People often say: “bitcoin can’t be money, it isn’t backed by anything.” This is an old way of thinking that originated with paper money. Prior to paper money, people used precious metal coins (such as gold) because they maintained strong monetary properties: scarcity, durability, divisibility, portability, fungibility, and acceptability (the six monetary properties).
Paper became money because it was superior to gold in terms of divisibility and portability BUT it lacked scarcity. People reasoned that we could benefit from the greater divisibility/portability of paper money as long as it was redeemable in a form of money that was scarce. This is when money needed to be “backed” by something.
Since we changed money to paper money that wasn’t scarce, it needed to be backed by something that was.
Since the repeal of the gold standard, politicians have retarded the meaning of the word because our money is no longer backed by something scarce. Governments say money is backed by their “full faith and credit” as an attempt to allude populations into the belief that their horrendous credit is economically equivalent to one of the scarcest commodities in the world.
So, what is bitcoin backed by?
Nothing. Sound money, like gold, isn’t “backed.”
Only money that lacks inherent monetary properties must be backed by another money that maintains those properties. The idea that our base layer money needs to be backed by something is thinking from the era of paper money.
Bitcoin does not require backing, it has inherent monetary properties superior to any other form of money that has ever existed. It’s important because when people think money needs to be backed by something, they assume money requires backing from a government.
As we transition out of the fiat era back to sound money, it will be important for individuals to remove the narrative that money is something that needs to be backed.
But isn’t bitcoin backed by energy?
Isn’t bitcoin backed by proof of…
