[prairiedock]

"it does what currency should do, which is increase in value over time."

What utter rubbish. Bitcoin may or may not survive (as a volatile commodity, like gold), but you buy it now at your peril. It is backed by nothing, and generates no earnings. It started at $.10, and to $.10 it might well return.

[nwzpaperman]

What is gold, silver or fiat currency backed by?

Commodity demand for gold is only about 12%.

http://www.gold.org/investment/why_how_and_where/why_invest/...

[sfjailbird]

What is Google public stock backed by? It buys no influence and yields no dividend, and Larry and Sergei have said it will stay that way, yet investors are happy to pay $800 for a symbolic piece (costing 25 times the share of earnings it represents, useless as that is without dividends).

[dhosek]

Which is one reason that I'm not buying stock. Of course even Groupon stock might when the company fails still yield some Aeron chairs and cubicle dividers. There is a something behind any (non-scam) stock. The same cannot be said about Bitcoin. If I had a bitcoin I would sell it as quickly as I could.

[betterunix]

"What is Google public stock backed by?"

The equity of Google -- if the company is liquidated, stockholders are entitled to the proceeds after bondholders have been paid. You can read the prospectus if you are curious about what a share of a company's stock actually means.

[ChikkaChiChi]

gold and silver are historical commodities that still have common uses even today.

"Fiat" currency is usually backed by the gold standard until such a point as the reputation of the state has matured to the point where borrowers can trust the state.

Bitcoin has neither.

[dragonwriter]

> "Fiat" currency is usually backed by the gold standard until such a point as the reputation of the state has matured to the point where borrowers can trust the state.

That's not really true; even immature states with poor reputations rarely have gold-backed currency these days. Some of them have currency backed by (convertible at a fixed exchange rate to) more mature fiat currencies, though.

[gtt]

12% of what? The gold has a limited supply as with bitcoins but it needed by industry. You may not be able sell your gold in 2040 for the same price in us dollars as you bought it today but it will be demand as industry hopefully will continue to exist.

[nwzpaperman]

Annual industrial demand makes up only 12% of the annual gold production-consumption. I provided a source for the stat above.

[betterunix]

"What is gold, silver or fiat currency backed by?"

Laws.

[nwzpaperman]

Man's laws are higher than nature's laws? Scarcity has natural authority on its side.

[betterunix]

Scarcity is not sufficient to make something valuable. Something must be both scarce and useful to have value.

I would argue that even when gold and silver were used as money, it was because of human laws -- taxes, debt laws, torts, etc. Even wampum's use as currency was connected to authority: tribal laws and religion. Even prison cigarette trade is government by a complex code that involves gangs, guards, etc.

[nwzpaperman]

A contraire. There is a long debate over subjective vs. objective value. Your argument falls under the category of an objectivist's arguments.

A simple example of subjective theory are two identically optioned vehicles isolated to one difference:

Vehicle A: Silver Metallic Clearcoat Vehicle B: Sunny Yellow Clearcoat w/Orange Flames

Under an objectivist framework the two must sell at the exact same price because the are intrinsically identical save for the cosmetic difference.

The US Government could pass a law making bitcoin legal tender much the same as pieces of paper or the majority of circulating money that is nothing but electronic bits also.

See J. orlin grabbe's essays if you prefer to hear about it from someone else.