Quote from: Melbustus on May 04, 2014, 01:18:25 AM

Quote from: johnyj on May 04, 2014, 01:00:30 AM

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This is very useful: Most of the people wonder who is backing bitcoin, and they are afraid that a currency without any backing will crash to zero one day. Now here is a simple answer: Millions of bitcoiners back bitcoin.

No. Utility "backs" bitcoin. Things have value because they're useful in some context. Bitcoin is a tool to reduce the friction of exchange. It happens to work very well for that in our modern internet-centric global instant era. We call such a thing money, or currency.

A couple hundred years ago, gold and silver did that very well. They had properties (scarcity, fungibility, recognizability, durability, divisibility, etc) that made them generally work better than anything else for the purposes of reducing the friction of exchange.

What "backed" gold and silver? The only thing that gave them value was their utility. And so it is, should be, and will continue to be, with bitcoin.

I think you're stuck in the last 200yrs of monetary thinking which has largely been an inelegant stop-gap. Sometime during that period, humans started doing commerce over greater distances and started demanding ability to settle accounts/debts more quickly over these distances. Transporting gold/silver all the time for these purposes started to become a pain. So various entities (merchants, governments, companies, banks, etc) issued their own more easily transportable scrip (paper money), and declared it "backed" by gold and silver.

Doing this was just a way to hack gold and silver to make them far more conveniently transportable (ie, adding the "backed" paper-money layer to the gold/silver infrastructure). The problem, of course, is the entities guaranteeing the backing. Eventually they always screw it up, and fail to honor their commitments.

Now, finally, after 200yrs of bad money and hackish systems/conventions, we have created something which actually functions ideally as money, natively, in our present economic environment. Bitcoin *is* the scarce asset that's *also* easily and instantly portable over any distance. It does not need "backing". Bitcoin *is* the backing.

I think we're all in agreement here about Bitcoin not needing to be backed by anything. I don't think that was OP's point. He was writing about something less fundamental, which is simply a collective / organized agreement among many participants to stabilize the price of Bitcoin (with a floor, but not a ceiling). Informally, you can refer to this kind of behavior as "backing Bitcoin" but it's really not using the word "backing" in the same category as in the many debates others have about backing fiat/bitcoin/whatever with gold/stocks/whatever.