Thread: Bitcoin

From bitcoin.org:

Bitcoin is a digital currency, a protocol, and a software that enables

• Instant peer to peer transactions
• Worldwide payments
• Low or zero processing fees
• And much more!

Bitcoin uses peer to peer technology to operate with no central authority; managing transactions and issuing Bitcoins are carried out collectively by the network. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment systems.

The software is a community-driven free open source project, released under the MIT license.

Bitcoins are a currency backed by a network of computers. Computers are required to solve difficult problems to add transactions to the public ledger and collect market-determined fees.

I first learned about bitcoins in the middle of 2011 and since then they've been through two major crashes. I started buying them in November last year at 11 dollars and since then the price has risen to a high of 260 dollars before crashing and stabilizing at about half that price. It's now on a stable upward trend again. To date, my investment in bitcoins has risen in value tenfold.


What do you guys think of bitcoin? Do you think it will replace centralized fiat currency? Does it have a chance of being accepted by mainstream businesses? Do you think governments will try to control it, or do you think it will be impossible to outlaw?

Discuss.

I don't really understand bitcoins. Does it take real money to get them? Can you exchange them for real money?

Yes, you can buy and sell bitcoins at a number of exchanges. The leading exchange for USD is Mt. Gox. There are also secondary exchanges like btc-e.com and bitfloor.

Mt. Gox has had a massive influx of activity recently, so there's a verification line a few weeks long to be able to get funds into there.

The fact that bitcoins are scarce means that you can buy and sell them like any other asset. The scarcity is enforced by the algorithm, and ownership is enforced with key-pairs like the ones used in PGP and SSL (https). You can only spend the coins belonging to the "address" (which is a hash of the "public key") they reside at if you have the "private key".

There will only ever be a total of 21 million coins in existence, and it will take a century to generate all of them.

Appropriate: Confession of a Bitcoin Skeptic | The Skeptical Libertarian

Originally Posted by BLUELINE976

Appropriate: Confession of a Bitcoin Skeptic | The Skeptical Libertarian

That article doesn't make any compelling arguments aside from the issue of volatility. And the problem with the price volatility argument is that the price of Bitcoin has generally been on a stable upward trend ever since its creation, aside from the occasional market crash (there have only been two significant crashes since 2009, after which the price has returned to its upward trend), which means the only problem with volatility is that businesses would be unexpectedly making more money than they thought (oh no!). And even if that was a problem for you and you wanted to avoid the risk of crashes in value, you can always peg your price in bitcoins to the price in USD or another fiat currency and use an instant exchange service like bitpay to convert the payment into fiat. That would only be necessary until bitcoin finds a stable price after its growth phase.

The only way to ban bitcoin, render it mostly useless and make it impossible to get aside from using the black market would be for the United States and the entire European Union to ban it. If any single large country banned bitcoin that wouldn't do any fatal damage to it since it could still be used in most other parts of the world.

The one threat to bitcoin that I know of that would render it useless is if quantum computing came out of left field with so much power that it could easily crack SHA-2.

Once the limit of one-million-something have been accumulated, aren't bitcoins just going to keep rising in price, up from the $180 they are now, causing even smaller fractions which would just be ridiculous? Common people will never be able to use them or possess a whole one because they'll be so rare. Everything would cost some fraction of a single bitcoin. It could never replace actual currency, unless the limit is going to be increased so the coins' value can be lowered.

Also, are people generally trying to accumulate bitcoins because they like the idea of a universal currency, or is the main reason because they think they'll rise in price and hope to sell them, like playing the stock market?

Those are just my thoughts anyway. Completely uneducated as I know nothing about economics. So someone educate me as to how it would work.

Originally Posted by Dianeva

Once the limit of one-million-something have been accumulated, aren't bitcoins just going to keep rising in price, up from the $180 they are now, causing even smaller fractions which would just be ridiculous? Common people will never be able to use them or possess a whole one because they'll be so rare. Everything would cost some fraction of a single bitcoin. It could never replace actual currency, unless the limit is going to be increased so the coins' value can be lowered.

The good thing about bitcoins is that they can be divisible down to any amount set by the network. It's currently 8 decimal places. If bitcoins reach something like 100,000 dollars in value, you could still divide 1 dollar worth of bitcoins down to the thousandths place.

The way people will send bitcoin transactions isn't by charging 0.000000182 bitcoins, rather I imagine people will call different amounts of bitcoins different things, for example mBTC/millibits or centibits (or, likely, more appealing names than those). You can have different notations for different denominations in bitcoins too, just like dollars have $ and ¢.

Also, are people generally trying to accumulate bitcoins because they like the idea of a universal currency, or is the main reason because they think they'll rise in price and hope to sell them, like playing the stock market?

Everybody has their own reasons, although I think the majority of the value comes from genuine interest in bitcoin as an alternative currency. I get that idea by looking at the baselines in value in between bubbles and crashes.