What is Bitcoin?

The whole bit coin thing makes no sense to me. How does one mine for them? Where are they found? Does the mining software steal them from other wallets? If so, none of them are safe.

They seem more like stocks to me. You buy in and values increase or decrease but you can't cash it in at the bank.

Seems like a seriously unstable currency, backed by nothing and used by too few.

...How does one mine for them? Originally Posted by pornodave69

Technically you can use any computer to "mine" for them. Even your cell phone. But since so many computers mine for them the rate of computing power needed has resulted in specialized chips being manufactured that only do the calculations needed to "mine" for them.

Where are they found? Originally Posted by pornodave69

They are found by your computer completing a computation before others "mining" the currency. This computation is solved, changed and all machines start the process over approximately every 10 minutes 24/7/365.

Does the mining software steal them from other wallets? Originally Posted by pornodave69

No

They seem more like stocks to me. Originally Posted by pornodave69

This is understandable. There are only so many Bitcoins in existence at the moment. As of this post roughly 12.3 million, but more are being created about every 10 minutes. As there are only so many the amount people are willing to pay for them has gone up quite a bit. There is no one company or entity that is determining the value of Bitcoins. It is simply the publicly determined value people are willing to buy them for from others.

You buy in and values increase or decrease but you can't cash it in at the bank. Originally Posted by pornodave69

The same way you cannot cash in Chinese Yuan. You would have to go to a currency exchange.

Seems like a seriously unstable currency, backed by nothing and used by too few. Originally Posted by pornodave69

It may be unstable compared to other currencies for awhile. It's a Fiat currency just like the US dollar. Backed by nothing but a promise. Use is rapidly growing.

This is a quick intro to bitcoin and basic concepts.

Here is a great FAQ about Bitcoin.

This is a brief NY Times article written 1/21/2014 titled "Why Bitcoin Matters"

The mining thing still makes no sense. All I can see is that computers solve math problems to earn bit coins. Who creates the math problems? Once the problem is solved bit coins are earned. Who creates the coins the pay for this? As devalued as it is, at least our currency used to be backed by gold and silver. What backs the bit coin to give it value? Not a damned thing that I can see.

Who funds bit coins? There has to be something giving it value. Hell, I could say mardi gras doubloons have value and start buying crap with those. Mining for gold, silver, gems and other precious metals produces a tangible product that has a value. How does a computer processing a mystery math problem and puts invisible, non-tangible "coins" in a wallet that doesn't exist produce anything of value?

Understandably, anything people are willing to trade for goods and services has value. We could trade rocks if someone wanted to do so but good luck buying a car with a bag of rocks.

I've read where there is a limited number of bit coins but supposedly they are created every day. How can that be? Either there's a finite number or there isn't. Which is it?

The whole thing makes absolutely no sense to me whatsoever.

The mining thing still makes no sense. All I can see is that computers solve math problems to earn bit coins. Who creates the math problems? Once the problem is solved bit coins are earned. Who creates the coins the pay for this? As devalued as it is, at least our currency used to be backed by gold and silver. What backs the bit coin to give it value? Not a damned thing that I can see.

Who funds bit coins? There has to be something giving it value. Hell, I could say mardi gras doubloons have value and start buying crap with those. Mining for gold, silver, gems and other precious metals produces a tangible product that has a value. How does a computer processing a mystery math problem and puts invisible, non-tangible "coins" in a wallet that doesn't exist produce anything of value?

Understandably, anything people are willing to trade for goods and services has value. We could trade rocks if someone wanted to do so but good luck buying a car with a bag of rocks.

I've read where there is a limited number of bit coins but supposedly they are created every day. How can that be? Either there's a finite number or there isn't. Which is it?

The whole thing makes absolutely no sense to me whatsoever. Originally Posted by pornodave69

pornodave69: I'm sorry you do not have a grasp of how currency works.

I took the time to write a reply to your individual questions previously. Please take the time to finish reading my post above and the 3 links I provided. After you should have all of your questions answered along with a decent understanding of how Bitcoin works. Until then your questions just seem silly if you're not willing to educate yourself.

Ex. The breathing thing still makes no sense. All I can see is that mouths suck in air. Who creates the air? Once the air is sucked in oxygen is earned.

All currency only has value if the public demand agrees that it has value. Bitcoin is not affiliated with federal US currency or any country's banking system for that matter. However, its properties as an unbacked currency that would be worthless if people didn't place value in it and weren't willing to buy it with something of value, are not different than other currencies. The US also continues to release additional currency into circulation, I assume loosely based on mathematical formulas. The major difference is that bitcoin itself is a computer program. The mathematical problems that need to be solved to generate bitcoins get increasingly more complex so they get harder and harder to mine. The number of bitcoins will continue to increase, but at this point they will increase slowly until they reach a cap number after which no more bitcoins will be produced. That doesn't mean people will stop buying bitcoins. The price will skyrocket, but people will operate in fractions of bitcoins. I could charge 0.4 bitcoin per hour, for example. Or maybe in the future, 0.04 bitcoin will be the amount that is worth about the same amount of money as 0.4 bitcoin is worth now. Bitcoin is similar to a foreign currency but it is regulated by a computer program and not a government. It is true that it is unstable because it is new. Don't STORE money in bitcoin that you're not okay with losing. But if you try using bitcoin, use your bitcoin wallet to facilitate electronic transactions that you'd like to remain totally anonymous. This is otherwise impossible in the climate created by the federal government with the patriot act. The US federal government and many federal governments feels that they have the right to track every electronic financial transaction that happens under the federal banking system. Their currency, their rules. Bitcoin circumvents that using a computer program to provide rules that are unchangeable by any individual or governing body. It is a currency regulated by mathematics and not by politics. It's true that if you don't understand complex mathematics or computer programming, you will not understand how and why bitcoin works the way it does. But taking the time to read about it and try to understand the concepts behind it will help. It was created by computer geniuses and understanding its mechanisms is not easy for the average person. Or just shake your head in disbelief and wait 5 years until everyone is using it and then hop on the bandwagon once you feel more secure about it based on observing its successful usage.

It's true that anyone can create any random BS "currency" and claim that it has value. Bitcoin actually HAS value because people learned how it works and upon gaining understanding, decided that it was a genius idea and that they would invest in it early on. Those people are now millionaires. At this time, lots of people all over the world think bitcoin has value and have invested in it. Therefore, it does. The demand/value relationship is the same as with any other currency not backed by gold. Of course bitcoin is unstable because it is newish, but once millions of people from all over the world are using it to facilitate anonymous and irreversible transactions I'm sure it will be much more stable.

Once you've convinced millions of people that your Mardi Gras doubloons as currency idea is totally genius, and they've bought into it, you will have successfully created your own currency as well. Good luck!

pornodave69: I'm sorry you do not have a grasp of how currency works.

I took the time to write a reply to your individual questions previously. Please take the time to finish reading my post above and the 3 links I provided. After you should have all of your questions answered along with a decent understanding of how Bitcoin works. Until then your questions just seem silly if you're not willing to educate yourself.

Ex. The breathing thing still makes no sense. All I can see is that mouths suck in air. Who creates the air? Once the air is sucked in oxygen is earned. Originally Posted by JAdams

Your analogy sucks. Oxygen is created through photosynthesis by algae, plants and trees - nature. We don't earn oxygen, we use it. Who creates bit coins? Nobody? There isn't even a physical coin. It's a virtual coin for something a computer does, which is still a mystery to me.

I did take the time to read your links. None of them answer my questions. There is no mention of where these coins come from. Having a computer solve problems is not an answer.

How are these math problems generated? No answer.

Who generates these problems and pays for the solution? No answer.

How are the coins created? No answer.

What is the currency backed by? No answer.


Everything I have read about this is very vague and nothing I have read answers any of my questions.

If you can explain it, please do, because nowhere can I get answers to these questions through any searching and reading at all.

The best analogy I can give is this:

A teacher writes 1 + 1 on the chalk board.

The student solves in by writing 2.

The teacher gives the kid a penny.

Who is the teacher? Where does the penny come from if there is no physical teacher? What are these math problems that are being solved for these coins and what is the purpose of solving these problems?

Is there some University or corporation supplying these problems to have more processing power to achieve a goal?

SETI has programs that people can download in order to process information from radio telescopes to look for extra terrestrial life. Millions of computers working to process all the data collected. Is bit coin mining something like this? If so, who is running it?

Wow so I read every ones comments and I am still very confused. I will be sticking with paper money lol

Your analogy sucks. Oxygen is created through photosynthesis by algae, plants and trees - nature. We don't earn oxygen, we use it. Who creates bit coins? Nobody? There isn't even a physical coin. It's a virtual coin for something a computer does, which is still a mystery to me.

I did take the time to read your links. None of them answer my questions. There is no mention of where these coins come from. Having a computer solve problems is not an answer.

How are these math problems generated? No answer.

Who generates these problems and pays for the solution? No answer.

How are the coins created? No answer.

What is the currency backed by? No answer.


Everything I have read about this is very vague and nothing I have read answers any of my questions.

If you can explain it, please do, because nowhere can I get answers to these questions through any searching and reading at all.

The best analogy I can give is this:

A teacher writes 1 + 1 on the chalk board.

The student solves in by writing 2.

The teacher gives the kid a penny.

Who is the teacher? Where does the penny come from if there is no physical teacher? What are these math problems that are being solved for these coins and what is the purpose of solving these problems?

Is there some University or corporation supplying these problems to have more processing power to achieve a goal?

SETI has programs that people can download in order to process information from radio telescopes to look for extra terrestrial life. Millions of computers working to process all the data collected. Is bit coin mining something like this? If so, who is running it? Originally Posted by pornodave69

Dave , what is that "dollar" in your pocket "backed" by?
Does that help clear things up for ya?
bayou boy

Pornodave brings up a very good point.

Basically "mining" is you renting your processor to an unknown. What they are using your computational power for....no one seems to know. Could be the gov't. Could be a cheap way to create more cloud storage or more cloud computational power to be sold (such as Amazon does).

Nothing in life is free, some use of the computational power is being used. Otherwise it would be a HUGE waste of energy.


Like with everything, those that get in on the ground floor make the big bucks with those that trail making peanuts.

Your analogy sucks. Oxygen is created through photosynthesis by algae, plants and trees - nature. We don't earn oxygen, we use it. Originally Posted by pornodave69

Yes, this is a well documented system backed up by scientific fact you learned about when you were a kid. Bitcoin is a system that is well documented and backed up by mathematical fact that you just do not yet know about.

Who creates bit coins? Originally Posted by pornodave69

Link One Section 2.1
Link 2 Section 1.7

There isn't even a physical coin. Originally Posted by pornodave69

Really? Do you have all of your paper money hidden in a mattress? We all use and transfer money in a digital way every day. Having an electronic currency is not a new concept.

It's a virtual coin for something a computer does... Originally Posted by pornodave69

No, it is a currency which protects its self against inflation by being released at a predictable rate. You seem to be hung up on this.

I did take the time to read your links. Originally Posted by pornodave69

I would not be writing this reply if you did

There is no mention of where these coins come from. Having a computer solve problems is not an answer. Originally Posted by pornodave69

You are looking at this as just one small component that is very important and do not understand WHY this mechanic even exists.

How are these math problems generated? Originally Posted by pornodave69

Link 2 Section 1.7 mentions that the mathematical problem solved forms a block and is "a proof of work with a difficulty that varies with the overall computing strength of the network."
This link within the explanation explains what a block is.
This link within the previous explanation is a technical explanation of the block hashing algorithm.

Who generates these problems and pays for the solution? Originally Posted by pornodave69

The problem is naturally generated by the mathematical algorithm that all people in the world who use Bitcoin have agreed upon. Solving the problem and submitting a valid proof of work to the bitcoin network results in the solving computer receiving a tiny payout. (Compared to the size of the currency overall.)

What is the currency backed by? Originally Posted by pornodave69

The same thing gold & silver is backed by.

Everything I have read about this is very vague and nothing I have read answers any of my questions. Originally Posted by pornodave69

The original technical paper written by the creator of Bitcoin can be found here. It explains in technical detail exactly how Bitcoin works.

What are these math problems that are being solved for these coins and what is the purpose of solving these problems? Originally Posted by pornodave69

This link is a terrific video from 2011 explaining Bitcoin on a more technical level. Keep in mind it's 45mins long.

SETI has programs that people can download in order to process information from radio telescopes to look for extra terrestrial life. Millions of computers working to process all the data collected. Is bit coin mining something like this? Originally Posted by pornodave69

No. But if you take the computing power of the Bitcoin network it's hard to compare it to other large computing speed records due to the difference in calculations. Estimates as of May 2013 (before specialized mining chips became readily available) explain the computing power of the Bitcoin network is over 8x as fast as the top 500 supercomputers in the world, combined.

Basically "mining" is you renting your processor to an unknown. Originally Posted by disilene

No. The computing power is used to do this specific calculation.

What they are using your computational power for....no one seems to know. Originally Posted by disilene

There is no "they". Bitcoin is a decentralized network. The calculations performed along with the solutions found ensure that transactions are valid. Every problem along with the answer is published to the entire network. The the transactions are then appended to the ledger of every Bitcoin transaction ever created.

Nothing in life is free, some use of the computational power is being used. Otherwise it would be a HUGE waste of energy. Originally Posted by disilene

It is being used to verify the transactions of the currency that happened world wide in the previous 10 minutes.

Like with everything, those that get in on the ground floor make the big bucks with those that trail making peanuts. Originally Posted by disilene

Not quite. Everyone has a chance depending upon their own computing power. If you buy a $15 gold mining pan and go down to a creek it may take awhile before you find something. If you had a million dollar mining operation you'll probably do better. All miners are competing for the same payout every 10 minutes. "Mining" is just one small component of what makes up Bitcoin a currency. If no one was "mining" the currency would technically be unable to transact between parties. This is the part a lot do not tie together when learning about Bitcoin.

I'm sticking with tulips.

JAdams....I appreciate your ability to read and regurgitate what you have read. However, as the link provided says..."However, it is (nearly) impossible for two people to have the same Merkle root because the first transaction in your block is a generation "sent" to one of your unique Bitcoin addresses. Since your block is different from everyone else's blocks, you are (nearly) guaranteed to produce different hashes. Every hash you calculate has the same chance of winning as every other hash calculated by the network."


This basically describes a batch queuing system which is very common in even the most basic use of super computing for the greatest efficiency of computational time.

Every person is preforming a different calculation which is only a portion of a larger calculation which is broken down by commonly generated hash marks (similar to how bit torrents are used in p2p networks.) If you produced the SAME hash, you would be performing the same calculation.

It is very clear that the exact same calculation is NOT being repeated. That would be a monumental waste of computational power.

Not trying to piss you off....as you seem to be taking this all a bit personal. But your explanation seems to be on level with a generic wiki level explanation. BY which I mean to say you are correct in what your read. However, the computational power that can be harnessed by this network is far greater than what is needed for such a network. That excess computational power has to be used.....perhaps a bit conspiracy theory....but it is enough computational power to break encryption possibly on level with the power of the NSA.

So, yes, I see what you say....which is what you read. But the power is too much for such a simple task.

I mean how many people would be so willing to "mine" for bit coin if they were told that their computer is being used to perform calculations of an unknown manner, for an unknown purpose, by unknown entities? Basically by downloading and installing the platforms for mining the bitcoin, you are installing a portal for which your computer can be interfaced by a remote computer and thus become a node in a what is essentially a super computing network that is decentralized which means the very expensive costs for hardware, cooling, upkeep, and power are not realized.

Dave , what is that "dollar" in your pocket "backed" by?
Does that help clear things up for ya?
bayou boy Originally Posted by Thibodaux

At least my "dollar" is earned by work done by me in the form of labor and producing a product that is tangible and used by others and I can get physical cash in my hand, not some computer processing for which one is paid in "magic" money.



JAdams,

All of these supposed Wiki explanations and links are complete gibberish as far as I'm concerned and explain nothing, but let me see if I have this right:

1. A mysterious mathematical equation is provided, for an unknown purpose, from an unknown source that magically appears in the mining software, created out of thin air;

2. Your computer solves the equation, for an unknown reason, to which the answer has no relevance whatsoever to anything that we know of;

3. Once your computer solves the problem, for which you did no work whatsoever, you are rewarded with phantom currency that is not used or recognized by most of the world market with the exception of a handful of foreign monetary exchanges and a few businesses.

Is that about right?

After reading my last post, it sounds like it came from an ass. My only point was that, since the dollar has become a fiat currency, it has no "real value" of it's own. Only through consensus, can it be used as payment for anything. It is money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard. An acorn has more "real" value than a U.S. Dollar. Bitcoins are purely speculative investments, they fluctuate in value relative to other currencies, just as U.S. Dollars do.

I already have a pretty low opinion of a U.S. Dollar , but I'm trying to collect as many of them as I can.
bayou boy