Fantastic money doesn’t need to be backed by anything.
It just is. Fantastic.
#Bitcoin
Discussion
Magic. Internet. Money.
I disagree. Bitcoin is backed by math.
Bitcoin is a technology that utilizes math to function. But there is no amount of math I can give you as backing for your bitcoin.
When you send a transaction, you provide a cryptographic signature to the network. It’s mathematical proof backing up the fact that you have the right to spend it.
It’s semantics but that’s what I’m getting at.
I agree, we're arguing semantics here. "Backing" has the historical context of hard assets being represented by paper notes. Maybe with the adoption of Bitcoin, people can have a better way of understanding what makes Bitcoin work, what backs up it's value, because of it's open source nature. It's easier to inspect what holds up Bitcoin's value than gold's, for example.
I think it is backed by energy.
It is transfered among participants with energy expenditure. But a "backing" would imply that you can exchange your Bitcoin for some equivalent amount of energy, which isn't possible. Bitcoin is a bearer instrument and stands on its own.
True, not directly backed like say gold to the dollar pre 1971. But the price of bitcoin will converge on its marginal cost of production, which is directly related to the energy used in mining.
Miners make up a portion of the sell side of the BTC-fiat markets, and yes, they need to sell at a price that exceeds their cost to obtain their bitcoins. But to say that the overall market will converge to that metric is to ignore all of the non-miners participants in it.
As more bitcoin gets distributed to non-miners, a growing proportion of the market will set prices that are completely removed from the miners' marginal cost of production. Most market participants won't even know anything about the cost of production. Buyers and sellers will set prices for their own reasons, and miners will make up a smaller and smaller portion of that action.
The price of bitcoin in fiat terms will be the aggregation of all participants' calculations, and that will likely not be at all correlated to the marginal cost of production. Miners time holding or selling or even buying based on market moves that are mostly out of their control, just like everyone else.
“The price of any commodity tends to gravitate toward the production cost. If the price is below cost, then production slows down. If the price is above cost, profit can be made by generating and selling more. At the same time, the increased production would increase the difficulty, pushing the cost of generating towards the price.
In later years, when new coin generation is a small percentage of the existing supply, market price will dictate the cost of production more than the other way around.”
- Satoshi Nakomoto, 2010
Welcome back to radiology! Best job in the hospital. Go stack them sats.
#Bitcoin is fantastic