Something that has no intrinsic value, like paper or virtual currency, eventually relies on its value by the backing of the “institution” that issued it. Dollars are universally accepted as the most stable* currency. It is backed by what is currently the world’s most stable government which controls resources and military prowess unequaled by any other issuer. Who or what stands behind Bitcoin? If you had to pack your bags and flee someplace, which would you prefer? Dollars? Or, Bitcoin?
*Stable...The Obama administration doubled the world’s supply of dollars twice and then added another $87 billion’s worth of dollars every month to the economy for several years. This was in a futile effort to stimulate an economy that he had quite literally killed by failed economic policies. Out of fear their money could be seized at any moment, as was shown by the “secured” bondholders in the GM disaster, institutions and private investors kept their holdings in cash. This led to the Trump economy once Obama was out of office. Several years of pent-up demand and what would have been natural growth took place in just four years instead of the previous eight. You’d think they’d learn, but politics “trumps” reality every time.
Currency isn’t backed by the institution that issues it. It’s backed by people’s willingness to take it in exchange for goods and services. Nobody cares who puts it out, what matters is who will take it. As long as you believe you can trade a currency for stuff you want you will be willing to take that currency for stuff.
The utility of the blockchain is the value of bitcoin.
The uses are not even beginning to hit mainstream. The blockchain will eventually become the arbitrator of “truth.”
The easiest example is the transfer of local asset titles to the blockchain. A land title search that took days and cost $500 can be confirmed in seconds for no cost. Because of the nature of the system, it provides value.
A dollar had value because it is backed by the government. But the government continually devalues the currency by adding more. Bitcoin’s value is what two parties agree what it is. It is the simplest form of barter known to man.
Do not confuse the bitcoin network with general digital currency or crypto currencies. Those are very different flavors. And as soon as “Central Bank Digital Currencies” are issued, people will realize that Bitcoin does the same stuff—only better and without government intervention.
I urge folks to learn about this and not dismiss it out of hand.
“Who or what stands behind Bitcoin?”
Same thing that makes gold a store of value. The rarity and impossibility of creating a fake. And the ability for it to stay the same even if your central government/bank fiat collapses.
It’s not like pieces of paper or ledgers in a bank that someone can easily alter. The value of crypto is in the uniqueness of the inherent mathematics which cannot be altered by any entirety in this universe. Math is math nomatter what.
Just as the value in gold is the rarity of it’s atomic structure. It exists that way and always will now nomatter what anyone does.
Until advanced quantum computers can break encryption, it will remain a store of value for this reason.
Just like gold will have value until particle science can cheaply create gold.
Is the market for crypto currency open to influence from central governments? Of course. But only in the exact same way gold is influenced by government- by changing the fiat currency relationship to gold, outlawing gold or buying/dumping vast amounts of gold on the market. If it exists, nothing is 100% safe from government power.
“If you had to pack your bags and flee someplace, which would you prefer? Dollars? Or, Bitcoin?”
Depends on the place and political situation but many expats today use bitcoin precisely for that reason. It can’t be found by customs or taxed if used with proper anonymous precautions.
But with bitcoin you can anonymously transit anywhere on the planet with near infinite amounts of value with only a hash number. As long as anonymous access to the internet remains possible.
Gold has the benefit of being decentralized and valuable even if the internet is fully shut down. But you will NEVER slip a substantial amount of gold past any customs.
Of course ANY circumvention of government fiat control would become impossible in a total digital surveillance state. Gold, bitcoin, wampum, barter could all be outlawed in theory if they can watch 24/7. That is why fighting for privacy at every turn is so important
“It is backed by THE TAXPAYERS OF THE UNITED STATES”
There. Fixed it.
The dollar is backed by the interest on the bonds (you have to create a debt to issue a credit) and who pays the interest?
We do.
The United States are now the biggest slave camp on Earth...well, maybe not as much as Chiner, but you get the idea.
The federal income tax was created to collateralize the Federal Reserve. The Reserve Bank and its currency can’t exist without it.
You could have a federal income tax but no Reserve bank and still be on the Gold standard, but as the period from 1787 to 1913 showed, it’s not really necessary. Minor money panics (like 1857, 1873 and 1907) might still happen but could be more easily ridden out by less draconian policies.
The Reserve Bank and its sister institution - the federal income tax - exist to extract future work / wealth out of a captive populace. It was exactly what the American Revolution was supposed to eliminate - the King’s hand in the individual’s pocket. Washington said those exact words.
Bitcoin is an attempt to create a stable storehouse of value absent such a system. It’s no more stable then casino chips since it operates by consensus. But its real problem is that it dosen’t have the power of arms to compel people to give up their labor and wealth to benefit the owners of the system. That is , it has no long term collateral.