Author Topic: ELI5 Reddit - Why will bitUSD work when they aren't backed by USD?  (Read 17668 times)

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Offline Riverhead

The take away from this is that people don't want Dollars, they want the VALUE of a dollar.    You can have a dollar worth of anything, People don't buy gold because they want gold, they buy gold because they want the exposure to the price.  Any asset that tracks the value of gold faithfully is as good as gold for 99% of the people who aren't using gold for industry.


I like this better. This is the same as my, "neither have even the slightest interest in gaining a controlling stake in Google, the important thing is they can sell it to someone else for more later".


Perhaps I should rewrite it using bitGold and your take aways.  Thanks for the input.

Offline bytemaster

The take away from this is that people don't want Dollars, they want the VALUE of a dollar.    You can have a dollar worth of anything, gold, silver, gas, or Bitcoin.   The amount of gold/silver/gas or Bitcoin will change over time but why do you care how much gold/silver/gas or bitcoin you have so long as what you have is worth a dollar.

People don't buy gold because they want gold, they buy gold because they want the exposure to the price.  Any asset that tracks the value of gold faithfully is as good as gold for 99% of the people who aren't using gold for industry.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Riverhead

I want to add an article to the reddit "Explain it like I'm Five" section. Please edit or tell me why it's a complete fabrication and I should start over :) . I am writing this as a person who has a basic understanding of the stock market but am by no means an economist.


https://docs.google.com/document/d/1C_4MR4d8AsoqWQw8UMCyKeuvhO5TSws_TPHG421HVJg/edit?usp=sharing


Let's take Google. The share price of Google is supposed to be their book value plus some fudging for revenue, growth potential, etc. It's why share-price/book is a key stat that tries to guess how much intangible value pushing the price above or below book is correct.
Now let's take two day traders:

Trader A looks at the price of Google and says, "$400? Heck no.  They're about to be regulated out of existence and Amazon is releasing Amazon Search soon. I think it's worth $80" so they short.


Trader B thinks Trader A is off his rocker. The Google pipeline looks awesome and the stock will easily reach $600 by the end of the year. He bids long $500.

And so the game goes on. The big take away from this is neither have even the slightest interest in gaining a controlling stake in Google. It could be the worth of fiddle sticks for all they care.  The important thing is one person thinks it's worth more than the other and the market transactions tend toward a consensus of the intangible value above/below book.

Call them Google Shares or bitGoogle, it doesn't matter. It's not like if you had a Google share you could walk into Google HQ and start scarfing down the free food. The share really only has demand, and therefore value, because someone else thinks they can sell it for more later.