6 votes

Can someone explain Bitcoins to me?

I have done some reading and what I got out of it is that they pay you an electronic currency to have a machine solve a math problem, yes? What are the math problems for? Is Bitcoin tied to any good or service? Isn't it a fiat currency?



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Not technically a fiat currency

because there isn't a government decree involved, but, like fiat, it has no intrinsic value. I, personally, am not getting involved with it for that very reason. Calm down Bitcoin fans, I'm not making a general statement here, if you want to use it that's just hunky-dory :)

I'm reaching up and reaching out.
I'm reaching for the random or what ever will bewilder me.
And following our will and wind we may just go where no one's been.
We'll ride the spiral to the end and may just go where no one's been.
Spiral out.

Cyril's picture

"Use the source, Luke" :

"Use the source, Luke"** :

http://bitcoin.org/bitcoin.pdf

:)

** (if not done yet)

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

the truth about bitcoin

With all of the comments and articles/videos about bitcoin, I'm not going to attempt to repeat the arguments many of which I agree with and others made by "less informed" people. So I will itemize what bitcoin is and is not... in my opinion of course.

1. Bitcoin is not fiat currency. The most significant aspect of fiat currency is that you have to use the force of law to get an economy to use it. Bitcoin is completely voluntary.

2. Bitcoin has no intrinsic value. I know this is going to upset some folks, but bitcoin's value is determined by it's demand as a currency or store of value. Intrinsic value would mean that bitcoin has value outside of it's use as a money or currency, which of course it doesn't. Bitcoin requires energy to exist, or be traded. In the absence of a network, computers, and the energy to operate them, bitcoin's value would be reduced to zero.

3. Bitcoin is complimentary to precious metals. They share a vitally important property: scarcity. Beyond that they have different properties that will ensure they will both have value. Let's compare them, and for the sake of brevity I will refer to gold but the argument applies to all precious metals.

Bitcoin is new and as such may still suffer issues or vulnerabilities as yet unknown. Gold is as as old as dirt and we can safely say we know it's future.

Gold cannot be lost forever, but if the encryption is as strong as purported, bitcoin can be lost forever. This can be viewed as either positive or negative depending on if you are the one who lost the bitcoin.

Gold markets are heavily manipulated by banks and governments. Come on now, you all know it's true. Bitcoin is not likely to ever be vulnerable to this.

Bitcoin is easily identifiable and difficult if not downright impossible to counterfeit. Gold has been successfully counterfeited and this gives bitcoin an unparalleled advantage in commerce.

Bitcoin is portable, I mean a whole new level of portable. Try converting your wealth into gold and leave the country with it. Good luck with that one. Wealth converted to bitcoin need not even be carried.

I am very enthusiastic about bitcoin and it's future. Bitcoin market value in fiat currencies continues to stampede. Is it a bubble? I don't think so, because I think it can be sustained as more people demand more bitcoin. We pretty much understand why folks want it right now, as many are waking up to what's going on. It may not matter if it is a bubble however. The demand for bitcoin right now is driven by speculation and asset protection, not commerce. Government policies, or future vulnerabilities of bitcoin could radically change that demand curve. Once bitcoin's value stabilizes it will become far more valuable as a means of commerce.

Jim Clark <><
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Hashing Away

The short answers to the question of the OP.

"they pay you an electronic currency to have a machine solve a math problem, yes? What are the math problems for?"

The data structure for Bitcoin is a chain of blocks also called the blockchain (www.blockchain.info). Each Block is nothing more than a chunk of data that contains all the bitcoin transactions that have occurred in approximately the last 10 minutes. These blocks are daisy chained together. So, where is the math problem? Before each block can be added to the chain, there is a cryptographic "math" problem that must be solved for the entire block of data. as of this writing (March 25, 2013), it would take hundreds of super computers totaling 616.24 Petaflops of processing power to solve one of these blocks in approximately 10 minutes. This solves a very critical problem for a distributed currency to work, that is, the double spend problem. If I have bitcoins. I could spend them mulitple times if I make purchases at the same time; however, the only one who gets the coins is the person who's transaction ends up in the block chain a few levels deep. After that, all the other transactions are dead in the water. So, it is important to wait at least an hour to make sure your received bitcoins are already a few blocks deep into the chain.

"Is Bitcoin tied to any good or service?"
It's not tied any good or service that is well understood. The good or service is the block chain data structure. This is new technology and it really take a vision to see what is possible with it. The only way to get data into it is with bitcoin. If you really want to see what could be built on top of this and its development in its early stages check out www.bitcoinx.org. The potential here is HUGE!
Also, there is development to create a new PKI system that is managed by protocol and that has some huge social implications that could then lead to a voting system where everyone has access to count the votes. "he votes decides nothing; he who counts the votes decides everything". This means we all need to be able to count the votes and block chain technology very well could make that a reality. The block chain data structure could also replace or compete with existing DNS technology which would make it impossible for governments to sensor internet material.

"Isn't it a fiat currency?"
Depends on what your definition of Fiat is?
One could argue that Bitcoin is backed by the miners and their capital. If that is the case, it's important to understand what it takes to mine bitcoins and take a share of the network. Doing so also helps find a true market value for Bitcoin and it isn't no $78 dollars (it hit $78 today)

Sorry for poor grammer. I wonder how I ever passed my english classes. oh yeah, with a D-.

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

Hi everyone

People know DPers like myself and haze have been advising people to look into Bitcoin for a while now, because it can aid the cause of liberty.

With Bitcoin prices now skyrocketing and news stories expanding, now people are paying more attention.

Bitcoin is HIGHLY complex to understand. However, to get a great start I recommend the following:

http://evoorhees.blogspot.com/2012/04/bitcoin-libertarian-in...

AND

http://bitcoinquickstart.com/

Basically, the creators of

Basically, the creators of bitcoin have a monumental task of convincing everyone that bitcoins are actually valuable. And the better job at convincing us they are "valuable", the richer they will become.

And so they should be...!

The were the first ones to the minning Pit but everyone had the ability to be there at the same time. The fact that your just catching on or still stubbornly refusing to move away from a FIAT dollar system is no ones fault but your own.

Sucker!

there are an infinite number

there are an infinite number of "bitcoin" systems that can be created. it is nothing of value.

there are hundreds

of business plans like facebook, facebook has no value

"We’ve moved beyond the Mises textbook. We’re running in the open market." - Erik Voorhees

tasmlab's picture

The bottoms up version of the bitcoin story

I'd love to see, if it is possible or practical, a bottom's up story of bitcoin the same way Rothbard explains how money and banking occur in the beginning of "What has government done to our money"

He starts with bartering, and then to the lack of consequences of needs, then to commodities that are ultimately marketable, then to the need for check money, etc.

Or a version like Peter Schiff's "How an economy grows..." - sort of the same thing but with fish.

I found both of those explanations for money to be really helpful.

As I understand it, Bitcoin requires a broad consensus of its value, whereas commodity money only requires some people to value it. I.e., I don't have to value gold myself, but I need to know somebody else will want it.

This said, if Bitcoin is the only way to participate in digital blackmarkets, this one utility e.g., buying LSD through the mail, will keep them fungible.

Currently consuming: Gatto: "Underground history of education..", FDR; Wii U; NEP Football

A fellow DPer explains public key encryption:

Enjoy!

http://www.dailypaul.com/279171/why-bitcoin-cannot-be-contro...

"We’ve moved beyond the Mises textbook. We’re running in the open market." - Erik Voorhees

For more comments on bitcoins

you might want to try listening to what Clif High has to say.
***WARNING - CONTAINS ADULT LANGUAGE ****

http://www.halfpasthuman.com/wujo/clifswujo3252013bitcoin.mp3

but, from what he says, you better hurry!

Here you go...

Please feel free to ask ANY questions!!!!

Here is a good rundown to start comprehending and using Bit Coins.

The Following 2 are great introductions:

This is a great forum:

www.bitcoinmoney.com/

This is a great pod cast:

www.omegataupodcast.net/2011/03/59-bitcoin-a-digital-decentr...

Services:

www.bitspend.net

www.bitpay.com

www.bitinstant.com

www.localbitcoins.com

Sites:

www.weusecoins.com

www.bitcoincharts.com

www.mtgox.com

www.elbitcoin.org

The software options:

www.multibit.org

www.bitcoinarmory.com

www.bitcoin.org

www.electrum.org

www.blockchain.info

www.strongcoin.com

"We’ve moved beyond the Mises textbook. We’re running in the open market." - Erik Voorhees

As a newbie focus on

Multibit
Electrum
Strong coin
Blockchain
And www.coinbase.com

The original bitcoin software(qt) can be difficult if you are not computer savvy. Armory builds on qt. if you choose to do bitcoin.org (qt) I recommend you also use armory.

"We’ve moved beyond the Mises textbook. We’re running in the open market." - Erik Voorhees

not fiat (by decree)

let me try to explain....
you see when a man and a women really love each other they......

oops wrong speech.

What is Bitcoin?
http://youtu.be/Um63OQz3bjo

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Rand Paul 2016

Phxarcher87's picture

Sent this to my dad today, it takes time to understand

here is the READ i found on it

http://evoorhees.blogspot.com/2012/04/bitcoin-libertarian-in...

and here is the AUDIO i found on it

http://www.youtube.com/watch?v=yi2WgeJ73IE

One of the biggest pitfalls in a "movment" is the temptation to get cultish about it and refuse to realize that it is only part of the picture. -Joel Salatin ; You Can Farm pg 202

That's the first explanation

That's the first explanation I've read/heard that makes sense, very detailed and simple. Thanks phxarcher87.

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Phxarcher87's picture

One thing you have to do

is diversify.

Trust in God almighty first and foremost above all material things. Then he will bless your family. I strongly suggest reading the account/book of Job in the Holy Bible.

Silver
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Water purification

One of the biggest pitfalls in a "movment" is the temptation to get cultish about it and refuse to realize that it is only part of the picture. -Joel Salatin ; You Can Farm pg 202

Call on God

“Call on God, but row away from the rocks.”
Hunter S. Thompson

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016