Quote from: tim2020 on November 15, 2014, 06:21:12 PM

While I've always thought energy is what backs productivity through mechanization, and countries issue currency based on there productivity, in my understanding energy is potential wealth, why do you think it is used energy that makes Bitcoin valuable?

A very natural consideration would be that electricity is used as currency and can be freely transferred throughout the world

However, as a currency, one of its main function is store of value. It is very difficult to store electronic energy without huge loss over time, so it is not suitable to act directly as currency. Crude oil works more or less close to this goal, but they can not be send over internet

When you issue currency based on your asset, currency users could redeem those asset any time, but more frequently they never redeem them, they just need a value behind the currency issuance to give them a rough idea about the currency's value, to make sure it is a fair trade

From this perspective, the bitcoin exchange rate is always related to the recent mining cost (mostly electricity), thus give its value for a fair trade (you can either mine bitcoin with certain amount of energy, or produce some goods with same amount of energy, they are interchangeable)