Like the U.S. dollar and most other fiat currencies, Bitcoin isn’t backed by physical assets in a vault, but instead by its value as a mode of payment.
The maths underpinning Bitcoin’s blockchain contributes to its desirability in a number of ways.
អាគុយម៉ង់នោះ Bitcoin (BTC) has no value because it isn’t backed by anything physical remains one of the major misconceptions about the cryptocurrency.
It’s a view that has been perpetuated by the likes of billionaire tycoon វរិនប៊ូហ្វេត and former U.S. President លោក Donald Trump—both of whom have been quoted as denying that Bitcoin has any value.
But now that Bitcoin ranks alongside the largest world currencies by market cap, it does beg the question… What exactly is it backed by?
The source of value: Bitcoin vs fiat
Up until relatively recently (the last century or so), most ordinary paper currency and coinage was directly redeemable for gold. This is because many of the wealthiest countries followed a monetary system known as the ស្តង់ដារមាស, which saw governments lay down a fixed exchange rate for national currency and gold. As part of this system, countries needed to keep sufficient reserves of gold in their vaults to 100% back their circulating currency supply, ensuring that people could always exchange their currency for gold if they chose to do so.
However, this also constrained the economy in the middle of the Great Depression, since governments were unable to simply source more gold to expand their money supply and stimulate spending.
The system was abandoned by Australia and New Zealand in 1929/1930; Canada, Germany, and the United Kingdom in 1931; and the United States partially left the standard in 1933.
It wasn’t until 1971 that the United States fully left the gold standard, after then-President Richard Nixon ended the interconvertability of the U.S. dollar into gold, thereby nullifying the ប្រព័ន្ធ Bretton Woods and essentially ending the age of the gold standard.