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and non-government backed non-commodity-backed currency I think hashing power is a commodity, just like electricity or bandwidth.
by nivertech 12y ago
and non-government backed non-commodity-backed currency
I think hashing power is a commodity, just like electricity or bandwidth.
- tzs 12y agoHashing power may be a commodity, but does it back Bitcoin? Hashing is used to create a new Bitcoin, but that seems more like a resource consumed as part of production, not something that is backing the currency. When a currency is backed by a commodity, such as a currency backed by gold, you can exchange the currency for the commodity at a fixed rate. The currency is a proxy for the commodity. When you hold a unit of a commodity backed currency, the appropriate amount of that commodity is being held for you somewhere. When you hold a Bitcoin, there is not someone holding a fixed amount of hashing power in reserve for you somewhere. The Bitcoin represents not hashing power available but rather hashing power that has been expended. In terms of gold coins, hashing power in Bitcoin is like the labor of mining the gold. I don't think that there is anything in Bitcoin corresponding to the gold. I suppose you could argue that Bitcoins themselves are the commodity, but that seems to me like calling USD a commodity-based currency based on its physical paper and ink. We don't count that because the commodity is essentially worthless compared to the value of the currency. The currency doesn't derive its value from the commodity.
- Aqueous 12y agoI think the 'gold' would be the hash collisions that the mining process discovers - this is like gold in the sense that these hash collisions are mathematically scarce and of finite supply, and very difficult to discover/extract. They are unlike gold in that they are not very useful by themselves, whereas gold is used as a material in many things.