"Backing" - what does this actually MEAN?

[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.

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[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.