Bitcoins

Old Dec 1st 2013, 11:58 am
  #1  
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Default Bitcoins

I don't understand.. can any IT geeks explain what they are and how they value?

http://www.dailymail.co.uk/sciencete...ace-weeks.html
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Old Dec 1st 2013, 12:42 pm
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Default Re: Bitcoins

it's a virtual currency, traded on a bit coin market similar to stocks.

Like any currency (non gold standard currencies) it has no real value at all only that people agree to accept it. Used to be mostly for buying drugs on the silk road website (that was closed down recently) but lately has had a huge surge in value. It is a currency that can't really be traced and is easily transferred or carried without problems.

The coin itself is just a string of numbers based on a computer algorithm, you store this locally on your own computer and when you buy something just transfer the code to the shop.

To own coins either you must buy them for their current market value or run the computer algorithm to generate the code for you. However you need massive computer processing power to do this now, so is out of reach of most normal people. This is called bitcoin 'mining'.

It's as valid a currency as any imo, it's advantage is that it's not government controlled or manipulated. It's disadvantage is that it is obviously being manipulated by someone and seems to be heading for a massive crash.
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Old Dec 1st 2013, 12:47 pm
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Default Re: Bitcoins

Erm ok that kind of makes sense, so if it's virtual money how is it worth anything? stocks I understand but I don't really get this, if there isnt a pot of money somewhere in real life how can anyone pay for anything in the real world?
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Old Dec 1st 2013, 12:56 pm
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Default Re: Bitcoins

Originally Posted by kittycat1 View Post
Erm ok that kind of makes sense, so if it's virtual money how is it worth anything? stocks I understand but I don't really get this, if there isnt a pot of money somewhere in real life how can anyone pay for anything in the real world?
It depends on people accepting it as currency, no different to sterling, dollars and euros. There is no intrinsic value in a dollar note, and no gold to back it up for example. So if we all decided not to accept dollars they would become worthless overnight.
Without that acceptance all the systems fall down. So as long as its possible to buy things with bitcoins it will have a value.
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Old Dec 1st 2013, 1:00 pm
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Default Re: Bitcoins

ok so if i had an internet shop selling underwear and i accepted bitcoins as payment where would my customers by them and how how would I cash them in? (best to speak slowly)
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Old Dec 1st 2013, 1:08 pm
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Default Re: Bitcoins

Originally Posted by kittycat1 View Post
ok so if i had an internet shop selling underwear and i accepted bitcoins as payment where would my customers by them and how how would I cash them in? (best to speak slowly)
You would accept them over the net, they would transfer the coin to you. Both of you would have some kind of locally stored bitcoin (virtual) wallet to arrange the transfer. Similar to paypal I suppose.

In order to get your money out you would either buy something yourself from someone else, repeating a similar transaction, so getting their value as goods.
Or selling them on a bitcoin exchange, similar to how you would sell off your stocks. They would pay the actual cash value to you.

Its a volatile currency, so the actual cash value of the coin is changing a lot. Upwards at the moment. So I doubt many are using them for purchases right now but are buying only to hold stock to sell later.
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Old Dec 1st 2013, 1:11 pm
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Default Re: Bitcoins

Ok I get it (I think), thank you so with the volatile nature its a bad currency to trade in basically. But if it stabilises it could be interesting

Thanks for making that clear weasal
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Old Dec 1st 2013, 1:15 pm
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Default Re: Bitcoins

I wonder when credit cards were first introduced, if they were met with the same skepticism that I have for bitcoins. But where are we now, the world cannot function without a credit card in most places of the world

The problem I have with bitcoins is that they can be mined i.e. digitally produced using very very high processing-capable computers. Hence 'they' and 'their' manufacturing is not controlled by institutes. Now is that a good thing or a bad thing? The rebel / anarchist in me loves the idea of not having anything to do with the banks or the governments or the governments controlled by the banks, but the sane person in my wants there to be order i.e. The rich keep on getting richer and the poor keep on getting poorer
But leaving the philosophy of it all behind for a second, I am pretty sure this bitcoin thing will stick only IF someone like Visa or MasterCard pick it up or some other big institute picks it up.
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Old Dec 1st 2013, 1:19 pm
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Default Re: Bitcoins

Originally Posted by kittycat1 View Post
Ok I get it (I think), thank you so with the volatile nature its a bad currency to trade in basically. But if it stabilises it could be interesting

Thanks for making that clear weasal
Its bad to trade in for goods right now, especially for a buyer. As one coin (for example) for a dress might be $200 today but $300 tomorrow. So it doesn't make sense.
If it stabilises it is an interesting alternative. One further thing is that it is finite, so once all the coins are 'mined' so to speak then there are no others, it is not possible to go out and print some more (like they are doing with dollars etc).

There will be other attempts at this with other systems which might be more stable, but the key is reputation.

If I was to give you $100 dollars or 21,500 Yemeni Rials for example as a choice (both are worth the same) you would take the dollars simply on reputation and image of being a stable, universally accepted currency.
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Old Dec 1st 2013, 3:36 pm
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Default Re: Bitcoins

it is not possible to go out and print some more
until the rules change
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Old Dec 1st 2013, 4:13 pm
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Default Re: Bitcoins

It is no less a virtual currency that dollars.

A dollar (or any other major currency) is not backed by gold or something physical, but a promise by the central bank to pay. It's a confidence thing only - google 'fractional reserve banking' if you want to **** with your mind. It's amazing that this is what 'money' is...

As far as I'm aware bit coins are not fractional reserve based and so is actually more like a real currency than all of the real ones...

All that said - I wouldn't touch a bit coin.
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Old Dec 1st 2013, 4:33 pm
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Default Re: Bitcoins

Originally Posted by OriginalSunshine View Post
until the rules change
It's not possible, the coding can only produce a finite number. The whole premise does not work if it's unlimited.
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Old Dec 1st 2013, 4:35 pm
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Default Re: Bitcoins

Originally Posted by Irishbeekeeper View Post
I am pretty sure this bitcoin thing will stick only IF someone like Visa or MasterCard pick it up or some other big institute picks it up.
Doubtful that that could happen as it's attractiveness for exchange was based on avoiding transaction charges such as visa cards etc. You could consider the transaction as peer to peer without an intermediary.
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Old Dec 2nd 2013, 10:18 am
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Default Re: Bitcoins

Interesting that Kittycat asked for help from an IT expert, not a currency expert - which is just as well, because after 35 years working in currencies, I might lay cliam to the latter title.........

........ but I readily confess to not quite getting the gist of Bitcoin.

Actually - I think I do, but as it is a currency with (presumably) no central bank, no monetary policy (no interest rates, in fact), it cannot be legitimately described as a currency as we know it. I can see similarities with gold (which I have always regarded as just another currency, not as a commodity), I admit.

Having read a lot on it - and a few of the comments in this thread are well-informed and helpful - I don't see (a) how you get your money out of Bitcoin if you want to (the talk is of spending any surplus gains you have on another transaction), and (b) how or why it has allegedly 'risen' in value lately.

Someone will help me, I'm sure, but it has the feel of a good old-fashioned Ponzi to me..........
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Old Dec 2nd 2013, 10:39 am
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Default Re: Bitcoins

The Federal Reserve Bank is also a Ponzi scheme - but on a very much larger scale.
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