Quote from: BeeCee1 on June 23, 2011, 01:31:07 AM

There are regular threads here about how bitcoin isn't backed by anything, generally followed by a plan to back it with gold or silver or dollars, however, every one of those plans relies on a central authority. This doesn't work since that central authority is subject to bankruptcy, corruption, and government influence.

In order to keep the distributed nature of bitcoin you would have to back it by something that is itself virtual. That got me thinking that maybe Namecoin is really a backed virtual currency. Even if the dollar/bitcoin/whatever value of namecoin went to zero, you'd still be able to use it for something. Currently, that something is registering domains but it is set up to allow you to store name/value pairs. This makes NameCoin a currency that is backed by the right to use a distributed data store, pretty interesting.

Backing (as well as intrinsic value) is a liability for money, not an asset. It artificially pins the value of the money-units to something other than what the market would reach absent the backing, or it artificially influences the value of the backing asset. E.g. in the case of gold gold is orders of magnitude more expensive than other substances which are more rare, more difficult to obtain, and more industrially useful thus leading to an inefficient under-utilization of gold.

The parallel with name backing is pretty obvious: If you fuse naming and bitcoin either names will be wildly under/overpriced due to demand for bitcoin, or bitcoin will be wildly under/overpriced due to demand for names, or both.

This article changed how I thought about money by arguing about why gold is not great money. Perhaps you'll find it interesting: http://www.libertariannews.org/2011/06/21/against-the-gold-standard/

I would instead argue that when people think of backing as a problem what they are really concerned with is guaranteed liquidity. Unfortunately, even if we made it so you could always buy names with bitcoin (perhaps with an automatic variable exchange rate to avoid the backing problems I suggested above) it wouldn't really solve the liquidity problem because you might want something _other_ than names, like food. And if you were having problems getting people to accept bitcoin for food then you're going to have pretty much the same problem with bitcoin-connected names for food.

I don't buy the bitcoin-backed-by-proven-transactions. I thought I might need certify a document creation time at some point in the future the other day so I dropped a SHA-512 randomly into #bitcoin where is was logged by hundreds of disinterested parties. Should I actually need to prove it I could just subpoena a few of them. I can cheaply put a hash in a newspaper classified, etc. Timestamping is so cheap that its almost valueless on its own, and the cases where you'd need machine verifiable timestamps that bitcoin provides over and above the cheap options I just gave are few and far between.