When money first began, it had all sorts of forms. Some societies used seashells while others used whales teeth. Some even used large stones that came from a nearby island that took immense amounts of effort and energy to acquire. One thing that all of these early forms of money had in common was that they were all backed by the free will of the people who chose to use them. Just like real money from the past, Bitcoin is backed by the free will of those who choose to use it.
What Is Money Backed By?
Before money was paper or similar medium that could easily be printed on a whim by politicians and bankers, it was a commodity. Something that required effort to produce. It was proof that some sort of work had already been done. These commodities didn’t need to be backed by anything since they were proof that energy had already been exerted. You might say that these older forms of money were proof of work.
Most modern money, such as fiat currencies, are all backed by the governments that issue them. They make legal decrees that their money is to be accepted within the geopolitical borders that they control. The US dollar is backed by the might of the US military in a few ways. Saudi Arabian oil fields receive protection in exchange for the Saudi government only selling their oil reserves for US dollars. This creates an artificial demand for the US dollar. Without this sort of arrangement, the Saudi oil fields wouldn’t be able to operate and the US dollar wouldn’t be able to maintain its world reserve currency status.
Bitcoin doesn’t need these sorts of agreements in order to exist. Everyone who uses Bitcoin chooses to do so on a purely opt-in basis.
What Is Bitcoin Backed By?
Just like the early forms of money mentioned above, Bitcoin is not backed by any tangible asset or commodity. Its existence is proof that resources have already been expended to produce bitcoin. In the case of Bitcoin, the resource that has already been expended is electricity or energy. Bitcoin can’t exist without energy first being consumed. You could say that it is backed by de facto laws of science rather than de jure laws of man.
No decree says that you are required to accept it for payments. No bank or government in the world has made any sort of decree that you need to use it for payments yet for some reason, people still do. People choose to use bitcoin of their own free will and that is part of what gives bitcoin so much value.
Instead of relying on large centralized institutions to enforce its use, Bitcoin is backed by the free will of the people who choose to use it. There is no other modern money that is capable of making such a claim. The open-source and public nature of the blockchain is what allows people to put so much trust in it.
Use Bitcoin
Bitcoin isn’t backed by any gold in a vault or any sort of commodity that is sitting in some sort of centralized repository. Its ownership is decentralized and so is the network that is in charge of its supply. It doesn’t need any law to declare it to be legal tender. Each and every transaction is audited each time a transaction receives a confirmation (approximately every 10 minutes).
It’s these core values that give people such trust in the system and allows them to feel confident using it of their own free will. If you’re looking for a monetary policy that is based on the consent of the network of users who choose it, use bitcoin.