I love a guy that creates a whole long freaking post to talk about PoW being "backed" by energy when he has no clue what "backed" even means
https://bitcointalk.org/index.php?topic=361813.msg7624335#msg7624335To be backed by something, your exchange rate back to energy cannot change, just like when dollar was backed by gold until the 1970s. It has to be set at a constant exchange rate and be guaranteed by some kind of entity that you can exchange the coin back to "energy cost" that it ORIGINALLY took to produce these coins. Your oh-so-dear PoW coin values fluctuates with no regard whatsoever to what energy costs to produce these coins.
A perfect analogy for your flawed argument is like saying "just because a stock X is dollar denominated, it is backed by the US Dollars" (and somehow that prevents it from dropping in value). Yes it is worth a certain amount of US dollars but that amount is always changing. A stock can be worth $50 one day and drop to $1 the next if people loses confidence in that stock. The dollar value does not affect the stock price or vice versa.
Same thing with PoW coins. If people loses confidence in a coin, no matter if it's PoW (or even PoS for that matter, but i'm only concentrating on your flawed premise, which is what your argument is based on), it is going to drop regardless, no matter how much "energy" you put into making this coin. This is why there is NO "BACKING" of any kind from energy. Plus no entity would guarantee that "backing" of yours.
Don't talk about stuff that's over your head please.
back when bank notes were backed by gold. you could never swap a bank note for the true value of gold. firstly the exchanger would look at the speculated price, then the local spot price for the area and add on their own admin fee.
meaning a £10 would get you £8 of true gold value. this is why people didnt really put gold under their bed and preferred to stick with bank notes as it was perceived as better value.
now bringing it to crypto currencies.. POW stops bitcoin falling too far.. because miners who have actual costs in mining, would be too stupid to sell at too much of a loss. so lets put this into perspective
mining costs have been calculated to be between $500 and $600 (dependent on electric, investment amount, size of reward person gets by being on the right/wrong pool), then as it reaches the exchanges, then comes the speculation and profiteering. adding another $50-$100 ontop.
so just like the gold backed bank note. bitcoin IS backed by POW costs, because this month bitcoin refuses to go below $500 (which has been proven).
in both cases there is a variance of 0%-20% but thats speculation/profiteering. but there is proof that POW costs do factor into the value of bitcoin, and the fact that bitcoin is over $500 due to it costing atleast that to mine them..
bitcoins true value is not $1 with $640 speculation, meaning bitcoin can drop and stay dropped to $1.. it can swing up and down, but on average it will be at or above mining costs because smart miners will refuse to sell at a lose, thus keping the prices on average above mining costs (excluding the random crackpot that dumps coin for a temporary crash..) but as i say ON AVERAGE the bitcoin value and mining costs do tally..
just watch out if someone makes a multi-terrahash miner that can mine a bitcoin for lets say $100.. then you will see the miners selling coins instantly, crashing the price to $100-$150 to grab profits.. but luckily i dont think that will happen..
what makes me laugh is when people true to say bitcoin is not backed by POW, and bank notes are not backed by minimum wage/cost of living (+/- upto 20% speculation).. these people can never actually make an articulate argument using examples and numbers to say what bank notes and bitcoins is backed up by, in their opinion