That's not quite true is it? A distributed cryptographically-guaranteed ledger has fundamental value, no?

Its an interesting thought. What's the upper bound on what a ledger could be worth?

That said, the value of the ledger derives almost entirely from the value of the items transacted in the ledger. Therefore, I'd say that the ledger value is derivative of the market value and thus doesn't itself convey an intrinsic value to the coins.

same as the dollar and euro then. They are not backed by anything except the status quo.

The dollar is backed by the word of the most powerful organization in the history of civilization. If that doesn't have value, what does?

First, the word of the powerful is worthless, because power corrupts. People might keep their word because they're honest, or because they're accountable, but the "most powerful organization in the history of civilization" is by definition not accountable, and being an organization, neither is it honest.

Second, the US government doesn't give its word that dollars are usable for anything other than paying dollar-denominated debts to people inside its jurisdiction. If you owe somebody in the US €100, that's currently US$130.50. But if the dollar collapses tomorrow, you might need US$1300 to pay that debt, even to somebody in the US.

The US government has not given its word that you can exchange those US$130.50 for €100 tomorrow, or for anything else, except for debts already denominated in dollars. It doesn't even require that businesses allow you to buy things with any particular currency (this is a FAQ on the Fed's web site) — just that they accept payment for debts already contracted.

The very concept of debt, of exchange, is one enforced by the United States. If the United States says that I owe a million dollars or none, that is just as true whether it is measured in gold, or hens, or the capricious will of the Federal Reserve. What matters is the power of the United States to force me to pay, and that power is unparalleled by any other entity that has ever existed.

To say that the word of the United States is worthless is to ignore reality.

This may be news to you, but debt and exchange still take place internationally, have taken place internationally since long before there were superpowers, and also take place in zones where no law is enforced.

As for the word of the United States, I'm guessing you've never been to an Indian reservation.

It may be in poor taste to say it, but if the Native American nations had bought American Dollars rather than trading for goods with "inherent" value, history may have played out very differently.

It's not poor taste; it just shows you don't know much about history.

That only really goes for people on American soil. Of course, most governments that owe money to the US are in such deep shit that they couldn't pay the cleaning lady next week without a new loan this week. New loans tend to be problematic if you don't pay interest on your current loan.

That's just the tin foil talking.

Look at it this way if you must: the rich and the powerful, in the US, have vast amounts of wealth stored in USD and USD-demoninated instruments. It is therefore in their best interests to preserve the value of the USD, or at times slightly inflate it.

The risk of your second paragraph cuts both ways. If the euro collapses tomorrow, you might need only US$13 to pay that debt.

That personal slur is uncalled-for and demonstrates that you are completely unfamiliar with me and my history.

You're suggesting that US elites are systematically long dollars and have the power to control the value of the currency, including overcoming coordination problems. If that were true, we'd be seeing dollar deflation. Instead, we've seen about eight decades of uninterrupted inflation. This means one or both of your premises are wrong. I suspect both.

As for the "risk", I didn't mean to suggest that USD is particularly risky, certainly not more risky than EUR. I was just pointing out that the USG isn't "backing" USD even in the sense of Bretton Woods.

> If that were true, we'd be seeing dollar deflation.

I disagree. There are a number of benefits to inflation - particularly to those who have large amounts of debt on the books. Mortgaged real estate benefits greatly. Interest rates go up. Who stands to gain the most by decreasing the real value of loans and increasing interest rates?

> I was just pointing out that the USG isn't "backing" USD

In the abstract, nobody can back anything, because all you're relying on is their word. You could back a currency with a precious metal, but even that assumes the metal is intrinsically worth something (which has compelling arguments both ways).

The USG backs the USD fundamentally because they have power over the USD. They could instantly crush the value of the dollar if they chose to. Personally, I believe that if/when that happened, we'd have a great deal more to worry about than our wallets.

"Those who have large amounts of debt on the books" are short dollars, not long dollars, if you mean debtors (as suggested by your "real estate benefits") rather than creditors (as suggested by your "interest rates go up") — both groups have debt on the books, just on opposite sides of the ledger.

Creditors compensate by increasing interest rates on new loans, but that's, properly speaking, a response to expectations of future inflation, not a cure for past inflation.

> nobody can back anything

I can't tell if you're actually unable to understand the distinction between reserve-backed currencies and fiat currencies like the current dollar, or if you're intentionally bringing up irrelevancies to try to confuse the discussion. Your unwarranted personal attack earlier in the thread makes me want to assume the latter. In either case, shut the fuck up, because whether your ignorance is faked or not, you're not contributing to the conversation. You're just being an asshole.

No, it's not backed in the sense that it has a concrete value. No one is guaranteeing that a US dollar will buy you exactly a gallon of gas, an ounce of gold, or a bushel of wheat or anything like that.

It is "backed" in the sense that people need it to pay taxes, but exactly how much value that gives it is completely uncertain and only determined by the supply and demand of people spending it/accepting it. If there were to be a major economic shift, the value could change to be literally anything relative to the value of other goods (without the supply and demand of those goods actually changing.) It could even completely collapse and be worth nothing under the right conditions.

If it was actually backed in the traditional sense it would be guaranteed to be worth some amount of some good or combination of goods, regardless what happens, regardless how many people are spending it or accepting it.

And who guarantees that an ounce of gold will buy me some amount of wheat? Or that a bushel of wheat will give me some amount of energy when eaten? Only a very powerful entity can make such guarantees.

On that basis I would say that the word of the United States is far more intrinsically valuable than any physical object.

Gold has generally had stable value throughout history, but you are right that it isn't guaranteed. Other commodities like wheat are a little harder to use to back a currency, but from year to year they are fairly stable and pretty much guaranteed to have some value whatever happens.

But US dollars aren't guaranteed to do anything for you either in such a situation. The currency could hyper-inflate tomorrow for all anyone knows, and it has no intrinsic value other than the requirement to pay taxes with it. It seems to work fine as a currency and maintain stable value, but the point is it really isn't backed by anything.

Gold has been stabilized through history because it has been used as currency by powerful governments. If the powerful governments of the world collapse, they will lose control of their large gold reserves at the same time they lose the ability to feed their citizens. What do you suppose will happen to the commodity markets then?

Nothing, neither gold nor grain, is backed by anything but power. Fiat currency is just the government accepting that responsibility de jure.

You do realize that modern fiscal policy near zero.

Ergo, a dollar today is guaranteed, on the average, to buy just under a today's dollar worth of things next year.

Ergo, a modern dollar is about the closest thing to a guaranteed exchange value that the world has ever seen.

Yes, it is a huge economy that has decades to stabilize, unlike bitcoin. My point is that it still isn't backed by anything. There is absolutely no guarantee that it will buy anything next year except what people next year are willing to give you in exchange for it (which could change due to a lot of factors.)

Being stable in value, and being guaranteed to have value are two very different things.

Dollar/Euro are backed by central banks who dynamically maintain money supply to maintain a promise of low price inflation.

Their fundamental value is derived from fiat.

It's similar, but not the same.

I am constantly amazed how little Bitcoin fans value large, stable, global financial and legal institutions like the US or EU.

Without them, Bitcoin, the Internet, and most of the other aspects of their comfortable lives would exist.

- the legal system is a huge disappointment (CISPA, SOPA, etc.)

- the financial system is a huge disappointment (worldwide financial crisis)

It's not that we love Bitcoin (sure, it is an interesting piece of technology, but it's money, and money is a dirty word), we just dislike the alternatives.

Of course they are disappointments. But are they worse than any known alternatives?

Democracy isn't promised to be perfect, just to be better than its predecessors.

Something can be the best-ever-made and still be disappointing.

The people are just taking back some of the power they had previously delegated to banks and governments. Our leaders have become too far disconnected from us, they don't even understand that we are used to unprecedented freedom of actions and speech, to levels that sounded crazy before the Internet (some people grew up downloading data from military satellites and servers just for fun, not in any way out of malice - this is something they'll never understand).

Let the hive mind decide what is moral and worthy and what is not. Democracy must evolve and this will never happen as long as the old generation has power to stop it.

There are a lot of reasons why people are skeptical of those systems. How could you not be at least a little? And I doubt the internet and life as we know it wouldn't exist if things were different, but it depends a lot what that means.

There's a fascinating potential circularity in what you're saying.

If you invest in bitcoin because you don't trust governments, but bitcoin relies upon the internet, and the internet requires governments to stay up; then there's a sad potential future where a government-skeptic bitcoin investor is exactly right but because of the prerequisites for bitcoin to maintain value ends up with nothing.

not 100% true. you have to pay taxes in dollars. the currency is backed by the value of not going to jail.

You may have hit on something here.

There is no guarantee that any item will be worth any amount of another item. You can make claims about the relative likelihood that some item will be exchangeable for some quantity of another item, but you cannot claim that in every future scenario your item will be exchangeable for any amount of another item.

Just because a transaction looks more like barter than commercial doesn't magically convert the ideas underpinning fundamental economics. At this level of understanding economics is more a study of sociological systems and less about banking, fiat currencies, and all the other modern mumbo-jumbo we go on about these days.

This is really key when discussing some utopian reality where we've untethered ourselves from any form of currency--an exchange of value is tied to the very earliest societal systems. Unless society shrinks back into nomadic wandering tribes some form of value exchange (aka: currency) will exist.

I've seen a lot of good arguments on the value/worthlessness of fiat currency, but I'd never seen fiat currency defended as having the value of not going to jail. That's an amusing and on its face compelling argument.

Actually this rule isn't limited to taxes. EVERY debt you may have in the united states HAS to accept a pre-agreed dollar amount as payment in full.

The value of the dollar is "guaranteed", in theory, by the law that states that anything for sale inside the borders of the united states can be bought for dollars, without exceptions.

As to how guaranteed that makes a dollar, that is a matter of opinion. It is a lot better than Bitcoin imho.