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The costs of producing BTC or USD are not their backings. You can't exchange your BTC back into electricity. The USD (and usually most other currencies) aims t
by jk4930 13y ago
The costs of producing BTC or USD are not their backings. You can't exchange your BTC back into electricity.
The USD (and usually most other currencies) aims to be indirectly backed by the corresponding amount of goods they represent within the currency zone and their legal status.
BTC isn't even indirectly backed. It just exists. And that's okay for its purpose.
- digitailor 13y agoRe your comment about currency production costs: A spike in electricity costs would directly effect existing bitcoins' value. A spike in cloth paper prices would not cause a meaningful change in the value of already-printed dollars. And the price of the dollar would spike with electricity costs indirectly. They're not the same, it's an invalid comparison that neatly evades their inherent technological and conceptual differences. "Store of exchange-value" != currency, and BTC is currently behaving best in that role. Admirably, really- see how it's spreading like hotcakes in China. That's as a store of exchange value, not a currency. You can't turn your gold "back into" ore or your diamonds "back into" carbon. The cost of an airline ticket is mostly determined by the current price of fuel. When BTC starts to be used as a currency in earnest we can revisit the issue. Although at that point, you will be able to exchange your BTC back into electricity or other commodities through speculation or arbitrage. Which you can actually do directly right now if you know the right people, anyway. Profitably.
- Nursie 13y ago>> A spike in electricity costs would directly effect existing bitcoins' value How? Please explain? It makes mining more expensive, and some people may be switched off mining as a result, but the same number of BTC will be made.
- splintercell 13y agoThat means the rate of inflation of bitcoins will slow down, thereby causing a spike in the value of existing bitcoins.
- Nursie 13y ago>> That means the rate of inflation of bitcoins will slow down, thereby causing a spike in the value of existing bitcoins Nope, the rate of bitcoin generation is fixed, it's nothing to do with how many people mine or what the hash rate is.
- Groxx 13y agoFor up to about two weeks, until it adjusts to the new, lower norm, and de/inflation continues at the same rate as before. But technically true over that period, yes.
- moocowduckquack 13y agoYou can't exchange your BTC back into electricity. Huh? Why not? Surely you could just buy some solar panels with bitcoins, or convert them to another currency and then buy electricity from the grid.
- DanBC 13y agoThat's a tortuously inefficient way to get electricity.
- deleted 13y ago[deleted]
- moocowduckquack 13y agoSurely it is just what bitcoin miners have been doing anyway, the difference remaining being their profit.
- philwelch 13y agoBy that reasoning, I can convert my USD into donuts, and hence the USD is backed by donuts, hence the term "dollars to donuts".
- moocowduckquack 13y agoWell, it is partly backed by donuts, along with any other commodities or instruments of value that it can be easily exchanged with.
- philwelch 13y agoWhich really puts the lie to the idea of currency being "backed by" a scarce resource at all, which is the main premise of goldbugs. I'm totally okay saying that a currency is backed by the entire economy of goods being exchanged for it myself.
- notahacker 13y agoBut I can't expect that I will be able to exchange the BTC for a fixed amount of electricity, which is the same as the fixed amount of electricity I originally exchanged for BTC. Hence BTC is not convertible, and not "backed" I can buy gold with the US dollar, but it doesn't mean the US dollar is backed by gold.