What are bitcoins?
Any of you in to bitcoins and/or bitcoin mining? If so, give me the dumbed down version of wtf this is. I've already been to the bitcoin website, a few other bitcoin-related websites, the bitcoin wiki, etc...yet I have some unanswered questions like...
1. If you can mine for bitcoins this means you're pretty much creating bitcoins for free, electric bill aside. If this is the case then why do bitcoins have any value to them? This seems like it would be the same as printing your own $ and being able to use it.
2. What exactly is bitcoin mining? So far I've gathered that you use your CPU or GPU to solve "puzzles" sort of like if you were folding@home but the part that confuses me is...what puzzles are you solving? Does the solution to this puzzle benefit anyone like folding virtual proteins benefit the medical world?
3. Apparently there is a bitcoin-USD exchange rate and it is currently around $5 to 1 btc. Again...how the hell do bitcoins hold value if they're created for free with little effort?
Your missing the point,
You are buying these at a fee (charged to your phone or cell phone, and how the become of value ), then using them like currency. The mining part is just your personal creation of the Credit marker, And I use the term credits, since it's only a promissory note from the system until the are cashed back out (read system could fold/fail, and your out any money you put into).
The mining part is just you creating the coins, so they can not just be duped like a stolen credit card.
Think of it as the just another credit card system with fees to convert cash to marker (like paypal), then pray like hell that it does not go belly up/markers loose value with you still holding markers.
And where I see the problem, since it's not based off the world bank values, no real control of exchange rates/price volatility, nor backed by some form of insurance, it all a crap shoot.
Don't get me wrong, digital form of currently like such would be great since you don't have to worry about someone stealing your credit card number and using it, but is the lack the backing of such a system (constant value hold) the down fall to system.
Bottom line, any currency is only as good as what is backing it (such as the us dollar at one time worth X amount in gold), and you will be far fetched to find such backing of such, nor proof that they could not be produced without adding funds into the system to off set them (read value of such destabilized, and petty much like the US dollar once the US stop becoming the world bank currency).
Well with as long as it's been running and how well it has continued to run, mining doesn't seem like a bad investment as long as you already have a rig to do it on. I wouldn't go out and buy new GPUs or exchange $ for BTC. I was just interested in mining for a month or two to see what it's like. In theory just one of my 5830s could net me $30+ a month at the current exchange rate and the only $ it will cost me is the added electricity consumption and honestly my bill is cheap and didn't even show much of a difference when I went through my f@h phase. I'm not really planning to "get rich quick," I was just curious to see how much I could mine and what I could use those BTC on. My GPU sure as hell ain't making me money or buying me goods just sitting there doing nothing.
I do see your points, though. Definitely some things to consider, but you left out one other issue...certain pools holding a majority of the mining. I believe the most popular pool holds 51% currently. There's a huge debate thread about this on the unofficial forum.
Eta: Looks like that article you linked mentioned that pool I was talking about. A world of hurt can be brought upon the entire BTC system at any second and the decision is in the hands of the guy that runs that pool.
May as well mine,
That way at least you have the hardware in the end when it all goes belly up.
And remember, you only getting 50 coins for every block you solve, so depending on the market value of a coin at the time you solve a block, may have spent much more in solving the blocks, the figuring them out in in hardware and cost to do so.
And to see it in a better light. X amount of people through money in a pile and get a coin base on some esquire value at the time (block value). Now some one comes alone, solves a block, then 50 more coins are added to what was already given out for that pile of money, so what does that do to the value of the pile of money that the block represents.
Bottom line, "But unless it can find a way to get consumers and merchants to adopt it, Bitcoin is more likely to go the way of Flooz (bankrupt in August 2001) than to challenge the dollar as a means of payment.", and when that happens, anyone holding such coins, will be out any money that they put into it.
Originally Posted By johnny_dot_exe:
If this is the case then why do bitcoins have any value to them? This seems like it would be the same as printing your own $ and being able to use it.... Again...how the hell do bitcoins hold value if they're created for free with little effort?
It's effectively impossible to counterfeit bitcoins. Your computer has to do a lot of work to generate them, and there's a finite amount of them that can be created. Every coin basically has a serial number that is recorded in a decentralized manner, so you can't simply copy existing coins.
Value is subjective
, whether one is talking about bitcoins or real gold.
Originally Posted By Dano523:
Bottom line, any currency is only as good as what is backing it (such as the us dollar at one time worth X amount in gold)
A currency is as good as whatever people are willing to trade for it. It doesn't have to be backed by anything, it just has to be accepted. Money originated from commodities, there are very good reasons to have a commodity such as gold uses as currency or as the backing of a currency, and people generally will prefer to have a commodity-based currency. But ultimately, a currency is as good what people are willing to trade for it, no matter what it's backed by, if anything.