Should ₿itcoin Be Backed By Something? 🤔
In this video, the problems with crypto/coins/tokens that are backed by something else like Gold, Silver or US dollars is discussed in detail.
Something-backed tokens must rely on a trusted third party to store and custody the underlying asset, as well as facilitate redemptions (i.e. conversions of the token into the underlying asset). This itself is a huge attack vector: if you want to attack the token, you need only attack the custodian or other centralized third party.
The failure of the gold standard and Nixon suspending the USD's convertibility into gold is a perfect example of failure mode.
If you own a something-backed token, you need to trust the issuer to keep its promises (unlike the US did to France)-- and you also need to trust that the issuer itself will not be pressured by a stronger outside party to do the same thing.
Trust, trust, trust. Why in the world would we ever want to reinvent this kind of system that has failed again and again?
When you hold your own ₿itcoin private keys, your ₿itcoin is a bearer asset that cannot be turned off, frozen, or deactivated by anyone. Once you hand them over, to an Exchange for instance, anything goes and you are no longer in control of your ₿itcoin.
You also need a native bearer asset like BTC to pay the ₿itcoin miners. If they were being paid in USD or physical gold, that would be another attack vector.
At the end of the video, I discuss how ₿itcoin has no competitors as a digital bearer asset. Ethereum's premine, its move to proof of stake, and its repeated hard forks makes it unsuitable.
Original Video by Trader University: https://www.youtube.com/watch?v=E6pGmGESjHw
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Litecoin (LTC):
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Dogecoin (DOGE):
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