Can someone explain how Bit Coins work?

[JJMartin]

One of the main things if not the main driving force behind the popularity of Bitcoin is it's use in anonymous transactions for black market purposes. You can exchange huge amounts of money with no tracking.

Bitcoin "value" took a hit when Mt.Gox, an exchange for Bitcoin from Japan went down and disappeared with millions of dollars worth of people's Bitcoins earlier this year. en.wikipedia.org/wiki/Mt._Gox

[davew]

even if it is a legitimate monetary device, it is acting like an investment bubble

I missed the tulip bulb craze and don't mind watching from the sidelines for quite some time, if not forever.


I do not understand the 'mining' or 'farming' of bitcoins - are more units generated out of thin air?

[GameTheory]

Originally Posted by davew

even if it is a legitimate monetary device, it is acting like an investment bubble

I missed the tulip bulb craze and don't mind watching from the sidelines for quite some time, if not forever.


I do not understand the 'mining' or 'farming' of bitcoins - are more units generated out of thin air?

It is kind of like the project to find prime numbers -- it is harder and harder to find new ones. But the rate is actually controlled by the bitcoin algorithm and the total will be capped at 21 millionish.

https://en.bitcoin.it/wiki/Controlled_supply

[JustRalph]

Saw this in opening of the Simpsons

[Dave Schwartz]

Mt.Gox

that is why I asked the questions that I asked. Whenever I ask such questions, the ultimate goal is to get around to discussing security. The response I get is always a lot like how we had to vote in the ACA before we could understand it.

That is, I would get a response like, "oh you don't need to worry about that. It is all taken care of for you." in other words the final answer is, "nobody knows."

That, ultimately, translates into, "there is none."

[PaceAdvantage]

Originally Posted by GameTheory

Anyway, if you compare bitcoin to how our normal currency currently "works" and you have a good understanding of both (if that's even possible for anyone), I'm not sure bitcoin would be ranked the more "scammy" of the two. (In fact it is pretty hard to see it coming out on top on the scam-o-meter.) And of course no one is requiring you to know anything about bitcoin, or give it the slightest bit of attention...

Hitting the nail square on the head with this one...

[GameTheory]

Originally Posted by Dave Schwartz

Mt.Gox

that is why I asked the questions that I asked. Whenever I ask such questions, the ultimate goal is to get around to discussing security. The response I get is always a lot like how we had to vote in the ACA before we could understand it.

That is, I would get a response like, "oh you don't need to worry about that. It is all taken care of for you." in other words the final answer is, "nobody knows."

That, ultimately, translates into, "there is none."

Well, if you ask random people you're going to get random answers. Everything that has happened has been pretty predictable considering it is an emerging unregulated thing dreamed up by computer geeks. So high risk/high reward, naturally. Bad things then happen, security breaches, bubbles, lots of ignorant people jumping in hoping to make a score: well, this is how regulations come about. (Japan is now creating regulations to treat bitcoin as a commodity, as I said -- more like a precious metal than a currency is where it is going.)

So the question is...will it be regulated to the point that it loses all its special advantages (at which point why would anyone use it, maybe other than it already exists?) or can a happy medium be reached where it could be made safe enough for normal people to use normally but still keep its essential uncentralized property, etc.

So "you don't need to worry about it", "nobody knows", etc...really meaning that ultimately meaning there is no security...well, that's not true -- there is security, but security can fail. ANY security for anything. And it often does under extreme circumstances. Security in most everything (including the US Dollar) is mostly illusory, and things that seem mostly secure are simply those things where extreme circumstances happen the least often.

Bitcoin is new, it has/had value, and so its very existence is an extreme circumstance until it gets settled, if it ever does. And so all highly predictable in nature if not in specifics. But who exactly at this point would be looking to bitcoin for a "secure" option when it obviously is at the "wild west" stage of its development? At its heart, it IS actually pretty secure, but if the exchanges and marketplaces can't be made secure also so transactions can be safely made without your bitcoins going missing I guess that won't matter much...

[DJofSD]

You will know bit coin has arrived when it becomes a part of the WSOP/WPT.

[barn32]

Originally Posted by GameTheory

And of course no one is requiring you to know anything about bitcoin, or give it the slightest bit of attention...

Until someone tries to pay me with it.

[GameTheory]

Originally Posted by barn32

Until someone tries to pay me with it.

No one will just send you bitcoin, they'd have to ask and you'd say no, which is the answer they usually hear. Not really a big burden on you. You probably won't take a check either (and which are probably more risky than bitcoin, actually.)

[Dave Schwartz]

Well, if you ask random people you're going to get random answers.

I would contend that there isn't anyone else to ask.

Security in most everything (including the US Dollar) is mostly illusory, and things that seem mostly secure are simply those things where extreme circumstances happen the least often.

While that is certainly a true statement, there are certainly degrees of security. For example if I loan my friend Bob $5000, that is a debt with a significant degree of INSECURITY. If I put that same $5000 into a bank CD, there is also a degree of insecurity, but far less than with my friend Bob. (You knew Bobby, like I know Bobby, oh, oh…)


Game Theory, your discourse here has provided more inside that I have been able to get from anyone else. It is appreciated.

Question: Why would a person doing business via "normal channels" ever want or need bitcoin?

[tucker6]

Originally Posted by Dave Schwartz

Question: Why would a person doing business via "normal channels" ever want or need bitcoin?

That is the question isn't it? Successful business is about making the transaction easy for all involved. What about normal currency use (easy transaction) forces one to ask the other party whether they would deal in bitcoin (more difficult transaction)? The obvious answer is that at least one of the parties wishes to hid elements of the transaction, but that seems too easy an answer. Would like to understand the psychology behind bitcoin from its beginnings to now, and whether it is being used as a real currency or as a protest against regulatory bodies.

[Magister Ludi]

Probably not very important to most on this forum in spite of Mr. Snowden's disclosures. However, for those who highly value their privacy or whose very lives depend on their online anonymity, cryptocurrencies such as bitcoins (BTC) can anonymously purchase goods and services and help to keep their online pseudoanonymous identities (nyms) compartmentalized and isolated from their real identities.

My most anonymous online nym surfs behind nested multihop vpn's purchased anonymously from multiple providers with BTC. In meatspace, my first choices for making purchases are cash, cryptocurrencies, and anonymously-purchased prepaid debit cards. I have no fear of ever being compromised by three-letter agencies or haxors, thanks, in part, to cryptocurrencies and deeply ingrained operational security.

[GameTheory]

Yes, the driving force behind "why?" I believe is because...libertarianism. And so AT THIS STAGE, why would a "normal" person want to use bitcoin? (Other than to make a score on trading, mining etc.) The answer is they probably wouldn't. However, if you do buying and selling with customers in far flung places where traditional methods are still fairly risky, bitcoin can provide some peace of mind there (especially if you are the seller and are going to be paid up front) -- bitcoin allows irreversible and secure transactions with little to no fees.

I gave the example of my own where I was selling something to a guy from India whom I had no reason to trust, and PayPal has proven that if the buyer wants to screw you (which is even easier across borders), they will side with them. So bitcoin allowed that transaction to happen. Also because of the emerging nature of bitcoin and other reasons, you will find that those that have bitcoin to spend are more likely to be in Asia or in places you might not normally be doing much business. If you can accept bitcoin as a seller of things you can expand your market by doing so. You might not think the advantages of bitcoin are a big deal as an American, but for those with whom you might do business with around the world those advantages may be quite significant.

[highnote]

Here is a link to an interview with a person who claims to know the person who invented bitcoin. The interviewee is involved with the bitcoin.org open source project. :

http://thisweekinstartups.com/bitcoi...-startups-140/

I watched this a couple of years ago. I was struck by the fact that the bitcoin person said he was going to Washington D.C. to discuss bitcoins with the CIA.

The fact that a few years have passed, the CIA is interested and the U.S. gov't has not tried to regulate them tells me that bitcoins are here to stay or the U.S. is taking a wait and see attitude like they did with internet regulation.

The interview is definitely worth watching if you are interested in bitcoins.