What's the best answer to this question ? "What is its backing? "

[finway]

How about this ?
"It's you, you people. "

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[aigeezer]

Delicious question, and your answer is good.

A related thought: precious metals are backed by the labor it takes to acquire them, unlike paper currencies. Similarly, bitcoin is backed by the labor it takes to acquire, which is perhaps another way of saying "the people", as opposed to some small manipulative group of politicians/counterfeiters. I think it is safe to ignore differences between machine labor and human labor because precious metals are rarely mined by hand.

There is something very wrong when central bankers make money out of thin air, yet it seems reasonable to me when bitcoin mining does something similar. It's interesting to explore the differences between the two models.

[finway]

Delicious question, and your answer is good.

A related thought: precious metals are backed by the labor it takes to acquire them, unlike paper currencies. Similarly, bitcoin is backed by the labor it takes to acquire, which is perhaps another way of saying "the people", as opposed to some small manipulative group of politicians/counterfeiters. I think it is safe to ignore differences between machine labor and human labor because precious metals are rarely mined by hand.

There is something very wrong when central bankers make money out of thin air, yet it seems reasonable to me when bitcoin mining does something similar. It's interesting to explore the differences between the two models.

You misread this, 
"you" means people who are USING it, HOARDING it, DEVELOPING it, SECURING it, SPREADING it.
Actually, It's ture to every single currency on earth that "Users" are backing the currency.

[herzmeister]

It's backed by freedom.

[cloon]

your answer is good, but i would answer: its the internet backing, because the only way to destroy bitcoin is to shut down the internet
(backing theyr existence, not theyr value, and as long they exist, they'll have a value (even if it is aproximately zero))

[Shawshank]

In Bitcoin, posession is control. Transparency in the number of bitcoins in circulation is total. It can be easily verified.

In the case of electronic gold, it is not known how much gold, or how pure, they store in their vaults because it is not audited. And in electronic gold, posession of the credentials is not control.

[Explodicle]

If they ask you a straight question, give them a straight answer. Bitcoin has no guaranteed exchange for anything else and is thus not technically backed by anything.

Nice sounding wordplay like "backed by freedom/internet/you" just sounds like you're trying to weasel out of it. If you demand backing, then don't use bitcoin or any major world currency.

[MoonShadow]

Delicious question, and your answer is good.

A related thought: precious metals are backed by the labor it takes to acquire them, unlike paper currencies.

That is the 'labor theory' of value, and is flawed in many ways, athough it does have an intuitive attractiveness to it.  Bitcoin isn't backed by labor, or electic power, or cryptography, or it's userbase, or it's long distance value transfer services.  Historicly, national currencies were 'backed' by gold in the sense that anyone who possesed a unit of currency had the legal and moral right to demand a defined amount of gold from the government agency that produced the currency.  But what backs gold?  The answer is nothing.  Gold is not backed, because it has an independent value.  That value is a matter of perception, developed over a 6K year history of gold as having value.  Bitcoin has value in the same way, meaning it does not require any explicit backing because it's literally valuable in it's own right, just like gold.  It's no one else's liablity, unlike a US$ or any of the payment methods that are based upon it (bank checks, credit cards, PayPal, Google Wallet, Facebook Credits, etc.)  One could make that rational argument that bitcoin derives value because of all of the things that I mentioned in my second sentence, but value is always subjective while a backing is always explict (and therefore, objective) in nature.

After all, as valuable as gold is as a store of value, without that monetary demand gold wouldn't likely be more valuable than lead.  Bitcoin is valuable only due to it's monetary demand, and it has monetary demand because there is a small (but growing) online community of people that believe that bitcoin (as a monetary & exchange system) has and will continue to do as it has promised, and thus see value in participating in that monetary & exchange system.

[proudhon]

I mean, that's really all there is to it.  It's backed by a sufficient number of people believing that it has value.

[lonelyminer (Peter Šurda)]

I once wrote that:

With a bit of exaggeration, I could say that it’s backed by government’s arrogance and greed .

Joking aside and after a more thorough analysis, I came to the conclusion that Bitcoin is an example of a pure network good, like language or the internet. It is not "backed" by anything, but it has a comparative advantage in transaction costs against the alternatives. The actions of the state that increase transaction costs of fiat money (e.g. banking regulation, existence of national currencies, war on drugs/prostitution/piracy/whatever and to a certain extent inflation) only increase the advantage of Bitcoin. As long as this advantage persists, I would not worry about its future.

[TTBit]

It is backed by currencies weaker than bitcoin.

The old joke with the punchline "I don't have to outrun the bear, I just have to outrun you" applies. I'm a huge bitcoin supporter, but if major countries decided to return to a gold standard, I would be selling my coins. But while the world plays pretend with fiat, bitcoin is superior. 

[molecular]

Delicious question, and your answer is good.

A related thought: precious metals are backed by the labor it takes to acquire them,...

that doesn't sound right to me? Can you redeem the gold and receive labor?

Some say gold is backed by the energy required to mine it. I find that far-fetched, doesn't "backing" imply that you can redeem the currency and get the stuff backing it in turn?

EDIT: I like moonshadows view: bitcoin/gold are not backed.

[molecular]

It is backed by currencies weaker than bitcoin.

The old joke with the punchline "I don't have to outrun the bear, I just have to outrun you" applies. I'm a huge bitcoin supporter, but if major countries decided to return to a gold standard, I would be selling my coins.

I might sell some of mine in that event (don't know what I'll sell it for, though) as a "internet blackout hedge" (shtf) and because I'd fear the panic (and add to it, I know), but I would try to buy back after the panic, because I think, fundamentally, bitcoin has advantages over gold (also disadvantages, but gold is not superior in all respects, like movability and divisibility).

relevant article by cypherdoc: http://bitcoinmedia.com/bitcoin-vs-metals/

[Grouver (BtcBalance)]

Maybe this article will help:

http://bitcoinweekly.com/articles/bitcoin-what-s-it-backed-by

[caveden]

As this question is normally asked by goldbugs, my answer normally is: "Bitcoin is backed by the same thing that backs gold, that is, nothing."

No "base currency" is backed by anything btw. People that say: "I don't accept a money backed by nothing" don't really know what they're talking about. Base money is by definition not backed by anything.

[Piper67]

The quick answer is: what is the USD backed by. And after you've gone through several levels of debunking (gold, fort knox, the US government, and so on) you quickly come to understand that the USD is backed by a tacit agreement, an understanding among most people on this planet, that one USD is worth about one USD.

Same same with BTC.

There are some people, probably deep in the Amazon, who would have absolutely no use for one USD. They're not part of the circle of understanding ;-)

[kangasbros]

A related thought: precious metals are backed by the labor it takes to acquire them, unlike paper currencies. Similarly, bitcoin is backed by the labor it takes to acquire, which is perhaps another way of saying "the people", as opposed to some small manipulative group of politicians/counterfeiters. I think it is safe to ignore differences between machine labor and human labor because precious metals are rarely mined by hand.

wat. This makes no sense. Labor can't be a backing. Gold miners and bitcoins miners mine, because they can get bitcoins and gold out of their effort, and they can change the bitcoins and gold to something else they desire. If no one else would value bitcoins or gold, they wouldn't mine.

[HonorMe]

Bitcoin Backs a free decentralized economy

[cbeast]

Fiat currency exists because our masters want a form of tribute that they don't need to store. For awhile they required gold as tribute, because it was rare and portable, but even that became too expensive to transport and store. Now they impose their currency with holy blessings of value that we are allowed to use so that we are forced to pay for all their property storage. Money that has lost the backing of the force behind it becomes worthless. All governments eventually fail so it follows that all money will fail. Items of barter are the only permanent backing of worth. Gold will always be rare and portable and difficult to store. Bitcoin is the first real challenger to gold.

[DeathAndTaxes]

Someone has a good quote in their signature.  I smile everytime I see it but I can't remember who it is. 

Paraphrased and butchered it is the value comes from its utility.  It has value specifically because of what it capable of.