Can someone explain how Bit Coins work?

[Dave Schwartz]

Topic says it all. I just do not get the flow of currency.

Help would be appreciated.

[JustRalph]

https://bitcoin.org/en/how-it-works

Dave, there are some videos on Youtube that explain it too...........

doing a google search for "how does bitcoin work" brings up lots

[Dave Schwartz]

I read that link. Thank you.

I have also read several others, including the Wiki. However, about every other sentence I run into a question I need to ask and, of course, there is nobody to answer, so the entire learning process stops.

Example: "Once you have installed a Bitcoin wallet on your computer or mobile phone..."

Where does one get one of those?
Is there a cost?
Are there any security risks in having a wallet on a particular computer?
Are there any risks, legal, financial or otherwise of owning a BC wallet?

To me, these are all logical questions to be answered.


More: "In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once."

What does that mean: "To use only once?"


The block chain is a shared public ledger on which the entire Bitcoin network relies.

Who manages this?
How is it secure?
What happens if it breaks?


Any takers on just these questions, thus far?

[barn32]

In my opinion Bit Coins are a scam. Stay away.

[DJofSD]

Originally Posted by Dave Schwartz

I read that link. Thank you.

I have also read several others, including the Wiki. However, about every other sentence I run into a question I need to ask and, of course, there is nobody to answer, so the entire learning process stops.

Example: "Once you have installed a Bitcoin wallet on your computer or mobile phone..."

Where does one get one of those?
Is there a cost?
Are there any security risks in having a wallet on a particular computer?
Are there any risks, legal, financial or otherwise of owning a BC wallet?

To me, these are all logical questions to be answered.


More: "In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once."

What does that mean: "To use only once?"


The block chain is a shared public ledger on which the entire Bitcoin network relies.

Who manages this?
How is it secure?
What happens if it breaks?


Any takers on just these questions, thus far?

Dave, I can guess as to why you are needing to come up to speed with this issue.

I only have followed the topic with minimal interest and only from a very narrow perspective. However, along the way I recall learning there have been some people that lost large sums of bit coin currency because of either drives crashing or drives being discarded by mistake with both set of circumstances resulting in very critical parts of bit coin data being lost. I believe in both instances they were screwed with no way to reclaim access to the value of the exchange -- they were screwed. I guess it would not be any different if you had a pile of Federal Reserve Notes that went up in flames.

GL

[Robert Goren]

1.Conman dreams up scheme.
2.Conman finds sucker.
3.Conman takes sucker's money.
4.Conman disappears with sucker's money.
5.Sucker is too embarrassed to admit he was taken.

[Dave Schwartz]

Dave, I can guess as to why you are needing to come up to speed with this issue.

My only goal here is understanding. It has me perplexed.

I have no plans for participating.

The funny thing is that I have asked several people privately who SEEM very knowledgeable on the topic and none of them can answer my questions. Okay, so there is the possibility that they just don't want to answer my questions, but that's not what I sense.

One fellow, who said he has money invested in bit coins, when I pressed him, could not answer the questions I listed above. He did tell me that there is an online document which contains ALL the answers. (I saw it in Ralph's post, I believe.) However, the document looks a lot like the Affordable Care Act.

[GameTheory]

For those who think it is a scam or a con, please explain how. I would submit you actually don't know anything about it, and are just parroting fears. In the end, all bitcoin is...is a protocol, a set of rules. Like email. Is email a scam? Like http. Is http a scam? See, the question doesn't even make sense.

Now of course there are some problems with bitcoin, and the government(s) may/are getting in the way of its use, etc etc. Although it is popping up in some surprising "legit" places. For instance I can now pay my Dish bill in bitcoin if I want. And a while back I was selling a camera lens to a guy in India for a few hundred dollars -- he wanted to pay in bitcoin, but I wasn't set up for that. But he was able to buy an Amazon gift card with his bitcoin and send that to me as payment, which I was then able to verify. That's more secure to me as a seller than PayPal (which can be reversed after the fact) for international transactions.

So anyway, and I'm not a great expert so I may get some details wrong, but to start, the basic idea is to have a digital currency that acts like a physical currency. So this is digital cash, not digital checking. There is no central authority or middleman keeping track of who has how much and who they gave it to, etc.

And yes, you can lose it or destroy it never to be seen again, just like if you throw your cash into a fire that money is just gone. All of these things are FEATURES, not bugs. Having these features (and a few others) are the very reason bitcoin was created -- to have a worldwide digital currency with no central control, yet that was secure and would not allow counterfeiting, etc.

It is "real" money not in the physical sense, but like gold it is scarce, there is only so much of it, and the only way to find more you must "mine" it. So if we still had dollars backed by gold, then the paper dollars or the entries in your bank account would all correspond to physical gold stored somewhere. But this is digital and takes up no space, so the "gold" and the "paper" don't have to separated with one representing the other -- the actual "gold" is passed around. Unlike gold however, which can never be totally lost forever except for shooting it into space or something, bitcoin does have the paper-like feature that it can be lost forever. I don't think there is any way to recover it at present.

Anyway, as long as there is "a lot" of it, that isn't a problem (for the currency itself, obviously it is for the individual that lost it), just like if you had gold-backed currency but the rate of exchange was allowed to float (yes, you can have such a thing), then as long as there is a decent but not unlimited supply of gold in the world, then that gold can back any amount of currency being passed around out in the world. And the fact that bitcoin's value can and does float (just like any other modern currency, btw) is one reason people have called it a scam -- because what was worth a lot for a brief moment is now worth not so much. So that's "something to be aware of", not a scheme to deceive you. No one else is getting rich off that fact at your expense.

[PaceAdvantage]

I agree with you GT...nice explanation...

[Frost king]

So how do you mine it? So there are people mining it, while others buy it?

[JJMartin]

Originally Posted by Frost king

So how do you mine it? So there are people mining it, while others buy it?

From what I recall, mining involves using your PC to solve a mathematical equation which is done after so many online transactions have been recorded. This "unlocks" or produces 1 bitcoin that is deposited in your wallet. The difficulty of these mathematical problems increase with time requiring more processing power, well beyond the average household PC. In fact graphics card's CPU's are preferred over the PC's CPU because they can be tuned for better output. Most people that get into mining are part of a pool because alone it would require 10's of thousands of dollars worth of equipment to be effective. There is a lot more technical stuff to it which I don't recall now.

[Dave Schwartz]

Wait a minute... You "mine" for coins by running a software program?

Is there user interaction?

[GameTheory]

Originally Posted by Dave Schwartz

Wait a minute... You "mine" for coins by running a software program?

Is there user interaction?

Yes.

No.

And it is too late to make any money doing it. If you had gotten into it a few years ago you could have made a million (if you converted it to USD before the value went down!)...

[JJMartin]

Originally Posted by Dave Schwartz

Wait a minute... You "mine" for coins by running a software program?

Is there user interaction?

By the way there are at least 10, maybe 20 or 30 other digital currencies besides bitcoin, the next biggest I believe is Litecoin also functioning and generated the same as bitcoin at least in principle.

[barn32]

Originally Posted by GameTheory

For those who think it is a scam or a con, please explain how. I would submit you actually don't know anything about it, and are just parroting fears. In the end, all bitcoin is...is a protocol, a set of rules. Like email. Is email a scam? Like http. Is http a scam? See, the question doesn't even make sense.

Now of course there are some problems with bitcoin, and the government(s) may/are getting in the way of its use, etc etc. Although it is popping up in some surprising "legit" places. For instance I can now pay my Dish bill in bitcoin if I want. And a while back I was selling a camera lens to a guy in India for a few hundred dollars -- he wanted to pay in bitcoin, but I wasn't set up for that. But he was able to buy an Amazon gift card with his bitcoin and send that to me as payment, which I was then able to verify. That's more secure to me as a seller than PayPal (which can be reversed after the fact) for international transactions.

So anyway, and I'm not a great expert so I may get some details wrong, but to start, the basic idea is to have a digital currency that acts like a physical currency. So this is digital cash, not digital checking. There is no central authority or middleman keeping track of who has how much and who they gave it to, etc.

And yes, you can lose it or destroy it never to be seen again, just like if you throw your cash into a fire that money is just gone. All of these things are FEATURES, not bugs. Having these features (and a few others) are the very reason bitcoin was created -- to have a worldwide digital currency with no central control, yet that was secure and would not allow counterfeiting, etc.

It is "real" money not in the physical sense, but like gold it is scarce, there is only so much of it, and the only way to find more you must "mine" it. So if we still had dollars backed by gold, then the paper dollars or the entries in your bank account would all correspond to physical gold stored somewhere. But this is digital and takes up no space, so the "gold" and the "paper" don't have to separated with one representing the other -- the actual "gold" is passed around. Unlike gold however, which can never be totally lost forever except for shooting it into space or something, bitcoin does have the paper-like feature that it can be lost forever. I don't think there is any way to recover it at present.

Anyway, as long as there is "a lot" of it, that isn't a problem (for the currency itself, obviously it is for the individual that lost it), just like if you had gold-backed currency but the rate of exchange was allowed to float (yes, you can have such a thing), then as long as there is a decent but not unlimited supply of gold in the world, then that gold can back any amount of currency being passed around out in the world. And the fact that bitcoin's value can and does float (just like any other modern currency, btw) is one reason people have called it a scam -- because what was worth a lot for a brief moment is now worth not so much. So that's "something to be aware of", not a scheme to deceive you. No one else is getting rich off that fact at your expense.

The fact that I don't understand any of this. No wait, the fact that I HAVE to understand any of this makes it nonsense in my book.