcoin and USD have wealthy people, who are essentially backers, who support the currency through various legal and technical means, but those wealthy people would not be stupid enough to start buying up a crashing currency just to prop up its price, if they see it doesn't have a future.

Actually yes it dose have thouse people in the Treasury department and the Federal Reserve, the former collects taxes in the Dollar and the later holds bonds and other assets.

I think you may be confusing backing and propping up. How does collecting taxes support a price floor? If USD price drops, they would just collect a larger amount of dollars to collect the same value. As for bonds, they could only continue propping up USD price (by buying USD in exchange for bonds) as long as people are willing to buy their bonds. At this point, these bonds pay almost no interest, and with a high national debt are getting riskier, which is a contradiction (higher risk should pay more interest) that is making them extremely unattractive. So we may have reached the end of being able to prop up USD with bonds. (USA can raise interest on bonds, but it is so deep in debt that it may not be able to afford paying interest, either).

The problem with this thread, and the many others like it, is that definitions get pulled out of asses, and it turns into a fight over which rectal definition is right.

Is this where the expression "shit storm" comes from? Because that would seem really apt.

[Rassah]

Backing= guarantee of future exchange value

BC, needs a guarantee of its future exchange value.

As it has none, it cant be money.

Obviously you mean guarantee by a central authority. That's not going to happen ever because bitcoin don't wants that to happen.
You see bitcoin with fiat currency standards thats why you can't understand basic things.

What would porc say to a central authority issuing a currency backed by bitcoin, where the central authority makes a guarantee that you can exchange their currency for a BTC in the future?

[Impaler]

A number of replies are coming from people who feel the need to disprove something I'm not arguing.  I pointed out that their is NO CRYPTOGRAPHIC SECURITY FEATURE that controls the scarcity of BTC, THAT IS ALL!  Joel was spouting BS when he implied their was and while peons on this forum will say that blithely a hundred times a day I find it detestable that someone who knows how to program makes the same mistake.

JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement.

That actually won't change the scarcity, as there are two things standing between finite supply and unlimited debasement. First one is that IF statement, second one is people's personal choice. If other people and exchanges choose to change that IF statement, and I along with a few of my friends choose not to, then we will still continue to use Bitcoin, along with its finite supply, while those other people and exchanges will be effectively creating an alt-coin through a hard fork. As long as there are enough people that refuse to change the IF statement, and enough miners to support their refusal to change, bitcoin will remain scarse.

As for what would actually happen in a fork, it has nothing to do with what a 'majority' dose.  It will come down to what the Exchanges Do, if they act in concert and choose one chain as the one which will be exchanged for all the USD they hold then that chain will live and the others will die as miners will move to mine coins that can be exchanged for money to pay for their overhead costs.  Sure some die-hard loyalists might keep 'original' BTC limping along with a pittance of the hash-power it once had but if that chain isn't showing a rising value because their are no exchanges for it or what exchanges do exist don't have the millions to create a high price then their would be zero interests, and the 'new' BTC network would have EVERY incentive to making denial of service attack on the old network to remove competition.

The point is BTC scarcity is supported only because the controlling entities of BTC wish it to stay with the original protocol, it is basically under human control, no different from any Fiat currency.  When the people in control want scarcity to end it will, yes their will be much wailing and gnashing of teeth just as when Fiat currency is debased but it's not got some magical cryptography guaranteeing scarcity, just people.

[kjj]

A number of replies are coming from people who feel the need to disprove something I'm not arguing.  I pointed out that their is NO CRYPTOGRAPHIC SECURITY FEATURE that controls the scarcity of BTC, THAT IS ALL!  Joel was spouting BS when he implied their was and while peons on this forum will say that blithely a hundred times a day I find it detestable that someone who knows how to program makes the same mistake.

You go off your meds again?  He implied no such thing, no matter how many times you repeat it.

Bitcoin's scarcity is guaranteed by mathematics.

Which math?

int64 static GetBlockValue(int nHeight, int64 nFees)
{
    int64 nSubsidy = 50 * COIN;

    // Subsidy is cut in half every 210000 blocks, which will occur approximately every 4 years
    nSubsidy >>= (nHeight / 210000);

    return nSubsidy + nFees;
}

[pand70]

Backing= guarantee of future exchange value

BC, needs a guarantee of its future exchange value.

As it has none, it cant be money.

Obviously you mean guarantee by a central authority. That's not going to happen ever because bitcoin don't wants that to happen.
You see bitcoin with fiat currency standards thats why you can't understand basic things.

No. Thats one form of backing (dollar).

Gold/Silver have backing (inherent).

Bitcoin has NO backing.

Bitcoin has that other backing that you talk about. It's the massive value of it's network and the thousands of people's that are strengthen that network.

[porc]

Backing= guarantee of future exchange value

BC, needs a guarantee of its future exchange value.

As it has none, it cant be money.

Obviously you mean guarantee by a central authority. That's not going to happen ever because bitcoin don't wants that to happen.
You see bitcoin with fiat currency standards thats why you can't understand basic things.

No. Thats one form of backing (dollar).

Gold/Silver have backing (inherent).

Bitcoin has NO backing.

Bitcoin has that other backing that you talk about. It's the massive value of it's network and the thousands of people's that are strengthen that network.

Thats not backing.

[deisik]

Obviously you mean guarantee by a central authority. That's not going to happen ever because bitcoin don't wants that to happen.
You see bitcoin with fiat currency standards thats why you can't understand basic things.

No. Thats one form of backing (dollar).

Gold/Silver have backing (inherent).

Bitcoin has NO backing.

Bitcoin has that other backing that you talk about. It's the massive value of it's network and the thousands of people's that are strengthen that network.

Thats not backing.

Backing for you is something that you redeem dollars (or any other currency) for? I remember you saying that gold doesn't need backing since it has real value by itself (nice to look at and so forth). Could we then proceed to the assumption that its inherent properties are what gives it value (nice look, indestructibility, heaviness, etc)?

[Erdogan]

Obviously you mean guarantee by a central authority. That's not going to happen ever because bitcoin don't wants that to happen.
You see bitcoin with fiat currency standards thats why you can't understand basic things.

No. Thats one form of backing (dollar).

Gold/Silver have backing (inherent).

Bitcoin has NO backing.

Bitcoin has that other backing that you talk about. It's the massive value of it's network and the thousands of people's that are strengthen that network.

Thats not backing.

Backing for you is something that you redeem dollars (or any other currency) for? I remember you saying that gold doesn't need backing since it has real value by itself (nice to look at and so forth). Could we then proceed to the assumption that its inherent properties is what gives it value (nice look, indestructibility, heaviness, etc)?

Partly yes, that is the intrinsic value, same as value for direct use. Most of the value of gold is the exchange value, value that comes from people who want to hold it for shorter or longer time. When you want to use something as money, you need to hold some sometimes. It is not the instant moving of the stuff from one person to another that gives it value, but the fact that you sometimes need to hold it. It is also called reservation demand.

Gold has some direct use value, but mostly exchange value. Bitcoin has only exchange value, which, for money, is ideal.

[deisik]

Backing for you is something that you redeem dollars (or any other currency) for? I remember you saying that gold doesn't need backing since it has real value by itself (nice to look at and so forth). Could we then proceed to the assumption that its inherent properties is what gives it value (nice look, indestructibility, heaviness, etc)?

Partly yes, that is the intrinsic value, same as value for direct use. Most of the value of gold is the exchange value, value that comes from people who want to hold it for shorter or longer time. When you want to use something as money, you need to hold some sometimes. It is not the instant moving of the stuff from one person to another that gives it value, but the fact that you sometimes need to hold it. It is also called reservation demand.

Gold has some direct use value, but mostly exchange value. Bitcoin has only exchange value, which, for money, is ideal.

Do you count as direct use (and thus the basis for deriving value) such property of gold as prettiness to the eye (as porc would say)? In other words, do you think that this quality contributes anything to gold's value, even if you personally don't find gold attractive or pleasant to look at?

[Erdogan]

Backing for you is something that you redeem dollars (or any other currency) for? I remember you saying that gold doesn't need backing since it has real value by itself (nice to look at and so forth). Could we then proceed to the assumption that its inherent properties is what gives it value (nice look, indestructibility, heaviness, etc)?

Partly yes, that is the intrinsic value, same as value for direct use. Most of the value of gold is the exchange value, value that comes from people who want to hold it for shorter or longer time. When you want to use something as money, you need to hold some sometimes. It is not the instant moving of the stuff from one person to another that gives it value, but the fact that you sometimes need to hold it. It is also called reservation demand.

Gold has some direct use value, but mostly exchange value. Bitcoin has only exchange value, which, for money, is ideal.

Do you count as direct use (and thus the basis for deriving value) such property of gold as prettiness to the eye (as porc would say)? In other words, do you think that this quality contributes anything to gold's value, even if you personally don't find gold attractive or pleasant to look at?

Yes, direct use value.

[deisik]

Backing for you is something that you redeem dollars (or any other currency) for? I remember you saying that gold doesn't need backing since it has real value by itself (nice to look at and so forth). Could we then proceed to the assumption that its inherent properties is what gives it value (nice look, indestructibility, heaviness, etc)?

Partly yes, that is the intrinsic value, same as value for direct use. Most of the value of gold is the exchange value, value that comes from people who want to hold it for shorter or longer time. When you want to use something as money, you need to hold some sometimes. It is not the instant moving of the stuff from one person to another that gives it value, but the fact that you sometimes need to hold it. It is also called reservation demand.

Gold has some direct use value, but mostly exchange value. Bitcoin has only exchange value, which, for money, is ideal.

Do you count as direct use (and thus the basis for deriving value) such property of gold as prettiness to the eye (as porc would say)? In other words, do you think that this quality contributes anything to gold's value, even if you personally don't find gold attractive or pleasant to look at?

Yes, direct use value.

But this is entirely subjective, isn't it? If you can prove that, say, gold density is equal to some figure (or pull out from your pocket a two thousand year old coin), but you can't impose the opinion that gold is nice looking on anyone because it is strictly for them to decide on that matter. They may not share this view and therefore gold will not have so much value on account of that, right?

[Erdogan]

Backing for you is something that you redeem dollars (or any other currency) for? I remember you saying that gold doesn't need backing since it has real value by itself (nice to look at and so forth). Could we then proceed to the assumption that its inherent properties is what gives it value (nice look, indestructibility, heaviness, etc)?

Partly yes, that is the intrinsic value, same as value for direct use. Most of the value of gold is the exchange value, value that comes from people who want to hold it for shorter or longer time. When you want to use something as money, you need to hold some sometimes. It is not the instant moving of the stuff from one person to another that gives it value, but the fact that you sometimes need to hold it. It is also called reservation demand.

Gold has some direct use value, but mostly exchange value. Bitcoin has only exchange value, which, for money, is ideal.

Do you count as direct use (and thus the basis for deriving value) such property of gold as prettiness to the eye (as porc would say)? In other words, do you think that this quality contributes anything to gold's value, even if you personally don't find gold attractive or pleasant to look at?

Yes, direct use value.

But this is entirely subjective, isn't it? If you can prove that, say, gold density is equal to some figure (or pull out from your pocket a two thousand year old coin), but you can't impose the opinion that gold is nice looking on anyone because it is strictly for them to decide on that matter. They may not share this view and therefore gold will not have so much value on account of that, right?

Yes subjective. Both types of value is subjective. That is why everyone should decide what they want for themselves in the market, and what they are willing to sacrifice to achieve it. If you already have  some of that what you want, that will change your values, also your total situation, and not least, your personal preferences. If you like fresh vegetables, you might want to trade some of your time in a job, to somebody who wants the work done, in stead of growing the vegetables yourself. Nobody has the knowledge, nor the right, to decide for others. This is why voluntary action is best: more freedom (by definition), and more wealth for everybody.

[deisik]

But this is entirely subjective, isn't it? If you can prove that, say, gold density is equal to some figure (or pull out from your pocket a two thousand year old coin), but you can't impose the opinion that gold is nice looking on anyone because it is strictly for them to decide on that matter. They may not share this view and therefore gold will not have so much value on account of that, right?

Yes subjective. Both types of value is subjective. That is why everyone should decide what they want for themselves in the market, and what they are willing to sacrifice to achieve it. If you already have  some of that what you want, that will change your values, also your total situation, and not least, your personal preferences. If you like fresh vegetables, you might want to trade some of your time in a job, to somebody who wants the work done, in stead of growing the vegetables yourself. Nobody has the knowledge, nor the right, to decide for others. This is why voluntary action is best: more freedom (by definition), and more wealth for everybody.

If so, do you agree that we could say that gold value is backed by its inherent objective properties through an individual's subjective valuation of them? If you don't like the word "backed" used here, what is, in your opinion, the best term describing the sustenance of value by objective properties?

[Nancarrow]

Blimey I don't think I've ever started a thread that's gone on as long as this one. Makes me feel right chuffed!

Very interesting and informative responses from many people. I will try to scrutinise and dissect each post as time permits. The general vibe I've got:

'Backing' is a nebulous everyday term with no well-defined meaning in any science, economics or otherwise.
If you have to give it meaning, two common ones are
1) X is backed by Y, where Y is a tangible substance e.g. gold, if it can be exchanged for a given quantity of Y and Y is generally considered to have value.
2) X is backed by Y, where Y is an intangible property such as scarcity or ability to pay taxes in it, if that property gives it value.

So if someone asks 'what is Bitcoin backed by?' it's probably better to ask them what they really mean first. In any case the important question is 'why do so many people consider Bitcoin to be valuable?', and the question usually carries a subtext that bitcoins are the new tulip bulbs, so that's the real 'question under the question'. In which case I'd mention all the usual aspects that have been hashed (ha!) to death here - scarcity, fungibility, cryptographic security, distributed consensus, decentralisation etc.

[deisik]

Blimey I don't think I've ever started a thread that's gone on as long as this one. Makes me feel right chuffed!

Very interesting and informative responses from many people. I will try to scrutinise and dissect each post as time permits. The general vibe I've got:

'Backing' is a nebulous everyday term with no well-defined meaning in any science, economics or otherwise.
If you have to give it meaning, two common ones are
1) X is backed by Y, where Y is a tangible substance e.g. gold, if it can be exchanged for a given quantity of Y and Y is generally considered to have value.
2) X is backed by Y, where Y is an intangible property such as scarcity or ability to pay taxes in it, if that property gives it value.

If you substitute intangible property with any property which is considered useful by an individual, then the first notion will effectively be a subset of the second...

[porc]

1) 'Backing' is a nebulous everyday term with no well-defined meaning in any science, economics or otherwise.
If you have to give it meaning, two common ones are
1) X is backed by Y, where Y is a tangible substance e.g. gold, if it can be exchanged for a given quantity of Y and Y is generally considered to have value.
2) X is backed by Y, where Y is an intangible property such as scarcity or ability to pay taxes in it, if that property gives it value.

1) Backing is a guarantee (weak or strong) that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

[Erdogan]

But this is entirely subjective, isn't it? If you can prove that, say, gold density is equal to some figure (or pull out from your pocket a two thousand year old coin), but you can't impose the opinion that gold is nice looking on anyone because it is strictly for them to decide on that matter. They may not share this view and therefore gold will not have so much value on account of that, right?

Yes subjective. Both types of value is subjective. That is why everyone should decide what they want for themselves in the market, and what they are willing to sacrifice to achieve it. If you already have  some of that what you want, that will change your values, also your total situation, and not least, your personal preferences. If you like fresh vegetables, you might want to trade some of your time in a job, to somebody who wants the work done, in stead of growing the vegetables yourself. Nobody has the knowledge, nor the right, to decide for others. This is why voluntary action is best: more freedom (by definition), and more wealth for everybody.

If so, do you agree that we could say that gold value is backed by its inherent objective properties through an individual's subjective valuation of them? If you don't like the word "backed" used here, what is, in your opinion, the best term describing the sustenance of value by objective properties?

Backed is a broad word, but in the realm of money it means that there is some entity that is willing and able to exchange the backed money for a specified amount of something else. So gold is unbacked. I prefer to use direct use value. That value is not dependent of what others think (well if you want it, because others think it is pretty, but not yourself, that is in the fringe). Also in the realm of money, intrinsic value is the same as value for direct use, but that word has the same definition problem, because it is used for other things. By the way, I can not think of anything that have absolutely no direct use value, absolutely in the mathematical sense, after someone has selected it and brought it to the market.

Gold is unbacked, bitcoin is unbacked. In history there has been gold-backed banknotes. We have Casascius coins, but that is really the bitcoins itself hidden inside the coin. I think it is inevitable that bitcoin-backed notes will appear in the market, and I welcome it. Bitcoin would be excellent for backing.

[deisik]

Yes subjective. Both types of value is subjective. That is why everyone should decide what they want for themselves in the market, and what they are willing to sacrifice to achieve it. If you already have  some of that what you want, that will change your values, also your total situation, and not least, your personal preferences. If you like fresh vegetables, you might want to trade some of your time in a job, to somebody who wants the work done, in stead of growing the vegetables yourself. Nobody has the knowledge, nor the right, to decide for others. This is why voluntary action is best: more freedom (by definition), and more wealth for everybody.

If so, do you agree that we could say that gold value is backed by its inherent objective properties through an individual's subjective valuation of them? If you don't like the word "backed" used here, what is, in your opinion, the best term describing the sustenance of value by objective properties?

Backed is a broad word, but in the realm of money it means that there is some entity that is willing and able to exchange the backed money for a specified amount of something else. So gold is unbacked. I prefer to use direct use value. That value is not dependent of what others think (well if you want it, because others think it is pretty, but not yourself, that is in the fringe). Also in the realm of money, intrinsic value is the same as value for direct use, but that word has the same definition problem, because it is used for other things. By the way, I can not think of anything that have absolutely no direct use value, absolutely in the mathematical sense, after someone has selected it and brought it to the market.

Gold is unbacked, bitcoin is unbacked. In history there has been gold-backed banknotes. We have Casascius coins, but that is really the bitcoins itself hidden inside the coin. I think it is inevitable that bitcoin-backed notes will appear in the market, and I welcome it. Bitcoin would be excellent for backing.

If it remains for an individual to decide what property should be considered as valuable (subjective valuation), therefore any subjective value would necessarily be direct use value (as you said before in respect to gold prettiness). If so, then, say, bitcoin security should by logical necessity be considered as direct use value too since there are many people who value bitcoin security high, right?

[Cryddit]

It really doesn't matter what form backing takes.  

A currency is backed by someone's promise to redeem it for some specific good or service. This promise must be a guarantee, in that it's supposed to bind even when the provider of that good or service would be exchanging it for coin at a loss.  Hell, in frontier America, a lot of saloons, merchants, and brothels issued 'trade coins' redeemable for drinks or goods or services and people used these tokens as money.  For as long as the 'money' value remained above the 'commodity' value anyway.  
^{Just a note, but 'bank runs' or their equivalent must have involved some very strenuous times at brothels and other service providers.}  
To the extent that people value the thing they can exchange a currency for, or know that others value that thing, they know that the coin they hold has some minimum value.  It may trade above that value, as did the Eagle coin when it was issued (it was worth a little *LESS* than $10 worth of bullion then), or at that value (as most Bullion coins do now).  But it will never trade for less, for the same reason US merchants in 1982 were buying up copper pennies; the copper in them had become worth more than a penny so the coins were being smelted into blocks and sold as metal.

In this sense, a bullion coin is "backed" by the bullion it's made of.  Even if that old $10 Eagle coin were worth less than its bullion value people could still sell it for its bullion value, just as Americans were selling their pennies in 1982. If it were stamped as a $2000 coin and made of $1300 worth of bullion, people could hold it knowing that no matter what happens to the dollar, it will always be worth at least $1300 worth of bullion.  

A fiat coin is backed by ... approximately nothing in the sense that there is nothing else you can really exchange it for.  It has value because it is approximately the only thing that the government will accept as tax payments and because people generally agree that it has value.  The issuer's power to compel payment of taxes and secure hold on temporal power play a big part in it.  But there's no good or service that you can take your fiat to the issuer and demand to exchange for it.

[Rassah]

1) Backing is a guarantee (weak or strong) that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

You just made up your own personal definition of "backing," which most people would just call "hope." Nothing is guaranteed to retain purchasing power.

[porc]

1) Backing is a guarantee (weak or strong) that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

You just made up your own personal definition of "backing," which most people would just call "hope." Nothing is guaranteed to retain purchasing power.

No. I did not just make it up. I look at the GOAL of backing.

Why do we want to back anything? Because we hope that by backing it, it will retain its purchasing power in future and thus there will be more trust.

[Cryddit]

1) Backing is a guarantee (weak or strong) that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

You just made up your own personal definition of "backing," which most people would just call "hope." Nothing is guaranteed to retain purchasing power.

No, that's pretty much the dictionary definition.  It's a promise to exchange the token for a specific good or service.  If you doubt the ability of the entity making that promise to keep it, then you may be well advised to trade it for less than the value of that good or service. But reliable or not, that promise -- or hope if you prefer -- IS what economists used to mean when they talked about a currency being 'backed' by something.  It's a notion most economists have stopped talking about.

[Erdogan]

Yes subjective. Both types of value is subjective. That is why everyone should decide what they want for themselves in the market, and what they are willing to sacrifice to achieve it. If you already have  some of that what you want, that will change your values, also your total situation, and not least, your personal preferences. If you like fresh vegetables, you might want to trade some of your time in a job, to somebody who wants the work done, in stead of growing the vegetables yourself. Nobody has the knowledge, nor the right, to decide for others. This is why voluntary action is best: more freedom (by definition), and more wealth for everybody.

If so, do you agree that we could say that gold value is backed by its inherent objective properties through an individual's subjective valuation of them? If you don't like the word "backed" used here, what is, in your opinion, the best term describing the sustenance of value by objective properties?

Backed is a broad word, but in the realm of money it means that there is some entity that is willing and able to exchange the backed money for a specified amount of something else. So gold is unbacked. I prefer to use direct use value. That value is not dependent of what others think (well if you want it, because others think it is pretty, but not yourself, that is in the fringe). Also in the realm of money, intrinsic value is the same as value for direct use, but that word has the same definition problem, because it is used for other things. By the way, I can not think of anything that have absolutely no direct use value, absolutely in the mathematical sense, after someone has selected it and brought it to the market.

Gold is unbacked, bitcoin is unbacked. In history there has been gold-backed banknotes. We have Casascius coins, but that is really the bitcoins itself hidden inside the coin. I think it is inevitable that bitcoin-backed notes will appear in the market, and I welcome it. Bitcoin would be excellent for backing.

If it remains for an individual to decide what property should be considered as valuable (subjective valuation), therefore any subjective value would necessarily be direct use value (as you said before in respect to gold prettiness). If so, then, say, bitcoin security should by logical necessity be considered as direct use value too since there are many people who value bitcoin security high, right?

No, all value is subjective, but some things have an exchange value component in addition to use value, and some things have only exchange value (fiat and bitcoin).

As I said, most things have at least a miniscule use value, for bitcoin (I am talking of the actual bitcoins) that could be the bragging value that the first miners might see in their otherwise valueless coins. The system itself, not the actual coins but the totality of the system, the invention, the miners, the fact that the system can transform the society, is of course extremely valueable, but it is difficult to decide exactly how much. You could try to say that the bitcoin system is more valuable than the gold money system, or the fiat system, or some other system, like the internet or the sea transport system or the judicial system or the police force. But we are concerned with what is the value of one dollar, one ounce of gold or one bitcoin. That is the units of the money systems.

[Erdogan]

1) 'Backing' is a nebulous everyday term with no well-defined meaning in any science, economics or otherwise.
If you have to give it meaning, two common ones are
1) X is backed by Y, where Y is a tangible substance e.g. gold, if it can be exchanged for a given quantity of Y and Y is generally considered to have value.
2) X is backed by Y, where Y is an intangible property such as scarcity or ability to pay taxes in it, if that property gives it value.

1) Backing is a guarantee (weak or strong) that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

Nothing has such "backing". Did you think of the fiat? You have been desinformed by the Federal Reserve propaganda system.

[Erdogan]

1) Backing is a guarantee (weak or strong) that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

You just made up your own personal definition of "backing," which most people would just call "hope." Nothing is guaranteed to retain purchasing power.

No, that's pretty much the dictionary definition.  It's a promise to exchange the token for a specific good or service.  If you doubt the ability of the entity making that promise to keep it, then you may be well advised to trade it for less than the value of that good or service. But reliable or not, that promise -- or hope if you prefer -- IS what economists used to mean when they talked about a currency being 'backed' by something.  It's a notion most economists have stopped talking about.

Pretty much, but not completely. It is not all traders that guarantee the value. The value of the money in the market is decided by the volume of the money and the value holding preferences of the actors. An instutution is the guarantist, and you have to go there to get your guaranteed value in gold. The institution will have to make sure that they do not issue to many units, else all money will go back to the institution and the money system will be de facto decommissioned.

[porc]

1) Backing is a guarantee (weak or strong) that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

You just made up your own personal definition of "backing," which most people would just call "hope." Nothing is guaranteed to retain purchasing power.

No, that's pretty much the dictionary definition.  It's a promise to exchange the token for a specific good or service.  If you doubt the ability of the entity making that promise to keep it, then you may be well advised to trade it for less than the value of that good or service. But reliable or not, that promise -- or hope if you prefer -- IS what economists used to mean when they talked about a currency being 'backed' by something.  It's a notion most economists have stopped talking about.

Pretty much, but not completely. It is not all traders that guarantee the value. The value of the money in the market is decided by the volume of the money and the value holding preferences of the actors. An instutution is the guarantist, and you have to go there to get your guaranteed value in gold. The institution will have to make sure that they do not issue to many units, else all money will go back to the institution and the money system will be de facto decommissioned.

You are babbling. Your post is nothing but distracting noise (irrespective of ones position on bitcoin, 0 relevant content).

[JoelKatz]

Backing is a guarantee (weak or strong) [/b]that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

You can define backing however you want, so long as you explain to other people what you're talking about. But IMO, that's not a useful definition of "backing". Suppose someone offered a "secured Bitcoins" service, with a promise that they will buy back any secured Bitcoins you have for $10 any time in the next ten years (or 1/4 gram of gold, if you prefer). These are "backed" by your definition, but common sense will tell you that they're not significantly more useful or valuable than "unbacked" Bitcoins. And the truth is, this is the only kind of backing you have for fiat or even gold. Nobody "backs" demand. At most, they back supply. And Bitcoin's supply is backed more than fiat is.

[porc]

Backing is a guarantee (weak or strong) [/b]that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

You can define backing however you want, so long as you explain to other people what you're talking about. But IMO, that's not a useful definition of "backing". Suppose someone offered a "secured Bitcoins" service, with a promise that they will buy back any secured Bitcoins you have for $10 any time in the next ten years (or 1/4 gram of gold, if you prefer). These are "backed" by your definition, but common sense will tell you that they're not significantly more useful or valuable than "unbacked" Bitcoins. And the truth is, this is the only kind of backing you have for fiat or even gold. Nobody "backs" demand. At most, they back supply. And Bitcoin's supply is backed more than fiat is.

You are off base in my opinion.

Ask yourself this simple question: Why back anything? Why the call for backing?

The reason is, that the person holding the media, wants to have confidence, that it will retain its purchasing power. Nothing more, nothing less.

Its not only about the supply. Yes exploding supply, will kill off the future exchange value (purchasing power) of the media.
However, something can be limited in number and still loose its purchasing power because nobody wants it.

It is a general concept; you want to be confident, that what you are holding will buy you (the same amount of) resources in future.

There cant be any serious discussion about this fact. This is the goal of backing.

[johnyj]

The reason is, that the person holding the media, wants to have confidence, that it will retain its purchasing power. Nothing more, nothing less.

Its not only about the supply. Yes exploding supply, will kill off the future exchange value (purchasing power) of the media.
However, something can be limited in number and still loose its purchasing power because nobody wants it.

It is a general concept; you want to be confident, that what you are holding will buy you (the same amount of) resources in future.

Very well said

The reason for seeking a "backing" is a sign of lacking of confidence, people need a powerful entity to provide that "backing"

But there is already a powerful entity: The bitcoin community. It is a collection of many talents from all around the world. Developers back the software infrastructure, miners back the computational power, exchange operators provide the exchange channel, and large traders provide the liquidity support. Those who hold lots of coins have already made a fortune and now they can support the exchange rate of bitcoin using a small part of their profit

Maybe this "backing" is not as powerful as today's government, but in a world wide context, this is the first multinational backing that has never existed before

[Rassah]

Ask yourself this simple question: Why back anything?

To establish trust in that thing, through transference of trust in another thing.

Why the call for backing?

General goldbuggery  (yes, I am sticking the UK version of the verb "bugger" in there)

[porc]

Ask yourself this simple question: Why back anything?

To establish trust in that thing, through transference of trust in another thing.

Why the call for backing?

General goldbuggery  (yes, I am sticking the UK version of the verb "bugger" in there)

You have not added to my post, merely restated its content (albeit poorly).

[Rassah]

Ask yourself this simple question: Why back anything?

To establish trust in that thing, through transference of trust in another thing.

Why the call for backing?

General goldbuggery  (yes, I am sticking the UK version of the verb "bugger" in there)

You have not added to my post, merely restated its content (albeit poorly).

I'll expand, then, by adding that if something doesn't require trust, it doesn't need backing, and reemphasize that value can not be guaranteed in the future. Though it can be diversified, such as by backing with multiple commodities in case one drops in value, or have multiple parties backing the same thing.

[porc]

I'll expand, then, by adding that if something doesn't require trust, it doesn't need backing, and reemphasize that value can not be guaranteed in the future. Though it can be diversified, such as by backing with multiple commodities in case one drops in value, or have multiple parties backing the same thing.

If you would have accurately restated my position, you have would seen how absurd your above statement is.

"trust in the future purchasing power of the media of exchange." (My position)

So Bitcoin does not require trust in its future purchasing power? Of course it does.

Also you continue to use straw-men:

"value can not be guaranteed in the future"

You imply like guarantee means 100% certainty. I already stated that the guarantee is either strong or weak (implying high probability versus low probability of future exchange value).

In effect you agree with me (regarding my definition), but you want to be pedantic (and place red herrings), because you feel like bitcoins guarantee is questionable at best, and non existent at worst.

[Hunterbunter]

Ultimately I think that bitcoins are backed by the network hashing power. Every miner is doing "legitimate" work, for their own profit, as opposed to an illegitimate attack from a would be block chain rewriter. You could even say it's backed by self interest.

[porc]

Ultimately I think that bitcoins are backed by the network hashing power. Every miner is doing "legitimate" work, for their own profit, as opposed to an illegitimate attack from a would be block chain rewriter. You could even say it's backed by self interest.

You have not defined the term backing. Thus the above statement is meaningless.

[pjviitas]

Ultimately I think that bitcoins are backed by the network hashing power. Every miner is doing "legitimate" work, for their own profit, as opposed to an illegitimate attack from a would be block chain rewriter. You could even say it's backed by self interest.

You have not defined the term backing. Thus the above statement is meaningless.

There is no such #^&*%* thing...get over it.

[porc]

Ultimately I think that bitcoins are backed by the network hashing power. Every miner is doing "legitimate" work, for their own profit, as opposed to an illegitimate attack from a would be block chain rewriter. You could even say it's backed by self interest.

You have not defined the term backing. Thus the above statement is meaningless.

There is no such #^&*%* thing...get over it.

If it makes you feel better. You fool.

[pjviitas]

Ultimately I think that bitcoins are backed by the network hashing power. Every miner is doing "legitimate" work, for their own profit, as opposed to an illegitimate attack from a would be block chain rewriter. You could even say it's backed by self interest.

You have not defined the term backing. Thus the above statement is meaningless.

There is no such #^&*%* thing...get over it.

If it makes you feel better. You fool.

Seriously?  You want to make this personal?  Don't pretend like you know me.

[porc]

Ultimately I think that bitcoins are backed by the network hashing power. Every miner is doing "legitimate" work, for their own profit, as opposed to an illegitimate attack from a would be block chain rewriter. You could even say it's backed by self interest.

You have not defined the term backing. Thus the above statement is meaningless.

There is no such #^&*%* thing...get over it.

If it makes you feel better. You fool.

Seriously?  You want to make this personal?  Don't pretend like you know me.

You spammed the thread. He said bitcoin is backed by X without giving his definition of backing. Thus his statement is meaningless.

[Mike Christ]

You back a money like you back a leader; neither count without believers, otherwise gold would just be shiny yellowish metal and a leader would be a regular Joe.  In the case of money, a backing is a measure of how many people endorse that object as their choice of money.

When a money is represented by another object, let's say in paper form, then the paper itself isn't money, but currency; the intention for the paper is not to act as money, but to act as a convenient way to trade money, to act as representations of that money, and so that currency is considered "backed" by, say, gold, which is then "backed" by endorsement; all is well at the moment.  To say one day, "Our money is no longer going to be backed by gold" is quite the perversion, then; the backing placed in gold, which the paper represented, was taken away, but the belief in the paper remained; the paper then wrongfully took that backing into itself, and, like all paper currencies do, that belief is steadily slipping away and back to where it rightfully belongs, in money.

So while money is backed by endorsement, paper which fails to represent money is backed by bait-and-switch.

[porc]

You back a money like you back a leader; neither count without believers, otherwise gold would just be shiny yellowish metal and a leader would be a regular Joe.  In the case of money, a backing is a measure of how many people endorse that object as their choice of money.

I have already explained to this board what backing means. No need to make up your own definitions, just so that bitcoin fits in nicely.

Backing is a guarantee (strong or weak) that the medium of exchange will retain its purchasing power.

[Mike Christ]

You back a money like you back a leader; neither count without believers, otherwise gold would just be shiny yellowish metal and a leader would be a regular Joe.  In the case of money, a backing is a measure of how many people endorse that object as their choice of money.

I have already explained to this board what backing means. No need to make up your own definitions, just so that bitcoin fits in nicely.

Backing is a guarantee (strong or weak) that the medium of exchange will retain its purchasing power.

That's exactly what I said.  Where do you think this guarantee comes from?

[porc]

You back a money like you back a leader; neither count without believers, otherwise gold would just be shiny yellowish metal and a leader would be a regular Joe.  In the case of money, a backing is a measure of how many people endorse that object as their choice of money.

I have already explained to this board what backing means. No need to make up your own definitions, just so that bitcoin fits in nicely.

Backing is a guarantee (strong or weak) that the medium of exchange will retain its purchasing power.

That's exactly what I said.  Where do you think this guarantee comes from?

In regards to paper dollars: the state
In regards to gold: its beautiful, humans have always lusted after it
In regards to bitcoin: there is no backing.

[Mike Christ]

You back a money like you back a leader; neither count without believers, otherwise gold would just be shiny yellowish metal and a leader would be a regular Joe.  In the case of money, a backing is a measure of how many people endorse that object as their choice of money.

I have already explained to this board what backing means. No need to make up your own definitions, just so that bitcoin fits in nicely.

Backing is a guarantee (strong or weak) that the medium of exchange will retain its purchasing power.

That's exactly what I said.  Where do you think this guarantee comes from?

In regards to paper dollars: the state
In regards to gold: its beautiful, humans have always lusted after it
In regards to bitcoin: there is no backing.

Your intentions are clear; you're not clever.

The state is backed by people, the state backs the dollar, ergo the dollar is guaranteed by the user.  Gold is backed by people, ergo gold is guaranteed by the user.  Bitcoin is backed by people, ergo bitcoin is guaranteed by the user.

Refuse to acknowledge the truth if you please, just don't do it publicly; it's degrading, and nobody will take you seriously if you continue this behavior.

[porc]

You back a money like you back a leader; neither count without believers, otherwise gold would just be shiny yellowish metal and a leader would be a regular Joe.  In the case of money, a backing is a measure of how many people endorse that object as their choice of money.

I have already explained to this board what backing means. No need to make up your own definitions, just so that bitcoin fits in nicely.

Backing is a guarantee (strong or weak) that the medium of exchange will retain its purchasing power.

That's exactly what I said.  Where do you think this guarantee comes from?

In regards to paper dollars: the state
In regards to gold: its beautiful, humans have always lusted after it
In regards to bitcoin: there is no backing.

Your intentions are clear; you're not clever.

The state is backed by people, the state backs the dollar, ergo the dollar is guaranteed by the user.  Gold is backed by people, ergo gold is guaranteed by the user.  Bitcoin is backed by people, ergo bitcoin is guaranteed by the user.

Refuse to acknowledge the truth if you please, just don't do it publicly; it's degrading, and nobody will take you seriously if you continue this behavior.

Lol. Propaganda at its best.

I am not hiding my intentions. I dont believe in bitcoin period. I prefer gold. Everybody know this.

The state is backing its currency via force. Bitcoin is not backed by any entity which has a monopoly on the use of force.

Gold is beautiful, we cant help but love it. This wont change, just like the fact that we need water to survive wont change.

Bitcoin is backed by absolutely nothing. The agreement you speak off is not backing. Backing is that the agreement will hold in future.

[Erdogan]

Backing is a guarantee (weak or strong) [/b]that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

You can define backing however you want, so long as you explain to other people what you're talking about. But IMO, that's not a useful definition of "backing". Suppose someone offered a "secured Bitcoins" service, with a promise that they will buy back any secured Bitcoins you have for $10 any time in the next ten years (or 1/4 gram of gold, if you prefer). These are "backed" by your definition, but common sense will tell you that they're not significantly more useful or valuable than "unbacked" Bitcoins. And the truth is, this is the only kind of backing you have for fiat or even gold. Nobody "backs" demand. At most, they back supply. And Bitcoin's supply is backed more than fiat is.

You are off base in my opinion.

Ask yourself this simple question: Why back anything? Why the call for backing?

The reason is, that the person holding the media, wants to have confidence, that it will retain its purchasing power. Nothing more, nothing less.

Its not only about the supply. Yes exploding supply, will kill off the future exchange value (purchasing power) of the media.
However, something can be limited in number and still loose its purchasing power because nobody wants it.

It is a general concept; you want to be confident, that what you are holding will buy you (the same amount of) resources in future.

There cant be any serious discussion about this fact. This is the goal of backing.

You can want this, and you can have faith, to ease your mind, like a baby is comfortable in its mothers arms, even in a warzone. But you can not have this, nothing can guarantee this, not even a totally planned economy and a well managed money system. Easy proof: When it comes to resources, they have to exist before you can consume them. Someone has to create the goods that you want to be sure that you can buy with the money. Nobody can guarantee that, especially not a totalitarian government.

[porc]

Backing is a guarantee (weak or strong) [/b]that the media of exchange will be accepted for goods and services in the future; that it retains its purchasing power. Your definitions are not helpful. Look at the goal of backing and go from there.

You can define backing however you want, so long as you explain to other people what you're talking about. But IMO, that's not a useful definition of "backing". Suppose someone offered a "secured Bitcoins" service, with a promise that they will buy back any secured Bitcoins you have for $10 any time in the next ten years (or 1/4 gram of gold, if you prefer). These are "backed" by your definition, but common sense will tell you that they're not significantly more useful or valuable than "unbacked" Bitcoins. And the truth is, this is the only kind of backing you have for fiat or even gold. Nobody "backs" demand. At most, they back supply. And Bitcoin's supply is backed more than fiat is.

You are off base in my opinion.

Ask yourself this simple question: Why back anything? Why the call for backing?

The reason is, that the person holding the media, wants to have confidence, that it will retain its purchasing power. Nothing more, nothing less.

Its not only about the supply. Yes exploding supply, will kill off the future exchange value (purchasing power) of the media.
However, something can be limited in number and still loose its purchasing power because nobody wants it.

It is a general concept; you want to be confident, that what you are holding will buy you (the same amount of) resources in future.

There cant be any serious discussion about this fact. This is the goal of backing.

You can want this, and you can have faith, to ease your mind, like a baby is comfortable in its mothers arms, even in a warzone. But you can not have this, nothing can guarantee this, not even a totally planned economy and a well managed money system. Easy proof: When it comes to resources, they have to exist before you can consume them. Someone has to create the goods that you want to be sure that you can buy with the money. Nobody can guarantee that, especially not a totalitarian government.

More straw-men and red herrings. Nice job.

[Erdogan]

[...]
More straw-men and red herrings. Nice job.

Even if I reply to your posts, I write not only for you, but for the others. There are 2000 readers of this thread if I understand the statistics correctly. And I must not forget that I write things also for myself, I write, because I can.

If you state your ideas and opinions well, with good writing style and logic and reason, your views are valuable to the readers. A straight derogation is of course also useful. Someone could have read my post and not by himself immediately see that it is only straw-men and red herrings.

This is the Intertubes you know. You can find anything here.

[Zarathustra]

You back a money like you back a leader; neither count without believers, otherwise gold would just be shiny yellowish metal and a leader would be a regular Joe.  In the case of money, a backing is a measure of how many people endorse that object as their choice of money.

I have already explained to this board what backing means. No need to make up your own definitions, just so that bitcoin fits in nicely.

Backing is a guarantee (strong or weak) that the medium of exchange will retain its purchasing power.

That's exactly what I said.  Where do you think this guarantee comes from?

In regards to paper dollars: the state
In regards to gold: its beautiful, humans have always lusted after it
In regards to bitcoin: there is no backing.

Your intentions are clear; you're not clever.

The state is backed by people, the state backs the dollar, ergo the dollar is guaranteed by the user.  Gold is backed by people, ergo gold is guaranteed by the user.  Bitcoin is backed by people, ergo bitcoin is guaranteed by the user.

Refuse to acknowledge the truth if you please, just don't do it publicly; it's degrading, and nobody will take you seriously if you continue this behavior.

Yes. The troll missed the train to Gold 2.0 and that makes him angry. Gold is backed by demand, Gold 2.0 as well, otherwise the price would be zero.

[porc]

You back a money like you back a leader; neither count without believers, otherwise gold would just be shiny yellowish metal and a leader would be a regular Joe.  In the case of money, a backing is a measure of how many people endorse that object as their choice of money.

I have already explained to this board what backing means. No need to make up your own definitions, just so that bitcoin fits in nicely.

Backing is a guarantee (strong or weak) that the medium of exchange will retain its purchasing power.

That's exactly what I said.  Where do you think this guarantee comes from?

In regards to paper dollars: the state
In regards to gold: its beautiful, humans have always lusted after it
In regards to bitcoin: there is no backing.

Your intentions are clear; you're not clever.

The state is backed by people, the state backs the dollar, ergo the dollar is guaranteed by the user.  Gold is backed by people, ergo gold is guaranteed by the user.  Bitcoin is backed by people, ergo bitcoin is guaranteed by the user.

Refuse to acknowledge the truth if you please, just don't do it publicly; it's degrading, and nobody will take you seriously if you continue this behavior.

Yes. The troll missed the train to Gold 2.0 and that makes him angry. Gold is backed by demand, Gold 2.0 as well, otherwise the price would be zero.

LOL. Gold 2.0. What a joke !

[Zarathustra]

LOL. Gold 2.0. What a joke !

We all know, late adopters don't love the digital versions of gold, letters, music etc.
They are always late and therefore punished.

[deisik]

Yes subjective. Both types of value is subjective. That is why everyone should decide what they want for themselves in the market, and what they are willing to sacrifice to achieve it. If you already have  some of that what you want, that will change your values, also your total situation, and not least, your personal preferences. If you like fresh vegetables, you might want to trade some of your time in a job, to somebody who wants the work done, in stead of growing the vegetables yourself. Nobody has the knowledge, nor the right, to decide for others. This is why voluntary action is best: more freedom (by definition), and more wealth for everybody.

If so, do you agree that we could say that gold value is backed by its inherent objective properties through an individual's subjective valuation of them? If you don't like the word "backed" used here, what is, in your opinion, the best term describing the sustenance of value by objective properties?

Backed is a broad word, but in the realm of money it means that there is some entity that is willing and able to exchange the backed money for a specified amount of something else. So gold is unbacked. I prefer to use direct use value. That value is not dependent of what others think (well if you want it, because others think it is pretty, but not yourself, that is in the fringe). Also in the realm of money, intrinsic value is the same as value for direct use, but that word has the same definition problem, because it is used for other things. By the way, I can not think of anything that have absolutely no direct use value, absolutely in the mathematical sense, after someone has selected it and brought it to the market.

Gold is unbacked, bitcoin is unbacked. In history there has been gold-backed banknotes. We have Casascius coins, but that is really the bitcoins itself hidden inside the coin. I think it is inevitable that bitcoin-backed notes will appear in the market, and I welcome it. Bitcoin would be excellent for backing.

If it remains for an individual to decide what property should be considered as valuable (subjective valuation), therefore any subjective value would necessarily be direct use value (as you said before in respect to gold prettiness). If so, then, say, bitcoin security should by logical necessity be considered as direct use value too since there are many people who value bitcoin security high, right?

No, all value is subjective, but some things have an exchange value component in addition to use value, and some things have only exchange value (fiat and bitcoin).

As I said, most things have at least a miniscule use value, for bitcoin (I am talking of the actual bitcoins) that could be the bragging value that the first miners might see in their otherwise valueless coins. The system itself, not the actual coins but the totality of the system, the invention, the miners, the fact that the system can transform the society, is of course extremely valueable, but it is difficult to decide exactly how much. You could try to say that the bitcoin system is more valuable than the gold money system, or the fiat system, or some other system, like the internet or the sea transport system or the judicial system or the police force. But we are concerned with what is the value of one dollar, one ounce of gold or one bitcoin. That is the units of the money systems.

I can't accept your reasoning as convincing. We started with some abstract property of gold being purely subjective  (i.e. prettiness to the eye) which you called its direct use, and now you turn to saying that we are concerned with what is the value of one dollar, one ounce of gold or one bitcoin. Then you say that the system itself, not the actual coins, is extremely valuable, but can't I say absolutely the same about gold, i.e. gold "system" being highly valuable for its properties, not actual coins? And now you implicitly suppose (not pronouncing it since it would sound too false) that security, anonymity and whatnot of actual bitcoins can't be direct use value for their owners. I am using you logic here, and nothing beyond it, and you suddenly stop using it in respect to bitcoins...

How come really?

[Nancarrow]

No, that's pretty much the dictionary definition.

Aaaaaaand here we cut to the heart of the matter - or at least, the fundamental reason I made the OP.
If there IS a dictionary definition, please provide a link.
If there isn't, please don't imply that there IS.

(Wouldn't it be ironic, not only to invent a meaning of 'backing' for this thread, but also to invent a new meaning for 'dictionary definition'?  )

[Nancarrow]

So now I've gone to all the trouble of formulating my google query a bit more sensibly ("backing definition" - doh!), I get:

http://www.thefreedictionary.com/backing

It seems here one could use the GENERAL meaning (1) or the more specific ECONOMICS meaning (6). Of course we should be using the latter:

"the support in gold or precious metals for a country's issue of money in notes".

I don't like it because then we have to say "support how exactly?", but at least with that definition we can absolutely say that Bitcoin has NO such backing (and neither of course has fiat money for some time).

[gooki]

The paper currency part I get. It's just paper (although backed by enforced tax collection of each country), but in the case of gold it think of the tangible uses for gold, as in electronics and other things (jewelry?). That sort of makes a thing useful in a deeper sense. This is what I understand as backing. I don't know, I'm just throwing this out there.

[porc]

No, that's pretty much the dictionary definition.

Aaaaaaand here we cut to the heart of the matter - or at least, the fundamental reason I made the OP.
If there IS a dictionary definition, please provide a link.
If there isn't, please don't imply that there IS.

(Wouldn't it be ironic, not only to invent a meaning of 'backing' for this thread, but also to invent a new meaning for 'dictionary definition'?  )

Why do you guys have such difficulty with the term backing? As I said: The goal of backing is to ensure, that the media of exchange will retain its purchasing power. There is nothing more to discuss, unless you hold the opinion, that the goal of backing is something different.

[Cryddit]

Sigh.  Yes, the goal of backing is to ensure that currency maintains some minimum amount of purchasing power. 

But that isn't the definition of it. 

The Method of backing a currency, or the means of achieving that goal, is what is meant.

Wikipedia page on currency:

...The advantages of paper currency were numerous: it reduced the need to transport gold and silver, which was risky; it facilitated loans of gold or silver at interest, since the underlying specie (gold or silver) never left the possession of the lender until someone else redeemed the note; ...

Wikipedia page on paper money:

... banks sought to ensure that they could always pay customers in coins when they presented banknotes for payment. This practice of "backing" notes with something of substance is the basis for the history of central banks backing their currencies in gold or silver. ...

I mean, geez, why are we still talking about this?

[JoelKatz]

Why do you guys have such difficulty with the term backing? As I said: The goal of backing is to ensure, that the media of exchange will retain its purchasing power. There is nothing more to discuss, unless you hold the opinion, that the goal of backing is something different.

I don't think many people dispute that the goal of laws against adultery is to protect the sanctity of marriage. However, a sensible discussion about laws against adultery would likely look very different form a sensible discussion about protecting the sanctity of marriage.

[porc]

Sigh.  Yes, the goal of backing is to ensure that currency maintains some minimum amount of purchasing power. 

But that isn't the definition of it. 

The Method of backing a currency, or the means of achieving that goal, is what is meant.

Wikipedia page on currency:

...The advantages of paper currency were numerous: it reduced the need to transport gold and silver, which was risky; it facilitated loans of gold or silver at interest, since the underlying specie (gold or silver) never left the possession of the lender until someone else redeemed the note; ...

Wikipedia page on paper money:

... banks sought to ensure that they could always pay customers in coins when they presented banknotes for payment. This practice of "backing" notes with something of substance is the basis for the history of central banks backing their currencies in gold or silver. ...

I mean, geez, why are we still talking about this?

It is important to define the goal before you talk about the methods.

[AdaptQuickly]

Short Run Model


Supply curve is composed of current supply of Bitcoins increasing at the current rate of mining (Slope)

Demand Curve is composed of people that demand Bitcoin.

Demand for Bitcoin is based on:

-Bitcoin's ability to act as a medium of exchange (Buy Stuff With it) .

-Bitcoins ability to store value (You can stash your Bitcoin away and it will remain intact)

-Bitcoin as an investment. (Buy it low and sell high)


Where these curves intersect that gives you the economic value of Bitcoin. Lucky for us this economic value is currently >0.




So to answer your question Bitcoin is "backed" by its current economic value (price) which is mostly derived from the demand for Bitcoin.

No demand= No economic value= No "Backing"

[Erdogan]

Yes subjective. Both types of value is subjective. That is why everyone should decide what they want for themselves in the market, and what they are willing to sacrifice to achieve it. If you already have  some of that what you want, that will change your values, also your total situation, and not least, your personal preferences. If you like fresh vegetables, you might want to trade some of your time in a job, to somebody who wants the work done, in stead of growing the vegetables yourself. Nobody has the knowledge, nor the right, to decide for others. This is why voluntary action is best: more freedom (by definition), and more wealth for everybody.

If so, do you agree that we could say that gold value is backed by its inherent objective properties through an individual's subjective valuation of them? If you don't like the word "backed" used here, what is, in your opinion, the best term describing the sustenance of value by objective properties?

Backed is a broad word, but in the realm of money it means that there is some entity that is willing and able to exchange the backed money for a specified amount of something else. So gold is unbacked. I prefer to use direct use value. That value is not dependent of what others think (well if you want it, because others think it is pretty, but not yourself, that is in the fringe). Also in the realm of money, intrinsic value is the same as value for direct use, but that word has the same definition problem, because it is used for other things. By the way, I can not think of anything that have absolutely no direct use value, absolutely in the mathematical sense, after someone has selected it and brought it to the market.

Gold is unbacked, bitcoin is unbacked. In history there has been gold-backed banknotes. We have Casascius coins, but that is really the bitcoins itself hidden inside the coin. I think it is inevitable that bitcoin-backed notes will appear in the market, and I welcome it. Bitcoin would be excellent for backing.

If it remains for an individual to decide what property should be considered as valuable (subjective valuation), therefore any subjective value would necessarily be direct use value (as you said before in respect to gold prettiness). If so, then, say, bitcoin security should by logical necessity be considered as direct use value too since there are many people who value bitcoin security high, right?

No, all value is subjective, but some things have an exchange value component in addition to use value, and some things have only exchange value (fiat and bitcoin).

As I said, most things have at least a miniscule use value, for bitcoin (I am talking of the actual bitcoins) that could be the bragging value that the first miners might see in their otherwise valueless coins. The system itself, not the actual coins but the totality of the system, the invention, the miners, the fact that the system can transform the society, is of course extremely valueable, but it is difficult to decide exactly how much. You could try to say that the bitcoin system is more valuable than the gold money system, or the fiat system, or some other system, like the internet or the sea transport system or the judicial system or the police force. But we are concerned with what is the value of one dollar, one ounce of gold or one bitcoin. That is the units of the money systems.

I can't accept your reasoning as convincing. We started with some abstract property of gold being purely subjective  (i.e. prettiness to the eye) which you called its direct use, and now you turn to saying that we are concerned with what is the value of one dollar, one ounce of gold or one bitcoin. Then you say that the system itself, not the actual coins, is extremely valuable, but can't I say absolutely the same about gold, i.e. gold "system" being highly valuable for its properties, not actual coins? And now you implicitly suppose (not pronouncing it since it would sound too false) that security, anonymity and whatnot of actual bitcoins can't be direct use value for their owners. I am using you logic here, and nothing beyond it, and you suddenly stop using it in respect to bitcoins...

How come really?

The system, and the actual money, are two different things.

[IS]

"Fiat is backed by men with guns."

Bitcoin is backed by men with brains.

[deisik]

I can't accept your reasoning as convincing. We started with some abstract property of gold being purely subjective  (i.e. prettiness to the eye) which you called its direct use, and now you turn to saying that we are concerned with what is the value of one dollar, one ounce of gold or one bitcoin. Then you say that the system itself, not the actual coins, is extremely valuable, but can't I say absolutely the same about gold, i.e. gold "system" being highly valuable for its properties, not actual coins? And now you implicitly suppose (not pronouncing it since it would sound too false) that security, anonymity and whatnot of actual bitcoins can't be direct use value for their owners. I am using you logic here, and nothing beyond it, and you suddenly stop using it in respect to bitcoins...

How come really?

The system, and the actual money, are two different things.

Actually, I want you to address the following points. Firstly, if you call gold's prettiness direct use value, I'd like to know how it concerns with what is the value of one ounce of gold. Secondly, you say that it is the bitcoin system itself which is extremely valuable, but I was talking about properties that are related to individual bitcoins as well. If so, why we can't them consider as direct use value like we do in the case of gold's prettiness? If you disagree with that, please provide come convincing reasoning as to why they should be considered only on a system level, meaning they are inapplicable on a per coin basis. And thirdly, explain why then we can't consider gold properties in the same way as you propose we should do in the case of bitcoin properties?

[Rassah]

You back a money like you back a leader; neither count without believers, otherwise gold would just be shiny yellowish metal and a leader would be a regular Joe.  In the case of money, a backing is a measure of how many people endorse that object as their choice of money.

I have already explained to this board what backing means. No need to make up your own definitions, just so that bitcoin fits in nicely.

Backing is a guarantee (strong or weak) that the medium of exchange will retain its purchasing power.

And as I said, that is not the generally accepted definition of backing, and is just another definition that you made up. I think what you said is typically called "guaranteed future purchasing power" (I don't think there is a word for it), and backing comes from a verb to back, meaning there is someone or something doing the backing. What you described is basically just everyone's hope about how things will be in the future, not actual backing by some entity or mechanism.

[Erdogan]

I can't accept your reasoning as convincing. We started with some abstract property of gold being purely subjective  (i.e. prettiness to the eye) which you called its direct use, and now you turn to saying that we are concerned with what is the value of one dollar, one ounce of gold or one bitcoin. Then you say that the system itself, not the actual coins, is extremely valuable, but can't I say absolutely the same about gold, i.e. gold "system" being highly valuable for its properties, not actual coins? And now you implicitly suppose (not pronouncing it since it would sound too false) that security, anonymity and whatnot of actual bitcoins can't be direct use value for their owners. I am using you logic here, and nothing beyond it, and you suddenly stop using it in respect to bitcoins...

How come really?

The system, and the actual money, are two different things.

Actually, I want you to address the following points. Firstly, if you call gold's prettiness direct use value, I'd like to know how it concerns with what is the value of one ounce of gold.

The prettyness is useful for you the owner of the gold. Direct use. Even if you don't fancy it yourself, you wear it because others think it is pretty or otherwise awsome, it is still use value. For the baerer, the use value in that case is to have the admiration. (To clarify my ealier "fringe" comment).

Secondly, you say that it is the bitcoin system itself which is extremely valuable, but I was talking about properties that are related to individual bitcoins as well. If so, why we can't them consider as direct use value like we do in the case of gold's prettiness? If you disagree with that, please provide come convincing reasoning as to why they should be considered only on a system level, meaning they are inapplicable on a per coin basis.

You could probably find a small use value also in bitcoin. I can only think of bragging rights for having mined a large number of coins. I am not so sure about the Casascius coins. They have the looks, and are at the same time bitcoins. What do you think?

And thirdly, explain why then we can't consider gold properties in the same way as you propose we should do in the case of bitcoin properties?

I think we can. Bitcoins could be compared to gold, and the bitcoin system could be compared to the gold system.


So basically, I don't think we are very much in disagreement.

[Rassah]

You could probably find a small use value also in bitcoin. I can only think of bragging rights for having mined a large number of coins.

I would posit that bitcoin's use value comes from it being the only token that is usable on the enormously valuable bitcoin network.

[infinitybo]

They are not backed by anything what is the point of BTC.

[Rassah]

They are not backed by anything. what THAT is the point of BTC.

[Nancarrow]

Why do you guys have such difficulty with the term backing? As I said: The goal of backing is to ensure, that the media of exchange will retain its purchasing power. There is nothing more to discuss, unless you hold the opinion, that the goal of backing is something different.

Why do you have such difficulty with the term 'definition'?
I am not interested in the GOAL of backing. So don't keep telling me what the GOAL of backing is.
I am interested in the DEFINITION of backing. And no, not A definition or YOUR definition, THE definition. And if you want to keep telling me what the definition is, you'd better be prepared to support that. with. a. link!

Anyway, since I've already scooted off to the various dictionaries google provides, there's no need to belabour the point. And the metadiscussion is interesting, it just ain't answering the question I asked. I had been under the impression that the word was a term of art in economics, in the same way that "force" is a very specific term of art in physics, notwithstanding the careless use it may have in the real world.

[Erdogan]

Why do you guys have such difficulty with the term backing? As I said: The goal of backing is to ensure, that the media of exchange will retain its purchasing power. There is nothing more to discuss, unless you hold the opinion, that the goal of backing is something different.

Why do you have such difficulty with the term 'definition'?
I am not interested in the GOAL of backing. So don't keep telling me what the GOAL of backing is.
I am interested in the DEFINITION of backing. And no, not A definition or YOUR definition, THE definition. And if you want to keep telling me what the definition is, you'd better be prepared to support that. with. a. link!

Anyway, since I've already scooted off to the various dictionaries google provides, there's no need to belabour the point. And the metadiscussion is interesting, it just ain't answering the question I asked. I had been under the impression that the word was a term of art in economics, in the same way that "force" is a very specific term of art in physics, notwithstanding the careless use it may have in the real world.

It is well defined, at least in the branch of economics called austrian. But that branch is not the main, and the whole area is infested with politics and newspeak. We need to have the discussion from time to time, and there will be no consensus.

[deisik]

Why do you guys have such difficulty with the term backing? As I said: The goal of backing is to ensure, that the media of exchange will retain its purchasing power. There is nothing more to discuss, unless you hold the opinion, that the goal of backing is something different.

Why do you have such difficulty with the term 'definition'?
I am not interested in the GOAL of backing. So don't keep telling me what the GOAL of backing is.
I am interested in the DEFINITION of backing. And no, not A definition or YOUR definition, THE definition. And if you want to keep telling me what the definition is, you'd better be prepared to support that. with. a. link!

Anyway, since I've already scooted off to the various dictionaries google provides, there's no need to belabour the point. And the metadiscussion is interesting, it just ain't answering the question I asked. I had been under the impression that the word was a term of art in economics, in the same way that "force" is a very specific term of art in physics, notwithstanding the careless use it may have in the real world.

I think you chose the wrong place to search for the definition. And I suppose as well that even if you went to some distinguished economists and their works on money theory, you would still find many different understandings and definitions of what backing actually is...

I have expressed my understanding of the term and am quite happy with it, so what are you waiting for?