Quote:
Originally Posted by Rathji
What backs the USD?
The only thing that gives currency value is the belief that the person accepting it can then spend it on something else.
If you can buy and sell a currency, and spend that currency on things, that is what gives it value. Since all of these things seem to me happening with bitcoins, I think that means they do have value.
I don't think the current value is realistic long term, but if it is, then it will likely be partially the result of things like money laundering, like Scott said.
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That's not exactly true. What gives money value is the belief that the issuer (usually a nation) has the value to back it up. In the past this was often tied to gold reserves but as economies got more complex and money got more digital it's tied to other factors.
Which makes the question 'what backs bitcoins?', a very valid question. Now obviously, you are correct in the assertion that the belief these coins have value and they will be able to be spent does give them value, but just as they are rising because of euro crisis (according to the links) one could ask what happens to them if some uncertainty happened the other way around. With much less 'backing' them than other more traditional currencies, it's a nervous situation.
Unless, there is something in reserve backing them, which was the original question.