Quote from: cr1776 on December 03, 2014, 09:25:07 PM

Quote from: RobbinHoodz on December 03, 2014, 06:26:45 AM

ELI8 (i feel like a 8 year old) Roll Eyes

- I've been doing research about the Gold standard and how it works. I'm trying to wrap my head around the concept to get a better understanding. http://money.howstuffworks.com/currency7.htm

I've searched the forums too and found https://bitcointalk.org/index.php?topic=24541.0 which further reinforced my knowledge to a certain degree.

My two questions are;

1. If it were backed by something, what does it mean to cryptocurrencies?

2. Is it a good thing or bad thing ?

Something similar was stated above, but as soon as bitcoin is backed by something physical such as gold, it implies that someone or some entity is holding the physical item that is being used to back the currency. So then you have some type of centralized entity that has to be able to resist the pressures of some other people and groups of people. Some of those people will be legally able to guns (governments) to force their will on this entity, some people may try to do so illegally (gangs, criminals etc). As soon as some entity is doing the backing, then that entity can be robbed or pressured by their government to remove the backing. Or to water down the backing etc.

Could a government be the backer? Sure, the government of Russia could resist the pressures from the EU, China, and US for example. But could the government of Russia resist the pressure of Putin to do so? Probably not. Could a US government agency resist pressure from China or Russia? Sure. But could the agency resist the pressure of the President? No. So then, which government would it be? There would be no consensus. Would it be the UN? They can't even resist the pressure from the smallest member, so that would be even worse.

So, in general backing bitcoin by something physical will result in centralization and all the problems inherent therein. And you have the problem of picking who the centralized entity will be.

Bitcoin itself is backed by math, the trust in the network, the trust in the protocol, the blockchain, the infrastructure and the combination of all of those (and more) into a network. It is likewise backed by the uses of all of those things. And together they are quite useful and consequently valuable. Nothing physical, but nevertheless these non-physical things backing bitcoin are quite valuable.

Kind of like the internet in 1993, few people were as aware as they could be of the uses to which it could be put. People are only scratching the surface of the uses of the blockchain concept.

:-)

Thank you, and to the rest of you for your sharing your knowledge.

In summary, I don't really like where this cryptocurrency is going then. After reading this, I don't know if I can even trust in the "trust". Don't even ask me why. In my view, its like opening Pandoras Box.