Here is the latest drop in the Gradually, Then Suddenly blog posts by Parker Lewis. This piece rebuts the common derision of nocoiners and others who do not understand Bitcoin, nor money, that “Bitcoin isn’t backed by anything.”
I have usually answered this critique with the response that Bitcoin is backed by the fundamental commodity of the universe, energy. Monetary goods, such as gold, naturally and spontaneously emerge as money due in large part to the unforgeable costliness of producing the good. The high cost to produce more gold restricts the supply, which keeps the value stable due to its scarcity and inability to be debased. It is principally for this reason that gold has been money-good for millennia (among other properties of gold, however scarcity is the most important).
Put another way, something unforgeably costly requires a large energy expenditure (typically in the form of capital and labor) to produce more of it. Bitcoin requires extremely large amounts of energy to secure and produce. This makes Bitcoin unforgeably costly, more so than even gold.
So the idea that Bitcoin is backed by nothing is uninformed. I’d go further and point out that Bitcoin also has other things giving it value or “backing” it, particularly: a massive network of 10,000+ hardware nodes relaying data, an autonomous, powerful cryptographic verification engine, billions of dollars worth of capex in software, hardware, and infrastructure, a passionate and fanatical user base, and perhaps the largest and brightest array of human capital ever assembled.
Parker Lewis goes a slightly different route and points out that Bitcoin “is backed by the only thing that backs any form of money: the credibility of its monetary properties.”
Essentially, the relative strengths of one monetary medium out-compete that of another, and bitcoin is no different. It represents a technological advancement in the global competition for money; it is the superior successor to gold and the fiat money systems that leveraged gold’s monetary properties. Bitcoin is out-competing its analog predecessors on the basis of its monetary properties.