That BitCoin Thing..

[Raithe]

So something I stumbled across the other day, and I was curious. How many of you folks know about it? Anyone tried it yet?

 

http://bitcoin.org/

 

Bitcoin is an experimental new digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out collectively by the network. Bitcoin is also the name of the open source software which enables the use of this currency.

The software is a community-driven open source project, released under the MIT license.

 

 

 

Bitcoin is one of the first implementations of a concept called crypto-currency, which was first described in 1998 by Wei Dai on the cypherpunks mailing list. Building upon the notion that money is any object, or any sort of record, accepted as payment for goods and services and repayment of debts in a given country or socio-economic context, Bitcoin is designed around the idea of using cryptography to control the creation and transfer of money, rather than relying on central authorities.

 

Edited February 19, 2013 by Raithe

[AGX-17]

Old news, never took off.

[Janmanden]

First time I saw a reference of it was in a discussion about graphics cards, something about 'bitcoin mining' or some such and I assumed it was related to some kind of gpu-computing.. Didn't care much about it. Never tried it.  

[JFSOCC]

Was cool, wanted to get involved since I had a pretty powerful graphical card (at the time)

But I found it was impossible to get the information I needed

 

And then the major trader of Bitcoin collapsed and took with it a large chunk of the market, I believe it never recovered after that.

Good idea, needs work, eventually it'll come back in some other shape, and then it's worth trying again.

[Gfted1]

So this is PayPal without the oversight? Give them real money and they will give you digital money? Sounds like a good way to get jacked.

[JFSOCC]

Not exactly, the idea was that there was a set amount of bitcoins in the world, each with their own ID so they could never be destroyed, and the supply would always be limited. Eventually they'd stop adding new coins to the supply (nothing more from mining) so you'd not have the value of the coin deflate. Making it an excellent standard as reserve money.

Ofc, the actual value would still fluctuate based on what people would imagine it was worth...

[samm]

Jup, Bitcoin seems like an excellent idea and, to me, on a philosophical level was an inspiration to think about how money actually works, and could work in an ideal situation. Never thought about that before. JFSOCC's last post sums it up nicely.

 

The bitcoin's inherent uniqueness and their creation algorithm are, even if the current "currency" should become worthless for lack of user's trust in it, a solid base for a future virtual currency (well, what currency isn't virtual anyway...)

 

It already doesn't pay anymore to mine for new Bitcoins using standard GPUs. Don't know if we're even already past the point where specialised FPGAs still afford a net benefit.

[Gfted1]

I use my bank card for literally 100% of my transactions. I have not carried cash in years. What does Bitcoin do different / better?

[Humanoid]

For most users, the appeal was that it was free money, which is the best kind of money. If your electricity was cheap enough, it meant that (environmental concerns aside), you'd be getting free money by letting your PC run some calculations overnight instead of turning it off. However it now sounds like the amount of "work" (and therefore time) to earn any real money is now so high that it really isn't worth it unless your electricity is free.

[samm]

I use my bank card for literally 100% of my transactions. I have not carried cash in years. What does Bitcoin do different / better?

Firstly, it's its own currency, while with your bank card, you pay in $.

 

Secondly, there are some fundamental differences. As noted above, each bitcoin is uniquely identified, that means contrary to a currency like dollars, they cannot be created from thin air. In contrast, other currencies can: the FED can create dollars directly (by giving free loans to banks or physically printing and giving it away), and banks do create dollars indirectly by only keeping a small percentage of the money really at their disposal as a security while "gambling" with the rest. Example is lengthy, thus in spoiler-tag:

Say you put $ 1000 on your bank account at bank A. The bank leaves $ 100 there and gives out $ 900 to someone else as a loan (the idea is, that the bank A can thus earn money by the interest to be payed by the debitor, and will sooner or later have the money plus interest back, while it still has enough other reserves/own cheap credits in case you will want your $ 1000 payed back before the debitor will pay his loan back to the bank). In this situation, you still see $ 1000 on your bank account, but the other person also sees $ 900 on their bank account at the same time! Now assume the other person puts that money on an account of another bank, bank B. This bank has now received $ 900 at its disposal, so it wants to earn some money from that money. So it keeps $ 90 of this money for security reasons and gives out the remaining $ 810 to some other person as a loan. At this point in time, you see $ 1000 cash on your bank account at bank A, and the other person sees $ 900 cash on their bank account at bank B and a third person has received $ 810 and will put that on a bank account as well. So from your "existing" $ 1000 there has now become $1000 + $900 + $810, i.e. $2710

 

You see where this is going to? The system can only work if people actually pay back their loans otherwise: instant collapse, because the VAST amount of money is not actually in existence.

 

This cannot happen with bitcoin - there is only existing money, because each part is uniquely identified, and new money cannot be created from thin air, but it has to be calculated at an ever increasing cost (cost measured in ever increasing computation effort per bitcoin, directly measurable in this case in the form of the bitcoin-miners' electricity bill - and as said before, we're already at the point where electricity to calculate new money is more expensive than the money itself is currently worth.)