4 ms·

The value of bitcoin, as of any other instrument of exchange, is backed by the trust that someone else will exchange it for something else in the future. Every

The value of bitcoin, as of any other instrument of exchange, is backed by the trust that someone else will exchange it for something else in the future. Everyday goods, like corn or crude oil, additionally have intrinsic usefulness and thus gain value from this. Government issued currencies have another aspect, namely that you have to pay taxes in gov issued currency, and thus there is always someone who wants gov issued currency, thus it is easy to trust. There are also often "legal tender" laws, which force people selling to the public to accept gov issued currency. This also makes it easy to invest that trust. But basically it is just how much you (and by extension the market) believe you will be able to get for your instrument of exchange in the future that determines its value.

philwelch 13y ago
That's not quite how legal tender laws work. If I want to operate a business that only accepts Bitcoin, that's not illegal. You give me the Bitcoin and I give you the donut. Legal tender only applies to debts, which include things like damages from lawsuits. In fact, if you want to receive anything other than dollars in a lawsuit, that's considered "specific performance" and is not always available. For instance, if I have a contract to ship you ten tons of flour for $10,000 and I don't ship the flour, most of the time you can sue me for some dollar amount of damages. Specific performance would be if the court ordered me to ship you flour--or indeed, gold, Bitcoin, or Euros.
- simbolit 13y ago
  I thought in France, for instance, companies may not refuse to take gov issued money as payment for their goods, but I cannot find a reference right now. So I suppose you are right. Thanks for correcting me.
  - philwelch 13y ago
    That wouldn't surprise me. The French are protective of their national institutions, and back in the day, the Franc would have been one of them. (Another, the French language, has lots of legal protections.)

philwelch 13y ago

That's not quite how legal tender laws work. If I want to operate a business that only accepts Bitcoin, that's not illegal. You give me the Bitcoin and I give you the donut. Legal tender only applies to debts, which include things like damages from lawsuits. In fact, if you want to receive anything other than dollars in a lawsuit, that's considered "specific performance" and is not always available. For instance, if I have a contract to ship you ten tons of flour for $10,000 and I don't ship the flour, most of the time you can sue me for some dollar amount of damages. Specific performance would be if the court ordered me to ship you flour--or indeed, gold, Bitcoin, or Euros.

simbolit 13y ago
I thought in France, for instance, companies may not refuse to take gov issued money as payment for their goods, but I cannot find a reference right now. So I suppose you are right. Thanks for correcting me.
- philwelch 13y ago
  That wouldn't surprise me. The French are protective of their national institutions, and back in the day, the Franc would have been one of them. (Another, the French language, has lots of legal protections.)