Some say we will have a “blockchain” money, backed by commodities. Why does it need to be backed by commodities? The reason people make this argument is because commodities have scarcity. The idea here is that since there is a limited supply of commodities, you won’t be able to create an unlimited supply of currency units. This is a credit based system, that will not work. The world could never coordinate this system and the commodities will never be held 1 to 1 with the currency (we got a taste of this with the gold standard). With Bitcoin the scarcity is built into the money, eliminating the need for the money to be backed by a scarce asset. This eliminates the inefficient and detrimental step of trusting all the network participants to have all the currency-backed commodities that they claim to have but never will.

#money #bitcoin