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Author Topic: What's the best answer to this question ? "What is its backing? "  (Read 4776 times)
myrkul
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July 20, 2012, 09:50:06 PM
 #61

Meh. Too wordy, plus it doesn't get to the heart of WHY paper, bitcoin, gold, etc. are different. It's just antagonistic toward paper without showing what makes gold (and bitcoin) valuable.

My take on it, anyway. Roll Eyes


Well, what makes gold valuable? People want it. Honestly, nothing more, nothing less.

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July 20, 2012, 10:45:36 PM
 #62

Meh. Too wordy, plus it doesn't get to the heart of WHY paper, bitcoin, gold, etc. are different. It's just antagonistic toward paper without showing what makes gold (and bitcoin) valuable.

My take on it, anyway. Roll Eyes


Well, what makes gold valuable? People want it. Honestly, nothing more, nothing less.

Yep. Human demand.

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July 21, 2012, 12:55:32 AM
 #63

When asked this question I reply: "maths"
myrkul
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July 21, 2012, 01:17:39 AM
 #64

When asked this question I reply: "maths"

Good one! "Bitcoin: Backed by mathematics."

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July 21, 2012, 07:11:39 AM
 #65

It's backed by the system of people using computers.

No. It's value may be supported by the "system of people". It's not backed by anything.

A is backed by B implies one can redeem A for B. Can you redeem a bitcoin for some "people using computers"? Certainly not.

EDIT: you also can't redeem it for some math.

I think maybe a good answer is: "It's not backed by anything since you can't redeem a bitcoin for anything anywhere. However, bitcoins have value because... <explain why bitcoins are valuable>"

As was explained above, backing is something used with paper currencies, which bitcoin is not. Bitcoin is a commodity money.

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July 21, 2012, 01:01:37 PM
 #66

Backing infers dimensionality to an object as having an unseen side. In the real world we know that backings exist after the age of object permanence. We extend the definition to Newton's Third Law of Motion of equal and opposite actions. We then extend that object permanence even further to believe that all actions have consequences.* This brings us to faith.

From the age we have faith that something we observed once will happen again under the right conditions, we develop confidence in these actions and outcomes. Once something has established a functionality that we observe to be reliable, we believe that under certain conditions we will always have predictable results.

Bitcoin is backed by our faith and confidence that it is a very reliable and functional currency.


*Some even go as far as to believe that everything happens for a reason, but that belongs in a discussion about the future of Bitcoin.

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July 21, 2012, 04:17:29 PM
 #67

There is no need for backing.  A need for backing presupposes that Bitcoin is an indirection or representation of something else.  Whereas Bitcoin is not a child node, but a universal master ledger of goods and services exchanged.  It has no parent (or, if you prefer, lower turtle Smiley).  It can directly record income and distribution of value, as it flows from person to person.

For 5000 years you could provide goods and services to society and record that fact via acquisition of gold, which acted as an implicit ledger of sorts.  Now the ledger actually exists, explicitly!  No need for any pseudoledgers above or below.

That's why it's revolutionary.  To update Plato a bit: up to now, we've been listening to vynil records and MP3s, but with Bitcoin we get as close as possible to the actual performance from which those recordings were sourced.  It's not 100% transparent because the musicians are all wearing masks, but the key thing is that all the notes come through with zero delay and zero distortion.
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July 21, 2012, 05:19:44 PM
 #68

I like to answer the question "What is it backed by?" by saying the following.

The words "backed by" are meaningless. They havent meant anything since we went off the gold standard. They originally meant that banknotes could be redeemed for physical gold or silver, kept back in a vault at the bank. Euros and dollars have not been "backed by" anything since we went off gold.

The bitcoin opponent then usually says that euros and dollars are backed by the government. I then respond that that is false. Euros and dollars are not backed by the government. Their value goes down at a minimum rate of 2% per year, which is the official inflation target. And its usually more. Euros and dollars kept in a bank, will lose half their purchasing power after 30 years. The government has never compensated anyone for this loss. Therefore the government does not "back" their own currency.
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July 26, 2012, 04:25:47 PM
 #69

Cryptography Software and a giant computer network.

You could also say "the same thing that backs anything of value - its utility".
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