Quote from: tadamichi on June 23, 2022, 02:14:00 AM

Quote from: larry_vw_1955 on June 23, 2022, 12:09:10 AM

That's why a cryptocurrency can't be backed by gold and be decentralized. But there should be something that can backup a cryptocurrency and still allow it to be decentralized.

The problem with backing is that you need to introduce a fixed exchange rate and always need an entity from which you can redeem your assets from. This leads to two problems:

There is no need for trying to control the exchange rate assuming you mean what the asset can be bought and sold for. Its price should be determined by the market. That means it can go up and down. We're not talking about it having to be some type of stable coin. I dont see why you need a central entity to redeem the asset either. it just depends on what the asset is. Some assets might not need a central entity. Some might.

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1. You’re limiting the potential of the actual asset(e.g. 1 Tether will never be worth more than 1 usd, 1 backed bitcoin would never be worth more than the backed asset itself), this becomes a problem, because there’s no reason that someone should replace all their usd with tether for example, it just never makes sense to primarily use this asset over the actual backed asset.

tether is a stablecoin that's its goal is to be worth exactly 1 usd. so tether's backed asset is supposedly us dollars. people replace their usd all day long with tether. why? so they can buy cryptocurrencies with it. or invest it into interest earning platforms (gamble). you can't use 1 usd to do anything digitally. that's why tether exists to turn it into a digital form. you seem to have the notion in your head that the goal of a cryptocurrency is to go up in value. i say it's to perform a useful utility to people.

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2. It requires trust, because you will always need to trust an entity to hold enough of the backed assets and redeem them. Even with a digital backing, we saw how well that worked for Luna. This would give up decentralization and would defeat what Bitcoin actually is, and thus make it useless.

no one is forcing people to invest in ponzi schemes. those will always be with us. but i do agree with the point that in order to be useful it needs to not rely on a central organization or entity. you can't have centralization for a backed asset it just leads to problems.

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That's really the best type of situation because then the cryptocurrency has an objective value which is whatever the value of the underlying asset is. With bitcoin since it is backup by nothing, then it has no objective value. So nothing is really stopping it from going to zero except peoples faith and trust in it.

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Your backed currency can go to 0 too, that’s what you keep forgetting.

Why are you assuming that I would want my cryptocurrency being backed by some fiat currency? It can be backed by some non-fiat asset. You can't back it with fiat anyway because guess what. The government controls fiat and the government is a central entity. Centralization.

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Centralized systems are easy to stop by the government, they can lie about their reserves, they can refuse to redeem the backed assets, they can give out more currency than backing exists, they can run away with the money. The list goes on. Everything falls apart with this asset, if someone inside the central entity doesn’t work honestly just once in all its lifetime.

that's why centralized systems are useless in this context.

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Now you have another asset that is decentralized and doesn’t have the problems i mentioned above. Is designed by computer science, cryptography, math, economics, game theory, psychology and a strong community. Has no need to have something else attached to it. Is the first currency that works trustlessly on the internet. Most successful asset of the last decade. Triggers people worldwide but can’t be stopped. That doesn’t need anyones approval, and is strong in reality and not just with words. Is an actual alternative to the current failing money system, and the only alternative there’s ever been that doesn’t require a central entity to work. Is gaining more and more people every day. Gives you full ownership over your wealth. Hardest asset to confiscate.

Let me guess. You're talking about bitcoin. All of that sounds nice in theory. But guess what I do need peoples approval to buy bitcoin. I have to depend on my bank to allow me to send money to coinbase. Then I have to trust coinbase to not freeze my funds once I send them there. Then I have to trust coinbase again when I buy bitcoin to let me send my bitcoin off their platform. I need their permission to do all of these things. And then they will report me to the government too maybe. Then if I ever want to cash out my bitcoin I need to send back to coinbase and hope they don't freeze my bitcoin and allow me to sell it. Once I sell it i have to trust them to not steal my money but to honor my instructions to send it to my bank account then i have to trust my bank not to freeze those funds once they get in the bank account.
Bitcoin is not trustless in practice. As this example shows. It requires depending on multiple central authorities for the average person.

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Now alternatively, consider oil. Oil has uses. it makes gasoline which runs cars. It has an objective value and people are willing to pay for it. If they lost faith in gasoline due to high prices then they can buy an electric car but that doesn't meant that gas price goes to 0. Likewise, a cryptocurrency that was backup by a decentralized asset should be able to maintain its value no matter what people thought about it whether it was too high price or not. Whether they used an alternative or not.

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This point is redundant with what i mentioned above, Bitcoin is the most decentralized asset there is, so how would the other „decentralized asset“ gain its value then, and be so superior that Bitcoin needs it? There is a logical flaw here. There’s no shortcut to letting people find Bitcoins value themselves, why is this so hard to accept?

Why is bitcoin only selling for $20,000 now when it used to be 3 times that? Did it become 3 times less value for some reason?

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Except that bitcoin requires computers and the internet. Fiat and gold don't depend on any of that. And until people can buy everything they buy with fiat using bitcoin then "I don't think so".

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Fiat and gold depend on the internet the same as almost anything else does on this planet now.

Me wondering how gold and fiat existed prior to the 1990s. I guess they didnt.

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We can’t expect an asset that came out in 08/09 to have the same acceptability, as gold or fiat yet. But over time this will fix itself and we can see this trend already happening. How was the internet used in the 90s and how is it used now? The Unit of account phase comes last and isn’t relevant for the initial adoption stages. Because Fiat is a terrible store of value, and Bitcoin will be adopted as hard money first.

Fiat is a great store of value. I can buy almost anything I want with it. Including things that I can't buy using bitcoin or any other crypto for that matter. I've yet to find a use case for bitcoin myself. Do I need to look harder?

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I hope it became clear now why it can’t be backed by anything else but itself.

ponzi scheme.

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Since you can't just print bitcoin and the supply has a cap, then your arguments here are moot.

But does it really have a cap? that could be changed via consensus.

Quote from: pooya87

That doesn't change the fact that bitcoin as a currency provides many utilities that gives it value and it doesn't need to be backed by anything.

but everything needs to be backed up by something. even fiat is backed up by the us government.

now, people that bought into bitcoin when it was $60,000. they've lost a good chunk of change. so they'll need to hodl to get back to break even. but as long as it has a utility for them i guess their fine right? is that what you're saying?