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Bitcoin rivals Silver! Threatens Central Banks

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Are you saying one person

Are you saying one person could not just buy all the bitcoin to control the market?

That's correct

Nobody can buy all the bitcoins.

There will be 21 million bitcoins total. Of that total about half, 10 million, are already in existence. The rest will come into existence until about the year 2033.

The number of bitcoins and how fast they come into existence is publicly known. You can see a chart here.

Let's say somebody wanted to buy all the bitcoins. Even if they already had all the bitcoins now in existence, which they don't, because they don't have mine (or my friend's), for example, they still have to wait to buy the other bitcoins when they come into existence over the next 20 years.

ok so in 20 years they could have them all

who's to say what you buy with your bitcoins doesn't go to that person? who's to say he doesn't buy them all in the next 20years?

Your logic is 100% flawed, its completely feasible for someone to buy ALL of the bitcoin.

Leaving but a few million in circulation just to jack up the black market price, wait for the price to go up, sell all his off, flooding the market and he keeps all the REAL money or goods, while you are all left with valueless currency.

Anyone playing the short game market is a fool. It's all about waiting for the best price, the whole game is about time.

Someone can buy most of the

Someone can buy most of the silver too, and use that to gain control of the market. 1980.

End The Fed!
BTC: 1A3JAJwLVG2pz8GLfdgWhcePMtc3ozgWtz

100% FUD.

1) MtGOX does not control 80% of the bitcoins.

2) MtGOX "caters" to the 5 big banks? MtGOX is an exchange and the only way to get USD out is to send it to a bank account. And I can't send USD directly to MtGOX because the banks won't touch it! I have to go through an intermediary (DWOLLA).

3) There will never be more than 21M bitcoins, so even if there's an entity with a large holding of BTC, you'll never see hyperinflation. That's an automatic win right there. 21M units is locked.

See....

this comes from the same school of thought that supports a "gold backed currency" - an ultra-finite resource that cannot be created out of "thin air."

Again - I've come to the conclusion that you do need something tangible to back up a medium of exchange - but if that something is TOO SCARCE it can be monopolized by the money changers.

Check out "Money Masters" - GREAT movie. Then you can also listen to a different solution to the money system question:

http://www.bart-mart.com/how.mp3

Two Questions About Bitcoin

1. What is the action that causes a new bitcoin to come into existence and by whom is it issued?

2. If bitcoins are infinitely divisible, then why is there a need for an arbitrary limit of 21M bitcoins in circulation?

This is NOT an attack! Just trying to learn more (which I couldn't find on their website).

Hey Gary, I'll take a

Hey Gary,
I'll take a stab at your first question.

1) Bitcoins come into existence with what is called a coinbase transaction. This transaction is included in a bitcoin "block" that can be solved by any miner. A "block" in simple terms is a chunk of data that shows the processed bitcoin transactions that have happened in approximately the last 10 minutes. Out of all these transactions, there can only be one "coinbase transaction". In order for that block to be included in a data structure called the "block chain", it has to be accepted by the majority of other miners by them solving additional blocks on top of yours. If it is not accepted it will become what is called an orphan and all the data including the coinbase transaction becomes meaningless.

I have successfully solved a few block with my mining hardware at bitminter.com. I could mine by myself, but the odds of me solving a block without working as a team is very small.

It's important to note that bitcoin mining wasn't intended for the sole purpose of making bitcoins. It also secures the network, processes transactions, and most importantly solves the double spend issue which makes a decentralized distributed currency possible.

One might ask what is the incentive of other miners to build on top of the block you solved. As soon as a solved block is broadcast on the network and is following protocol, there is a risk of wasting mining resources by rejecting it because the majority of other miners will most likely accept it and leave the "rebellious" miner in the dust.

Also, the protocol has the coinbase transaction fixed at 50 bitcoins per block for the first 210000 blocks, 25 bitcoins for the next 210000, 12.5 for the next and so on. If you try changing the coinbase reward for solving a block it will be orphaned.

Not sure I understand your second question. Can you rephrase it?

“I’m fully diversified. I’ve got some under the mattress, some under the floor boards, some in the backyard.”

As I understand it...

Simplistically, a bitcoin comes into existence when a computer solves an arithmetic problem akin to finding a new largest known prime. There are infinitely many primes, but no one knows them all explicitly. There's no formula, for example, like there is for even numbers. We know all of those because they are given by the formula 2n. In particular, when you multiply two really large primes together, it can be hard to find either of them...unless you already know one. (If you know one, you can just divide.) This is the basic principle of current encryption. Eventually, the code used to encrypt your electronic information could be cracked, but it is supposed to take some hundreds of years. That's why it's supposed to be secure. (This is assuming no one has quantum computers. If anyone has a quantum computer, however, he can break current methods of encryption in seconds supposedly, but that's a different question.)

Similarly, the basic principle of bitcoin is that it is supposed to take some hundreds of years for anyone else to solve the arithmetic problem which your computer solved.

Again, simplistically, there are supposed to be infinitely many of these problems, so there is no actual limit of 21 M bitcoin. However, they have estimates on how many solutions are out there, just like there are estimates on how rare it is to run across primes. The further you go, the fewer there are. In the same way, there is a kind of practical asymptotic limit for the number of bitcoin.

I'm no expert, but that's the way I understand the basic situation.

No

This isn't quite right. I don't have time to correct it now, but readers should know it's not right.

a bit more. (pun pun pun pun)

Just to add a little bit of flavor to this description (which is very nearly spot-on, but a bit technical ;) )

Every Bitcoin transaction is locked with one of those cryptographic keys. Those keys can only be unlocked with brute-force, guess & check math, as describe above.

Every ten minutes, a block of these transactions are brute-force validated by the users on the network (the miners). They are in a race to validate the keys first. The miner who does so is rewarded with a set number of bitcoins. Initially the prize was 50BTC. Recently the price halved to 25BTC, and after another couple years, it'll halve again until all 21M BTC have been mined.

Mining also serves to secures the Bitcoin ledger from attempted false transactions (spending bitcoins you don't have) because all the other miners won't be able to validate the transaction you've falsified. Securing the network is an incentivised activity, which I think is brilliant.

Thanks for the "Bitcoin 101"!

The subject obviously has some enthusiastic supporters. I've been working to wrap my head around the general concept of it all.

From what you wrote:

"a bitcoin comes into existence when a computer solves an arithmetic problem"

What does that have to do with the creation of value and how would one human (a dumb one) differentiate himself from another (smart one) and be rewarded proportionally for his creation/contribution?

Just on the surface, this all seems like academic "wheelie popping" with no real connection between value and currency.

value

Again, as I understand it the creation of value in bitcoin is a bit like mining. When someone expends energy by swinging a pick or panning a stream and they obtain gold, what is the connection between value and currency there? How would a dumb miner be differentiated from a smart miner? Is that the question you're asking? If so, then I'm not sure that is the right question.

Smart or dumb, the miner has that piece of gold and others don't. If someone else wants it, it can be used for exchange. In the same way, someone expends energy (using electricity for example running their cpu) to obtain a piece of secret information (the bitcoin) which has value simply because it is inaccessible to others.

Now the gold may have other uses. You can make jewelry out of it for example. But I don't have any use for jewelry. And it may be that bitcoin has some other use too---I don't think anybody knows any if it does, but that's beside the point. Bitcoin's primary value is in providing a medium of exchange to compete with the frn, and it also may have some advantages with regard to anonymity over the frn.

I think if you could get people to reject the other fiat currencies and stick to gold and silver or some other commodities, then bitcoin might not hold up so well in competition. But in competition with the utter evil that is the frn monopoly, it has some evident value.

clarity

Just above this comment, I described what the value of the "wheelie popping" really is. Hopefully it'll answer your questions.

What is Ron Paul's and Austrians take on Bitcoin?

Alt Currency?

No offense, but I'm gonna say what you don't want to hear

But I seriously wish all you bitcoin a pushers would just shut up about bitcoin.

If you support bitcoin please comment below so I can send you information for proper training in economics.

People keep trying to justify it, even the guy below tried to say it has intrinsic value, please show me where it has value without being backed by something else, I think you misunderstood the term 'intrinsic'. Bitcoin is another form of CENTRAL PLANNING. It is doomed to fail because its value is not affected by the market the same ways GOODS are. It is only holding value now because it is popular. So are FRNs, popularity means nothing.

They try and justify it by saying "we'll what could better serve as a unit of currency"

Here's the answer your all missing: Nothing

What you are failing to understand is that no one item/product/good can be made perfect currency, including gold. Gold simply has withstood the test of time. The only way to have a true stable market is with competing currencies who's value is always changing, gold, silver, and other goods. Bitcoin by itself holds no value, and has no function in the real world, it MUST be backed by something else to maintain value(that sounds familiar).

So downvote me and show your ignorance all you want, but please leave a comment with your name so I can send you the tools to get educated, thank you.

It Appears to be Just Another "Faith-Based" Currency

The one good thing I've found so-far about Bitcoin (when compared to FRN's) is that at least they're not trying to charge interest for it.

Aren't they all?

Yes, I have faith. Faith that the laws of mathematics and cryptography - the laws which make Bitcoin secure, impenetrable, and unmanipulable - will hold true tomorrow.

Meanwhile, you have faith that gold will remain valuable tomorrow just because it's been valuable historically.

Which faith is sillier? the faith in mathematics? or faith in precedent?

so

if there no interest to be charge with it then is it better than FRN"S by any stretch?

Albert Camus — 'The only way to deal with an unfree world is to become so absolutely free that your very existence is an act of rebellion.'

Central planning?

Central planning? By whom? For what purpose? Why would someone create a currency that cannot be controled, or intercepted?

(If you doubt that the latter two properties are legitimate, you have no business posting on a Bitcoin topic, unless you are asking for information. Seriously.)

Also, no Bitcoin advocate _EVER_ called for the end of competing currencies. In fact, most advocate owning PMs in addition to Bitcoin.

What your not understanding...

It cannot be a viable option as an alternative currency because it must be backed by some other currency to be used.

Therefore it's very existence goes against true competing currencies.

Yes, everything in life is a currency from cigarettes to shoes, all have their own value, bitcoin has none. It is fiat by true definition.

Fiat "by true definition?"

You do know that "fiat" means by government edict, yes? Of course you do. (http://en.wikipedia.org/wiki/Fiat_money)

Bitcoin is not prescribed value by gov't edict. Its value comes from the properties of being impervious to manipulation.

And I will try to explain this for the sake of someone who will at least attempt to have an open mind about this topic: Bitcoin is "backed" by the processing power of the Bitcoin network, which serves to keep the system secure against fraudsters. This combined network has ten times the hashing power of the world's most powerful supercomputer.

But Bitcoin doesn't even need that to be valuable. The fact that it can't be manipulated by nefarious entities is its own virtue.

SteveMT's picture

Bitcoin does not fulfill the definition of money.

Characteristics of money:

Portable
Durable
Uniform
Limited Supply
Acceptable
Divisible

Both silver and gold do.

Which property is missing for

Which property is missing for bitcoin?

SteveMT's picture

Nearly every one it seems. The two are very different.

Portable - If there is an EMP or the grid goes down, Bitcoins disappears.
Durable - If there is a tsunami or a fire, Bitcoins disappears.
Uniform - same
Limited Supply - Bitcoins are created out of thin air.
Acceptable - Gold or Bitcoins. Which is accepted everywhere?
Divisible - Can you half or quarter a Bitcoin? I guess both are also the same.

FUD.

If you believe the entire Globe will be simultaneously EMP'd, then, sure, you have reason to doubt Bitcoins' usability, but even in such an event, the Bitcoins themselves will not be destroyed, so long as at least one copy (even one printed on paper) of the blockchain survives.

As for your laughable FUD posing as answers to the properties of money, let me correct you for the benefit of those who actually want to have an open mind.

Portable - Electronically sent to anyone, anywhere, instantly.
Durable - Bitcoins cannot be destroyed without destroying the entire internet. And even then might survive.
Uniform - Every Bitcoin has equal spending power.
Limited Supply - Bitcoin supply is programmatically capped at 21M units.
Acceptable - Bitcoin adoption is growing, recently being accepted at sites like wordpress, reddit, wikileaks, LewRockwell.com, AdamVStheMan
Divisible - Bitcoins are divisible to 8 decimal places.

SteveMT's picture

Thanks for explaining everything.

My "laughable fear, uncertainty, and doubt" are founded on the same skepticism that Ron Paul would have about this. I don't believe that he owns any. I see no reason to trust Bitcoin when gold and silver are proven money that works. I wish you well with your currency.

Bitcoin is not money

Bitcoin is not a store of wealth. When you transfer a bitcoin, nothing tangible is transferred. If nothing tangible has changed hands, payment has not been made. It is every bit the unjust system that the FRS is, because it does not follow the form of money. That which is not money, should not act as money.

Buy Gold and Silver.

semantics

Bitcoin is open to some of your opinions/criticisms. Your assertion that it is "every bit the unjust system that the FRS is" shows that you have missed something. The FRS is not subject to competition. Bitcoin is an attempt to provide that, and is therefore not as "unjust," if bitcoin can be called "unjust" at all.

Why was his opinion downvoted?

Because he was right? Bitcoin is simply a competing currency of failing currencies, all backed by IOUs of FRNs or other large banks. bitcoin holds no value on its own and is worthless to anyone who studies economics.