RE: [gsc] Bitcoin
From the mailbag:
On Sun, May 01, 2011 at 07:52:22PM -0700, ****** wrote:
> Thats pretty cool. I see that you have made it live. I have been
> reading about Bitcoin and I don't fully understand the concept, how it
> doesn't seem to be backed by anything.
It's backed up by people's willingness to trade it for other valuable items, Liberty Reserve for example.
Bitcoin's inherent worth is it's utility as a vector for communicating value - private money
decentralised and impossible to stop is useful and therefore valued.
Sort of like fiat currency, Bitcoin is valued by the decree of it's users, but not by the decree of
government. I put up my Pecunix, Silverman his
silver coins, L2V their telephone services, Capulin coffee etc. etc.
That talk about the price of electricity somehow backing the issue was just confusion and
misunderstanding. It came from the idea that if the price to buy a bitcoin remained more than the price of
the electricity burned to mine a bitcoin, people would continue to mine. Of course, burned electricity
has no more value than burned firewood.
The mining process is really just a cool and novel way to issue the currency across the user base over time. I
can't think of another way to do it, to put the currency in the hands of the users without becoming a central
authority. The bticoin monetary constitution is inflexible. "in math we trust". You have to crack crypto
puzzles to bring the coins to exist. Once the 21,000,000 have been created, no more can be.
It's true that this mining exercise is like tail chasing, and that some electric energy is lost in the
process. It seems counter produtive to see air conditioners sucking up the juice to cool computers