Comment by bushido | Hacker News Reader

Comment by bushido | Hacker News Reader

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> What backs the value of a Bitcoin Value is always backed by perception of individuals(micro) and groups of individuals(macro). A change in perception of these groups manifests as volatility.

> Isn't Bitcoin the only currency which is in fact backed by Nothing valuable

Depends on what you perceive as valuable.

Theoretically, it could be argued that BTCs value ought to be as valuable as the time, equipment and energy dispensed in mining it + a perceived premium or discount.

In that it is similar to most commodities and currencies.

Further, if someone(Alice) doesn't mine but rather buys bitcoins, then on an individualist scale the price paid is the notional value of the bitcoin's that they hold. Next, Alice just need one person willing to accept her perceived value in exchange of goods and services rendered.

> Paper money imo is backed by regional Economy

You're right. But the same may hold true for bitcoin in the future, if they can develop economies that accept it at all stages of production and final use. They only such economy that exists in part is for mining equipment. Unfortunately, that too is exposed to other(less volatile) currencies which render it inefficient.

Money/labour input does not equal value. I could spend 10 years pulling all the grass from my backyard and sorting it from longest to shortest in length. A lot of effort went into it. Doesn't make it valuable.

Paper money is backed by the willingness of other people to price their goods and services in it. If people stop pricing their goods and services in it then it is no longer money. eg: a Zimbabwe dollar is no longer money. No one will exchange anything for it except for a novelty value.

Generally vendors exchange those paper monies for goods and services due to the requirement to pay taxes in fiat dollars. Vendors aren't required to sell for dollars, they can sell for whatever medium of exchange they want. It's just convenient to do so due to the tax reason. That reason alone can't save a currency though. eg: $Zim.

> Money/labour input does not equal value. I could spend 10 years pulling all the grass from my backyard and sorting it from longest to shortest in length. A lot of effort went into it. Doesn't make it valuable.

Doesn't make it valuable to 'you', but if you found someone willing to pay you with another object of value, that's another story.

Better answered by another user here "money is backed by the willingness of other people to price their goods and services in it.Vendors aren't required to sell for dollars, they can sell for whatever medium of exchange they want. It's just convenient to do so."

But the same may hold true for bitcoin in the future, if they can develop economies that accept it at all stages of production and final use.

Yeah, but in the case of an economy, you create the value first, then you create the currency to help hold that created value. You do not start a country and say, here is $1 trillion. With Bitcoin, you create $1 trillion, then you say "Go buy things from other countries with it."

> Yeah, but in the case of an economy, you create the value first

In any transaction the value can only be determined if the buyer thinks the product or service is valuable enough to pay for. Which is why products and companies fail all the time.

> You do not start a country and say, here is $1 trillion.

This hasn't been done in a while. But, it has been done before with a few variations. It's never pretty. Usually leads to hyperinflation. It's definitely way beyond the scope of this discussion. Though for a primer you could read up on the history of the Deutsche Mark.

> With Bitcoin, you create $1 trillion, then you say "Go buy things from other countries with it."

Actually that is excessively exaggerated scenario. At their peak $14.5 billion. In my opinion they were way above their market cap even then. I'd elaborate but that too is out of scope for this conversation.

What I can say is $14.5 billion was the speculated value, which is a different beast within itself.

Also, I think there are some gaps in your understanding of concepts such as crypto-currencies, proof-of-work and proof-of-stake.

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