Thoughts on Bitcoin?

[Mezzoforte]

A while ago I read about BitCoin, a kind of Internet currency.

It seems the idea is to enable to send a receive currency without the need for a bank to act as a middleman. The network for using bitcoin is distributed - there is no central authority that handles it all, as far as I can see.

Has anybody here tried it out? Any thoughts on it? To me, it seems like a pretty good idea. I generally trust my bank to keep my money safe at a low cost, but it's an intriguing idea to be able to have complete and direct power over my own money.

[Thewhistlingwind]

I have several problems with the bitcoin design (I think that it solves a challenging problem brilliantly however.)

1. Bitcoin's infrastructure depends on large amounts of computers working together to solve a problem. (This in itself isn't a problem EXCEPT)

2. The distribution of bitcoins given out becomes less and less over time, eventually growing to a standstill.

If 1, then 2 means that over time less and less computers will compete for bitcoins on the network, eventually leading to a sufficiently large 3rd party being able to hijack the bitcoin network and do false transactions.

Also, 2 was a bad design descision because it allows critics to label bitcoin as a ponzi scheme to make it's early adopters rich, with no other real reason for existence. (Though I believe that a bitcoin-like system actually has several potential benefits for trade and currency.)

[gsmanners]

My thoughts (if I owned stock in Bitcoin right now) would be: SELL SELL SELL!

[Paqman]

Has anybody here tried it out? Any thoughts on it? To me, it seems like a pretty good idea.

It's highly unstable. Since October the value of a bitcoin has gone from under USD5 to over USD30 and back again. On some days it's swung wildly within a few hours. That could mean you'd buy bitcoins with the intention of making a purchase, only to find that the cost of that purchase has skyrocketed by the time you want to spend. If I was running a business there's no way I'd accept bitcoins unless it stabilised, and as a consumer there's no way I'd convert my hard-earned into such a flaky currency.

Bottom line: use something more dependable.

[in·ter·punct]

I remember reading a NewScientist article about it, some retailers were already accepting these things. I thought it was awesome.

I tried it a couple days later, set up the miners (or is it workers?), did some solo mining, wondered why it took so long, found out you needed to join a pool and have an ATI gpu. We would need 3 days to solve this thing. I then realised that I would need to leave my pc on 24/7 which I wasn't keen on, anyway, I stopped the same day I started. No bitcoins for me.

Is the bitcoin faucet still empty?

[Thewhistlingwind]

Is the bitcoin faucet still empty?

Let me explain something to you.

The calculations take three days on purpose. Theres supposed to be less and less bitcoin over time.

That, and the calculations involve SERIOUS number crunching.

[in·ter·punct]

Let me explain something to you.

The calculations take three days on purpose. Theres supposed to be less and less bitcoin over time.

That, and the calculations involve SERIOUS number crunching.
I understood that, but thanks for your clarification.

[Mikeb85]

While the idea has merit, I don't think it's realistic. The amount of currency being reduced over time is to prevent inflation, but in the real world inflation is a useful tool to prevent excess accumulation of wealth (although excess inflation will destroy value). Anyhow, I can't see people ever trading in real money for bitcoins... The idea that a network of computers controls it brings about fear of tampering and possible abuse.

[BrokenKingpin]

I like the concept. I was going to try mining myself, but it is just too competitive now.

[Mezzoforte]

The idea that a network of computers controls it brings about fear of tampering and possible abuse.

Well, that goes for traditional banks too. Sure, they (presumably) work a lot with their data security, but there is always the possibility that someone manages to hack something vital.

[Mezzoforte]

It seems one of the big problems is how you can make a new currency like this stable. (It's not really an option to decree that you can swap it for a piece of gold, right? :D) I guess it's a bit of a catch 22 - if major retailers would fix bitcoin prices for some products, then maybe the value would stabilize, but major retailers are probably not keen on accepting a flaky currency.

[ssam]

paypal and visa pretty much shut down wikileaks by preventing donations to it. some people think this is very good, and some very bad. with bitcoins that could not happen.

i am confused at people who complain about the mine aspect of bitcoins. if everyone just mined, and then expected to get products and services it could not work. the best way to get bit coins is to offer some product or service for them.

[Paqman]

the best way to get bit coins is to offer some product or service for them.

Why would you do that, when you could easily get a more reliable currency for your work?

[Smilax]

bitcoins pretty usefull to send money overseas,

some exchanges don't have fees

so change £ to bitcoins send them where you want then withdraw in $.

by doing this you can avoid the bank;s transaction fee's

it works.

plus, there's only so much gold in the world, if you could just make more gold, it wouldn't be, you know, golden

[Paqman]

by doing this you can avoid the bank;s transaction fee's

it works.


Pretty risky though. The value of a bitcoin wouldn't have to fall by much during the transaction for it to wipe out any saving in transaction fees, and the trend of the value of bitcoin has been very much downwards for several months now.

[BkkBonanza]

I mined Bitcoins for a couple months with just 2 GPU cards. I became very interested in it technically and how it works. The problem has been that too many people got into it to speculate, thinking they'd get rich quick. After that wild ride it's stabilized quite a bit but still the trading volume is too low to iron out the volatility. Now, it often trades for days in narrow ranges like now at $3 for over a week so it's fairly easy and reasonable to exchange real currency, and buy something before the value changes (usually you would agree with the seller on an exact btc amount before trading anyway). It doesn't make much sense to "hold" bitcoin at this time unless you intend to speculate.

I think it has great potential but it's going to take a lot more work to make it useful in the real world. I've sent and received coin and it all works as described. I find it impressive that anyone, without any affiliations, memberships or accounts, can create an "address" (& key), and use it for trading money across the globe. I truly hope it can weather the storms and succeed - let's take some power out of the corporate bankers hands for once.

[alambpencil]

For all you bitcoin users, check out Bitmit (http://bitmit.net/en/?ref=1314), the first bitcoin auction site which actually looks promising.

[ubiquitin.jf]

It's an interesting concept but it seems to cost more in electricity to mine a Bitcoin than one is actually worth.

[Paqman]

It's an interesting concept but it seems to cost more in electricity to mine a Bitcoin than one is actually worth.

Interesting, that should set the lower boundary of its value then. Although electricity prices vary hugely around the world.

[donkyhotay]

I don't understand how bitcoin can really work. I read the wikipedia article and ss far as I can tell they are generated based off how much work your computer provides to keeping the bitcoin system going. That makes sense and gives bitcoins value but only for the bitcoin system as a whole. There is no conversion to a 'real world' value except by what people say they're worth. People buy/use bitcoins because they now others will use them and they have no inherent value themselves. Now admittedly this happens a bit with normal currency, I'll take paper as an example. Paper currency has no value itself beyond the value we give it, however unlike bitcoins most paper currency in the world is enforced by the government that produces it. While you can choose not to accept cash in a transaction that hasn't happened yet, if there is a debt owed then cash in all forms must be accepted by law (for most countries that is). This gives paper currency some stability in value and keeps it from ending up in the fireplace, at least so long as the government that backs it remains stable (like what happened in zimbabwe or the CSA). Bitcoins on the other hand don't have a legal fiat anywwhere. If you have bitcoins you can only spend them with people that actually want them. This is why the price on them fluctuates and why I think unless they get tied to some real world value they'll eventually fail. If no one wants a bitcoin then you can't actually *do* anything with bitcoins. You don't even have the 'fireplace' option paper currency gives. Now if there was some way to convert a bitcoin back into some real world value then while they may rise and fall on their own they wouldn't completely fail because even if people chose not to use them there would still be people wanting them for that use. I don't know how practical it is but my thought was to make each bitcoin worth a certain amount of distributed processing time/power on the bitcoin network. This would be similar or almost identical to those distributed processing programs some research centers allow home users to put on their computer that allows them to perform hard calculations without spending a ton of money on computer farms. Now that isn't really a solution I'd recommend but it's the only one I can think of off hand that would give bitcoins some sort of real world value, the only other option would be some government to back it but then that would pretty much defeat the purpose of bitcoins. If I'm completely off about the lack of real world value to bitcoins and there is a real world value I've missed, let me know.

[Paqman]

There is no conversion to a 'real world' value except by what people say they're worth.

That's all that gives anything any value. What is the intrinsic value of one of the coins in your wallet? A lot less than what everybody agrees it's worth, that's for sure.

[donkyhotay]

That's all that gives anything any value. What is the intrinsic value of one of the coins in your wallet? A lot less than what everybody agrees it's worth, that's for sure.

But as I mentioned the value with modern currency is somewhat enforced (I'm assuming your in the US). The coins in your wallet are "legal tender for all debts public and private" (at least in the US) which is why it is perfectly legal and ok to pay your taxes all in pennies (which some people do to try to prove a point), the government by current law must accept it which means so long as the USA government exists it has value. Now that value may change because of inflation but it will exist. Now if the US government just left for some reason tomorrow then yes those coins and dollars would be no more then shiny bits of metal and colored paper. Same is true for most other modern currencies in the world.

[Paqman]

But as I mentioned the value with modern currency is somewhat enforced (I'm assuming your in the US). The coins in your wallet are "legal tender for all debts public and private" (at least in the US) which is why it is perfectly legal and ok to pay your taxes all in pennies (which some people do to try to prove a point), the government by current law must accept it which means so long as the USA government exists it has value. Now that value may change because of inflation but it will exist. Now if the US government just left for some reason tomorrow then yes those coins and dollars would be no more then shiny bits of metal and colored paper. Same is true for most other modern currencies in the world.

Ok, forget currencies. Bitcoins won't really behave like a currency, because as you correctly point out, they aren't backed by a country, so won't be treated the same by the market as a currency that is. They're essentially a commodity, not a currency.

Take any other thing that people trade. Say an autograph of a celebrity. They can be quite valuable, but only because people assign value to them. Likewise the value of any commodity or stock on the market. The actual value is determined entirely by the attitude of humans, which is why share prices can be affected so much by information (even if its wrong). That's why markets act like a complex organic thing, because they are, and also why they tend to only look at the short term (because crowds are bad at long-term planning).

Everything is only worth what people will pay for it. That's why the supply of bitcoins is strictly finite. If they become useful the fact that there's only 21 million of them would mean they become quite valuable. However, if nobody wants them, they're worthless. Demand creates value, even if the actual commodity is ethereal.

[shadylookin]

Should it not fail the inevitable deflation that will occur as a result of not being able to increase monetary supply will become an issue.

From a security stand point if someone finds a way to game the system the whole thing can collapse because there's no centralized authority to issue a patch.

[Paqman]

From a security stand point if someone finds a way to game the system the whole thing can collapse because there's no centralized authority to issue a patch.

It's already been shown that even if the security of the actual bitcoin system is bombproof, the weak point is the exchange sites. A lot of value was lost after Mt Gox got pwned. An optimist would say that the market will eventually move to the sites that have the best security track record, but while the bitcoin market remains small and the value of a bitcoin low it would seem like there isn't a whole lot of money to be made in providing a really robust service for exchange.

[BkkBonanza]

It's an interesting concept but it seems to cost more in electricity to mine a Bitcoin than one is actually worth.
Completely dependent on where you mine. In Venezuela the cost of electricity is < 0.01 USD/kwH. Here in Thailand I pay 0.116 USD/kwH and it's still profitable down to about $1.50 BTC price. I stopped mining when the price went down to around $2-3 because it's not really worth the hassle.

But now that it's back around $7 USD it's actually quite good. One 5830 GPU card makes about $37/mo. now and costs only $75 on eBay. However, I'm moving towards FPGA mining as electricity cost is only about 10% and so long term profitability is better.

If you don't know why Bitcoin works then you haven't researched it enough. There is a lot of incomplete, partially correct info around that leaves many confused. Wikipedia isn't very good on this topic.

[alambpencil]

Russia Today, Keiser Report: In the second half of the show, Max talks to Amir Taaki (chairman of the Bitcoin Consultancy) about hackers, piracy, technology and bitcoin.

http://www.youtube.com/watch?feature...YrTxz9U#t=780s
(http://www.youtube.com/watch?feature...YrTxz9U#t=780s)
An interesting clip.

[zipperback]

Russia Today, Keiser Report: In the second half of the show, Max talks to Amir Taaki (chairman of the Bitcoin Consultancy) about hackers, piracy, technology and bitcoin.

http://www.youtube.com/watch?feature...YrTxz9U#t=780s
(http://www.youtube.com/watch?feature...YrTxz9U#t=780s)
An interesting clip.


Invalid link. Could you please repost it. Thank you. - zipperback

[alambpencil]

http://www.youtube.com/watch?feature=player_detailpage&v=GX-gYrTxz9U#t=780s