Bitcoins experience


Well, if you account for the overhead of exchanging you are left with the question of why would the buyer not do that on their part. Well, it makes it untrackable, other than dragonbox getting your address I suppose, which is a benefit.

http://flattr.com/ is nice though. Donations your way, and although i haven't read their terms and/or conditions i feel they are less evil than paypal. Oh snap, already have one, I'm getting an account.
 
Ok, someone please explain to me how this works with Bitcoin. I know they issue a number of bitcoins each year . I also know that these Bitcoins value fluctuate against say the USD. I also know that Bitcoins are earned via Bitcoin mining which from what I understand is people running algorithms to decrypt a number?

How on earth does someone decrypting a number equate to real value that deserves a tradeable currency? 
It's not like they are offering real work done , built products of value in exchange for these Bitcoins. The whole thing just sounds so suss to me - like a giant pyramid scheme awaiting to crash. Unless of course the algorithms run are of value?
 
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Huh, you seem to have problems understanding how currencies work. 

A currency should be:

- in limited amount

- accepted and recognized by many to exchange goods

- hard to falsify and to make

- portable and have the right density/value ratio. 

Currently with what is going on around the worl (EURO, USD, and JPY) the existing currencies are not doing their job anymore, since Big Governments associated with Central Banks are deliberately issuing "more" money since we use paper and super cheap metals as daily exchange mediums. So they are losing one of the characteristics of a currency to be "in limited amount". That is why you see the price of GOld going up against existing currencies, because Gold is in limited amount and is seen as refuge against mass inflation. 

Actually, the value of a currency is always subjective. There's no value in Gold, paper or bitcoin in nature. You can't eat gold, you can't survive on paper (well at least it helps to clean yourself in the toilet) and bitcoin is pretty much useless if you don't have network access). What makes them valuable is what people do with them. Bitcoin is not like other currencies yet, since you cannot buy many things with it, and it's far from being recognized everywhere. But at the core of its algorithm, it's made to limited in amount, to be anonymous and easy to exchange, and impossible to falsify. 

So I do not really see where you see a massive pyramid scheme - (that expression does not work at all to describe the current situation). What's happening currently is that there is a massive interest in Bitcoin that sparks demand up and therefore prices go up as well since supply is limited. Of course it could crash, but in the end its value should be relatively stable since the supply is limited - and since the other currencies are going the way of mass inflation (in Japan they recently announced that they want to double the amount of cash in circulation, artificially, in the US you have a massive wall of debt that is never going to go away, and in Europe the public debt crisis is going to crush the currency as well and very likely split the Euro Zone in the short-mid term), Bitcoin could seem like a safer bet for some. 

Interesting times.
 
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I don't really understand how currencies are created, which is totally different to how they work..  That said, I have a hard time understanding how someone (other than a government) can create a currency from nothing. Who's to say the issuer cant create/issue some for themselves or friends for example and be millionaires .   That's why I made the pyramid comment, not that it is one, but because it sounds as dodgy as one.

I always thought governments printed money via a system known as “open market operations” which is a complex system which I read about here: http://welkerswikinomics.com/blog/2010/08/28/why-cant-the-government-just-print-more-money-not-such-a-silly-question/
 
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Seems to me that you might have a lot bitcoin spin-off's in the future and that will certainly lead to devaluation. I would be a bit less concerned if this was an official currency and governments would accept it as such. 

The idea behind it is great though. 
 
I don't really understand how currencies are created, which is totally different to how they work..  That said, I have a hard time understanding how someone (other than a government) can create a currency from nothing. Who's to say the issuer cant create/issue some for themselves or friends for example and be millionaires .   That's why I made the pyramid comment, not that it is one, but because it sounds as dodgy as one.

I always thought governments printed money via a system known as “open market operations” which is a complex system which I read about here: http://welkerswikinomics.com/blog/2010/08/28/why-cant-the-government-just-print-more-money-not-such-a-silly-question/
You do not need a government to create a currency. A currency is a medium of exchange. There were currencies in the world well before there were established governments. 

It's only VERY recently that governments have acquired the monopoly of issuing a currency. 

About your comment regarding issuing money: first, it's illegal in most countries to make your own currency nowadays, and then, even if you create it, it has no value as long as nobody uses it. I can say tomorrow that red shells is a new currency, but if noone trades it, its value is nil. 

Currency gets its value through trust. 

 I would be a bit less concerned if this was an official currency and governments would accept it as such. 
If I were you I would rather be worried about the future of your Euros/Dollars/Yen or other currencies backed up by governments on the verge of bankruptcy. Did you see what happened in Cyprus recently ? 
 
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To me currency is created as an exchange of value. Not just printed, as Bitcoins are effectively doing. 

It's a question of how it's generated/printed in the first place. Not how it is used.  

Real currencies are printed backed by real value items like gold etc.  (When they are on the level that is).  It is just not printed in exchange for a decrypted number which has no established value, that's not how real money is based and created. There is a value exchange propostion which currency is meant to be based on.
 
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To me currency is created as an exchange of value. Not just printed, as Bitcoins are effectively doing. 


It's a question of how it's generated/printed in the first place. Not how it is used.  


Real currencies are printed backed by real value items like gold etc.  (When they are on the level that is).  It is just not printed in exchange for a decrypted number which has no established value, that's not how real money is based and created. There is a value exchange propostion which currency is meant to be based on.
I guess nobody told you that the gold standard was abandoned in 1972.

On top of that, you did not read my earlier posts. There is no intrinseque value to Gold. Gold only has value because people use it. 

And bitcoins are not printed, they are mined and there is maximum number of bitcoins that can be mined and no more. Nothing like dollars or current paper currencies which can actually be printed.
 
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Its not just Gold , that was an example and you know that.  The point is , cash generally is just not printed , its backed by intruments of value which take all sorts of forms. But all of which are established value items which unfortunately decrypted numbers are not.

Which is the point, Bitcoins are effectively printing cash backed by absolutely nothing of value.  
 
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Its not just Gold , that was an example and you know that.  The point is , cash generally is just not printed , itsbacked by intruments of value which take all sorts of forms. But all of which are established value items which unfortunately decrypted numbers are not.

Which is the point, Bitcoins are effectively printing cash backed by absolutely nothing of value.  
When you make a point it is preferable to clarify what you mean. What instruments of value are you talking about ? Have you ever heard of quantitative easing? Do your so called instruments of value apply in that case?? Then explain why the current currencies have lost so much value vs Gold if the instruments you think are out there are working? 

And Bitcoin is not printed and cannot go over a maximum number of bitcoins available. So your comparison makes no sense and you cannot print bitcoins as much as you want. Check how bitcoin works before making statements.
 
The problem with bitcoins is that the idea itself is not protected. That is why I like governments to support it. Without that it can fail very easy. 

The Euro will be protected even though there are issues, I am not very worried about its value. 

That is why I agree with Vcoleiro that the idea behind bitcoins have a lot of similarities with pyramid schemes. I don't think it is a scheme but the early adapters can make a huge amount of money. The later you buy them the higher the risk of losing lots of money (maybe everything).  

http://bitcoincharts.com/charts/mtgoxUSD#rg60ztgSzm1g10zm2g25zv

That can happen with usual currencies as well, but there is a lot of experience with those currencies (backed by governments). 
 
Its not just Gold , that was an example and you know that.  The point is , cash generally is just not printed , itsbacked by intruments of value which take all sorts of forms. But all of which are established value items which unfortunately decrypted numbers are not.

Which is the point, Bitcoins are effectively printing cash backed by absolutely nothing of value.  
When you make a point it is preferable to clarify what you mean. What instruments of value are you talking about ? Have you ever heard of quantitative easing? Do your so called instruments of value apply in that case?? Then explain why the current currencies have lost so much value vs Gold if the instruments you think are out there are working? 

And Bitcoin is not printed and cannot go over a maximum number of bitcoins available. So your comparison makes no sense and you cannot print bitcoins as much as you want. Check how bitcoin works before making statements.
Bitcoins are just created, effectively printed - generated by bitcoin mining . Bitcoin mining is people running algorithms to decrypt a number. . Decrypting a number has no value. Perhaps you should have read my first post where I mentioned how they are created. Yes there are a restricted amount that are released each year - And, so what ? - The point is they are not generated in exchange or backed by anything of value - Absolutely Nothing!

The US government for example has in hold bonds, gold, land etc etc that backs its currency to an extent. IT's not completely backed in total value, but it is backed to an extent. Yes the currency is floated and goes up and down on the exchange rates.  It would especially go down if it prints money in exchange for nothing of value. You know, like  what bitcoins is effectively doing.

 What is backing bitcoins?
 
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Money is not backed at all by anything physical. The government can print more bills at its discretion. It doesn't need permission, it doesn't need to find any more gold or precious gems or make deals with another country, it simply does it. The gold reserves, the real estate, foreign bonds, none of that is backing the US currency, it is all stuff that the US has purchased with currency which it literally created out of thin air.

So if governments can just arbitrarily make more money, why don't they and become the richest country in the world? Because currency is only valuable to people who will accept it: if the US government printed off enough money to give $1000000 to everyone (and in this digital age they don't even need to print it, just electronically hand it out) in the US all that would happen would be everyone in the US could spend an extra million. But then, because everyone has an extra $1000000 you would get rapid inflation: price is effected by supply and demand, when more people have money, demand goes up and supply lags behind so price skyrockets. Spain tried this, they had an influx of gold, turned it all into coins (because they didn't have computers to store numbers like we do) and for a brief moment everyone enjoyed being rich; then inflation happened and everyone was poorer than they started.

There's also foreign trade: the US dollar has no real value in other countries. If you come to Canada, you need to buy Canadian dollars. Think of the Canadian dollar as just another product, and you need to buy it if you want to travel to Canada. You buy CAD from a foreign exchange broker who works with a Canadian Foreign Exchange broker and they reach an agreement. "I have 100 USD. I will give this to you so that you can buy stuff here in the US in exchange for 100 CAD so that I can do the same in Canada", and just like with any other product, the exchange rate is affected by supply and demand: if more people have more money and want to travel more they will need more foreign currency so the price of that currency will go up. This happens whether you explicitly exchange cash or just use your credit card for foreign transactions: someone somewhere is buying and selling the currency you are using. Germany tried doing this as well, and I think we can safely say it didn't go so well.

It's really easiest if you stop thinking about currency as anything special and realize that currency is just another product. I trade 2 pigs for your cow. I trade 2 pigs for $1000. Exact same thing. The biggest difference is that the scarcity is entirely controlled by the government: while they can create money at will they can also destroy money, and this balance allows the currency to remain more-or-less stable year to year, where the number of pigs, cows, crops, and everything else we might barter with can fluctuate wildly month by month.

And this is where bitcoins come in. They have a value because, like any product, someone wants to buy them. They have a purpose and people are willing to exchange their government issued money for them. The fact that it is called a currency is just confusing you, just think of them as stamps, or bottle caps, or whatever arbitrary item you want, and imagine a world where some people really want these items. I can buy fancy old stamps for hundreds of dollars, I can trade those stamps for other stamps, if I find a fellow collector I can bargain them to accept this old stamp for their XBox. If suddenly a lot of people want that stamp, he might then find someone to trade that stamp for a car. The value of the car hasn't come down, the government issued currency I originally used to buy the stamp is still the same value, I can still walk into a store and buy an XBox for the exact same price as I did before the stamp was suddenly worth a car, it's just that now the stamp itself is worth significantly more.

Replace "stamp" with "bitcoin".

To answer your final question "what is backing bitcoins?", I will say again, bitcoins are backed by the exact same thing as the USD, and the CAD, and every other currency in the modern world: absolutely nothing. They have value because people want them to have value. They have value because they are stable and they are stable because the government makes them so.

To answer the ancillary question "how is the price of bitcoins going up while they're effectively just printing them off?" Simply because the demand is outstripping supply: people want bitcoins faster than they can be mined. Following numbers are used for example purposes only and do not reflect reality: 3 days ago one person wanted bitcoins, 2 days ago two people wanted them, yesterday four people wanted them, today eight people want them, but in that time only 2 new coins were created, and those 8 people are fighting over those two coins. This is why I said the current growth is unsustainable, unless 16 people want bitcoins tomorrow and 32 people the day after, the rate of growth will start to slow and eventually stop. Then supply will start to catch up and the demand will start to come down as will the price.

The most interesting thing about bitcoins as a currency though is that, unlike government backed currencies which are arbitrarily created and destroyed whenever and however much they want, bitcoins can neither be destroyed nor created arbitrarily, they must be mined, and once mined they exist forever. Furthermore, while government currencies have no limit to how much they can create, bitcoins are hard limited by the algorithm: one day we will have generated every single bitcoin, and then there will be no way to get any more.

tl;dr;

If it makes you feel better, think of bitcoins as being nothing more than electronic gold, not a currency. It is mined, bought, sold, and exchanged with government backed currencies.
 
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Well I see it like this, the US has power to govern rules and law that give it's currency legitimacy and value. It partly has this power by the reserves of real value wealth (gold, land etc). That's what I mean by being able to back it

There has been a number of scams around the world where people have lost there bitcoins because there is no governance over bitcoins.  No rules , law or enforcement.  
 
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Personally I am only interested in bitcoins as a short term (but risky) investment. Value seems to be sky rocketing right now. Wouldn't surprise me if its value doubled in the next few months. 

Just installed bitcoin-qt. I think I am going do a bit of gambling :)  
 
There has been a number of scams around the world where people have lost there bitcoins because there is no governance over bitcoins.  No rules , law or enforcement.
Forget everything else I said, I tried to condense four months of macro economics into a single post and obviously didn't explain it well enough.This is all you need to understand:

If it makes you feel better, think of bitcoins as being nothing more than electronic gold, not a currency. It is mined, bought, sold, and exchanged with government backed currencies.
Just like your gold jewelery can be stolen and the only recompense you have is insurance, if you're worried about your bitcoins being similarly stolen take out some insurance on them.
 
Bitcoins are just created, effectively printed - generated by bitcoin mining . Bitcoin mining is people running algorithms to decrypt a number. . Decrypting a number has no value.
Digging gold out of the ground holds no value unless someone wants the gold. What if gold (or diamonds) are discovered on the moon and China's space programme brings it back to earth. Sure, initially people will pay extra for "Moon Diamonds!!!", but soon enough the market price for diamonds will diminish as supply increases.

Tying a currency to the price of a rare metal that has to be dug up from the earth at some expense is pointless and why most currencies are no longer tied to gold. Crunching away on chunks of data in the bitcoin mining process has no value either other than to get the bitcoin, which, like gold only has value if there is a market for it.


I think bitcoins are an interesting experiment, but one I'm happy to watch from the sidelines for now.
 
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^ Well gold out of the ground has an established value.  It's value can and does change. But one things for certain, it has some value .  It's used in jewellery, electronics etc. 
 
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There has been a number of scams around the world where people have lost there bitcoins because there is no governance over bitcoins.  No rules , law or enforcement.
Forget everything else I said, I tried to condense four months of macro economics into a single post and obviously didn't explain it well enough.
This is all you need to understand:

>>If it makes you feel better, think of bitcoins as being nothing more than electronic gold, not a currency. It is mined, bought, sold, and exchanged with government backed currencies.
Just like your gold jewelery can be stolen and the only recompense you have is insurance, if you're worried about your bitcoins being similarly stolen take out some insurance on them.
Can you insure bitcoins?.

The scams I was referring to involve people sending in there bitcoins fo be invested or exchanged for real money. They never saw them again. What recourse do they have if it's not a currency recognised by their countries law.  
 
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