BITCOIN as an alternative to regular currency

[LeTiss]

Not for me thanks

It's not a real currency, so it has no value.....it's all based on piss and wind

There will be major manipulation by individuals who can con naive people into thinking this is the next big thing

[Euler]

Ultimately that is why bitcoin will fail as it has nothing underwriting it. If you issue a currency you have to back it up somehow. When the US issues debt it has to raise tax to pay off that debt, which is issued as an interchangeable currency. Bitcoins are just a figment of somebodies imagination and are only worth what people will pay for them.

[kelpie]

I don't even understand where these bitcoins come from but surely if something isn't governed it will lead to being massively manipulated as is what is probably happening at the moment. Is it possible for the creator to just instantly create or print a trillion new bitcoins? How many are currently in circulation?

Steven - there's a log of issued bitcoins. The final amount is capped at 21 billion bitcoins, from memory, something finite anyway.

After they're all issued no more bitcoins will circulate. Therefore bitcoins in circulation value will increase over time.

They come from users completing (ever more difficult) puzzles - ie, you have to put in effort to get bitcoins. Same as real world where you have to put in effort to get money.

[steven1976]

Hi kelpie
Thanks for explanation.
So where do I sign up for these puzzles? Is there a job center as such. If I was to spend say 35 hrs next week working at it would I get half a bit coin?

It just has pump and dump written all over it in my eyes. The only thing that gives it any substance is governments are acknowledging it. However, I'd imagine there will be a lot of people selling bitcoins that don't exisit in the near future at prices they bought in at 100 dollars but want out at 500 dollars even though price is 1000 if they can hold onto them for 3 months. Seems an easy sale.

I am genuinely interested in how and what time of work/puzzles are done to earn them?

[Euler]

https://terrahash.com/terrahash-to-prov ... -november/

[steven1976]

Its still got me. I'm sticking with greenbacks for now before sending invoices asking for bitcoins.

[jimrobo]

how do they verify a bitcoin is a genuine bitcoin compared to a fake one? There must be a record somewhere so people can verify. s it at mtgox? If they got hacked is there a possibility the whole worlds supply could be cloned??

[Will Sharpe]

Here's a reasonable non techie attempt
http://blog.zorinaq.com/?e=66

Snippets from the above:

How are the coins created?
With gold, miners have to perform a lot of work to discover gold deposits in the planet's crust. Bitcoin emulates gold here again: "Bitcoin miners" run specialized software on high-powered computers and solve complex mathematical puzzles. The difficulty of the puzzles ensures that coins are slowly introduced in the system over time, and are randomly distributed to its users. (Depending on your electrical costs, mining may be a profitable activity.) However the vast majority of Bitcoin users acquire them by simply purchasing them from other users or from exchange markets, or by trading goods or services with users owning bitcoins.

If the coins are stored on my device, what prevents me from making copies, counterfeiting them?

The entire network uniquely identifies all coins and tracks all transfers. For example a transfer is recorded like this, coming from opaque addresses, going to other opaque addresses. (Note that this makes Bitcoin not fully anonymous, but at least pseudo anonymous, because it can be hard to figure out who owns which addresses as the Bitcoin software creates new addresses for every transfer and users are encouraged to not re-use them.) If you copy coins and attempt to spend them twice, the network will detect the "double-spend" and reject it.

Why do Bitcoins have value? What backs Bitcoin?
Bitcoin is like gold: nothing backs it. The only reason a currency or commodity has value is because people are willing to trade goods or services for it. Initially, Bitcoin was perceived as having no value. Then early-adopters started to grasp its potential and invested in it. For example, one of the first transactions was two pizzas that famously sold for 10000 Bitcoins. This was a risky trade because Bitcoins were worth virtually nothing at the time. Nonetheless, this trade and subsequent ones helped "bootstrap" the currency, because people knew there would be at least one guy willing to trade pizzas for Bitcoins. Trade and value grew step by step over time. Fast-forward to the present and there is today a thriving community of merchants accepting Bitcoin. This community alone is what gives bitcoins value.

[jimrobo]

so there is a centralized network centre that tracks and verifies bitcoin ownership and locations.

This is my point though. If this system is compromised the entire system is worthless??

[Will Sharpe]

so there is a centralized network centre that tracks and verifies bitcoin ownership and locations.

This is my point though. If this system is compromised the entire system is worthless??

From the same source:

Payments are sent directly from one party to another without going through a financial institution, similarly to how cash or gold can be handed directly to someone.

You do so by sending them from your computer, to the recipient's computer, through the Bitcoin network (which is nothing more than other computers running Bitcoin).

Since no one can realistically prevent a computer from getting Internet access one way or another, no one can regulate or block transactions (eg. oppressive governments financially repressing activists.)

Finally, there is no financial institution, or bank, or company, operating Bitcoin, just like there is no company in charge of "operating gold". There is no Internet server to shut down to terminate Bitcoin. It exists merely as an application running on your computer, which communicates with other Bitcoin users over the Internet.

This "mesh" Bitcoin network is called a peer-to-peer network, and this design makes it effectively indestructible, as long as the medium of communication (Internet) exists.

[jimrobo]

I still don;t really get it!! Why can't someone spoof their address making the system think they are the verified address of the particular bitcoin

[Will Sharpe]

I still don;t really get it!! Why can't someone spoof their address making the system think they are the verified address of the particular bitcoin

From another source:

The basics for a new user

As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one.

You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once.

Balances - block chain

The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender. The integrity and the chronological order of the block chain are enforced with cryptography.

Transactions - private keys

A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued.

All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining.

Processing - mining

Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends.

[steven1976]

Someone ordered a pizza and paid with 10,000 bitcoins. Im just struggling to believe it. I don't know how much a pizza costs in UK but I can't see a for a 5 quid pizza they all went to their computers and did an online transaction at a pizza company who installed payments when they were worthless. If they did and the owner is now a Multimillionaire from selling that one pizza, fair play.

Thanks for the info, enjoying hearing about it.

[Euler]

"I, Broken Pencil": An Economic Analysis of Bitcoins

http://www.garynorth.com/public/11857.cfm

[steven1976]

That was the longest article I've ever read about a pencil but a very good piece. Got to say I agree.
Its easy for reasonably tech savy people to think digital money is here, but the majority of the world don't have access to tech and cash is king, so to pay for the pencil lead you need real money.