Am I the only one who doesn’t understand Bitcoin, bitcoin mining and anything to do with any of that?
What is bitcoin, who “invented” it, if it can be exchanged for money (or items) who is guaranteeing the currency? IS it even a currency?
I came across this recently that seems to answer some of your questions:
https://www.youtube.com/watch?v=bBC-nXj3Ng4&feature=youtu.be
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It’s a practice that is currently making me wait to upgrade my graphics card. Miners have driven prices above retail, and the GPUs are used to quicken mining. I just want a card with better performance for my new VR system and engineering analysis software.
Ah no, you don’t understand. It’s very complicated. It’s aggregate, so we’re talking about fractions of a penny here. And over time they add up to a lot.
This is a longer, more technical description of how it works:
https://en.wikipedia.org/wiki/Blockchain
Bitcoin mining is, in a nutshell, people doing computational work to verify the blockchain. As a reward for that work, sometimes they get lucky and receive bitcoins.
My head pretty much exploded at “the dollar has a perceived value” in the ad pre-amble. Please, someone tell me what’s backing the Bitcoin?
I don’t know. I actually don’t know a thing about Bitcoin. I just saw a convenient opportunity to quote Office Space.
My head pretty much exploded at “the dollar has a perceived value” in the ad pre-amble. Please, someone tell me what’s backing the Bitcoin?
Well I know that the US dollar is backed by the US government. Bitcoin on the other hand, the ether of the internet? WTF? It has no real backing. Buy it if you want, mine it if you want but I sincerely hope that any government worth it’s salt will out right ban it as tender.
My son is really into cryptocurrency (bitcoin, ether, litecoin, etc) and has made a lot of money for a 22 year old kid. He is well on his way to purchasing his first house - with cash. In addition to being directly involved in the block chain process, he basically day trades the volatile cryptocurrency market with all coins, with a larger focus on ether/ethereum than bitcoin. He also does mining, typically ether although he may be required to switch to mining other currencies with some potential upcoming changes. I’m not sure who backs it - but he manages a wallet through the coinbase website. He deals in ether mostly so sells either sells ether to buys bitcoin he then uses to buy from specific vendors, including amazon, or simply sells the coins through coinbase and covert to us dollars in his coinbase wallte and transfers to his bank account. There are some transaction fees, not sure how much to be honest, but they seemed minor on the purchases and transfers I’ve made through coinbase.
My main takeaways from his mining are already described on this thread but the takeaways for me are the graphic card requirements and electricity costs since he never shuts his computers down. He has free electricity at his apartment so it’s easy for him. It’s kind of like the penny fraction program in office space in time/output I guess.
My main concern is tax implications for him given the money he is dealing with. The web-based crypto-market seems like the wildwest and he is under the impression his transactions are invisible to the IRS at the current time The IRS has been trying to figure out this issue and I think Congress just told the IRS to let it go at the current time but I’m sure they will come back to it soon. I will consult with an attorney this year personally for my small foray into this market since my job requires an annual financial disclosure - he has a top secret security clearance so I don’t want him to screw that up.
Ah no, you don’t understand. It’s very complicated. It’s aggregate, so we’re talking about fractions of a penny here. And over time they add up to a lot.
This is a longer, more technical description of how it works:
https://en.wikipedia.org/wiki/Blockchain
Bitcoin mining is, in a nutshell, people doing computational work to verify the blockchain. As a reward for that work, sometimes they get lucky and receive bitcoins.
It has no real backing.
It doesn’t need backing, which is the whole point.
any government worth it’s salt will out right ban it as tender.
Why? Perfectly legal in the U.S.
It has no real backing.
It doesn’t need backing, which is the whole point.
any government worth it’s salt will out right ban it as tender.
Why? Perfectly legal in the U.S.
why would government’s possibly ban it?
I dunno, maybe because it basically allows untraceable wire transfers equivalents that could be for millions of dollars? If you are worried about how terrorists and drug dealers could transfer large sums of money or launder cash, it might be a concern. Or maybe because government’s can deflate their debts through inflation, but this is based on currency hegemoney. A competing money might be a problem for that.
If the bitcoin gains more traction and the government cannot track transactions, a ban or restrictions (such as use of a government clearinghouse) doesn’t seem far out of the realm of possibilities.
It has no real backing.
It doesn’t need backing, which is the whole point.
any government worth it’s salt will out right ban it as tender.
Why? Perfectly legal in the U.S.
And when it collapses, because it will. Where do bitcoin holders go?
And when it collapses, because it will. Where do bitcoin holders go?
What do you mean where do they go?
How to do you think the likelihood of collapse compares to other monetary systems, and why would it be more or less likely?
Not sure why I’m picking on you today. I’m a technologist, you’re a luddite. 
I dunno, maybe because it basically allows untraceable wire transfers equivalents that could be for millions of dollars? If you are worried about how terrorists and drug dealers could transfer large sums of money or launder cash, it might be a concern.
Bitcoin and bitcoin-like currencies are extremely traceable. The blockchain encodes transaction history in a way that is constantly verified by bitcoin miners. The anonymous part used in black markets currently is that there’s often no physical address or real name tied to a bitcoin address. And people can just create a new bitcoin address for each transaction. But that’s a detail of implementation. Exchanges with greater transparency and verification of identity are certainly possible - and some exist now. Bitcoin can be used in legal markets or black markets. Just like most types of currency. It is a very convenient asset for use in participating in black markets, however. No doubt.
Or maybe because government’s can deflate their debts through inflation, but this is based on currency hegemoney. A competing money might be a problem for that.
Under current law it’s probably better to think of bitcoin as an exchange medium and/or a commodity rather than a currency. It doesn’t really compete with the dollar directly. The U.S. government still requires payment in dollars, and use of bitcoin can’t be legally used as a tax dodge. And use of bitcoin requires an implicit contractual agreement between buyer and seller. E.g. a seller can refuse bitcoin as payment, but generally can’t refuse a dollar as payment.
If the bitcoin gains more traction and the government cannot track transactions, a ban or restrictions (such as use of a government clearinghouse) doesn’t seem far out of the realm of possibilities.
I agree there. Increased regulation by the government is, indeed, a possibility, e.g. putting legal requirements on the exchanges that I mentioned above.
When we have governments and government agents acting unethically and in secret & playing with much larger stakes, should that not be of a greater concern than a non-mainstream, niche currency?
It has no real backing.
It doesn’t need backing, which is the whole point.
any government worth it’s salt will out right ban it as tender.
Why? Perfectly legal in the U.S.
why would government’s possibly ban it?
I dunno, maybe because it basically allows untraceable wire transfers equivalents that could be for millions of dollars? If you are worried about how terrorists and drug dealers could transfer large sums of money or launder cash, it might be a concern. Or maybe because government’s can deflate their debts through inflation, but this is based on currency hegemoney. A competing money might be a problem for that.
If the bitcoin gains more traction and the government cannot track transactions, a ban or restrictions (such as use of a government clearinghouse) doesn’t seem far out of the realm of possibilities.
And when it collapses, because it will. Where do bitcoin holders go?
What do you mean where do they go?
How to do you think the likelihood of collapse compares to other monetary systems, and why would it be more or less likely?
Not sure why I’m picking on you today. I’m a technologist, you’re a luddite.
No, I’m not a luddite. I just don’t trust something that to me at least has been created out of thin air, or I suppose electrons in this case. Then again, hardly any nation is backing their currency with anything real these days anyway.
I’ll throw a hint out there: bitcoin has a fixed limit on how many coins can ever exist. Meaning it behaves a little more like gold, and less like paper currency that governments can print to their hearts’ desire.
Yeah, I should have been using the term cryptocurrency. (I think I used the awkward term bitcoin-or-bitcoin-like currencies, once but that gets tiresome.
Etherium, etc.
Currencies need a concept of scarcity.
But I completely agree that the relatively modern ability of governments to regulate the supply of money is tremendously beneficial (thought we could argue about the transparency in how they do that), and bitcoin is technologically limited in that regard, and the the “unlimited” ones have other issues. Having a body of smart people regulating supply could be, sometimes, better, than relying on the possibly irrational nature of markets (bubbles, etc).
So I don’t think traditional currencies are going away anytime soon.
And I agree that government has a choice to make. They can embrace a useful technology, or try to fight it. Just like Uber, etc.
There will be a culture clash. There are bitcoin open source fanatics who will rage against any government “interference.” (In a Venn diagram they’re nearly the same as the set of people who think the Fed is an evil world-control organization). But cryptocurrency is just such a smart idea that I hope governments in general don’t react to it like a contagion and instead seek to understand its possible benefits relative to other electronic “currencies.”
And I hope the geek world understands that possibly having some type of government regulation would be good for stability, etc, and ultimately beneficial in the long run.
And when it collapses, because it will. Where do bitcoin holders go?
Into another cryptocurrency, and they will have “learned from the mistakes of Bitcoin” and it will be so much better and blah blah blah.
The Government (any government) can’t ban it, since they can’t control it. It’s like if they tried to ban swimming. You can shut down the pools, but there’s so many other places to swim you couldn’t stop it if you tried.
**<<And I hope the geek world understands that possibly having some type of government regulation would be good for stability, etc, and ultimately beneficial in the long run.>> **
Agreed. Seems to me gov’t regulation is going to come, what with big corporate concerns getting into it in a serious way: http://fortune.com/2017/02/28/ethereum-jpmorgan-microsoft-alliance/
It has no real backing.
This is a difficult concept to wrap your head around, but Bitcoin (speaking in the generic sense to include other cryptos such as Ethereum and Litecoin) is ultimately backed by game theory and economic principles. A blockchain is only secure if it employs enough computational hashing power to make a 51% attack economically infeasible. This requires real world expenditures, namely hardware and electricity. Miners will not operate at a loss, so they will only mine on networks that have enough real world value to net a profit. Non-mining users will only use networks that are sufficiently secure, which requires a great deal of hash power from the miners. Obviously this is a bit of a chicken and egg problem at first, but once a network manages to bootstrap itself up to where it can be profitably mined, it becomes a positive feedback loop. Bitcoin and Ethereum are currently at this point. To effectively compromise either network you would need the electricity output of a small nation and more mining hardware than is physically available to buy, at any price. No corporation or government can pull this off. Short of literally powering off the entire nation’s internet infrastrucure, no government can stop any of it’s citizens from transacting in cryptocurrency.
Assuming you’re on board with all of that, you’re still probably asking yourself, “Unless I’m buying hookers and blow on the darknet, what’s the point? My USD’s work just fine for everything I do.” Well… good on you for living in a stable democracy with relatively sane fiscal policy. Residents of places like Zimbabwe, Cyprus or Venezuela would have a vastly different take. All of these places have had catastrophic monetary system collapses since the Bitcoin network went live in 2008. Even for those of us who enjoy access to traditional financial services and a stable local currency (which is only like 15% of the people on the planet BTW, it’s quite easy for those of us that grew up in this system to lose sight of this), for things like P2P transactions crypto transfers are much faster, cheaper and ultimately more secure than things like Paypal or bank wire transfers. I could sit here all day and write down additional real world cases where crypto has advantages over any fiat currency, even the almighty US dollar, but suffice to say that blockchain technology is absolutely here to stay.
As to whether or not the current BTC->USD exchange rate is appropriate… who the hell knows. Just like any other highly speculative investment, some people with make a fortune gambling on cryptocurrency, others will get obliterated. This technology is in it’s absolute infancy and adoption is not nearly widespread enough to expect any sort of stability. But to say that cryptocurrency is “backed by nothing” and therefore valueless is just flat wrong.