Quote:
Originally Posted by cmitch
My biggest question: What or Who stands behind it if something goes sour? Now, it would be great if a large investment firm bought gold and then sold bit coin and it was backed up by the gold.
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No one is backing it. It is worth X amount because people have agreed that is what it is worth (this is what is known as an "exchange valued currency").
It may sound odd - but it is the truth. Keep in mind that the US hasn't been on the gold standard since Nixon put a stop to it in 1971. There's really nothing behind the US dollar either - aside from the fact that people agree that it has value. This holds true for the US Dollar, the British Pound, the Euro, etc.
At this point, gold is used as a safe haven from fear of currency problems. When the US (and really the entire world) was crashing in 2008, everyone was fleeing from currency and into gold. The mindset being that if SHTF in a big way, gold might become the currency/bartering tool of choice going forward.
That's how I understand money/currency today, at least.
Quote:
Originally Posted by macsauce13
Currently it's main use is for drugs. Its a black market item in beta for real world use. I know it isn't exclusively for drugs, but that is where the majority is spent.
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I'd expand that to say that it is used for anything you don't want tracked (usually for legal reasons, admittedly). Online gambling is another big market. Along with items that are embargoed for political or health reasons (cuban cigars, unpasteurized cheeses, etc).
Although right now a lot of people are using it as an investment vehicle. Just holding onto their bitcoins as the value continues to inflate.
It is interesting because bitcoins aren't just created whenever there is a need. Bitcoins are only created/released at very scheduled times, and it is clearly relayed when those times are. So what we see is the true effect of demand and demand alone. The value isn't affected by bankruptcy concerns, it isn't affected by additional money being printed, it isn't affected by an earnings release or by unemployment numbers. It moves
almost at random. It is really quite interesting from an economics perspective.
That being said - I don't want any part of it. I believe that I am relatively well informed on bitcoins, but I'm just not willing to gamble on them. It is too random for me at this point.
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