Is bitcoin backed?

3 points

15 years ago

While trying to answer the broad question "Is bitcoin going to become a stable, functional currency?" I have repeatedly seen the assertion [1,2] that bitcoin is backed in some way by the energy or computational power needed to create the bitcoin.

I have done very little economics, but to me being 'backed' suggests the bitcoin should be redeemable for the powered used to generate it, which is not the case. For a potential bitcoin purchaser, the only value is the future ability to spend it, like a fiat currency.

So my question is: Are the claims that bitcoin is backed meaningful? Specifically does the work required in creating the coins change the economics of the coin in any way other than controlling the rate of currency 'printing'?

[1] http://bitminer.info/ [2] http://forum.bitcoin.org/index.php?topic=57.0

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