EPThttp://www.reuters.com/article/2014/03/25/us-bitcoin-irs-idUSBREA2O1LR20140325
Interesting development for sure. I'm glad to see regulation (whether good or bad) is coming into play here.
Bitcoin discussion thread - Page 43
| Forum Index > General Forum |
|
Ace
United States16096 Posts
http://www.reuters.com/article/2014/03/25/us-bitcoin-irs-idUSBREA2O1LR20140325 Interesting development for sure. I'm glad to see regulation (whether good or bad) is coming into play here. | ||
|
17Sphynx17
580 Posts
Thanks. Yup. A bit you mentioned is one of my concerns. If the mining is meant to support the network was incorrect information, then was receives, collects and distributes the block chains which record authentic transactions and "real" bitcoins mined/generated in the system? I really can't figure it out for the life of me. If it takes so much GPU to compute using the algorithm to create a unique bitcoin, surely you wouldn't expect the hashes/generated bitcoin code to not be stored or else, you would need all that computing power to check whether the bitcoin is also authentic right? It has to be saved somewhere and referenced by each transaction. So if mining isn't meant to support that system, what then? Also, I would expect these hashes/block chains to exists as bits/bytes (roughly 10bits per byte for a reference). If each unique transaction is always recorded, surely the bitcoin "unique" hashes plus their recorded transaction records (wherever that is referenced and stored) will slowly and surely grow in size (although bit by bit). But you then have to factor in the divisibility of the bitcoin to each transaction. Say 1 bitcoin now has a 64 hexadecimal code / unique hash (humor me here). The divisibility of the bitcoin is almost infinite right as it is advertised? Meaning it go to the millionth or billionth decimal place to make way for an assumed future bigger market? Correct? If that were the case, 21 miliion divided by a billionth decimal places each with unique 64 hexadecimal code each with a underlying billion codes for each decimal place the bitcoin has been subdivided to at that point. Again, where is this stored then? I know you e wallet, but where else for you to reference and cross check that the bitcoin (whatever decimal value) you received was an authentic part of a formerly 1 unit bitcoin (mined/generated)? Again, this means more data to deal with, so who keeps it for verification purposes? Another thing, can you essentially make an IOU bitcoin? I think you can't but I could be wrong. Say for exchanges like mt Gox (disregarding that it failed). It wasn't jus8t a bitcoin exchange but also converts the bitcoin to and from a fiat currency correct? Say right now, they have 1 million bitcoins priced at 10 dollars each unit. After X hours/days, they only had 750k bitcoins remaining. Do/Can they bump up price to 100usd to slow their eroding inventory of bitcoin? Is it just limited to them or do all exchanges follow in that exchange rate they established? Then the exchange drops further to 500k bitcoins on hand, they raise it again to 1000usd per bitcoin to slow the demand, since price is based on supply on demand as I mentioned I see the bitcoin being treated more as a stock than a currency (so it can in a blink of an eye go bust). So that was the scenario for Exchange 1 who had eroding inventory. How about exchange 2 who still has say a million bitcoins in storage and is trading at 20usd per bitcoin? Can they price it freely? Again, I am asking since bitcoin value is fiat currency based. I think no one can argue against that. So what happens when 2 exchanges have differing conversion rates for the same bitcoin unit? How do you then value your products if you use bitcoin as a mode of payment? If the exchanges then dictated the price per bitcoin in the long run, what is then stopping it from being manipulated by the exchanges? Or so we can put it blunty, the "bitcoin banks"? You as a user are reliant on the exchanges to determine the value of your coins. You can't really dictate that as a user. So you would need an organization to dictate the value at any given time. So therefore, you are going back to the fiat system with banks. I thought bitcoins aimed at removing that handicap? I really don't see it as a solution. Bitcoin created a product with 0 value and told the world it will have value by giving it various anti-establishment issues that people bought into to give it the initial "real value". But once all is said and done, you are caught in the very same system you wished to do away with. So I don't get the point. You just don't plan on kicking yourself now, but getting bull rushed in the rear later on, hoping you won't be caught in it when S*it hits the fan. | ||
|
17Sphynx17
580 Posts
On March 26 2014 21:40 Ace wrote: Got so caught up I forgot to post what I originally came here for. The IRS has declared that bitcoins are going to be taxed as assets and not treated as a currency. http://www.reuters.com/article/2014/03/25/us-bitcoin-irs-idUSBREA2O1LR20140325 Interesting development for sure. I'm glad to see regulation (whether good or bad) is coming into play here. I think this is essentially just calling bitcoins as they are being treated by the majority who hold them for their expected rise in value in relation to a fiat currency, STOCK units or Fund Units that are just being honoured by some as an acceptable mode of payment. You could argue the same of using 10 shares with company x to pay for an item you wish to buy really. It just doesn't have the word "coin" in its name. | ||
zatic
Zurich15353 Posts
Please familiarize yourself at least to the level that you know what an exchange or what the block chain is. All of the questions you are asking are answered in the Wikipedia page for Bitcoin, or in some cases in more detail in further reading (This is probably the best all around explanation of how Bitcoin works: http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-actually-works/ ). In short: - The block chain is the public ledger which holds all transaction - You can download the blockchain using a Bitcoin client to your computer, and verify it if you want (this is called mining) - Yes, it grows in size constantly - Prices are set by the market, not by individual exchanges. No one dictates it. - Exchanges don't necessarily hold any Bitcoin | ||
|
17Sphynx17
580 Posts
Thanks for the link. Actually that looks to be more detailed than the wiki. I'll read more into it when I have time, but my questions still exists upon my initial review to your response. Who holds the public ledges given there is a cold storage and a hot wallet? If you say anyone who has an active hot wallet then that wallet will get continously loaded with data to make sure the ledger is up-to-date with "all transactions" happening all over the world. Or if you went off the grid for a week, when you do update your ledger, where do you get your copy of the latest ledger that updated for all the weeks transactions as well. I have tried to educate myself on bitcoin through the months in my spare time and still had these questions. The reason why I am only posting recently because it still doesn't make sense from a "currency" standpoint to actually facilitate trade in the long term from a big picture standpoint. But I will try to further my education with the link you sent. Thanks. | ||
|
Ace
United States16096 Posts
If the mining is meant to support the network was incorrect information, then was receives, collects and distributes the block chains which record authentic transactions and "real" bitcoins mined/generated in the system? I really can't figure it out for the life of me. If it takes so much GPU to compute using the algorithm to create a unique bitcoin, surely you wouldn't expect the hashes/generated bitcoin code to not be stored or else, you would need all that computing power to check whether the bitcoin is also authentic right? It has to be saved somewhere and referenced by each transaction. So if mining isn't meant to support that system, what then? Also, I would expect these hashes/block chains to exists as bits/bytes (roughly 10bits per byte for a reference). If each unique transaction is always recorded, surely the bitcoin "unique" hashes plus their recorded transaction records (wherever that is referenced and stored) will slowly and surely grow in size (although bit by bit). But you then have to factor in the divisibility of the bitcoin to each transaction. Say 1 bitcoin now has a 64 hexadecimal code / unique hash (humor me here). The divisibility of the bitcoin is almost infinite right as it is advertised? Meaning it go to the millionth or billionth decimal place to make way for an assumed future bigger market? Correct? If that were the case, 21 miliion divided by a billionth decimal places each with unique 64 hexadecimal code each with a underlying billion codes for each decimal place the bitcoin has been subdivided to at that point. Again, where is this stored then? I know you e wallet, but where else for you to reference and cross check that the bitcoin (whatever decimal value) you received was an authentic part of a formerly 1 unit bitcoin (mined/generated)? Again, this means more data to deal with, so who keeps it for verification purposes? Ok I think what you're asking is if this thing is decentralized, where is the public ledger stored?. And these transaction chains should be getting so big, they take up lots of data. Also checking the authenticity of coins. 1.) the public ledger can be seen on blockchain.info. It wasn't always there, and I think transactions were originally recorded in some google groups setting. I can't say for sure. But blockchain.info is where everything is referenced. 2.) The size of the chain is huge. If you wanted to download it when creating a wallet, it would take hours to put on your computer. This is where online wallet services come in. They already downloaded the blockchain, you just get a wallet from them and do your business. The only thing you need to download for the future are copies of your own transactions. No matter how big the chains get you aren't concerned as a casual user because you don't need most of the information. This is also a trust issue because you need to trust the online wallet provider doesn't screw you over (they have access to your account). 3.) Checking authenticity of transactions is easier than generating them. The way the hash works is once a solution is found, reversing it to make sure it answered the target problem isn't difficult. Basically imagine looking at a puzzle and it's damn hard to find out how to put it together. Once you find the correct pieces though, you prove to everyone you solved it and it's trivial for them to agree because the puzzle picture can be checked quickly by looking at the puzzle box. (this analogy probably sucks :/) Another thing, can you essentially make an IOU bitcoin? I think you can't but I could be wrong. Say for exchanges like mt Gox (disregarding that it failed). It wasn't jus8t a bitcoin exchange but also converts the bitcoin to and from a fiat currency correct? Say right now, they have 1 million bitcoins priced at 10 dollars each unit. After X hours/days, they only had 750k bitcoins remaining. Do/Can they bump up price to 100usd to slow their eroding inventory of bitcoin? Is it just limited to them or do all exchanges follow in that exchange rate they established? Then the exchange drops further to 500k bitcoins on hand, they raise it again to 1000usd per bitcoin to slow the demand, since price is based on supply on demand as I mentioned I see the bitcoin being treated more as a stock than a currency (so it can in a blink of an eye go bust). So that was the scenario for Exchange 1 who had eroding inventory. How about exchange 2 who still has say a million bitcoins in storage and is trading at 20usd per bitcoin? Can they price it freely? 1.)Let me explain something about that situation which may answer most of this since what I bolded, a concern you have is pretty much what happened. When Mt.Gox realized like the amateurs they were that they were losing coins, they started raising the price of coins/dollars on their exchange to remain solvent. The other bitcoin exchanges lashed out and called this fishy behavior. It got to the point that Mt.Gox was quoting a price far above what the other exchanges (Coinbase and BTC-E being heavily involved iirc). Since there is no central authority the only thing consumers have to go by now is trust. Also remember Mt.Gox was known for problems long before this happened. While they were the largest exchange by volume, some of this is by their own hand (raising coin prices only to drop them later) and they were not secure. As people woke up to this fact and tried to take their money out which Mt..Gox obviously wouldn't allow, shit hit the fan. Now I don't know exactly how bitcoins are priced (I look at Coindesk's index for the actual number) but I do know the big exchanges work together. There should be some volatility since the thing is still young, but I don't see the exchanges quoting wildly different prices going on. If you're concern is that nothing can stop all of them from just saying screw it, I want to set my price at X to undercut everyone and make a ton of $$ then yea, nothing is there to stop it from happening. 2.) regarding IOUs. I think what you're asking here is can people do private transactions that don't appear in the public ledger? If so the answer is yes. These are faster and actually happen all of the time. This is how some of the exchanges do business with customers. The exchanges then go trade on the public ledger. This of course, assumes a level of trust when doing private transactions. If you and I are friends and therefore trust each other, we don't need to wait for the network to confirm our transaction and record it to the public ledger. We just do it off the block chain and get it over with. You as a user are reliant on the exchanges to determine the value of your coins. You can't really dictate that as a user. So you would need an organization to dictate the value at any given time. So therefore, you are going back to the fiat system with banks. I thought bitcoins aimed at removing that handicap? I really don't see it as a solution Bitcoin created a product with 0 value and told the world it will have value by giving it various anti-establishment issues that people bought into to give it the initial "real value". But once all is said and done, you are caught in the very same system you wished to do away with. Actually not necessarily. If say, enough exchanges popped up that the users of bitcoin trusted, the ones quoting rogue prices would just not see business. This is what happened to Mt.Gox. Once people don't trust it anymore - they leave. The core problem is people leaving too much money on the exchange because... You are correct in that going back to the same banking system doesn't really attend to removing a promised handicap. That however is the behavior of people that choose to use their coins that way. What some people do is leave a vast majority of coins in cold storage - no one can touch it. Then put some in an online wallet or an exchange, and do their business. There is still a level of trust needed, but you are on control of your money. You treat your wallet as a real life wallet - very little of your entire cash storage is in it. The actual system doesn't behave like a real world system. Part of the reason you see so many bitcoin thefts is that people that wouldn't be able to open up exchanges and businesses in the real world are doing so with the Bitcoin platform. Likewise the good companies are seeing a ton of business because there is no political lobby or crazy law to stop them from operating. It is the ultimate buyer beware market built on distributed trust. The fiat system also is built on trust, with the major difference being the Government enforces it. also this specifically needs to be addressed: So what happens when 2 exchanges have differing conversion rates for the same bitcoin unit? How do you then value your products if you use bitcoin as a mode of payment? There are companies that exist to take bitcoins from merchants and change it directly to their currency(Bitpay). There are also services that handle the bitcoin pricing for you. So you as a merchant can just list your currency in it's fiat price, and the app or whatever displays it in bitcoin. The middle man company is assuming the risk on the fluctuation of bitcoin prices now. Whatever exchange they are using to quote prices - the merchant has less concern. As long as the exchanges aren't wildly differing in price, the middle man company isn't probably too worried. Also, use this site for Bitcoin education too. These videos are easy to follow. http://bitcoin.cbtnuggets.com/# | ||
|
GreenHorizons
United States23439 Posts
"In the near future, will we be tipping with dogecoin, spending ‘loose change’ with litecoin and making big payments with bitcoin? Instead of competing with each other, could cryptocurrencies work in harmony to each play a very specific role in the digital economy’s future?" It also talks about a few other things that have been coming up here. http://www.coindesk.com/doge-eat-doge-world-can-every-altcoin-survive/ | ||
|
Ace
United States16096 Posts
| ||
|
DoubleReed
United States4130 Posts
| ||
|
aksfjh
United States4853 Posts
Certainly, more could crop up and beat Dogecoin, but they have the most long-term plan in motion it seems. I doubt we'll see a digital wallet made up of different currencies. | ||
|
ETisME
12494 Posts
On March 27 2014 22:36 aksfjh wrote: Assuming nothing is changed with Dogecoin, I imagine it will last the longest of the current list of cryptocurrencies. It doesn't suffer from the same deflationary pressures of most others, while the founders seem to back the individualized nature of mining as well. Certainly, more could crop up and beat Dogecoin, but they have the most long-term plan in motion it seems. I doubt we'll see a digital wallet made up of different currencies. doge coin is worth investing alone just for being named dogecoin now if they produce real coins for them..... :D | ||
|
aksfjh
United States4853 Posts
On March 27 2014 22:41 ETisME wrote: doge coin is worth investing alone just for being named dogecoin now if they produce real coins for them..... :D Don't invest in Dogecoin, use it instead.  Ultimately, that is the goal of cryptocurrency, to be used, not | ||
|
justinblack
Canada2 Posts
| ||
|
Ace
United States16096 Posts
http://www.coindesk.com/developers-battle-bitcoin-block-chain/ | ||
|
zaMNal
Mongolia385 Posts
| ||
|
ToSs.Bag
United States201 Posts
On April 01 2014 21:59 zaMNal wrote: what is the current price of BTC? i have rediscovered a forgotten account of mine containing few BTC, which i used to mine 2009. where and how can i sell my BTC? thank you. I'm always blown away by posts like this. You were smart enough to be able to catch on and mine BTC back in 2009 (of which is highly unbelievable, considering the EXTREMELY low amount of miners in 2009), and yet you don't know how to use google to type something like "Current price of bitcoin"... Sorry to come off like an asshole, but just, personal pet peeve of mine -_-. That said, this thread is great, and I its good to see some honest discussion surrounding bitcoin. | ||
|
GreenHorizons
United States23439 Posts
"This instant hack was made possible by Heartbleed, a bug in the internet’s infrastructure that some are calling the worse thing they’ve seen in years. “‘Catastrophic’ is the right word. On the scale of 1 to 10, this is an 11,” security expert Bruce Schnier, wrote on his blog today." http://www.wired.com/2014/04/heartbleed/ | ||
|
zatic
Zurich15353 Posts
| ||
|
Rannasha
Netherlands2398 Posts
On April 10 2014 18:10 zatic wrote: Heartbleed truly is catastrophic ... Has anything Bitcoin specific been reported yet though? Nothing problematic. A new (and currently rarely used) feature of the reference client (Bitcoin Core) uses OpenSSL and was potentially vulnerable, but an update was released. Some websites, including exchanges, were offline for a short time or had disabled logins while they patched the problem. Of course, there is no saying what was leaked before the patch was applied. But that is true for every internet-service that was vulnerable to Heartbleed. | ||
|
Chrono000
Korea (South)358 Posts
| ||
| ||
