1 bitcoin worth more than dollar

Ecosystem? How about the Payment portion of the ecosystem ... let's take a "competitor", PayPal, for example. When you send $100 to a business using your Paypal, the recipient gets $97, or less. With bitcoin, when you send $100, the recipient gets $100 (at least until fees are necessary ... but even when that starts being necessary the fees should be just a FRACTION of what Visa / MC / PayPal / etc. take.)

efnx• 15 years ago

I'll agree that it's confusing, but I will also say that it's less confusing than our practices with mainstream fiat currency.

Charuru• 15 years ago

OK, I understand how they're created and how many there are. But why?

jackowayed6• 15 years ago

The idea is that it's not under any entity's control, and the amount of currency grows in a predictable (and decreasing) way. This should prevent the crazy inflation we've seen occur with normal currency where the government can always just print more.

jerf2• 15 years ago

Bitcoins are a creation by some who don't understand what a currency is. Bitcoins back to nothing and are only useful to the extent that you can fool another ideologue into taking them; for as long as they've been around, it is far, far easier to obtain goods or services with Warcraft gold or Microsoft Points, which aren't even trying to be universal currencies. (Just yesterday I was on a blog that cataloged the reasons Microsoft gave for various bannings, and selling services for Microsoft Points was a very common one. It's so easy Microsoft considers it a pestilence.)

Last time this came up on HN BitCoin's FAQ had a question directly asking what useful thing it backs to. I say "asking" because the answer was basically no answer at all. I see it is no longer there. This is because if they can't answer it, it is better for them not to bring the question up at all, so I guess it's a good move for them.

Currencies have to back to something. Dollars back to being able to pay the various governments of the US not to throw you in jail for breaking various laws (tax, fines, etc); a dollar is useful even in Africa to someone not subject to those laws, because you can trade it to somebody else who has that use. The way an economy works allows the value of a dollar to appear to become severed from its backing and just float in space, propped up only by mutual consensus, but this is an illusion. When the backing goes, so does the currency. History's full of examples, just look up "hyperinflation".

(Also note the difference between backing and rarity. Anybody can make something rare, backing means it's actually worth something even on its own.)

Bitcoins provide an interesting technology platform around which to build a currency, but trying to use them directly as currency is only slightly different than using Monopoly money, and the differences aren't relevant.

mynameishere• 15 years ago

All of the above absolutely screams BULLSHIT harder than anything I've ever read before.

kiba3• 15 years ago

Please tell us why it is absolute bullshit?-

icarus_drowning2• 15 years ago

(2.10.11, at around 14:10 MST): How does this have any positive karma at all?

s0urceror• 15 years ago

All I wonder is, what happens if you delete a portion of the wallets in existence. Given that the supply of bitcoins is limited, does that mean you've essentially permanently destroyed part of the bitcoin economy?

jackowayed6• 15 years ago

You haven't destroyed part of the economy. You've just made everyone else's bitcoins worth a little bit more.

0x676310• 15 years ago

The only part of the economy that's "destroyed" is access to some of the bitcoins. All the goods and services that were there before the wallet is destroyed are still there after the wallet is destroyed. The effects of a destroyed wallet are limited to the owner of the wallet and their plans for the money...A good reason to learn how to backup your wallet!!

iheartmemcache• 15 years ago

I read the wiki on BitCoin and I still don't understand how the BitCoin forex market is made. Usually currencies are based on national GDP and that sort of thing, but I haven't the faintest as to what controls the strength of this currency. Can someone enlighten me?

hippich5• 15 years ago

price of bitcoins depends on amount of bitcoins in circulation and number of people using it.

sgornick7• 15 years ago

have you read the blog on Technical Analysis for bitcoin? You might find some good info there: http://mtgox.com/blog

antimatter15• 15 years ago

I think I read somewhere that the value is derived from the amount of electricity and hardware required to mine for a bitcoin.

sgornick7• 15 years ago

Not really, but to make MORE bitcoins yourself you would need to expend a fair amount computing power that chews up a fair amount of electricity. Here's a chart showing that possibly as the price rises, the amount of computing power (and thus electricity) rises to match. http://www.bitcoin.org/smf/index.php?topic=2399.msg42269#msg...

hyp3rVigi1ant• 15 years ago

It's called the Subjective Theory of Value. That's what determines every market price. Learn it.

nopassrecover• 15 years ago

Floated currencies are NOT based on national GDP and that sort of thing. They are based on the price that someone is willing to pay and someone is willing to sell. I.e. if someone will spend 1 AUD to buy 1 USD, and someone is willing to sell 1 USD for 1 AUD then the price of 1 USD is 1 AUD. This is completely unrelated to GDP (although GDP might be used as a marker of confidence that indicates security of currency investment).

daeken• 15 years ago

Topic correction: s/then/than/

hippich5• 15 years ago

thank you. i still learn english =)

solipsist2• 15 years ago

Anyone want to offer some insight into what a bitcoin is?

(Sorry for my ignorance. I tried looking it up, can't seem to understand what it really is.)

hippich5• 15 years ago

online currency which is not controlled by one issuing center but is being "generated" by all members of p2p network. this currency has limit on number of coins in circulation.

sgornick7• 15 years ago

Security Now on TWIT tv covered Bitcoin today. Steve Gibson does a pretty decent job describing it. http://twit.tv/sn287 Bitcoin coverage is from 0:41:25 to the end of the podcast.

kleevr• 15 years ago

This was an excellent explanation, and it's a really brilliant idea. And the fact that it already has an impressive perceived value (parity with USD), I would totally accept it as a form of payment. It will be interesting to see what this does over time.

kablamo• 15 years ago

I followed all kinds of links and couldn't figure out bitcoins. This link actually answered some questions. Sounds really fascinating. Definitely will look into this more.

trotsky• 15 years ago

A gentleman's agreement between a certain faction of econ-crypto-tinfoil-hat-botnet nerds to assign trade value to the wastage of increasingly large amounts of electricity.

phirephly• 15 years ago

Best description I've seen yet. Granted, I'm impressed with how much momentum they seem to have already collected, so I feel like their implementation is sound, but still tin-foily.

They are working on a real problem though. Paypal kind of works, but isn't ideal.

mkramlich5• 15 years ago

I'm fairly certain that more money is spent to create & manage a single US dollar in circulation than is used for a single bitcoin unit. The latter has no paper form, no need to be physically lugged around, no ongoing R&D design overhead spent on counter-counterfeiting measures, no Department of Treasury budget costs, no Secret Service budget costs, no banks or bank vaults, no armored trucks with armed guards lugging money bags... I could go on but I'll stop.

To address from a different angle, the phenomenon where you say electricity is being "wasted" to produce a bitcoin is analogous to the creation of a US dollar. Not to the using of it or acquiring of it. You can buy and acquire a bitcoin fairly quickly and cheaply, CPU/electricity-wise. Much more so than if you had to "mine" it. Much like dollars. Much cheaper/easer/faster to "buy" a dollar than to construct one out of thin air. (A legal one, anyway.)

mkramlich5• 15 years ago

Ummm....

http://www.bitcoin.org/

solipsist2• 15 years ago

> I tried looking it up, can't seem to understand what it really is.

jackowayed6• 15 years ago

Wow. The value has roughly 4x-ed since I was looking at bitcoin for the first time a couple months ago.

Maybe it is worth it to implement my idea of writing something that tries to get free cycles out of EC2 Spot instances by predicting when the price will rise and spinning up instances before it does. (They don't charge you for fractional hours if they kill you due to a price increase.)

EDIT: I think it's actually gotten a little less favorable to generate bitcoins. My cheap VPS peaks at 1M hashes/sec, which according to http://www.alloscomp.com/bitcoin/calculator.php used to mean it would take around 250 days to generate a block, as I recall. Now, the value of a block has 4xed, but the average time to generate a block at 1M hps is now 1300 days, which is more than 5x as long.

bdonlan• 15 years ago

These days there are 'pooled' mining systems in which you can receive payment for working on fractions of a block.

jackowayed6• 15 years ago

But that doesn't change the fact that, since I was able to get $12.50 every 250 days and now I can get $50 every 1250 days, I'm getting less money per day than before.

rgrieselhuber• 15 years ago

Does this mean that people are actually paying for bitcoins or that, based in bitcoin's own systems they are worth more than $1?

kevinburke• 15 years ago

I think it's the exchange rate - you can buy 1 bitcoin for $1.

janzer• 15 years ago

I see a lot of people basically saying this same thing. It seems to me though the real question is how easily can I sell my bitcoin for a dollar?

To me at least that seems more defining as a currency rather than simply say a digital good.

0x676310• 15 years ago

Those are prices that people are buying and selling bitcoins at. Many thousands are traded every day on mtgox.com alone.

arohner2• 15 years ago

Most of the comments here are "why bitcoin?" I'll ask again, but in a form that I hope is slightly more detailed:

Gold was valuable before it started being used as money. It started being used as money because it has several valuable properties: it's rare, it's portable, it's fungible.

Why would someone start using bitcoin? Who will accept a bitcoin in trade, and why is that bitcoin more valuable to them than $1?

hippich5• 15 years ago

'cos "it's rare, it's portable, it's fungible."

hristov3• 15 years ago

And it can be quickly sent and received over the internet anonymously, which is something gold cannot do.

0x676310• 15 years ago

It has almost all of the same characteristics of gold, though in some ways more convenient. Bitcoins are rare, portable, fungible, divisible, durable, etc. The system is fairly anonymous, completely decentralized, completely free market. And for many, it's more accessible than gold/silver. Bitcoins have increased in value and are expected to continue increasing in value for some time, unlike government fiat currencies.

If you look at some of the charts from the trading websites, you can see they weren't all that valuable right away. But as more people learned of bitcoin and the way the system is designed with it's anonymity and security, as well as it's hard money qualities, it started to catch on.

A single U.S. penny used to be able to buy lots of bitcoins. At this moment, not even $1 USD can buy a whole bitcoin. It's generally expected that it will take many USDs to buy a single bitcoin before too long.

hristov3• 15 years ago

Wow, I just learned about bitcoins and I have to say they are very clever. Their brilliance is in that they play to the urge to collect in humans.

You run the software and makes bitcoins for you. Almost like earning money in your sleep. And of course once you have "earned" these bitcoins by installing the software you have a psychological inclination to assign actual value to them.

Of course like most things academic it falls flat on its face on execution. My software did not work. I had to spend half an hour diving through forums and wikis to find some obscure command line argument that may make it work, although I am still not sure it is working properly. Of course 99% of ordinary people would have just given up.

So the folks at bitcoin have ensured that only persistent nerds like me use their service.

0x676310• 15 years ago

All I did was download the client and run it. It "just worked" for me without doing any special on either Linux or Windows (XP). This was with the current version 0.3.19.

kiba3• 15 years ago

I don't mine bitcoin. I just earn them as a freelancer.

pzxc• 15 years ago

If anybody else has trouble setting it up I wrote a tutorial on it: http://pzxc.com/how-to-get-started-with-bitcoins

vinyl• 15 years ago

"No central authority" ? Well, I think the guys who decide there will only be 21 million bitcoins can be considered a central authority. Currency, in any form, is deemed to have a central authority -- national currencies, for example, have real-life value because states limit the available quantity. In this case, the Bitcoins people are acting as the central bank. Especially when I see that the total produced bitcoins will be halved each year by decision.

0x676310• 15 years ago

Someone proposed 21 million coins, and others, by voluntarily choosing to run the software, agreed to the 21 million coin limit. That's not a central authority...just an agreement between individuals.

In all of your statements you're conflating a protocol, and voluntary social agreement, with a central authority.

Anyone is free to fork the software and change the rules to create their own protocol for people to use! If they like the rules, they join...if they don't like the rules, they don't join. Freedom.

svrocks2• 15 years ago

I really like the idea, but I have a question about how transaction growth can be sustained once all 21MM bitcoins have been generated. In order to support borrowing/lending IMO you need an increasing supply of currency. Otherwise where will the interest on debt come from?

The only other type of non-inflating "currency system" I can think of is the market for collectibles (baseball cards, limited edition artwork, etc.). But collectibles have intrinsic value while bitcoins only have value inasmuch as they are useful for transactions.

So, TLDR I am concerned about the long-term viability of bitcoins

svrocks2• 15 years ago

To try to answer my own question, I believe the asymptotically decreasing inflation in bitcoins is compensated by its increase in value against traditional inflationary currencies.

For example, on the surface it looks like a bad deal to lend someone bitcoins when almost all bitcoins have been generated. You will most likely receive a very low interest rate. Why wouldn't you just convert to some other currency (say USD), lend money out in that currency, and capture a higher interest rate? The answer is that because since bitcoin inflation will be nonexistent by that time, its exchange value against USD would increase by precisely the amount of US inflation.

0x676310• 15 years ago

To ensure that all debt can be paid back with interest the money supply must continually grow - FALLACY! See this simple google spreadsheet - http://bit.ly/f2yE4D

Intrinsic value - FALLACY! Behold, the Subjective Theory of Value - http://en.wikipedia.org/wiki/Subjective_theory_of_value

Concerned about long-term viability of bitcoins? Maybe your concern should be with learning logic and economics first.

hristov3• 15 years ago

You are entirely correct. This will eventually develop all the problems associated with a strictly limited currency. If a nation's economy was purely based on bitcoins, one would expect that economy to quickly grind to a halt as people start hoarding their bitcoins instead of investing them in businesses, etc. (BTW something like this is currently happening to the world with gold).

However, I doubt any economy will be purely based on bitcoins. If successful, the bitcoin will merely be a useful way to do painless and anonymous internet transactions, and not the only money out there. And if bitcoins get too rare for internet transactions (because people are hoarding them) it would be very easy for someone else to start another bitcoin-like currency.

0x676310• 15 years ago

If bitcoins become so valuable, this by definition means that people are offering and trading MORE goods and services to get bitcoins, not less. Prices will adjust! Trades will continue to be made. That is not what I would call an economy grinding to a halt. This is the opposite of grinding to a halt.

You do realize that bitcoins are extremely divisible, right?

You have heard of Time Preference, right? People aren't going to stop buying goods and services altogether because they believe they could buy more in the future. Sure they'll actually save more than they would with a money that loses value over time, but they still have necessities they want to buy, and toys they want to play with now rather than later, old goods that wear out, need new cars, want a new house (or another house), etc. Why do you think people want money in the first place? To live a long destitute life and maybe spend it if they don't die first?

People have used gold as money for thousands of years...how come suddenly current generations are trying to stock up on it more than previous generations? This surely couldn't have anything to do with the insane economic environment created by the various governments, their central banks, and the giant businesses practically created by those governments!?

Bitcoins will never become "too rare" for internet transactions. The protocol currently supports the total bitcoin supply being divided into 2,100,000,000,000,000 units, and that can always be changed if most bitcoin users think they need it to be divided further.

rdixit• 15 years ago

This is largely true. Bitcoin is a brilliant idea combining a several innovations that in and of themselves would be laudable. Still, it is most likely true that expecting Mr. Satoshi Nakamato to have a perfectly formed working model of a new financial system at one go is unrealistic, even with his obvious brilliance and dedication.

As a corollary to your point, other world currencies are going to be considerably more inflationary than Bitcoins the longer this experiment last. Then converting bitcoins to a national currency with a more profitable interest rate is an inevitability. bitcoins will be sucked into financial services rather than building out a viable economic platform for the currency.

That strikes at the heart of it, IMHO. The current currency distribution model is good at least in the sense that the newly "printed" currency is allocated for the most part by banks with (ostensibly) some degree of investment saavy. Here, we are asking "network operators" doing the proof-of-work algorithms to essentially act like banks and distribute bitcoins into larger circulation. That seems likely to cause problems.

0x676310• 15 years ago

First, those that get the coins first aren't "distributing" them into larger circulation. If they generate a block and get the reward, they either save the bitcoins or buy goods/services with them. This is not "distributing", but just normal trade.

Second, how else do you bring coins into the market? Be forced to buy them from the system's founder? I doubt that would catch on. Reserve a set number for each person onthe planet and give it to them when they ask for them? I don't think I could count all of the problems with that idea. Hand them out some arbitrary number of some supply in a first come first serve manner? I don't see how that would be an improvement.

The system needs people to generate blocks in order to provide the security of the system, but generating blocks has costs associated with it (hardware, electricity). Why not reward those block generators that are providing the system's security with new coins for each block they generate, at least until the number of transactions per block grow to a point that block generators can charge transaction fees?

Block generators aren't just generating blocks for the fun of it...they want bitcoins so they can spend them, which means those bitcoins will go to others, who can then further spend them, etc. Anyone can do it. GPU mining is profitable for most who wish to make the investment. There's no central authority choosing who gets to generate new blocks. Each person chooses whether they want to generate blocks or not.

If you don't want to generate blocks, but still want bitcoins, then you offer goods/services for bitcoins.

So far no one has thought of any less arbitrary way to introduce bitcoins into the network while continuing to support the security of the network at the same time.

And the term "proof-of-work" is misleading. They're generating blocks in such a way to deliberately make it difficult for someone else to attack the network by generating replacement blocks in an attempt to double-spend their bitcoins. They're not doing these calculations as an attempt to prove they're not some malicious node. Block generators do the work of creating a block, and if someone wants to double-spend their money, they have to generate that block and every single block that's been generated afterwards with at least the same total difficulty of the other blocks. This can only theoretically be accomplished if they have more processing power than the entire bitcoin network, and even then it would take a long time to do unless they had a lot more. Otherwise they just fall further and further behind as the bitcoin network block generators increase in power and the difficulty increases. Contrary to the opinions of some, these calculations are not wasteful, but are a necessary part of the system's security.

1 bitcoin worth more than dollar

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