Bitcoins

[jgmcdee]

I can only see the first of those as an advantage to me - the other three seem totally irrelevant.

Never had credit/debit card problems with it being refused, stopped due to "security" or just because the bank screwed up? Not worried about inflation eating away your savings? Ever thought about selling goods or services but the hassle involved put you off?

 

[TheJasperCo]

I don't understand how it works either. I just don't get how you earn them, and also how it can be immune from any form of control. If it's run by the people for the people, what's to stop someone hacking their own account to increase the amount of BitCoins they have? If it's all virtual and doesn't physically exist, how can it have value?

 

[beorhthelm]

Global currency - no conversion fees going from one local currency to another.
Distributed - no single entity able to control it and decide if you are allowed to spend/receive your funds.
Fixed amount - no ability for anyone to go out there and print more.
Irrevocable - once a transaction is confirmed it cannot be rescinded

There are more, but those are the ones which are most useful to people out there.

and none of them are really advantages.

Global: as Titanic's already spotted you'll lose value on conversion, and there are fees involved through the systems - servers and services dont run on air. peer 2 peer improves this but then same applies to regular currency.
Distributed: no one can decide what i spend my £ on. they can make items illegal, but i can still buy them with £ if the other party accepts £.
fixed amount: a myth, litecoin, feathercoin, bbqcoin and a couple dozen others show how easy it is to create a new coin. it might count now, but in a future where say governments accept or pay in crypto currencies, if they need more money they can spin up a new pre-mined block chain to use.
Irrevocable: i was going to agree with that, because technically its a secure one way transaction. but any transaction is legally revocable, if im in a contract and you dont fullfill your side i could seek refund through courts etc. (this is also a problem, with stolen or lost bitcoins)

i'm in for the record, just dont buy the hype. i'm finding the whole thing very interesting, though the most interesting parts are how the community have built up this distorted view of how economies work and how crypto currencies will solve all the perceived (usualy deeply ideological) problems. really its main uses are secure transfer and speculation.

 

[Herr Tubthumper]

If it's all virtual and doesn't physically exist, how can it have value?

Regular money is pretty much the same though. It just represented by bits of paper and metal.

 

[beorhthelm]

...what's to stop someone hacking their own account to increase the amount of BitCoins they have? If it's all virtual and doesn't physically exist, how can it have value?

the existance of a bitcoin is held with in the blockchain, a networked ledger. if you try to invent a bitcoin, it wont appear in previous blocks so its rejected by the network. the bitcoins are created by the network rewarding a miner (as they are known) finding a special cryptographic value that validates a block. (little fuzzy on the exact detail there myself). the value comes from the same mechanics as anything, from a bushel of wheat, a days labour, to a Picasso painting: Bob has one, Alice wants one, therefore Alice will give something of value to Bob that he wants.

 

[Goldstone1976]

really its main uses are secure transfer and speculation.

I agree with just about all of this post, but called out this snippet as this is what I used bitcoins for over the last 12-18 months.

 

[jgmcdee]

the existance of a bitcoin is held with in the blockchain, a networked ledger. if you try to invent a bitcoin, it wont appear in previous blocks so its rejected by the network. the bitcoins are created by the network rewarding a miner (as they are known) finding a special cryptographic value that validates a block. (little fuzzy on the exact detail there myself). the value comes from the same mechanics as anything, from a bushel of wheat, a days labour, to a Picasso painting: Bob has one, Alice wants one, therefore Alice will give something of value to Bob that he wants.

To fill this out a little, when you spend some bitcoins it goes in to a block, which is like a page of the ledger. Every miner has a copy of the block (although they can choose which transactions go in to the block, as of now blocks have never filled up before being solved so there is no real choice to make). What happens then is that each mine attempts to find a number which they can add to the page which, when the entire page is put through a mathematical process, gives a number which is more than a given target number. The process is to all intents and purposes random, and the target number is calculated automatically based on the time it had taken to find previous answers so that regardless of how much computing power is thrown at the problem it will always be very difficult for any individual or group holding a minority of the computing power to cheat in any way. Solving a block takes 10 minutes on average, although as it is probabilistic it could take seconds or hours for a specific block to be solved.

The really clever bit is the idea of the blockchain. Although it is hard to find an alternative answer to a block it is by no means impossible. So what's to stop someone working away on an earlier block, changing the details of the transactions in it so that you receive all the coins in it? Once a block has been solved a summary of it (known as the hash) is added to the next block. So if you want to rewrite history you don't have to just change the block you are altering explicitly but also every block which comes after it, up to the current block. If you can't do that then you can't alter the blockchain, and so transactions and ownership are secure.

As to those who don't see the benefits of Bitcoin but are happy to speculate in it: try using it for a bit rather than just hoarding it. Yes the are limits on where and how you can use it at the moment, but companies are working hard to make it easier to do so and I can see it becoming a general-purpose currency in the next 5 or so years.

 

[AZ Gull]

Global currency - no conversion fees going from one local currency to another.

I can only see the first of those as an advantage to me - the other three seem totally irrelevant.

And even for the 'global' currency, I will need to convert GBP into Bitcoins (or how else will I accumulate them?) and that exchange rate will dictate whether it is worthwhile or not.

But you will get a better/more pure exchange rate as there will not be a banking fee... similar to what I get with peer-2-peer.

you can now trade bitcoin as yoou would any other commodity.

really its main uses are secure transfer and speculation.

I see this as one of the main conundrums with bitcoin; it isn't a true currency, and it isn't a true commodity, although it exhibits characteristics of both. In the last year, a unit of bitcoin has risen from about £5 pounds, all the way up to £93 pounds, back to £46 pounds and currently hovers around £76. This will add so much volatility for an individual or business trying to conduct transactions in bitcoin that it makes it almost impossible for all but the most speculatively inclined.

 

[jgmcdee]

and none of them are really advantages.

Global: as Titanic's already spotted you'll lose value on conversion, and there are fees involved through the systems - servers and services dont run on air. peer 2 peer improves this but then same applies to regular currency.
Distributed: no one can decide what i spend my £ on. they can make items illegal, but i can still buy them with £ if the other party accepts £.
fixed amount: a myth, litecoin, feathercoin, bbqcoin and a couple dozen others show how easy it is to create a new coin. it might count now, but in a future where say governments accept or pay in crypto currencies, if they need more money they can spin up a new pre-mined block chain to use.
Irrevocable: i was going to agree with that, because technically its a secure one way transaction. but any transaction is legally revocable, if im in a contract and you dont fullfill your side i could seek refund through courts etc. (this is also a problem, with stolen or lost bitcoins)

i'm in for the record, just dont buy the hype. i'm finding the whole thing very interesting, though the most interesting parts are how the community have built up this distorted view of how economies work and how crypto currencies will solve all the perceived (usualy deeply ideological) problems. really its main uses are secure transfer and speculation.

Other blockchains don't count, so no it isn't a myth that Bitcoin is limited. Not to say that they can't have value, but to put your argument in to physical terms you are saying that because silver exists it means that good isn't limited in availability. No matter how many altcoins are spun up it won't affect the value of Bitcoin directly (unless people move to another coin en mass, but that wouldn't change the fundamental argument for a cryptocurrency).

And yes you can attempt to go down the legal route to reclaim a Bitcoin transaction: I suspect it will be many years before you see such a case, if at all. With things like escrow and contacts ending the frame Bitcoin will be pretty well set up to provide a low cost way to provide high levels of payment security of required.

The point of the global bit is that once you have Bitcoin you can transact in Bitcoin for incredibly low fees anywhere in the world (including for free if you are prepared to wait a while). Try to use your £ to buy something in $ and then compare it to doing the same with Bitcoin - much cheaper.

All that said, yes there are loads of problems and obstacles, and is quite possible that Bitcoin will die from a technical, regulatory, economic or evolutionary issue, but it's the first decent attempt to build something different in terms of decentralised currency and I'm hopeful that it or something like it makes it to the mainstream.

 

[Goldstone1976]

I see this as one of the main conundrums with bitcoin; it isn't a true currency, and it isn't a true commodity, although it exhibits characteristics of both. In the last year, a unit of bitcoin has risen from about £5 pounds, all the way up to £93 pounds, back to £46 pounds and currently hovers around £76. This will add so much volatility for an individual or business trying to conduct transactions in bitcoin that it makes it almost impossible for all but the most speculatively inclined.

Absolutely. I've nothing against bitcoins in principle as a trading currency and would happily use it as such if the exchange rates settled down considerably for a decent period of time. As a purely speculative play it's been amazing for that proportion of savings that I've been prepared to lose entirely if the worst happened.

 

[beorhthelm]

Other blockchains don't count, so no it isn't a myth that Bitcoin is limited. Not to say that they can't have value, but to put your argument in to physical terms you are saying that because silver exists it means that good isn't limited in availability. No matter how many altcoins are spun up it won't affect the value of Bitcoin directly (unless people move to another coin en mass, but that wouldn't change the fundamental argument for a cryptocurrency).

im saying is the fixed amount of a given crypto currency wont mean anything in the long term. actually yes, because silver exists there is an impact on the value of gold. this applies in anything where there is a suitable substitute. cant afford wheat but barley is half the price? switch to barley and the demand for wheat drops, thus the price. that aside, you said that you cant print more, you can and people are printing more crytpo currencies.

i could also delve into the subject of devaluation, shifting the decimal point to the left. item x is 1 BTC now, in a years time it might be 0.1. everyone thinks this means the currency is deflationary, but in reality its missing the point that inflation is a measure of prices increasing, not the money. if marked against a constant y the price of item x is relativly more than it was, inflation occured. we would have to start changing the semantics but the same economic function occured: you get less for your than you did last year money. ( i probably have put this across well, hope you get the drift).

 

[jgmcdee]

im saying is the fixed amount of a given crypto currency wont mean anything in the long term. actually yes, because silver exists there is an impact on the value of gold. this applies in anything where there is a suitable substitute. cant afford wheat but barley is half the price? switch to barley and the demand for wheat drops, thus the price. that aside, you said that you cant print more, you can and people are printing more crytpo currencies.

Silver might not have been the best example, perhaps coffee would have been a better choice because additional cryptocurrencies are orthogonal: one has no bearing on the other. I could create a currency tomorrow with billions of coins but it will not affect the value of Bitcoin in any way. Certainly I can see that you can have exchange rates one to the other, but that is not the same thing as being able to affect the money supply in Bitcoin itself.

i could also delve into the subject of devaluation, shifting the decimal point to the left. item x is 1 BTC now, in a years time it might be 0.1. everyone thinks this means the currency is deflationary, but in reality its missing the point that inflation is a measure of prices increasing, not the money. if marked against a constant y the price of item x is relativly more than it was, inflation occured. we would have to start changing the semantics but the same economic function occured: you get less for your than you did last year money. ( i probably have put this across well, hope you get the drift).

Nope don't get your point here. "item x is 1 BTC now, in a years time it might be 0.1" and "you get less for your than you did last year" seem to be contradictory to me.

Although I think that the above two points are linked. If you cannot increase the number of bitcoins and bitcoins are used to represent more value then the purchasing power of Bitcoin will increase. If you don't agree with the points though then you won't agree with the conclusion.

 

[Titanic]

Silver might not have been the best example, perhaps coffee would have been a better choice because additional cryptocurrencies are orthogonal: one has no bearing on the other. I could create a currency tomorrow with billions of coins but it will not affect the value of Bitcoin in any way. Certainly I can see that you can have exchange rates one to the other, but that is not the same thing as being able to affect the money supply in Bitcoin itself.

If someone else creates another xxxcoin currency wouldn't that undermine confidence in Bitcoin... after all Bitcoin is only any use if it it widely used, competition from other xxxcoin's could destabilise that?

I still don't really see the point - if it is to make it cheaper to transact in multiple countries, I think this is and will continue to happen with improved standard banking computer systems.

 

[jgmcdee]

If someone else creates another xxxcoin currency wouldn't that undermine confidence in Bitcoin... after all Bitcoin is only any use if it it widely used, competition from other xxxcoin's could destabilise that?

There needs to be a reason for someone to use xxxcoin rather than Bitcoin though. There are a number of valid reasons to use an alternate cryptocurrency, and another one rather than Bitcoin might win out, but if there is at least one major stable cryptocurrency then the others will either have a fixed exchange rate to Bitcoin or will be totally unrelated by managing a different measure of value.

I still don't really see the point - if it is to make it cheaper to transact in multiple countries, I think this is and will continue to happen with improved standard banking computer systems.

There are lots of benefits to it, a number of which I outlined before. If you don't think of them as benefits then fair enough but many others do, and that is why there is so much interest around Bitcoin. There has been a lot of investment over the past 6 months in startups which will create all sorts of ways to make Bitcoin easier to exchange and use, and so over the next couple of years expect to see it becoming more mainstream.

 

[Jimmy's gonna get ya!]

I still don't understand this *fully, but I'm giving it a go. Got a wallet and I'm mining.

*at all

 

[pork pie]

Difference is they have ex-gloryhunter fans from years ago all over the country from when they WERE a big club.

Ours are mainly local to Sussex, or people who have relocated or second generation exiles.

 

[Herr Tubthumper]

I still don't understand this *fully, but I'm giving it a go. Got a wallet and I'm mining.

*at all

I forgot about this, I have the purchase and use of Bitcoins on my to-do list. I shall give this some though over the weekend. Have you mined any yet?

 

[jgmcdee]

At this stage there is little point in mining for bitcoins unless you have some very specific hardware purchased for this purpose alone.

 

[beorhthelm]

at this point there is no point mining for bitcoins unless you already have very specific hardware.

the ship has already sailed. even people with orders for November delivery will be lucky to see a profit on current numbers. one can mine for one of the other alternative coins and exchange for Bitcoins, that might still be economical. you're probably better off buying bitcoins outright (if you can find a way).

 

[Herr Tubthumper]

you're probably better off buying bitcoins outright (if you can find a way).

There are a number of options and ways to buy. I must admit I got confused by the online purchasing sites I was looking at but I have details (somewhere) of a place where I go and buy them face-to-face...and crucially have a lot of questions answered.