why can't bitcoin be based on something that has value?

[KingsDen]

Op, your argument is indirectly pegging to value. The reason you are talking about the tangibility of bitcoin is it's value. Your question is the kind of questions that came when bitcoin was newly introduced to the world. For me, I would say that bitcoin has grown above this type of question. There are many tangible things that are of great and there are some tangible things that does not have value.
When we talk of fiat, you believe it because it's in the form of paper? If yes, is the value of dollar in the paper it's printed on? No! The value of dollar is abstract just like bitcoin.
The recent rise in the government adoption of CBDCs should fault your claim of bitcoin being pegged to another assets in order to have value.

[1715086397]

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[darkangel11]

Electricity has value, doesn't it? If it costs x Watts to mine a bitcoin it's going to be worth something close to the value of that power. Currently it appears that the production cost of 1 bitcoin is above 21k USD so that's where the value should be at the very least.

You say that bitcoin is based on people's perception of value. Isn't hat with all things? How do you know what your apartment or a house is worth? You know you paid some money for it, you know your neighbor sold a similar apartment for certain amount of money, you know that if you rent it out you can make that much money every year. This allows you to put a price tag on it but if people won't buy you will probably lower it.

If people were buying my bitcoin for 60k USD it means that was a real price or a price in a given range. Now thy're ready to pay 20k so we know the price is somewhere between those numbers.

[tadamichi]

i dont understand why bitcoin has to be just base on people perceive value of it. and for someone to just artrarily fix the supply of them at 21 million doesn't make any sense.

Because one component of money is being a store of value, and for this it needs relative scarcity compared to other goods. Money that isn’t scarce just looses more and more value over time, everything around you gets more expensive and your money worth less, a bad situation to be in.

it should be able to contract and expand the # of bitcoins in existence.

Humans are too bad at predicting the future to be able to handle this correctly. We see it right now, where inflation gets out of hand and all they can do is manipulate statistics, so it looks better than it actually is, instead of actually fighting inflation. The problem is human decision making will mess the supply up, so a fixed one is better, apart from also making it a better store of value.

but because bitcoin is design very simplistically it is kind of like monopoly money. not backed up by anything.

This is a feature not a bug, it might sound unintuitive at first, but being backed up by an inferior form of money is a disadvantage. It doesn’t bring any benefits, and no one would need have the need to use the currency that needs backing, because they could just use the asset that it’s backed by directly. Why buy a crypto that’s backed by gold, instead of buying gold directly, it just doesn’t make sense. I say this overly simplistic to get the point across, because there’s reasons why gold fails as a medium of exchange, most people use crypto as a store of value at the moment, that’s why i won’t get in deeper now.

Bitcoin is something complete in itself, it doesn’t need other bs that’s inferior to it.

i'm not saying bitcoin doesn't do that. but bitcoin has weaknesses. you can't deny that. the main weakness being that it is not backed up by something like gold. gold could then be used to measure the value of bitcoin. and gold has real world use. people wear it. it gets used in all kinds of electronics. bitcoin doesn't get used anywhere for any purpose. it's just imaginary.

First of all, this is not a weakness, money isn’t an economic resource, it’s there to facilitate trade, it doesn’t make sense to make products out of money.

For the simple reason of fungibility, another function of money, each unit should be exactly the same as the other. This is not the case with jewellery and gold coins, they’re different so they’re desired differently, which is bad for money. No person that used gold as money, will use it to make a product out of it. Even gold coins have different desirabilities depending on when they were made and by who, this is bad for fungibility. Pure money doesn’t need another use to be desirable, just like no football club wouldnt hire messi, because he isn’t good at basketball.

I’ve seen this mixing between money and economic resource many times now, i think some people have a hard time separating this. But don’t forget the market can separate between the two pretty well and made Bitcoin the most successful asset of the last decade(outperformed gold and everything), doesn’t seem like a weakness to me, this wouldn’t be possible by being tied to gold.

Being backed by something also opens up a whole new array of attack vectors and market manipulations, as a side note.

[larry_vw_1955]

So I understand what everyone is saying here, I read through all the comments. But here is where I stand on the issue. Just so everyone knows.

I think bitcoin is not stepping up to the plate when it just says to people to "figure out what I'm worth, I can't tell you". So of course a system like that will never have any issues with any type of real world asset. I mean the way bitcoin is set up right now, it could run inside someone's brain if they had enough mental capacity. But it wouldn't really mean anything.

Now lets say one day there comes a bitcoin 2. This bitcoin 2 is backed up by a real world asset. And people agree on the value of that asset. Not everyone uses that asset but they don't have to. But then can if they want to. that is, convert their bitcoin2 into that asset if they want to. Or they can sell their bitcoin2 to someone else on an exchange much like they do with legacy bitcoin. Bitcoin2 just provides more uses for the coin. The good thing about it is that if this asset is stable in price then bitcoin2 will not have wild price fluctuations and will be a better store of value than bitcoin1. People will be able to put their money into it without having to worry that the price of it will go down or up too much.

Thus my conclusion is that if this bitcoin2 could ever come into existence then it would make legacy bitcoin obsolete. No one would want to use the old bitcoin anymore.

[bittraffic]

So I understand what everyone is saying here, I read through all the comments. But here is where I stand on the issue. Just so everyone knows.

I think bitcoin is not stepping up to the plate when it just says to people to "figure out what I'm worth, I can't tell you". So of course a system like that will never have any issues with any type of real world asset. I mean the way bitcoin is set up right now, it could run inside someone's brain if they had enough mental capacity. But it wouldn't really mean anything.

Now lets say one day there comes a bitcoin 2. This bitcoin 2 is backed up by a real world asset. And people agree on the value of that asset. Not everyone uses that asset but they don't have to. But then can if they want to. that is, convert their bitcoin2 into that asset if they want to. Or they can sell their bitcoin2 to someone else on an exchange much like they do with legacy bitcoin. Bitcoin2 just provides more uses for the coin. The good thing about it is that if this asset is stable in price then bitcoin2 will not have wild price fluctuations and will be a better store of value than bitcoin1. People will be able to put their money into it without having to worry that the price of it will go down or up too much.

Thus my conclusion is that if this bitcoin2 could ever come into existence then it would make legacy bitcoin obsolete. No one would want to use the old bitcoin anymore.

Nope it's not going to make Bitcoin obsolete, there will just be a split of the community. But together they'd still be using Bitcoin.

BTC is not just a perceived value. Bitcoin is backed by the community. The miner's machine had to make all its effort to mine them. That's a real value, you can compare it to a worker who worked his day job which an employee pays for his day.

[tadamichi]

I think bitcoin is not stepping up to the plate when it just says to people to "figure out what I'm worth, I can't tell you".

This is the market man, the degree of adoption is still low, you gotta pioneer trough it. Taking shortcuts gets back to you many times in life and bitcoin didnt take them yet. It all depends on the degree of adoption, if it reaches closer to 100% in the future, then it becomes the worlds unit off account and you can divide all worlds assets(400 trillion) by 21 million and then you know what it can be worth. So it’s up to you to speculate how many people it can reach in what timeframe, i just showed you the max potential, it will be somewhere between this and where we’ve already been, if we already knew we would be there already.

Now lets say one day there comes a bitcoin 2. This bitcoin 2 is backed up by a real world asset. And people agree on the value of that asset. Not everyone uses that asset but they don't have to. But then can if they want to. that is, convert their bitcoin2 into that asset if they want to. Or they can sell their bitcoin2 to someone else on an exchange much like they do with legacy bitcoin. Bitcoin2 just provides more uses for the coin. The good thing about it is that if this asset is stable in price then bitcoin2 will not have wild price fluctuations and will be a better store of value than bitcoin1. People will be able to put their money into it without having to worry that the price of it will go down or up too much.

This would play out differently in practice, tying yourself to an asset also means you can never outperform it. So Bitcoin 2 would just be a worse version of the real world asset and not outperform it. If it can’t even outperform the asset it’s backed by, then it won’t be able to outperform bitcoin too.

The price fluctuations of bitcoin will become less and less anyways as the degree of adoption rises, pure money doesn’t need bs tied to it, like i said. The fluctuation will be zero once the unit of account phase sets in, so bitcoin 2 didnt actually solve something that wasn’t already being accounted for and actually limits it’s potential for some temporary price stability.

There’s a saying nothing good in life comes easy, if the market gave you a stable asset, it also means it will stay in the place where it’s at, you can’t have both at the same time here. So if Bitcoin 2 is just a worse version of gold for example, why should someone use it over gold? Comfort is never free, it means you’ll be giving up something else, everyone would love something that never bears a risk, but to win you gotta beat the competition and not bow to them for some temporary comfort and stability.

Essentially bitcoin 2 would just stick a different label to an asset and bitcoin, but is neither of the two. Sure i could name my son lionel ronaldo in the future, but it doesn’t mean he would perform like them. This is the catch here.

[franky1]

I think bitcoin is not stepping up to the plate when it just says to people to "figure out what I'm worth, I can't tell you". So of course a system like that will never have any issues with any type of real world asset. I mean the way bitcoin is set up right now, it could run inside someone's brain if they had enough mental capacity. But it wouldn't really mean anything.

golds price is about $1700.. its value is about $900
but i bet in al your years you never looked at the $900 number or thought about gold even having a number below the price..

but then now knowing both figures.. what is gold worth to you.
are you able to start a gold mine to get gold nearer the $900 level. or is it not worth the investment effort. is it more worthy to you to buy now at the market price. or are you not really needing gold right now and think it might be worth it later to buy if it comes down closer to the $900 amount.

see even gold. thousands of years being traded and still people cant categorically say a whats worthy to them amount, as each person has a speculative different thought on it, but all thoughts are on amounts at $900+

...
as for your other comment.. not stepping upto the plate and creating a bitcoin 2 stablecoin:
an asset backed by another asset!?. is not as much of an asset as you think. its just a convertible note of a asset..
a real asset has value in of itself.

bitcoins asset value is derived from its mining cost.. the actual cost of acquiring it. into existence thats not due to any asset that done the actual work.

meaning. if a fresh token can be created for a penny. but then is pegged as priced at $$$ because of some other asset that actually had cost/work required to bring the actual asset to existence. then the fresh token is not valued as an asset..  its just a convertible token/note.
(ots why bank notes are not assets. but even in the goldbacked era of last century. bank notes were just convertible notes that cost penny to make but were not the asset. the gold backing it last century was the asset.)

these days a dime costs more then a dime to create a dime. so a dime is a more valued asset than a bank note.
...
take the difference between PoS and PoW
ethereeum when it detonates to PoS will change from being worth over $1k value to being worth only a few dollars value. and any price above value is speculative emotion.

bitcoins main value is the baseline mining costs that actually does cost many many thousands of dollars per coin right now.

golds base value is derived from the diesel and sluice machines that are paid for to mine it. its base value is over $900 right now.

if you are just wanting to create a new coin that has no cost in its creation but just magically gains $XXXX due to it somehow representing another asset.. then that new coin is not itself the asset.

i know you want to only look at the PRICE and think its volatility is not backed.. you are right. but you then talk about it as if the price is the value. which it isnt

EG
take real estate.
if you look at any region and look at the base sq metre prices of many homes.. and look at the base line that no one is selling below. thats the true value..
then when you look at the real estate prices of the home as as a whole you can then look at which homes are selling closest to that value or are exceedingly expensive at a premium.

house prices are not stable. and houses PRICES are not their VALUE. you have to find the value below the price to then see how good or bad the price is. to then work out if that house is worth it.

if you just want a stable coin that never changes. heck you dont even need to back it with a reserve(legally and morally you should. but its not needed). you just form an exchange where you only offer swaps at 1 for 1 and never deviate. never offer premiums or discounts. never have a orderbook of varying prices. never change the price. and boom you have created a stablecoin.

if you just want a coin thats backed by a real world rare mineral or something you can lock up in a vault as a reserve. thats possible too. but that rare mineral may adjust in price AND value meaning you then have to adjust the value/price of the coin. which then comes with risks of it detaching its backed 'value' if you are not careful.

however..
if you ignore the bitcoin PRICE. and stop thinking of the PRICE as the value. and instead realise the VALUE is a lower number. then you might start seeing bitcoins VALUE is not volatile and unstable. but just like other things in all markets. assets that have underlying value. also then ontop have the speculative discount/premium price

same as gold same as real estate

[Fundamentals Of]

If Bitcoin is backed up with gold, does it mean that it is already better off? Or does it actually make it worse?

What if Bitcoin is backed with gold? And then the supply of which is rising and rising and the source is also getting wider and wider with the outer space also contributing greatly no end. Bitcoin would then devalue. Or what if the hundreds or thousands of tons of gold back up were bombed because of a stupid war? Would Bitcoin suddenly turn to 0 overnight? Or is it better this way, that Bitcoin is backed with codes etched in stone?

[pooya87]

~
if i should emphasis on how Bitcoin is different from other currencies. My suggestion goes this way. The difference between bitcoin and other currencies is that Bitcoin a valuable asset that have different method of regulations and automatically base on its regulations because of it's decentralized kind of life, other currencies that's known and also popular to the society centralized currency which can be monitored and controlled by a specific sector. So the different is very clear from my perspective.

You are focusing on other aspects of bitcoin and you are right but the point was to focus on the "currency" aspect of bitcoin and as a medium of exchange it is the same as any other medium of exchange namely fiat.

Now lets say one day there comes a bitcoin 2. This bitcoin 2 is backed up by a real world asset.
The good thing about it is that if this asset is stable in price then bitcoin2 will not have wild price fluctuations and will be a better store of value than bitcoin1.

You are naive if you think any "asset" exist in the world that has a stable price! For example gold that people think is stable, is not stable at all. It's just that gold that existed for thousands of years is not not as volatile as bitcoin that existed only 13 years. Otherwise gold has gotten dumped hard and pumped hard. They also recently found a massive amount of gold that they are going to extract and enter circulation that could dump gold price in the following years to come!

Again you didn't answer my question, fiat is not backed by anything so why should bitcoin?

[Wind_FURY]

It's a common myth.  Bitcoin’s price is not directly caused by subjective perceptions:  It is a result of the market, based on supply and demand.  Perceptions are one factor in the “demand” side of that.  There are other factors to demand; and perceptions do not alter supply.

Ultimately, Bitcoin’s fundamental value derives from its facilitation of productive economic activity, which would be costlier, infeasible, or impossible without Bitcoin.  I know that I have done productive non-Bitcoin, non-market business with Bitcoin, which I could not have done without Bitcoin.  That’s not extraordinary:  It is being an ordinary Bitcoiner who uses Bitcoin as money, rather than a purely speculative buyer who just wants “number go up”.  The more such people they are, the higher the organic, non-speculative demand for BTC.

i'm not saying bitcoin doesn't do that. but bitcoin has weaknesses. you can't deny that. the main weakness being that it is not backed up by something like gold. gold could then be used to measure the value of bitcoin. and gold has real world use. people wear it. it gets used in all kinds of electronics. bitcoin doesn't get used anywhere for any purpose. it's just imaginary.

It's not backed by "something", but it is really useful in the Dark Markets to buy Heroine from Mr. Drug Dealer. It's very useful to go around a government's oppressive policies, like capital controls imposed on Chinese citizens. Did you know that only $50,000 is allowed to be sent per year outside of China per person? Bitcoin can break down political strongholds ser. It has a bigger role to play than Gold, and we don't know what it really is yet. The cat is out of the bag though.

[larry_vw_1955]

You are focusing on other aspects of bitcoin and you are right but the point was to focus on the "currency" aspect of bitcoin and as a medium of exchange it is the same as any other medium of exchange namely fiat.

Ideally bitcoin would be a medium of exchange and not something that people obtain just to speculate on its price. They would just use bitcoin as a tool to buy things. Kind of like they use fiat. Now I do realize there are people that speculate on usd/euro but that's a very niche group. that's not the purpose of us dollar for people to sit around speculating on its relative value vs some other currency.

You are naive if you think any "asset" exist in the world that has a stable price! For example gold that people think is stable, is not stable at all.

Well in the last 11 years, it's more stable than bitcoin's price. Alot more stable. Bitcoin has much wilder price fluctuations. That's not a good thing for a store of value.

They also recently found a massive amount of gold that they are going to extract and enter circulation that could dump gold price in the following years to come!

So maybe that's why gold has had fluctuations in its price in the past for similar reasons? But again as I pointed out to you, bitcoin is more volatile than gold. when it comes to price.

Again you didn't answer my question, fiat is not backed by anything so why should bitcoin?

fiat used to be backed by gold in the united states. that's how it should have stayed. by the way you pose your question, you seem to be suggesting that fiat not being backed by anything is ok. that's right bitcoin is backed by absolutely nothing except peoples' belief that it has value. if one day they decided it didn't have any value anymore, bitcoin's price could plummet. and that would harm alot of people.

If Bitcoin is backed up with gold, does it mean that it is already better off? Or does it actually make it worse?

I just used gold as a convenient example of an asset. Gold is not necessarily an ideal asset to back up a digital coin with though. The ideal thing to use would be something that you didn't have to trust was stored in a vault somewhere.
If each individual user was able to create the asset, store the asset and consume the asset so much the better. Then it would not be centralized. Something like that is a bit more complicated than standard bitcoin it is more highly advanced. But if it ever came into existence I think people would be excited about it.

But I do realize that it wouldn't necessarily mean the end of legacy bitcoin. But it would usher in a new era of cryptocurrencies which did not rely upon people just trusting that something has value when it is not backed up by any real asset. That's why people invest in real estate because you can see it, use it and touch it. your money is secured by it. So it's not going to zero.

Just as an example. Say an asteroid was going to hit the earth in a year. Or 5 years or whatever. What do you think would happen to the price of bitcoin? What do you think would happen to the price of gold? What do you think would happen to any type of cryptocurrency that was not backed up by a real asset that they could use without having to sell the cryptocurrency for fiat in order to use it?

[pooya87]

that's not the purpose of us dollar for people to sit around speculating on its relative value vs some other currency.

Then what is ForEx used for?
People are already speculating on all fiat currency values. The more volatile they are the more they will be speculated on.

Well in the last 11 years, it's more stable than bitcoin's price. Alot more stable. Bitcoin has much wilder price fluctuations. That's not a good thing for a store of value.

It's about age and maturity. As I said, gold has existed for thousands of years and have been considered valuable for a long time but bitcoin is a toddler in comparison.

fiat used to be backed by gold in the united states.

"Used to be".

by the way you pose your question, you seem to be suggesting that fiat not being backed by anything is ok. that's right bitcoin is backed by absolutely nothing except peoples' belief that it has value. if one day they decided it didn't have any value anymore, bitcoin's price could plummet. and that would harm alot of people.

People's belief doesn't come blindly, it is based on the utility that medium of exchange provides them and its supply. If bitcoin, like any other form of money, stopped providing utilities that gives it value then it will lose that value and could even become worthless.

Just as an example. Say an asteroid was going to hit the earth in a year. Or 5 years or whatever. What do you think would happen to the price of bitcoin? What do you think would happen to the price of gold? What do you think would happen to any type of cryptocurrency that was not backed up by a real asset that they could use without having to sell the cryptocurrency for fiat in order to use it?

It depends on the size, it could be an extinction level event in which case who cares about price of x and y because humanity will no longer exist

[tadamichi]

If Bitcoin is backed up with gold, does it mean that it is already better off? Or does it actually make it worse?

What if Bitcoin is backed with gold? And then the supply of which is rising and rising and the source is also getting wider and wider with the outer space also contributing greatly no end. Bitcoin would then devalue. Or what if the hundreds or thousands of tons of gold back up were bombed because of a stupid war? Would Bitcoin suddenly turn to 0 overnight? Or is it better this way, that Bitcoin is backed with codes etched in stone?

First of all, decentralization and backing are two things that are almost incompatible with each other, because who is the central entity you will be redeeming from? How will you verify the reserves? What about the fungibility issues of gold? Who stores the gold and keeps it safe?

Second of all, you would have to tie the value of bitcoin to a fixed amount of gold, you would need to create a fixed exchange rate, which brings in new economic problems and attacks.

Third of all, this will always fail and makes 0 sense, it makes the primary asset useless. It just becomes a servant for gold, it will never become worth more than gold, because the fixed exchange rate. Why should we spend all this energy to mirror the gold price, when this can already be done more easily. It doesn’t actually help Bitcoin and we gotta go trough these huge fluctuations in the beginning, shortcuts won’t help.
 
Bitcoin is better money than gold or fiat.

[larry_vw_1955]

First of all, decentralization and backing are two things that are almost incompatible with each other, because who is the central entity you will be redeeming from? How will you verify the reserves? What about the fungibility issues of gold? Who stores the gold and keeps it safe?

That's why a cryptocurrency can't be backed by gold and be decentralized. But there should be something that can backup a cryptocurrency and still allow it to be decentralized. That's really the best type of situation because then the cryptocurrency has an objective value which is whatever the value of the underlying asset is. With bitcoin since it is backup by nothing, then it has no objective value. So nothing is really stopping it from going to zero except peoples faith and trust in it.

Now alternatively, consider oil. Oil has uses. it makes gasoline which runs cars. It has an objective value and people are willing to pay for it. If they lost faith in gasoline due to high prices then they can buy an electric car but that doesn't meant that gas price goes to 0. Likewise, a cryptocurrency that was backup by a decentralized asset should be able to maintain its value no matter what people thought about it whether it was too high price or not. Whether they used an alternative or not.

Bitcoin is better money than gold or fiat.

Except that bitcoin requires computers and the internet. Fiat and gold don't depend on any of that. And until people can buy everything they buy with fiat using bitcoin then "I don't think so".

fiat used to be backed by gold in the united states.

"Used to be".

You seem to agree with fiat being not backed up by anything. not sure why. you do realize that when fiat is backed up by nothing they can just print it at will, further devaluing it and thus your paycheck. everything you buy will cost more. because prices will go higher to compensate for the reduction in purchasing power of the dollar. your paycheck though won't get bigger to the same degree. so you might need to gamble some of your money in the crypto markets maybe buy some bitcoin and hope it goes "up".

[tadamichi]

That's why a cryptocurrency can't be backed by gold and be decentralized. But there should be something that can backup a cryptocurrency and still allow it to be decentralized.

The problem with backing is that you need to introduce a fixed exchange rate and always need an entity from which you can redeem your assets from. This leads to two problems:

1. You’re limiting the potential of the actual asset(e.g. 1 Tether will never be worth more than 1 usd, 1 backed bitcoin would never be worth more than the backed asset itself), this becomes a problem, because there’s no reason that someone should replace all their usd with tether for example, it just never makes sense to primarily use this asset over the actual backed asset. You can’t use another assets value and discover your own at the same time. You have two give up one of the two. A Bitcoin that is a cheap copy of another asset serves no purpose, so the answer which one to pick is clear.

2. It requires trust, because you will always need to trust an entity to hold enough of the backed assets and redeem them. Even with a digital backing, we saw how well that worked for Luna. This would give up decentralization and would defeat what Bitcoin actually is, and thus make it useless.

Bitcoin is a really cleverly designed system, there’s reason why it is like it this, you can’t just change the properties without changing what made it successful in the first place.

That's really the best type of situation because then the cryptocurrency has an objective value which is whatever the value of the underlying asset is. With bitcoin since it is backup by nothing, then it has no objective value. So nothing is really stopping it from going to zero except peoples faith and trust in it.

Your backed currency can go to 0 too, that’s what you keep forgetting. Centralized systems are easy to stop by the government, they can lie about their reserves, they can refuse to redeem the backed assets, they can give out more currency than backing exists, they can run away with the money. The list goes on. Everything falls apart with this asset, if someone inside the central entity doesn’t work honestly just once in all its lifetime.

Now you have another asset that is decentralized and doesn’t have the problems i mentioned above. Is designed by computer science, cryptography, math, economics, game theory, psychology and a strong community. Has no need to have something else attached to it. Is the first currency that works trustlessly on the internet. Most successful asset of the last decade. Triggers people worldwide but can’t be stopped. That doesn’t need anyones approval, and is strong in reality and not just with words. Is an actual alternative to the current failing money system, and the only alternative there’s ever been that doesn’t require a central entity to work. Is gaining more and more people every day. Gives you full ownership over your wealth. Hardest asset to confiscate.

Which one of the two do you need to have more faith in to not go to 0? Which one of the two requires less trust of you to work? What you mentioned above is a far worse situation.

Now alternatively, consider oil. Oil has uses. it makes gasoline which runs cars. It has an objective value and people are willing to pay for it. If they lost faith in gasoline due to high prices then they can buy an electric car but that doesn't meant that gas price goes to 0. Likewise, a cryptocurrency that was backup by a decentralized asset should be able to maintain its value no matter what people thought about it whether it was too high price or not. Whether they used an alternative or not.

This point is redundant with what i mentioned above, Bitcoin is the most decentralized asset there is, so how would the other „decentralized asset“ gain its value then, and be so superior that Bitcoin needs it? There is a logical flaw here. There’s no shortcut to letting people find Bitcoins value themselves, why is this so hard to accept?

Except that bitcoin requires computers and the internet. Fiat and gold don't depend on any of that. And until people can buy everything they buy with fiat using bitcoin then "I don't think so".

Fiat and gold depend on the internet the same as almost anything else does on this planet now. We can’t expect an asset that came out in 08/09 to have the same acceptability, as gold or fiat yet. But over time this will fix itself and we can see this trend already happening. How was the internet used in the 90s and how is it used now? The Unit of account phase comes last and isn’t relevant for the initial adoption stages. Because Fiat is a terrible store of value, and Bitcoin will be adopted as hard money first.

I hope it became clear now why it can’t be backed by anything else but itself.

[GreatArkansas]

(....)
i'm not saying bitcoin doesn't do that. but bitcoin has weaknesses. you can't deny that. the main weakness being that it is not backed up by something like gold. gold could then be used to measure the value of bitcoin. and gold has real world use. people wear it. it gets used in all kinds of electronics. bitcoin doesn't get used anywhere for any purpose. it's just imaginary.

I can say that we are still early these days, still, the majority of the people don't know what Bitcoin is and don't know how it works.
For me, I can consider Bitcoin as digital gold, as you can see there are a lot of people using gold as store value or investment, not the one we saw physically like wearing it for accessories or jewelry.
Bitcoin is also created as mode of payment, that's the real world use for me of Bitcoin, using for payment.

[pooya87]

you do realize that when fiat is backed up by nothing they can just print it at will,

Since you can't just print bitcoin and the supply has a cap, then your arguments here are moot.

so you might need to gamble some of your money in the crypto markets maybe buy some bitcoin and hope it goes "up".

That is irrelevant. There are always people who are gambling on anything including the direction wind is going to blow! That doesn't change the fact that bitcoin as a currency provides many utilities that gives it value and it doesn't need to be backed by anything.

[larry_vw_1955]

That's why a cryptocurrency can't be backed by gold and be decentralized. But there should be something that can backup a cryptocurrency and still allow it to be decentralized.

The problem with backing is that you need to introduce a fixed exchange rate and always need an entity from which you can redeem your assets from. This leads to two problems:

There is no need for trying to control the exchange rate assuming you mean what the asset can be bought and sold for. Its price should be determined by the market. That means it can go up and down. We're not talking about it having to be some type of stable coin. I dont see why you need a central entity to redeem the asset either. it just depends on what the asset is. Some assets might not need a central entity. Some might.

1. You’re limiting the potential of the actual asset(e.g. 1 Tether will never be worth more than 1 usd, 1 backed bitcoin would never be worth more than the backed asset itself), this becomes a problem, because there’s no reason that someone should replace all their usd with tether for example, it just never makes sense to primarily use this asset over the actual backed asset.

tether is a stablecoin that's its goal is to be worth exactly 1 usd. so tether's backed asset is supposedly us dollars. people replace their usd all day long with tether. why? so they can buy cryptocurrencies with it. or invest it into interest earning platforms (gamble). you can't use 1 usd to do anything digitally. that's why tether exists to turn it into a digital form. you seem to have the notion in your head that the goal of a cryptocurrency is to go up in value. i say it's to perform a useful utility to people.

2. It requires trust, because you will always need to trust an entity to hold enough of the backed assets and redeem them. Even with a digital backing, we saw how well that worked for Luna. This would give up decentralization and would defeat what Bitcoin actually is, and thus make it useless.

no one is forcing people to invest in ponzi schemes. those will always be with us. but i do agree with the point that in order to be useful it needs to not rely on a central organization or entity. you can't have centralization for a backed asset it just leads to problems.

That's really the best type of situation because then the cryptocurrency has an objective value which is whatever the value of the underlying asset is. With bitcoin since it is backup by nothing, then it has no objective value. So nothing is really stopping it from going to zero except peoples faith and trust in it.

Your backed currency can go to 0 too, that’s what you keep forgetting.

Why are you assuming that I would want my cryptocurrency being backed by some fiat currency? It can be backed by some non-fiat asset. You can't back it with fiat anyway because guess what. The government controls fiat and the government is a central entity. Centralization.

Centralized systems are easy to stop by the government, they can lie about their reserves, they can refuse to redeem the backed assets, they can give out more currency than backing exists, they can run away with the money. The list goes on. Everything falls apart with this asset, if someone inside the central entity doesn’t work honestly just once in all its lifetime.

that's why centralized systems are useless in this context.

Now you have another asset that is decentralized and doesn’t have the problems i mentioned above. Is designed by computer science, cryptography, math, economics, game theory, psychology and a strong community. Has no need to have something else attached to it. Is the first currency that works trustlessly on the internet. Most successful asset of the last decade. Triggers people worldwide but can’t be stopped. That doesn’t need anyones approval, and is strong in reality and not just with words. Is an actual alternative to the current failing money system, and the only alternative there’s ever been that doesn’t require a central entity to work. Is gaining more and more people every day. Gives you full ownership over your wealth. Hardest asset to confiscate.

Let me guess. You're talking about bitcoin. All of that sounds nice in theory. But guess what I do need peoples approval to buy bitcoin. I have to depend on my bank to allow me to send money to coinbase. Then I have to trust coinbase to not freeze my funds once I send them there. Then I have to trust coinbase again when I buy bitcoin to let me send my bitcoin off their platform. I need their permission to do all of these things. And then they will report me to the government too maybe. Then if I ever want to cash out my bitcoin I need to send back to coinbase and hope they don't freeze my bitcoin and allow me to sell it. Once I sell it i have to trust them to not steal my money but to honor my instructions to send it to my bank account then i have to trust my bank not to freeze those funds once they get in the bank account.
Bitcoin is not trustless in practice. As this example shows. It requires depending on multiple central authorities for the average person.

Now alternatively, consider oil. Oil has uses. it makes gasoline which runs cars. It has an objective value and people are willing to pay for it. If they lost faith in gasoline due to high prices then they can buy an electric car but that doesn't meant that gas price goes to 0. Likewise, a cryptocurrency that was backup by a decentralized asset should be able to maintain its value no matter what people thought about it whether it was too high price or not. Whether they used an alternative or not.

This point is redundant with what i mentioned above, Bitcoin is the most decentralized asset there is, so how would the other „decentralized asset“ gain its value then, and be so superior that Bitcoin needs it? There is a logical flaw here. There’s no shortcut to letting people find Bitcoins value themselves, why is this so hard to accept?

Why is bitcoin only selling for $20,000 now when it used to be 3 times that? Did it become 3 times less value for some reason?

Except that bitcoin requires computers and the internet. Fiat and gold don't depend on any of that. And until people can buy everything they buy with fiat using bitcoin then "I don't think so".

Fiat and gold depend on the internet the same as almost anything else does on this planet now.

Me wondering how gold and fiat existed prior to the 1990s. I guess they didnt.

We can’t expect an asset that came out in 08/09 to have the same acceptability, as gold or fiat yet. But over time this will fix itself and we can see this trend already happening. How was the internet used in the 90s and how is it used now? The Unit of account phase comes last and isn’t relevant for the initial adoption stages. Because Fiat is a terrible store of value, and Bitcoin will be adopted as hard money first.

Fiat is a great store of value. I can buy almost anything I want with it. Including things that I can't buy using bitcoin or any other crypto for that matter. I've yet to find a use case for bitcoin myself. Do I need to look harder?

I hope it became clear now why it can’t be backed by anything else but itself.

ponzi scheme.

Since you can't just print bitcoin and the supply has a cap, then your arguments here are moot.

But does it really have a cap? that could be changed via consensus.

That doesn't change the fact that bitcoin as a currency provides many utilities that gives it value and it doesn't need to be backed by anything.

but everything needs to be backed up by something. even fiat is backed up by the us government.

now, people that bought into bitcoin when it was $60,000. they've lost a good chunk of change. so they'll need to hodl to get back to break even. but as long as it has a utility for them i guess their fine right? is that what you're saying?

[Abiky]

i dont understand why bitcoin has to be just base on people perceive value of it. and for someone to just artrarily fix the supply of them at 21 million doesn't make any sense. it should be able to contract and expand the # of bitcoins in existence. but because bitcoin is design very simplistically it is kind of like monopoly money. not backed up by anything.

Fiat isn't backed by anything either. It just has value because people think it has value. In the case of Bitcoin, its value comes from its decentralized and censorship-resistance design. Even though it's not issued by a reputable entity such as a central bank, the mere fact that it's sound money no one can shut down makes it an extremely-valuable cryptocurrency. Unlike Fiat, people are the ones who determine Bitcoin's price on the market. I'd say the max supply of 21 million coins is perfect for Bitcoin. No more coins will be mined, meaning there should be no inflation in the long term (which translates into higher market prices).

Ultimately, it's all about utility (not the price). As long as Bitcoin works as intended, nothing else matters. Just my opinion

[goldkingcoiner]

Is Bitcoin really not backed by anything of "value"? Really? So those miners needed for mining Bitcoin are worth nothing? The internet costs nothing? What about the electricity? Is it free too?

Bitcoin is very much backed by diverse sources of "value". Even though those sources are backed by a fiat value as well as production costs and so on. If electricity were to double in price tomorrow, don't you think that this would have an effect on the price of Bitcoin?

Bitcoin is backed by tradition value, but its most valuable property is being the next generation of money. If you can't see that then have fun with your fiat. Im sure scraps of paper with a value which is decided by corrupt and clueless politicians is going to stay around forever...