Bitcoin

Is anyone using this currency?

I seriously cannot wrap by brain around how this works. I understand it eliminates a middleman or payment processor, like Paypal, which I like.

I also like that it is not tied to a Central Bank, like the Federal Reserve, a decentralized currency, if you will.

How does it get its value? I don't believe it is tied to a gold standard.

Also, how is it created? I've seen some hardware where people dedicated CPU cycles to create Bitcoins.

All in all, some of the articles that I've read online say this could be the next major tech disruptor, much like Bit Torrent. Here is an example of an article:

Need Bitcoins? This ATM takes dollars and funds your account | Politics and Law - CNET News

Find more posts tagged with

Save $250 on 2025 certification boot camps from Infosec!

Book now with code EOY2025

Button

Comments

YFZblu

Everything I've read about bitcoins and the people who 'mine' them is really, really, really obnoxious. Randomly CBT Nuggets does have a pretty thorough video series on Bitcoins though so perhaps check that out if you're interested.

the_Grinch

Basically, some random guy (with a little help) develop the currency. The idea is there can only be 21 million bitcoins in circulation ever. All transactions are public and processed by people running the software. As each transaction takes place, people running the software begin to process it and whoever finishes the process gets 50 bit coins for doing it. As more are placed out there, mining will generate fewer coins. Very interesting and I'd like to see where it goes.

tpatt100

I spent some time trying to read different sources and I still am confused.

the_Grinch

Anything specifically that's confusing? If you're an Amazon Prime member there is a decent book you can barrow for free.

tpatt100

I think I am having issues since there is not a central "authority" I guess since I am so used to traditional currency. Since it is transparent it seems more honest but the "mining" part is where I kind of get confused.

YFZblu

On the 'value' question: Bitcoins have value because people believe they have value.

The best comparison I can come up with is gold. Gold is valuable because we say it is - Supply and demand. My understanding is that Bitcoins will eventually cap out at 21 million, making the similarities more accurate. Limited quantity.

I am not comparing Bitcoins to the value and purpose of gold obviously, that is just the most convenient comparison I can make.

the_Grinch

The mining portion is to actually generate the currency and to also reward people for processing the transactions. There is a fairly complex algorithm at work which requires a lot of computing power to process. The idea of mining is to get people to leave their systems on to process the transactions and give them something for their troubles (an incentive). I think right now they are still in the phases of paying 25 bit coin (one bitcoin is around $30 USD) for processing the transaction to the ledger. Slowly, but surely the reward will go down to zero (once they reach the 21 million bitcoin mark).

As YFZ has said, the value comes from people valuing it and using it. It provides a degree of anonymity so that is an incentive to use them. Their slowly, but surely being accepted by a good amount of places so I suspect their use to go up.

Bill3rdshift

JockVSJock wrote: »

Is anyone using this currency?

I seriously cannot wrap by brain around how this works. I understand it eliminates a middleman or payment processor, like Paypal, which I like.

I also like that it is not tied to a Central Bank, like the Federal Reserve, a decentralized currency, if you will.

How does it get its value? I don't believe it is tied to a gold standard.

Also, how is it created? I've seen some hardware where people dedicated CPU cycles to create Bitcoins.

All in all, some of the articles that I've read online say this could be the next major tech disruptor, much like Bit Torrent. Here is an example of an article:

Need Bitcoins? This ATM takes dollars and funds your account | Politics and Law - CNET News

Listen to this:

http://media.grc.com/sn/sn-287-lq.mp3

Steve Gibson's Security Now Podcast

Asif Dasl

CBT Nuggets did a free course on Bitcoin, I think it's about 4.5 hours long. Might be useful to delve in to the details of it...

Bitcoin Training

Cold Titanium

ARGH That guy's voice is so annoying.

JockVSJock

Found this VERY interesting article about Bitcoin.

BitCoin Seen Through The Eyes Of A Central Banker | Zero Hedge

Defcon 19 Topic
https://www.youtube.com/watch?v=v4pJwUeNFk8

the_hutch

The bitcoin market has fascinated me for years now. What makes it really interesting in my opinion is the fact that it is a decentralized currency that is not backed by anything. We obviously have currencies that have no backing (the US dollar being one example), but it is still supported by confidence in a central authority. But here there is no central authority. But yet the bitcoin still does retain legitimate value. It is however, a true currency in the sense that it has no practical value other than the value that it represents.

I think one of the big things that keeps bitcoin going is the anonymity of it. This feature allows it to support black market transactions online (online drug trade being a big one), which in turn helps to sustain the economy.

Fascinating stuff, from a technical perspective, but even more because of the discussions it raises about economic theory.

TheShadow

Money is what ever you can get people to believe in. Yap island in micronesia uses stone money, big cicular limestones with a hole in the middle too big to steal easily. Me I am still waiting for gold-pressed latinum to make its debut.

yoshiiaki

Well for those watching the market value, it recently broke an all time high early to mid-January (I don't remember exactly) of about 15-16USD$. Just checking today it appears to be worth 32USD$ meaning in about a month and a half to 2 months it just doubled it's value. With stocks, I would bet that this would come down fairly soon. However knowing there is a limited amount of bitcoins I would think eventually (assuming it stays active and isn't replaced) once all the bitcoins are completely mined, in order help spread out bitcoins they would break them into smaller fragments, thus increasing the overall value of an entire bitcoin. So buy now or keep trying to earn a coin? idk...but I find it insanely hard to earn myself even one bit coin. But then again all i use is free faucets and give aways.

dontstop

Ask yourself this... Not how does bitcoin get it's value... How does golf get its value?

It's just earth

lsud00d

Most people buy bitcoins through a broker and store them in online digital wallets. They then use the wallets to purchase things that accept the bitcoin currency.

Here's an arstechnica article from September 2012 of a hack that stole ~$250k in bitcoins:
Hacker steals $250k in Bitcoins from online exchange Bitfloor | Ars Technica

This is one of the innate problems of a non-centralized, non-bank backed currency...if your money gets stolen, you're most likely not getting it back.

Also with transactions...unless you go through an escrow, there is no guarantee of services, and most often there are no returns. There is a huge element of trust in this style of exchange.

Add to that the currencies volatility, which can be wildly affected (moreso than stocks) due to speculation.

It's very interesting.

wd40

I was watching an old episode of "The Good Wife" yesterday and it was about bitcoins.

I learned from it that creating bitcoins is illegal, is using it illegal too?

I collect real coins, so the illegality of creating currency makes sense to me, and I know that knowingly using forged currency is illegal.

I think using bitcoins is in a dark gray area.

jibbajabba

TheShadow wrote: »

I am still waiting for gold-pressed latinum to make its debut.

I am with you on that - just make sure you don't lose all of it at the Dabo Table and keep it small, only play slips rather than strips. Takes longer to win, but you obviously lose less

JockVSJock

lsud00d wrote: »

This is one of the innate problems of a non-centralized, non-bank backed currency...if your money gets stolen, you're most likely not getting it back.

Non-bank backed? The US Dollar is not backed by anything of value, except faith, which is quickly eroding since Bretton-Woods Agreement created in 1944 is really no longer in effect.

As with banks backing their deposits, they only guarantee so much and if there is a run on the bank, they call up the Federal Reserve to print more money out of thin air, which devalues the American Dollar and means that your dollar is worth less and less.

This is known as inflation, the hidden tax.

JockVSJock

A Bitcoin for Your Thoughts | Zero Hedge

Quote from the article:

The best performing currency year-to-date has no home country, no central banker and no physical scrip; it is the online-only ‘Bitcoin’and as we noted recently, it is becoming more mainstream.

One of the post on this article

Mark Carney

Hmmmm, bitcoin, something that is electronic, non tangible and could disapear anytime...... think ill stick to gold and silver buillon.

antielvis

You can buy some services with Bitcoin most notably VPN Services. It allows a person to purchase services, like VPN pretty much anonymously. While the immediate thought for most is that it's used to buy services to hack, etc (hence the VPN) but for those in countries under the thumb of invasive, spying governments and for those who live in a world of paranoid

I've watched the Nugget series and it's quite interesting. You set up a wallet online and then trade from there. People can sent you fractional pieces of coin. Those doing the processing of transactions get paid in bitcoins. It's quite fascinating to be honest and an interesting idea. I can see federal governments NOT liking it. It would allow you to escape the tax system too easily (and we can't have that).

Personally, I think it'll help online gambling take off. Online gambling for actual money is illegal in many areas. If they play with bitcoin it would fall in a sort of grey area. And for the feds to stamp it out, they'd essentially be admiting it was a form of currency.

lsud00d

@JockVSJock my point was protection in a consumer-based transaction, like the FDIC.

lsud00d

Just as an update, 1 BC is at $94.45 USD

JasonIT

Wired Magazine had a couple good articles on bitcoin a few months back. Worth a read.

J

exampasser

the_Grinch wrote: »

The mining portion is to actually generate the currency and to also reward people for processing the transactions. There is a fairly complex algorithm at work which requires a lot of computing power to process. The idea of mining is to get people to leave their systems on to process the transactions and give them something for their troubles (an incentive). I think right now they are still in the phases of paying 25 bit coin (one bitcoin is around $30 USD) for processing the transaction to the ledger. Slowly, but surely the reward will go down to zero (once they reach the 21 million bitcoin mark).

As YFZ has said, the value comes from people valuing it and using it. It provides a degree of anonymity so that is an incentive to use them. Their slowly, but surely being accepted by a good amount of places so I suspect their use to go up.

But what will happen when the mining portion becomes completely unprofitable, and therefore a lot less people willing to use their computers to process transactions? I've just begun to read up on bitcoin, so perhaps this issue has already been addressed. UPDATE: I just read how it's addressed.

lordy

I attended this talk which I found quite helpful:

28c3: Bitcoin - An Analysis - YouTube

JockVSJock

A visual guide to Bitcoin, from Visual Capitalist

Bitcoin: The Encryption Standard | Visual Capitalist

tpatt100

I went to the official Bitcoin site and their explanation made the most sense to me. It really made a light bulb go off for me when it explained about the sharing of time stamps and transaction histories among all the nodes.

lsud00d

I'm not sure if anyone has been watching this WILD ride but I watched tickers and graphs show the crash yesterday from a high of 266 to a low of 55 today...the bubble has burst for the second time and I wouldn't be surprised if it was a coordinated DDoS attack to sell of in droves and buy super low.

the_Grinch

While I understand you don't see that kind of flux with a regular currency, it's not completely unusual with currency to jump up and down. As you stated, this was from a coordinated attack, but generally speaking I don't think you lose anything by holding onto it. The other side of it is really the jump it got from media. Once that goes away, I think it will even out to a more suitable price. I'm definitely thinking about starting to buy some not as an investment so much as I like the philosophy behind it.