Home Forums General Discussion Bitcoin? :-/

This topic contains 20 replies, has 14 voices, and was last updated by  Chel View Post.

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  • #24837

    Can anyone explain the Bitcoin phenomena in simple language? Is it just a small-scale fad, or something to keep an eye on?

    Thanks,

    George

    #24842

    Bitcoin is a virtual peer-to-peer(p2p) currency. You gain access to this p2p network by either downloading a bitcoin client or using an online wallet service, which has access to this p2p network. Basically, it is like bit torrent, except that each client connected to the network is sharing the same file, known as the ‘blockchain‘. This blockchain contains all of the ‘money‘, as well as all of the transactions that have taken place since bitcoin was first introduced. To get access to that money, one needs the addresses to their location within the blockchain, as well as a ‘private key’. This information is contained in a wallet file, on the clients computer. When that client makes a transaction, the wallet file will point to different addresses that reflect the new balance. The encryption that is used on these files is impossible to crack with current technology.

    The advantages of Bitcoin

    • It is a decentralized currency (The ‘bank’ or ‘federal reserve’ of bitcoin are all those clients downloading the blockhain, not some snakes who print up as much money as they want)
    • Allows for ‘anonymous’ transactions (relatively speaking)
    • Amount of maximum bitcoins is limited, meaning it’s value as a currency may go up over time (unless and until a superior virtual currency overtakes it)
    • Low fees for sending coins (Send bitcoins to someone half way across the world and they exchange it for cash. Pay much less in fees than western union)

    The disadvantages of Bitcoin

    • A government or huge company could try to gain over 51% of the p2p network and mess around with the blockchain file, effectively killing it (Will be less likely as more people mine it)
    • Transactions are irreversible (Not much you can do if you send money to an anonymous scammer. And with bitcoin, there are many scammers!)
    • Not many online vendors accept it yet (That can change over time)
    • Long transaction wait times (The transaction does actually happen instantly, but a lot of vendors usually wait about 1 hour for confirmations that the payment went through)
    • The value of it is very volatile (today it’s worth $600, tomorrow it might be 50% more or 80% less)
    • The blockchain size keeps growing (Eventually, it may be too large to store it on a personal computer, and have to be on servers only)

    I noticed a lot of people on the web are interested in buying bitcoin as an investment, hearing that it’s going to be worth $1000 or $10000 soon. You have to keep in mind that there are people who have a lot of bitcoins that are constantly praising bitcoin and trying their best to whore it to the media. Many of those people bought it simply to hold it for the price to go up and then sell it. The people who buy it from them are also buying it to hold it for the price to go up and sell it to the next person who is buying it for the same reason. Eventually, it will reach a price where no one is going to buy it, and it will crash. As there are currently lots of people flocking to buy bitcoin now, it may be a while before this happens.

    The real value that derives from bitcoin is based on those advantages that I listed above (And maybe others that I forgot about), and not from people who plan to hoard it and sell. Eventually the price of bitcoin will reflect the real value, and that price may be higher or lower than what it is right now. If you are interested in getting into bitcoins, I suggest you do a lot more reading on the subject before plunking down 1000’s of $$$$ into it.

    Here is some advice I can offer if you do decide to get into bitcoins:

    • Do not use an online wallet (There are a lot of potential problems: website gets hacked, company runs away with your money, ddos attack and can’t log into website, etc.)
    • Don’t leave large amounts of money in an exchange for long periods of time (These can also run into the same problems as above)
    • Be careful who you trust when buying stuff with bitcoin (Nothing you can do if you get scammed)
    • If someone sends you a payment and it doesn’t show up in your client right away, don’t panic (These things happen sometimes, there are ways to verify it was sent)
    • Make backups of your wallet file and encrypt them (If you lose that file, you lose your coins)
    • Do business that earns bitcoins instead of buying them (I have a friend who sold a virtual item for 1 bitcoin and so far has had hundreds of buyers)
    • Be wary of predictions that bitcoins are going to be worth x amount of dollars soon (Unless they have something of substance in their claim)
    • Be wary of companies selling ASIC mining equipment (Many are flat-out scams, or will ship the equipment once it becomes obsolete. Even the legit ones take a long time to ship)

    Here’s a good site where you can keep an eye on the BTC and other cryptocurrencies prices:

    http://btc-e.com

    And another one where you can see BTC transactions in real time:

    http://fiatleak.com

    I hope it helps people who are still confused about bitcoin. Feel free to add your criticisms/suggestions and point out any mistakes in this post.

    #24846

    Thanks @TomSmith. great explanation.

    #24854

    Thanks, @TomSmith, that’s the most sensible explanation I’ve heard.

    #24858

    If you want to start your bitcoin business right away, go to invest on bitcoin itself rather than mining.

    To see who is causing the motion, go to https://vip.btcchina.com/

    #24868

    Wow, I had no idea what it was really about. I just saw CNBC talking about it a lot so I thought it was a crummy investment! In theory I think it might be good, but without many safeguards, I think I would be hesitant to try it.

    #24872

    Well, you can start your bitcoin investment by accepting to your service or products, as long as they are digital, so you won’t risk much.

    #24933

    I’ve been hearing about bitcoin for a while now.  I think I heard someone in the news say that there have been people making a lot of money from it.  I find it all a little strange as it is virtual currency.  Is it recognized by governments as being legitimate currency?

    #24936

    Thanks a lot, TomSmith, for explaining what bitcoin’s about. I’ve heard the word flown around in passing, but had little clue about it, except that it was some form of currency.

    What I wanted to ask is: can bitcoin currency be exchanged for real currency, like how Paypal money can be transferred into a bank account?

     

    #25003
    #25005

    I just checked on btc-e.com and the price for one bitcoin went up to $800+. If Amazon starts accepting BTCs then I think the price will go up a hell of a lot more. what do you think?

    #25009

    It’s definitely something to keep an eye on but I would not invest heavily in it right now. It needs to stabilize a bit before I would think about it. Anyways, it is risky and you should not invest money that you cannot afford to lose.

    #25014

    @cezar,

    a videogame company accepts bitcoins and pushes it up to 1000+

    It’s said that facebook is going to accept bitcoins to pay for the games and ads, let’s wait and see.

    #25018

    Bitcoin is a digital currency created in 2009 by Satoshi Nakamoto. The name also refers both to the open source software he designed to make use of the currency and to the peer-to-peer network formed by running that software.
    Unlike other digital currencies, Bitcoin avoids central authorities and issuers. Bitcoin uses a distributed database spread across nodes of a peer-to-peer network to journal transactions, and uses digital signatures and proof-of-work to provide basic security functions, such as ensuring that bitcoins can be spent only once per owner and only by the person who owns them.
    Bitcoins can be saved on a personal computer in the form of a wallet file or kept with a third party wallet service, and in either case bitcoins can be sent over the Internet to anyone with a Bitcoin address. The peer-to-peer topology and lack of central administration are features that make it infeasible for any authority (governmental or otherwise) to manipulate the quantity of bitcoins in circulation, thereby mitigating inflation.
    Bitcoin is a peer-to-peer implementation of Wei Dai’s b-money proposal and Nick Szabo’s Bitgold proposal. The principles of the system are described in Satoshi Nakamoto’s 2008 Bitcoin whitepaper. Bitcoin relies on the transfer of amounts between public accounts using digital signatures. All transactions are public and stored in a distributed database which is used to confirm transactions and prevent double-spending.Bitcoins are internet currency, the price of bitcoins may go up, go down, a few months ago they were 50dollars, they are now like 300dollars, they be used in a lot of sites now. Bitcoin is a form of alternate currency. It’s like money, except it’s exclusively online. It’s pretty new, and the technology behind how it’s distributed is very different from paper money (won’t explain this, since you would have to know more about how peer-to-peer distribution works, which can be quite technical).
    There’s only about 12 million Bitcoins in circulation right now, meaning the US dollar-to-Bitcoin exchange rate is very high and very unstable. At the current moment, 1 Bitcoin is worth about 720 USD.

    #25034

    It is all confusing to me. I have been hearing about it for a while now. Apparently, it is becoming more popular. I would be too afraid to try it…

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