EPTI just don't get it. >.<
Bitcoin discussion thread - Page 30
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AlternativeEgo
Sweden17309 Posts
I just don't get it. >.< | ||
KwarK
United States43348 Posts
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aseq
Netherlands3991 Posts
On December 19 2013 06:33 AlternativeEgo wrote: What is a bitcoin? I read OP and the official site but it's pretty much just "a bitcoin is a bitcoin". So if the fractions are like gold in the river then what is it that the computer is mining? Special unicorn 1s and/or 0s floating around in cyberspace? If so then who put them there in the beginning, how much, and how do you identify it? I just don't get it. >.< Takes most people a while to find out how it works completely. Even some renounced economists/professors get it completely wrong and declare something like: 'everyone will just mine until there are so many coins that they have no value' or 'they will always find ways to make more bitcoins when they've all been found' or some other ridiculousness that shows they should be fired. You mine Bitcoin by hashing input strings and seeing if they match one asked for by the network. Because you cannot reverse this hashing operation, the thing left to do is try out billions of possible input strings until you've found a correct one. When you do, you're rewarded 25 BTC. The Bitcoin algorithm makes sure it gets harder and harder to find correct ones because the number of correct answers (hashes) gets smaller in stages, making sure all 21 million BTC will be found around 2040. | ||
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iamho
United States3347 Posts
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aseq
Netherlands3991 Posts
On December 19 2013 11:07 iamho wrote: So how many people are actually using this as currency? It seems at least 90% of bitcoin is held by speculators who don't do anything with it but sit on it. Also if there are only 21 million BTC that can exist, that means there will be a massive deflationary spiral when that limit is reached.. in other words bitcoin will never even be able to function as a real currency. The whole idea is that they'll be used more and more, gradually. With the initial huge bubble, people will sit on it, but as it stagnates people will start to use it. More and more services offer is as a payment option (in NL, the biggest online food ordering & delivery site now supports it). The spiral you describe would happen if the inflation would suddenly stop, but it's programmed to be a 1/x curve, so in the final year(s), there will be hardly any new bitcoins, not creating any sudden change. So it could grow to overtake part of the 'normal' currency worldwide. But of course, this is only in case everything goes according to plan. Still, the technical concept is brilliant, and the ideology is great too. | ||
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Gorsameth
Netherlands21996 Posts
On December 19 2013 11:07 iamho wrote: So how many people are actually using this as currency? It seems at least 90% of bitcoin is held by speculators who don't do anything with it but sit on it. Also if there are only 21 million BTC that can exist, that means there will be a massive deflationary spiral when that limit is reached.. in other words bitcoin will never even be able to function as a real currency. If you search back to earlier in the thread you will see that the finite amount of bitcoins isnt the problem. When you cut down bitcoins in there smallest current value you actualy have more bitcoins then dollar in the world so thats not going to stop it. As for speculators. Thats a problem any new "currency" will experience. The biggest thing stopping it atm is simple its lack of acceptance. There are very few places you can spend bitcoins. Most of the time you need to convert them to another currency before being able to buy with them. | ||
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Eiii
United States2566 Posts
On December 19 2013 10:56 aseq wrote: You mine Bitcoin by hashing input strings and seeing if they match one asked for by the network. Because you cannot reverse this hashing operation, the thing left to do is try out billions of possible input strings until you've found a correct one. When you do, you're rewarded 25 BTC. The Bitcoin algorithm makes sure it gets harder and harder to find correct ones because the number of correct answers (hashes) gets smaller in stages, making sure all 21 million BTC will be found around 2040. You're confusing the difficulty adjustment with the decaying block reward, here-- the algorithm dynamically adjusts how easy it is to find a 'correct' nonce regularly to attempt to ensure that blocks are always found at an average rate of one per ten minutes regardless of the amount of hashing power in the network. The block reward has nothing to do with how difficult it is to find the block, though! The reward started at 50 BTC/block and is cut in half every 210k blocks. If everyone stops mining so the difficulty tanks or everyone starts mining so it spikes, the reward is still tied exclusively to how many blocks have been mined on the blockchain. On December 19 2013 11:30 Gorsameth wrote: If you search back to earlier in the thread you will see that the finite amount of bitcoins isnt the problem. When you cut down bitcoins in there smallest current value you actualy have more bitcoins then dollar in the world so thats not going to stop it. People's concern isn't that there 'aren't enough' bitcoins, it's that at some point there will stop being more bitcoins. | ||
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endy
Switzerland8970 Posts
On December 19 2013 11:34 Eiii wrote: People's concern isn't that there 'aren't enough' bitcoins, it's that at some point there will stop being more bitcoins. Yeah what I'm wondering is: if there is a limited supply (finite amount of bitcoins), but Bitcoin popularity keeps increasing with more and more services accepting transactions in Bitcoin, then its value is bound to increase isn't it? | ||
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Warri
Germany3208 Posts
On December 19 2013 14:06 endy wrote: Yeah what I'm wondering is: if there is a limited supply (finite amount of bitcoins), but Bitcoin popularity keeps increasing with more and more services accepting transactions in Bitcoin, then its value is bound to increase isn't it? Until a saturation is reached yes. On December 19 2013 14:06 endy wrote: People's concern isn't that there 'aren't enough' bitcoins, it's that at some point there will stop being more bitcoins. Peoples concern isnt that at some point there will stop being more bitcoins, but that there will start being less bitcoins because wallets get lost. Im not an expert on market things, but ive been told deflation is bad for the economy because it encourages to save your "money" because it will be worth more tomorrow, instead of spending it. | ||
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Djzapz
Canada10681 Posts
I don't think the value will stop increasing when saturation is reached, quite the contrary - all things being otherwise equal, it'll start increasing even faster because there's going to be more rarity. However, this assumes that the whole market won't crash, which very well might happen if the currency fails to gain traction. Plus I can think of a bunch of scenarios that could negatively impact the currency's value. There's already the fact that a minority own a large part of the pool of bitcoins. They could dump, or the simple fact that bitcoins will slowly converge toward people who don't intent to spend it will naturally make it an unattractive investment. I'm no prophet though, unlike all those very optimistic people who preach the bitcoin gospel :D | ||
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endy
Switzerland8970 Posts
So unless all countries go like China, then it's super safe to buy bitcoins and we can be sure than in 10 years they'll be worth 5000+ ? Hell, if everyone has the same perspective it may not even take 10 years. I guess the same thing can be applied to any financial product used for speculation... Economics are such a mystery to me o_o | ||
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Warent
Sweden205 Posts
On December 19 2013 15:32 endy wrote: So unless all countries go like China, then it's super safe to buy bitcoins and we can be sure than in 10 years they'll be worth 5000+ ? Hell, if everyone has the same perspective it may not even take 10 years. I guess the same thing can be applied to any financial product used for speculation... Economics are such a mystery to me o_o No! It is a super risky speculation. BTC dosen't have a real demand - and therfore nothing that backs its value. | ||
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endy
Switzerland8970 Posts
On December 19 2013 16:09 Warent wrote: No! It is a super risky speculation. BTC dosen't have a real demand - and therfore nothing that backs its value. But there are more and more services accepting bitcoin, and Paypal is a pain in the ass. The more services accept it, the more people will start to use it, the more it is makes it a legit currency. I know a lot of speculation is happening at the moment, and the current price might be much over its real value, but it's clearly going in the right direction, isn't it? By the way, how do we define the right value for a bitcoin? I know about supply and demand of course, but we're not talking about a kilo of sugar or a barrel of crude oil, a bitcoin is artificial and I want to use them because they're convenient and there are almost no transaction fee. For this purpose it doesn't matter whether 1BTC = 1USD or 1000USD. If I want to purchase something worth $100USD, I'll just get $100USD of bitcoins. Sorry for the noob questions, but it's a bit hard to figure it out. | ||
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Eiii
United States2566 Posts
On December 19 2013 16:18 endy wrote: By the way, how do we define the right value for a bitcoin? I know about supply and demand of course, but we're not talking about a kilo of sugar or a barrel of crude oil, a bitcoin is artificial and I want to use them because they're convenient and there are almost no transaction fee. For this purpose it doesn't matter whether 1BTC = 1USD or 1000USD. If I want to purchase something worth $100USD, I'll just get $100USD of bitcoins. Sorry for the noob questions, but it's a bit hard to figure it out. I'm confused about this question! Bitcoins don't have any inherent value you can point to to define how much they 'should' be worth (arguably similar to just about every other thing of value around)-- their long-term worth comes from people valuing bitcoins' ability to be spent and transferred worldwide with minimal fees, hassle, and delays, as you describe. If you're asking how much that's worth, no one knows. All you can do is guess. If you're just interested in using bitcoins as a short-term 'proxy' for some other currency then you're right, it absolutely doesn't matter what the exchange rate for bitcoins is. | ||
zatic
Zurich15357 Posts
On December 19 2013 06:20 autechr3 wrote: I'm really not concerned with the immediate price of bitcoin. I think anytime in the last few days (especially now) was a good time to buy in the long run. Yes, China is causing problems, but the demand will rise again when more people in other countries realize how important Bitcoin is. Bitcoin is not going anywhere, don't forget that. It just may become increasingly difficult to trade for fiat money. There are lots of companies investing in Bitcoin and Bitcoin technology right now, more than ever. In my opinion, this is the real Bitcoin boom. This is the first step in legitimizing cryptocurrency, a very exciting time to live in. Don't fret over these fluctuations in price, It will be worth a lot more than $1000 sooner than most people think. Bolded the important part. What people seem to forget is that the exciting thing about bitcoin is that it is the first concept to solve a number of problems with virtual currency, most prominently the trust and decentralization problem. However, it still does not solve / brings with it a share of new problems, most of all the environmental impact of the insane amount of energy it consumes to solve the first two problems. It is entirely likely that based on the experience we gained with bitcoin a better concept is designed in the near future that will solve the energy problem - at which point the demand for bitcoin will go to zero and never come back. You should really think of bitcoin as an important, experimental step toward an actually well functioning virtual currency. The surprising thing I suppose is just how well it is functioning already. Since there is a real demand for virtual currency, it will continue to be used, until a better system is developed. | ||
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Rannasha
Netherlands2398 Posts
On December 19 2013 16:18 endy wrote: But there are more and more services accepting bitcoin, and Paypal is a pain in the ass. The more services accept it, the more people will start to use it, the more it is makes it a legit currency. I know a lot of speculation is happening at the moment, and the current price might be much over its real value, but it's clearly going in the right direction, isn't it? Right now, awareness and adoption are both growing at a nice pace, so if that trend continues, so will the price trend (if you smooth out the spikes and crashes). However, the future is extremely uncertain in this case. A superior crypto-currency might be created, governments may ban it or it simply fails to catch enough momentum and fades away. For the long-term (think 5-10 years or more), I consider Bitcoin to be a binary investment: Either it will die and price will go to zero, or it will be widely used and prices will go much higher than what they are now. I don't see there being a big chance of a middle ground scenario, By the way, how do we define the right value for a bitcoin? I know about supply and demand of course, but we're not talking about a kilo of sugar or a barrel of crude oil, a bitcoin is artificial and I want to use them because they're convenient and there are almost no transaction fee. For this purpose it doesn't matter whether 1BTC = 1USD or 1000USD. If I want to purchase something worth $100USD, I'll just get $100USD of bitcoins. Sorry for the noob questions, but it's a bit hard to figure it out. You're right that for the purpose of transacting value, the price of a Bitcoin is irrelevant. A widely used payment system needs to have enough value in its currency units for people to effectively use it. A payment network used by 10 people for small payments doesn't need a market cap of more than a few thousand USD. How much value the total Bitcoin supply should represent will depend on the number of users and the rate at which they transact their coins. Right now, the price is quite a bit higher than what is needed for Bitcoin to operate its underlying payment network efficiently. The amount of commerce and other transactions currently done on the network could just as well be done with sub-$100 coins. What you see reflected in the price is the expectation of people that the payment network will become much more widely used in the future. | ||
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endy
Switzerland8970 Posts
On December 19 2013 19:46 Rannasha wrote: Right now, awareness and adoption are both growing at a nice pace, so if that trend continues, so will the price trend (if you smooth out the spikes and crashes). However, the future is extremely uncertain in this case. A superior crypto-currency might be created, governments may ban it or it simply fails to catch enough momentum and fades away. For the long-term (think 5-10 years or more), I consider Bitcoin to be a binary investment: Either it will die and price will go to zero, or it will be widely used and prices will go much higher than what they are now. I don't see there being a big chance of a middle ground scenario, You're right that for the purpose of transacting value, the price of a Bitcoin is irrelevant. A widely used payment system needs to have enough value in its currency units for people to effectively use it. A payment network used by 10 people for small payments doesn't need a market cap of more than a few thousand USD. How much value the total Bitcoin supply should represent will depend on the number of users and the rate at which they transact their coins. Right now, the price is quite a bit higher than what is needed for Bitcoin to operate its underlying payment network efficiently. The amount of commerce and other transactions currently done on the network could just as well be done with sub-$100 coins. What you see reflected in the price is the expectation of people that the payment network will become much more widely used in the future. Ok, that pretty much confirms my existing understanding. Would you mind elaborating a bit about the sentence I bolded please? Thank you. | ||
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Eiii
United States2566 Posts
On December 19 2013 18:55 zatic wrote: Bolded the important part. What people seem to forget is that the exciting thing about bitcoin is that it is the first concept to solve a number of problems with virtual currency, most prominently the trust and decentralization problem. However, it still does not solve / brings with it a share of new problems, most of all the environmental impact of the insane amount of energy it consumes to solve the first two problems. It is entirely likely that based on the experience we gained with bitcoin a better concept is designed in the near future that will solve the energy problem - at which point the demand for bitcoin will go to zero and never come back. You should really think of bitcoin as an important, experimental step toward an actually well functioning virtual currency. The surprising thing I suppose is just how well it is functioning already. Since there is a real demand for virtual currency, it will continue to be used, until a better system is developed. A cryptocurrency that doesn't require (additional) power to secure the network would be ideal, for sure, but I can't even begin to imagine what one would even theoretically look like. Cryptocurrencies pretty much as a whole right now rely on some form of computing power to attempt to protect themselves from being tampered with-- so a non-power-scaling wouldn't just be just a 'better concept' based on the same principles, it seems like it would have to be a different invention altogether. One thing I'm curious about, though, is why you think people would be incentivized to move to an eco-friendly cryptocurrency system from bitcoin to the point that bitcoin would disappear entirely. I just don't see eco-friendliness as much of a draw compared to momentum and market share-- if that was the case, the world would look pretty different right about now! | ||
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zatic
Zurich15357 Posts
On December 19 2013 20:26 Eiii wrote: A cryptocurrency that doesn't require (additional) power to secure the network would be ideal, for sure, but I can't even begin to imagine what one would even theoretically look like. Cryptocurrencies pretty much as a whole right now rely on some form of computing power to attempt to protect themselves from being tampered with-- so a non-power-scaling wouldn't just be just a 'better concept' based on the same principles, it seems like it would have to be a different invention altogether. One thing I'm curious about, though, is why you think people would be incentivized to move to an eco-friendly cryptocurrency system from bitcoin to the point that bitcoin would disappear entirely. I just don't see eco-friendliness as much of a draw compared to momentum and market share-- if that was the case, the world would look pretty different right about now! I agree that most people running miners probably don't care about the environment more than anyone else, but in the end energy costs money. I understand that the hashing is supposed to be payed by transaction fees in the future as mining becomes less and less viable. A system that won't require a huge energy input will then run at lower transaction costs and be thus more attractive. My general point is more that there is real demand for virtual currency, but that that doesn't mean that this demand will necessarily be supplied by Bitcoin specifically in the future. | ||
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Rannasha
Netherlands2398 Posts
On December 19 2013 19:56 endy wrote: Ok, that pretty much confirms my existing understanding. Would you mind elaborating a bit about the sentence I bolded please? Thank you. In a small isolated village with just 100 people with a currency such that a loaf of bread costs 1 unit of currency, there is no need to have 10 billion units of said currency. Depending on the wealth of the village, less than 1 million units of currency should be more than enough for people to buy, sell and do other transactions with. Suppose now that in this village there does exist 10 B units of the local currency. One can reasonably assume that a loaf of bread will then cost far more than 1 unit of currency. In a perfectly isolated environment, we can expect prices of goods to adjust to the amount of currency available and the speed with which it is transacted. Right now, the Bitcoin economy (that is: people using Bitcoin to pay for goods) is rather small. There is no need for $10 B worth of Bitcoin (the current market capitalization, roughly) to do all the transacting with. I have no exact numbers, primarily since they're impossible to find because of the nature of the Bitcoin network, but if the price of a single Bitcoin was still at $100, there would be no shortage of Bitcoins for payment purposes. The price is considerably higher, because many people buy Bitcoins in the hope that they will be worth more in the future, effectively reducing the number of currency units in circulation. | ||
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