BitCoin: Should I Sign Up?

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Rob Lister
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BitCoin: Should I Sign Up?

Post by Rob Lister »

Should this be in a different forum too? All my threads are so muddled. Anyway

BitCoin


A rhetorical question really 'cause I've already decided to do it. Without your permission. I am looking forward to somebody here telling me 1) what a mistake it is, or 2) how useless it is, or 3) how flawed it is or 4) what a a great idea it is but I'm still an asshole.

If you haven't heard of it, here's the wiki of it.

http://en.wikipedia.org/wiki/Bitcoin
Q. What is Bitcoin?

A. Bitcoin is a peer-to-peer currency. Peer-to-peer means that no central authority issues new money or tracks transactions. These tasks are managed collectively by the network.

Q. How does Bitcoin work?

A. Bitcoin utilises public-key cryptography. A coin contains the owner's public key. When a coin is transferred from user A to user B, A adds B’s public key to the coin, and the coin is signed using A's private key. B now owns the coin and can transfer it further. A is prevented from transferring the already spent coin to other users because a public list of all previous transactions is collectively maintained by the network. Before each transaction the coin’s validity will be checked.
It's all very technical really. I don't get it all. I grok it but I don't understand the finer details.

Dive head first.
gnome
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Re: BitCoin: Should I Sign Up?

Post by gnome »

What are the coins for?

And you're still an asshole.
Rob Lister
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

gnome wrote:What are the coins for?
The same thing your nickels, dimes and quarters are for. In a word: Stuff.

Those that accept the bitcoin currency will give you stuff in return for your bitcoins. With 'stuff' being defined as something you want.

But that's the easy part of it really. The hard part is getting your head around the distribution part of it.

Join me?

http://bitcoin.org/
gnome
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Re: BitCoin: Should I Sign Up?

Post by gnome »

Seems blocked at work. I kind of get the distribution method... the collective validation files serve as multiple redundant backups to each other.

How do bitcoins enter circulation?
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Re: BitCoin: Should I Sign Up?

Post by DrMatt »

It's a virtual global currency, more or less the opposite of local currency. Like any currency, its value depends purely upon everybody acting as if it had value.
Rob Lister
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

gnome wrote:Seems blocked at work. I kind of get the distribution method... the collective validation files serve as multiple redundant backups to each other.

How do bitcoins enter circulation?
that would be the part that I have a hard time wrapping my head around.

from an article on it...
Bitcoins are "mined" when you set your Bitcoin client to a mode that has it compete to update the public log of transactions. All the clients set to this mode race to solve a cryptographic puzzle by completing the next "block" of the shared transaction log. Winning the race to complete the next block wins you a 50-Bitcoin prize. This feature exists as a way to distribute bitcoins in the currency's early years. Eventually, new coins will not be issued this way; instead, mining will be rewarded with a small fee taken from some of the value of a verified transaction.

Mining is very computationally intensive, to the point that any computer without a powerful graphics card is unlikely to mine any bitcoins in less than a few years.
so, essentially you get paid for being a bitcoin accountant...kinda.
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Re: BitCoin: Should I Sign Up?

Post by DrMatt »

...virtual mining.
Of a puzzle.
How do existing governments decide how much money to mint?
specious_reasons
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Re: BitCoin: Should I Sign Up?

Post by specious_reasons »

I was tempted to sign up for bitcoins. I certainly have enough computing power, and I have a tendency to leave the computer on all the time. I heard about from Econ Talk - it's probably worth a listen. I think in the end is was just laziness and I didn't sit down in front of the PC to find the software.
Rob Lister
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

corplinx wrote:You burn coal and get a virtual currency that is probably just a scam to make the creator rich.

Bitcoin mining basically means running your power efficient cpu or gpu in full speed mode.

Thumbs down. Plus, it sounds like a scam, feels like a scam, quacks like a scam.
You're a technical guy, can you find the flaw that makes the scam? I can't, but I'm not really that technical.

can you think of a currency that is not a scam? less of a scam?

some people covet them to some extent. Really, that's all that is required.

here's a cool 'how it works' video

[youtube]Um63OQz3bjo[/youtube]
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Re: BitCoin: Should I Sign Up?

Post by Mentat »

Going to go with Corplinx here. Don't trusts its, my precious. Not that I think the creators had a malicious intent in making it.
Rob Lister
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

Mentat wrote:Going to go with Corplinx here. Don't trusts its, my precious. Not that I think the creators had a malicious intent in making it.
what's to trust? what's to risk?
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Re: BitCoin: Should I Sign Up?

Post by gnome »

I don't trust the basic idea--running your CPU at no constructive purpose, and arbitrarily awarding the biggest computing time wasters?

I would think that any system of currency should be based on some kind of wealth creation to accumulate.
Rob Lister
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

gnome wrote:I don't trust the basic idea--running your CPU at no constructive purpose, and arbitrarily awarding the biggest computing time wasters?

I would think that any system of currency should be based on some kind of wealth creation to accumulate.
well, in mining, the CPU cycle's go to validating transactions so it has a constructive purpose, but I get your drift.

Still, upon what type of wealth creation is your currency based?
ed
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Re: BitCoin: Should I Sign Up?

Post by ed »

Maybe it is to use up the processing freed by the demise of SETI at home.
Rob Lister
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

ed wrote:Maybe it is to use up the processing freed by the demise of SETI at home.
Egg-zakly! My CPU cycles have value. They have value to SETI@home, einstein@home, lhc@home and lots of others.

Here is a pretty good list of organizations vying for my cycles
http://distributedcomputing.info/projects.html

If they want my cycles, they gotta pay me.

now, while I'll accept visa, mastercard, paypal and bitcoin, conceptually, bitcoin is the most logical currency for the trade.
gnome
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Re: BitCoin: Should I Sign Up?

Post by gnome »

Rob Lister wrote:
gnome wrote:I don't trust the basic idea--running your CPU at no constructive purpose, and arbitrarily awarding the biggest computing time wasters?

I would think that any system of currency should be based on some kind of wealth creation to accumulate.
well, in mining, the CPU cycle's go to validating transactions so it has a constructive purpose, but I get your drift.

Still, upon what type of wealth creation is your currency based?
I missed that bit. So the CPU cycles go to the functioning of the system as a whole.

US currency is based on wealth created in the economy. The fed actually manipulates the money supply ostensibly to match the current economic environment, in which the creation of wealth matters significantly.
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Re: BitCoin: Should I Sign Up?

Post by clarsct »

What is a bitcoin worth?

I understand the currency part..worldwide currency...et cetera. They have some way of generating them...K.

But like all currency, it must be translatable...X Yen is worth Y Euros, and so forth.

So 100 bitcoins = ?

I realize currency markets also change. But in estimated figures, or even at a certain date, what's the number?

If it cannot be thus translated, then I think it is a waste of CPU cycles.

If it can be thus translated, then I think it's a very easy way to make money, even if 1000 bitcoins = $.01
specious_reasons
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Re: BitCoin: Should I Sign Up?

Post by specious_reasons »

clarsct wrote:What is a bitcoin worth?

I understand the currency part..worldwide currency...et cetera. They have some way of generating them...K.

But like all currency, it must be translatable...X Yen is worth Y Euros, and so forth.

So 100 bitcoins = ?

I realize currency markets also change. But in estimated figures, or even at a certain date, what's the number?

If it cannot be thus translated, then I think it is a waste of CPU cycles.

If it can be thus translated, then I think it's a very easy way to make money, even if 1000 bitcoins = $.01
https://en.bitcoin.it/wiki/Trade
There are over 100 sites which accept bitcoins, along with some currency exchange sites. I looked at one exchange site, and it looks like the last trade was 7 bitcoins/USD. The chart is not clear on units, so I could be off by orders of magnitude.

Most of the sites look like small businesses with techie-geeky people running them.
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Re: BitCoin: Should I Sign Up?

Post by Anaxagoras »

All the clients set to this mode race to solve a cryptographic puzzle by completing the next "block" of the shared transaction log.
Could this have a nefarious purpose?

Does this "cryptographic puzzle" mean that you are helping them hack into something?
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Re: BitCoin: Should I Sign Up?

Post by Anaxagoras »

corplinx wrote:You burn coal and get a virtual currency that is probably just a scam to make the creator rich.

Bitcoin mining basically means running your power efficient cpu or gpu in full speed mode.

Thumbs down. Plus, it sounds like a scam, feels like a scam, quacks like a scam.
Is that enough to make a difference in your electric bill?
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Re: BitCoin: Should I Sign Up?

Post by gnome »

I'm actually renewing my point about getting your PC to do something constructive because I realized what bugged me about the answer.

If all the CPU cycle usage is only for sustaining the system that creates and distributes the bitcoins, it is still accomplishing no more than doing nothing. So I'm not sure why bitcoins should be considered valuable except for a curiosity effect.
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

corplinx wrote:Originally, bitcoins were basically worthless, now they are are about 7 bucks a coin? The rumor is, the creators farmed most of the coins to begin with, and waited for careful astroturfing of sites like slashdot to create interest so they could dump their coins and become millionaires.

I applaud the audacity of such a thing.
The technical discussion on the creation and distribution of bitcoins seems to imply that the rumor cannot be true, but let's say that rumor is true.

How does that impact the value of the currency?
Class-warfare arguments withstanding, so long as people can [and do] buy and sell using the currency, does it matter?
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

gnome wrote:I'm actually renewing my point about getting your PC to do something constructive because I realized what bugged me about the answer.

If all the CPU cycle usage is only for sustaining the system that creates and distributes the bitcoins, it is still accomplishing no more than doing nothing. So I'm not sure why bitcoins should be considered valuable except for a curiosity effect.
Every currency has to be bootstrapped in some fashion. If you think too hard about any currency you'll always find the smoke and mirrors behind it. It is the 'curiosity effect' that got me to sign up. It doesn't matter how you assign value, so long as value is assigned. What matters is whether or not it is useful and the extent to which it is stable.
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Re: BitCoin: Should I Sign Up?

Post by gnome »

But as bitcoins accumulate and circulate, won't their value degrade over time, with no equivalent of a central bank adjusting the supply?
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

gnome wrote:But as bitcoins accumulate and circulate, won't their value degrade over time, with no equivalent of a central bank adjusting the supply?
Deflation! IOW, as more people use bitcoins, and the supply maxes out at 21m, the existing bitcoin holdings become more, not less valuable. Not a scary thing if it is expected. And if each bitcoin can be subdivided indefinitely (not indefinite but close enough) then it doesn't matter.
Capture.JPG
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Re: BitCoin: Should I Sign Up?

Post by Mentat »

4 million addresses were enough.
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Re: BitCoin: Should I Sign Up?

Post by gnome »

Rob Lister wrote:
gnome wrote:But as bitcoins accumulate and circulate, won't their value degrade over time, with no equivalent of a central bank adjusting the supply?
Deflation! IOW, as more people use bitcoins, and the supply maxes out at 21m, the existing bitcoin holdings become more, not less valuable. Not a scary thing if it is expected. And if each bitcoin can be subdivided indefinitely (not indefinite but close enough) then it doesn't matter.
Capture.JPG
Is that 21m a hard limit?

And that dynamic goes to the idea of the earliest people in get the most value.
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Re: BitCoin: Should I Sign Up?

Post by DrMatt »

This is where a mathematician is needed to determine whether racketeering laws apply... Hm!
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

gnome wrote:
Rob Lister wrote:
gnome wrote:But as bitcoins accumulate and circulate, won't their value degrade over time, with no equivalent of a central bank adjusting the supply?
Deflation! IOW, as more people use bitcoins, and the supply maxes out at 21m, the existing bitcoin holdings become more, not less valuable. Not a scary thing if it is expected. And if each bitcoin can be subdivided indefinitely (not indefinite but close enough) then it doesn't matter.
Capture.JPG
Is that 21m a hard limit?

And that dynamic goes to the idea of the earliest people in get the most value.
yes. yes, assuming they are good savers.
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Re: BitCoin: Should I Sign Up?

Post by gnome »

Someone else who considers the bitcoins to be worth something may offer you something you want, in exchange for those you accumulate.
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Re: BitCoin: Should I Sign Up?

Post by gnome »

I realize this isn't explicitly an MLM scheme, but some of the incentives remind me of pyramid marketing. Get in early and spread the word. Mathematically speaking, the longer it goes on and the more popular it is, the less able a new participant is to be able to accumulate the wealth early starters did.
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Re: BitCoin: Should I Sign Up?

Post by specious_reasons »

gnome wrote:I realize this isn't explicitly an MLM scheme, but some of the incentives remind me of pyramid marketing. Get in early and spread the word. Mathematically speaking, the longer it goes on and the more popular it is, the less able a new participant is to be able to accumulate the wealth early starters did.
Part of the intention of the generation system was to benefit early adopters. I thought bitcoin generation slows down over time, which long term would even the playing field.

Although another way to collect bitcoins is to sell goods or services and accept bitcoins as payment. Obviously, this is the proclaimed goal.
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Re: BitCoin: Should I Sign Up?

Post by DrMatt »

This is badly begging for satire.
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Re: BitCoin: Should I Sign Up?

Post by Cool Hand »

gnome wrote:I realize this isn't explicitly an MLM scheme, but some of the incentives remind me of pyramid marketing. Get in early and spread the word. Mathematically speaking, the longer it goes on and the more popular it is, the less able a new participant is to be able to accumulate the wealth early starters did.
Yes. This is just MLM.

CH
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Re: BitCoin: Should I Sign Up?

Post by EvilYeti »

corplinx wrote:Originally, bitcoins were basically worthless, now they are are about 7 bucks a coin? The rumor is, the creators farmed most of the coins to begin with, and waited for careful astroturfing of sites like slashdot to create interest so they could dump their coins and become millionaires.

I applaud the audacity of such a thing.
You are really, really bad at math.

The only real scam going on is that some of the supercomputer sites have caught staff (or hackers) stealing cycles to "mine" bitcoins.
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

corplinx wrote:You burn coal for imaginary currency.
what method would you prefer for initial distribution? I think they should have made a deal with some of the big distributed computing organizations (like seti or einstein) but that's just me. still, it's working.

and all currency is imaginary.
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Re: BitCoin: Should I Sign Up?

Post by Nyarlathotep »

corplinx wrote:You burn coal for imaginary currency.

Cool. I'll get some bitcoins and use then to buy magi items for a World of Warcraft character.

Then I'd be using imaginary currency to buy imaginary things for imaginary people in an imaginary place.
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Re: BitCoin: Should I Sign Up?

Post by Rob Lister »

Nyarlathotep wrote:
corplinx wrote:You burn coal for imaginary currency.

Cool. I'll get some bitcoins and use then to buy magi items for a World of Warcraft character.

Then I'd be using imaginary currency to buy imaginary things for imaginary people in an imaginary place.
and when you're done playing games you can sell your bitcoin stock, hopefully at a profit, buy a fishing rod, and relax a different way.
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Re: BitCoin: Should I Sign Up?

Post by gnome »

Rob Lister wrote:
corplinx wrote:You burn coal for imaginary currency.
what method would you prefer for initial distribution? I think they should have made a deal with some of the big distributed computing organizations (like seti or einstein) but that's just me. still, it's working.

and all currency is imaginary.
I would have preferred a distribution method that doesn't start with most of the money in the hands of people that have produced nothing and provided nothing.
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Re: BitCoin: Should I Sign Up?

Post by DrMatt »

gnome wrote:I would have preferred a distribution method that doesn't start with most of the money in the hands of people that have produced nothing and provided nothing.
Alas, that is one of the puzzles of Western Civilization. But this case is particularly clear.