What is Bitcoin Backed by or When Will the Bubble Burst ...

I stored bitcoins online ... aaaand they're gone.

/SorryForYourLoss is a place to showcase the top minds of bitcoin (and cryptocurrencies) failing to secure their precious internet money properly. It's a memorial for the countless incidents of thefts, scams, hacks, goxxes, .. etc.
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Nautiluscoin

Nautiluscoin is the digital currency powering the Drachmae Platform.
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GIFcoin Token

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If you complain that Bitcoin sometimes has high transaction fees and is backed by nothing, remember: in Brazil, a country ravaged by hyperinflation, many prople use soybean sacks as money

If you complain that Bitcoin sometimes has high transaction fees and is backed by nothing, remember: in Brazil, a country ravaged by hyperinflation, many prople use soybean sacks as money submitted by ludovicoworker to btc [link] [comments]

Bitcoin is digital gold and the LightningNetwork uses cryptographically secured and trustless “IOU’s” as a medium of exchange backed by bitcoin, for efficiency. Like when paper money was backed by gold in 1844. But this time no one can suddenly take the gold away.

Edit:
Yikes, this blew up a little and I’m being hit from all angles about why I’m wrong.
I probably shouldn’t have used the term “IOU” cause it insinuates debt, as well as there being counter party risk. My point is that it’s like having the most trusted and secure IOU in the world, because it’s not backed by promise of the other person, it’s backed by cryptography, so you can claim your money at any time, or you can continue to pass it on to the next person without any risk. So in that sense, it is similar to an IOU, but it’s trustless.
I really liked this analogy and I was hoping this would just be an easy way for people to understand but I was wrong.
Edit 2: I think a better word would have been “promise”. LN is like exchanging trustless and secure promises of funds, which carry no risk, unlike when paper money was a promise to the equivalent value in gold and the promise was broken. I hope that clears up my thinking a little.
submitted by LeeWallis to Bitcoin [link] [comments]

10-29 02:14 - 'No, what I am saying is Bitcoin is worthless and it’s scarcity will not increase demand. A better crypto currency, likely backed by some type of sound money or portfolio of investments will become the crypto curre...' by /u/Admittedly_Ignorant removed from /r/Bitcoin within 456-466min

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No, what I am saying is Bitcoin is worthless and it’s scarcity will not increase demand. A better crypto currency, likely backed by some type of sound money or portfolio of investments will become the crypto currency of the future.
Bitcoin is like one of those dumb web companies from the dot com bubble. They knew roughly where technology was going, but they just didn’t create a good product. Bitcoin, backed by nothing, is worthless. It’s pure speculation and has no basis which would make it valuable for anything.
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Debunked: "Fractional reserve banking is fully prevented in the Lightning Network, because it's decentralized just like Bitcoin. There's no way to inflate the money supply in the second layer, since all transactions are backed by real bitcoins."

I will here for purposes of making no exaggeration present an especially drawn out scenario dealing with game theoretical factors rather than code and that would be impossible to time or predict perfectly. As such it could take possibly a decade or even generations to complete, or it might just never happen. Other scenarios might be equally possible, but would instead depend on unknown factors and perhaps happen in a much shorter time. These will not be dealt with in this post.
The example provided is only meant to get you thinking about the limitations and systematic risks themselves in the network, that indeed can not rule out and will compared to the network design provided by Satoshi instead actually tend to help efforts such as introducing inflation if this is popular with key players in the network. It is not to conclude that somehow I have thought of every way in which the system could suffer, or that I am Nostradamus making a prediction of absolute and certain disaster. Instead it focuses on the game theoretical problems of irreconcilability.
This also isn't a post against the Lightning Network as such, because if well implemented it could still turn out to have great use cases and there's then nothing preventing different chains from adopting it for those use case in particular. Now on to the post.
Some refer to the Lightning Network trading of bitcoins as in a sense "trading unforgeable certificates of gold, that can't ever have their redeemability taken away". This certainly seems to be the case from a coding and cryptology perspective. It becomes an especially convincing perspective of course, when the remaining Bitcoin Core developers argue in favor of and actually do choose to effectively eliminate various cash attributes for the "coin" (now even unable to do secure 0-conf transactions and instead having to wait on average 10 minutes per transaction) that trades under the BTC ticker and it still seemingly getting along happily in the markets. But as soon as we take economics and system security into account we notice that it's actually not quite so simple.
Bitcoin alone will always be susceptible to some attacks of course (this is not really possible to avoid with any system) and in a worst case scenario a majority of the community would actually be convinced to abandon the fundamental principles described in the systems design paper for an inferior replacement.
This would radically reduce both the actual economy and the perceived utility of the old network, most likely leading to a rapid drop in the global market price for the coins held by those community members still wanting to transact by the old means. Simultaneously, it could still potentially generate a handsome profit for those wanting nothing to do with the old system and hence selling their coins on the global market before the older coin had a chance to grind its way back into recovery.
As long as Proof-of-Work is kept, the users of the Lightning Network will always suffer the same risk in this regard as the users trading bitcoins directly on the Bitcoin Network. If they switch to a non-PoW model, they will immediately face other issues. But they will also have to deal with any other potential risks introduced by the system design of the Lightning Network itself.
It is true that all coins or "certificates" on the Lightning Network piggy back of the Bitcoin Networks security provided by hashing nodes and are economically speaking also "backed" by real bitcoins. The only reason taking away the peg in fact at some point in fact might work, is that the LN transactions are not themselves actual Bitcoin transactions in the process of being settled on the chain. They are not 0-conf transactions held in the many mempools of nodes on the Bitcoin Network, subject to the "first seen" rule or and currently waiting to be timestamped by inclusion in block. As soon as they are, this is less of a problem.
But the plan with regard to the Lightning Network is to popularize these "second layer" transactions as regular transactions in order to reduce the total number of transactions made on the Bitcoin blockchain and reduce the recourse requirements of running nodes, potentially letting them happen very rarely, take a very long time or even to actually have users never perceive a need to settle them.
Considering the practical topology of how the more high profile "nodes", "hubs" or "more popular users" with greater than average connectivity and liquidity in the otherwise generally "decentralized" network have so far, and indeed must be expected to organically accumulate -- by merit of those choosing the routes and connections they themselves perceive to be the best, given their particular taste in all of the other individual users or businesses on the LN network and the relative liquidity that they provide for making a particular sought after transaction --, we can conclude that they have per these traits a greater economic influence then the rest that have chosen to depend on their reliability. We are not here concerned with making any sort of typical ethical condemnation of size or of having money, so we would not be interested in this if it weren't for the fact that introduces the same local potential failure points that are the key to centralization. The economy will therefore be susceptible to many of the same pitfalls as the old old economy that had preceded Bitcoin as it had been properly known per Satoshis design in the first place.
Because of the users flocking to the previous mentioned "hubs" that provide greater liquidity, lower fees or help connect them better to the rest of the network, the precise routing of the system becomes a source of constraint. Users can no longer connect to just any node in the network and there is no way other than preferring the already largest hubs to as objectively as possible judge the incentives and the reliability of the nodes involved. Such measurement also never gives any guarantee whatsoever that the node you prefer and depend on will always remain available all the minutes of the day, every day, -- nor could the operator ever guarantee such a thing -- how likely it is to disappear in the event of financial turmoil or what happens if a government takes action against the operator for any number of reasons that need not have anything to do with the individual operator himself or his company in question.
Because of this remaining element of risk, a certain need for trust spreads throughout the system. An algorithm that instead determines the route used by the individual user in a very careful way, can make a trade-off between such risk and benefit, which would help mitigate some of the risk and maximize benefit per a certain formula. But the fundamental problem doesn't change or disappear.
Because of their importance in the ecosystem, hubs can now use it as leverage in upcoming board meetings about how Bitcoin should grow as a payment-/settlement system and what changes or other perceived improvements are necessary to make. Their combined influence, if they are many and diverse, may be significantly mitigated and will especially meet initial resistance from node operators (solo-miners and pools) in the Bitcoin Network itself on key topics. But as long as the miners are happy, the Lightning Network or any other second layer can operate as they wish. This can be the case with or without the changed incentives that some specific code changes along the way might bring. There is also no guarantee that there will not be significant overlap between these two groups over time.
As we have seen throughout history, gold backed currencies rarely survive for long before a central entity controls and manipulates them. Not even gold trade itself is entirely without its scammers and where no alternative is allowed, manipulation still takes place from the top. It would be easy for the greater beneficiaries of the Lightning Network to honestly but mistakenly conclude that it is the best possible system and that making transactions on the Bitcoin Network is actually unnecessary for anyone but the miners. Striking a deal with the miners, that let miners keep their transaction fees or even increase them by making transactions possible on a less regular basis, they can safeguard the survival of their own system, increase their own influence and more aggressively at this point push almost any agenda that they'd like as long as miners do not interfere.
Users that dissent with the policies of the Lightning Network can't merely take their money out of the system. They will have to trust that settlement is still possible or that a greater fool, that's so far using a different cryptocurrency, willingly takes their place.
If transactions on the Bitcoin network are still somewhat reliable, economic activity can happen there instead of the Lightning Network. But it will only do so if there are actually bitcoins left un-pegged and held by enough users that are doing business on it.
In our case The Lightning Network itself might already have become considered the primary space where exchange of bitcoin and as such "bitcoin transactions" takes place -- even though what trade hands are actually the certificates -- making certificates the default means of exchange within the community economy. Interest in regular Bitcoin transactions might be low due to impracticality alone or also ignorance and standing alone is not so easy.
As long as there then is still some monetary value to the "bitcoin backed" notes being produced by the Lightning Network, it is not a long shot that those disagreeing will largely have left and that economic policy can be more fundamentally change through political persuasion, not to mention propaganda. It would not matter much if the devalued "bitcoins" were produced as real bitcoins would by the miners, whom would have the power to lift the 21 million limit, or in the form of fractional reserve fiat on the Lightning Network itself which could be implemented by developers working for the most popular hubs. The currency could be equally distributed throughout the entire network, but in either case the bulk of the money would be most likely to end up with the hubs themselves, who could then mercifully distribute it "fairly" to the rest of the ecosystem.
Miners would eventually want their share of course, but no other party would have any practical way of stopping inflation and even if the miners decided to reduce congestion it is not clear that it would be possible for neither them or users to resurrect the network without great struggles.
It would of course not ever be entirely unfeasible to see an economic exodus through open source means similar to how Bitcoin and other cryptocurrencies are being used today, early on or much later, such as through establishing a copy of the blockchain. But even if this happens, the event here described would, again, already have significantly damaged the economy and the market value of the new competing currency would initially likely be nowhere near the currency by this time still widely known by the Lightning Network participants and also many outsiders as "bitcoins".
Finally; If you are trading cryptocurrency to make a short term profit, none of this might interest you that much. You are looking at current sentiment and expectations, not necessarily the technology behind it.
But if you truly are in this for the long run and have other motivations, such as saving, continuous spending or, more than anything, if you want to support the bootstrapping of a revolutionary global financial network that potentially could bring freedom and a raised standard of living to millions by preventing systematic exploitation, then you should care about system design, long term viability and therefore also any potential pitfalls even of the most popular and supposedly "decentralized" networks.
submitted by fruitsofknowledge to btc [link] [comments]

Bitcoin is dead. Fiat is real money backed by governments.

submitted by flowbrother to Buttcoin [link] [comments]

Funny how the loss of backing of tether, supposedly backed by "real cash" is putting upward pressure on Bitcoin as people rush to dump it for real money.

submitted by Trondapphub to CryptoCurrencies [link] [comments]

If the governments shut down and your money is backed by the government, is your money worth anything? /r/Bitcoin

If the governments shut down and your money is backed by the government, is your money worth anything? /Bitcoin submitted by ABitcoinAllBot to BitcoinAll [link] [comments]

Paul Krugman makes a technical point that I think is often overlooked: fiat money is backed by taxation, and Bitcoin stands alone in being unbacked.

Paul Krugman makes a technical point that I think is often overlooked: fiat money is backed by taxation, and Bitcoin stands alone in being unbacked. submitted by Nielsio to austrian_economics [link] [comments]

04-16 19:05 - 'no, it went down nearly $1000 and its back up again. Just proves my point, its so volatile that putting your money in is at best foolish' by /u/MotionlessMerc removed from /r/Bitcoin within 344-354min

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no, it went down nearly $1000 and its back up again. Just proves my point, its so volatile that putting your money in is at best foolish
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11-07 08:53 - 'Gold-backed Crypto is the next step in the Money Revolution' (self.Bitcoin) by /u/intlmanphyle1 removed from /r/Bitcoin within 149-159min

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Gold-backed Crypto is the next step in the Money Revolution
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1: in*e*n*tional*an.c***art**les/t*e-gold**ac*ed-cr*pto-revo*utio*/ 2: i*ter**tional**n.co*/article*/*he-gold*ba*ked-c**pt**r*vol*tion/]^^* 3: i.r**d.it/g***cri7puw*1.jp*
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If Bitcoin is not backed by gold or some other stable value how can it be the future of money (money=something backed by some form of value like gold)? Or is it just another form of currency doomed to go to its intrinsic value of zero after hyperinflation?

submitted by raj4real to Bitcoin [link] [comments]

03-29 08:44 - 'r/thathappen I'm sorry you guys wasted your time and money only for bitcoing to crash during these trying times. I was considering it at some point. Glad i didn't jump into it' by /u/Nokita_is_Back removed from /r/Bitcoin within 42-52min

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thathappen I'm sorry you guys wasted your time and money only for bitcoing to crash during these trying times. I was considering it at some point. Glad i didn't jump into it
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03-28 01:13 - 'Remember: Bitcoin only *actual* use case is to liquidate retail traders so that a few whales can make a ton of money on their back. Bitcoin is working just as intended! HODL!' (self.Bitcoin) by /u/vanderkant removed from /r/Bitcoin within 14-24min

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Welcome to "the future of money"!
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Remember: Bitcoin only actual use case is to liquidate retail traders so that a few whales can make a ton of money on their back. Bitcoin is working just as intended! HODL!
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ELI5 why money backed by bitcoin is not a good idea

I imagine some metal coins something similar with casascius ones, but without a private key, that can be used for people where there is no internet coverage. to get your bitcoin in your wallet, you will have to visit some exchanges that will buy them and provide you local currency or just transfer bitcoin to your wallet.
submitted by gta350 to Bitcoin [link] [comments]

Debunked: "Fractional reserve banking is fully prevented in the Lightning Network, because it's decentralized just like Bitcoin. There's no way to inflate the money supply in the second layer, since all transactions are backed by real bitcoins." /r/btc

Debunked: submitted by SimilarAdvantage to BitcoinAll [link] [comments]

Bitcoin is digital gold and the LightningNetwork uses cryptographically secured and trustless IOUs as a medium of exchange backed by bitcoin, for efficiency. Like when paper money was backed by gold in 1844. But this time no one can suddenly take the gold away. /r/Bitcoin

Bitcoin is digital gold and the LightningNetwork uses cryptographically secured and trustless IOUs as a medium of exchange backed by bitcoin, for efficiency. Like when paper money was backed by gold in 1844. But this time no one can suddenly take the gold away. /Bitcoin submitted by HiIAMCaptainObvious to BitcoinAll [link] [comments]

01-22 01:23 - 'Look at [link] This is how much tether they printed over the last few days: [link] I hope it is backed with USD, but they may just printing it so traders can use it for margin (and they can make money of margin fees). It’s ske...' by /u/coin6205 removed from /r/Bitcoin within 15-25min

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Look at [link]1 This is how much tether they printed over the last few days: [link]2 I hope it is backed with USD, but they may just printing it so traders can use it for margin (and they can make money of margin fees). It’s sketchy they don’t have a bank, and they don’t get a full yearly independent audit with that much money printed.
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1: https://mobile.twitter.com/bitfinexed 2: https://mobile.twitter.com/Bitfinexed/status/954556779244830720/photo/1
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01-12 21:03 - 'The federal reserve is America's *central bank*. It issues credit to all the others on the condition that they follow its guidelines, credit that is "backed" by the government's ability to either print money or levy taxes to cove...' by /u/pwag42 removed from /r/Bitcoin within 2-12min

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The federal reserve is America's central bank. It issues credit to all the others on the condition that they follow its guidelines, credit that is "backed" by the government's ability to either print money or levy taxes to cover its debts. The fact that you equate that common knowledge to "flat earth theory" shows that the depth of your economic illiteracy is matched only by your blind faith in government.
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Bitcoin mentioned around Reddit: Man the process for putting new money into the cryptocurrency market is horrible every time, no wonder this card has created so much buzz. Perfect exchange rates at an instant backed by Visa would hav /r/MonacoCard

Bitcoin mentioned around Reddit: Man the process for putting new money into the cryptocurrency market is horrible every time, no wonder this card has created so much buzz. Perfect exchange rates at an instant backed by Visa would hav /MonacoCard submitted by BitcoinAllBot to BitcoinAll [link] [comments]

Bitcoin: The End of Money as We Know It (2015) - Is Bitcoin an alternative to national currencies backed by debt?

Bitcoin: The End of Money as We Know It (2015) - Is Bitcoin an alternative to national currencies backed by debt? submitted by dakecan to Documentaries [link] [comments]

I learnt at Walmart High School #4 that in the year 1 AP (Anno Paul), our founding father Ron Paul declared that money is to be backed by gold and 1 oz of gold is worth 1500 Bitcoins. I might be wrong, but isn't this price fixing and central planning?

Asking just out of curiosity of course. I am sure the founding father knows what he's doing.
submitted by F21Global to libertyworldproblems [link] [comments]

The Evolution of Money | "The USD is dead - its backed by nothing." - Robert Kiyosaki /r/Bitcoin

The Evolution of Money | submitted by BitcoinAllBot to BitcoinAll [link] [comments]

Why Bitcoin IS Money A brief history of money - From gold to bitcoin and ... Is Bitcoin the Future of Money? Peter Schiff vs. Erik ... Paul Krugman - Bitcoins isn't backed by men with guns so ... Bitcoin Now Backed by Gold & Silver?  Maya Preferred 223 Review

Wondering what bitcoin is backed by? The answer is nothing at all, but that’s actually not a bad thing. Like most modern currencies bitcoin is not backed by gold or other precious commodities. In a sense, bitcoin’s value is derived from our common belief that bitcoin has value. The same is true of the American dollar, the British pound, and the European Union’s euro, as well as nearly ... Fiat money are backed up with nothing except for being recognized as a means of payment and political constituent of national and international economic processes. What is Behind Bitcoin? Like any fiat currency Bitcoin is not backed up with tangible assets. But it does not imply that Bitcoin is a dummy, which has nothing behind it. The principal basis supporting Bitcoin is its being recognized ... Bitcoin is not a (good) means of exchange. (At best its way worse than ‘fiat’ money.) Reality: Bitcoin is an excellent means of exchange. You can’t reverse a bitcoin payment like a payment ... Money On Chain DeFi for Bitcoin Money on Chain provides a Bitcoin-Collateralized Stablecoin. This solves the biggest problem for Bitcoin mainstream adoption: the volatility problem. The Dollar On Chain, a Bitcoin-Backed Stablecoin, uses a trust minimized, decentralized system. Although it doesn't have intrinsic value, the value of fiat money is set by changes in supply and demand, as well as the strength of the government behind it. Since governments only accept payment of taxes in fiat currency, and tax evasion is illegal, their value is also partially maintained by the need to pay taxes. So while fiat currencies are not formally backed by anything, we tend to buy ...

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Why Bitcoin IS Money

On July 2, 2018, Reason and The Soho Forum hosted a debate between Erik Voorhees, the CEO of ShapeShift, and Peter Schiff, CEO and chief global strategist of... #bitcoin #bitcoins #bitcoinnews #bitcoinmining #BitcoinBillionaire #bitcoinprice #bitcointechnology #bitcoinacceptedhere #bitcoincasino #bitcoinexchange #BitcoinMillionaires #cryptography # ... NEW CHANNEL: https://www.youtube.com/channel/UCH9HlTrjyLmLRS0iE1P4rrg ----- Rich Dad Poor Dad: https://amzn.to/3cKJ4Ia C... 📚📚Books to start Your Journey in CRYPTO📚📚 1. The Internet of Money Volume One: A Collection of Talks by Andreas M. Antonopoulos: https://amzn.to/37F3LBT 2. T... ***UPDATE*** I've tested this scam with REAL MONEY in this vid: https://youtu.be/Ud9xN1VBTts BEEN A VICTIM OF A SCAM? GET YOUR MONEY BACK HERE: www.scamxpose...

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