BitCoinnnnnnnnzzzzzzzzzzz
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there's no security to its value.
irrelevant: "Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context.[1][2][3] The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, sometimes, a standard of deferred payment.[4][5] Any item or verifiable record that fulfills these functions can be considered money."
You're kinda arguing past me. Yes, you're right it maybe shouldn't be considered money, but it is. @accalia says so in the very next post: " it's always been as a [...] medium of exchange." (yes, I removed a word that wasn't germane to my point.) Even as she claims it's missing trust, she admitted it's de facto money.
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thanks to inflation, the dollar loses value too, but at least with the dollar, you can always make more;
BTW, "making more" is the very definition of inflation.
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partial coind (no i don't pretend to understand that either)
You are clear that a penny is a fraction of a dollar or euro. It's the same principle.
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You are clear that a penny is a fraction of a dollar or euro. It's the same principle.
Bitcoins are (theoretically) infinitely divisible; dollars et al aren't.
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Bitcoins are (theoretically) infinitely divisible; dollars et al aren't.
Irrelevant to the discussion of whether it's money.
Dollars could be if the backers of the currency wanted to. There used to be mills, for example.
One could argue that the Zimbabwean dollar is, in fact, infinitely divisible.
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…y'know, 3AM is a bad time to be debating the intricacies of currency
Anyway, I've never said Bitcoin isn't money; all I'm maintaining is that it shouldn't be money, mainly because there's no security to its value. That, and the complete lack of regulation.
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You are clear that a penny is a fraction of a dollar or euro. It's the same principle.
it isn't really. a cent is a separate physical thing that's representative of a dollar. it is not a literal piece of that dollar. that's easily verified that it's a penny, how do you verify that this 0.01BTC is part of a valid BTC and that this particular 0.01BTC is yours to trade?
the workings of crypto currency confuse me.
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it isn't really. a cent is a separate physical thing that's representative of a dollar. it is not a literal piece of that dollar.
Ugh. Here's your "overly literal" badge. A cent represents a fraction of the value of a dollar the same way a fraction of a Bitcoin represents a fraction of the value of a bitcoin.
how do you verify that this 0.01BTC is part of a valid BTC and that this particular 0.01BTC is yours to trade?
Because somehow it can be verified. I don't care enough to check the details.
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A cent represents a fraction of the value of a dollar
not exactly. but close enough for this argument i guess.
My main point was a penny is a physical thing (or nto in the case of online banking, then it's the idea of a physical penny (currency theory is weird!)) where as BTC only exists as a series of ones and zeros.
Because somehow it can be verified. I don't care enough to check the details.
i presume that it can yes, because otherwise the whole thing would be a scam, and not just most of the exchanges.
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Just thought of another flaw with Bitcoin; how to ensure bits don't just go missing.
Let me explain:
A dollar is 100 cents, and a cent is atomic. So you can always choose a representation that has absolute precision.
A Bitcoin is infinitely divisible. So you need a representation that can handle infinite precision. Which is impossible.
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A Bitcoin is infinitely divisible.
yes, but for a simmilar reason you don't need to divide it forever because at some point it's not worth further subdividing. that's why hapennies and farthings aren't around anymore.
so this is.... inaccurate
So you need a representation that can handle infinite precision.
you just need a representation that can store a "sufficient" precision without error. and since storage is getting cheaper every year it'll hopefylly stay reasonable to store the required precision no matter how much it has to grow over the years.
otherwise it'll just be incentive to build better storage methods.
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My main point was a penny is a physical thing (or nto in the case of online banking, then it's the idea of a physical penny (currency theory is weird!)) where as BTC only exists as a series of ones and zeros.
Does your employer pay you in actual bills that you carry and physically deposit in your bank? Do you ask your bank to transfer the physical bills you deposited to different branches and ATMs so you can take out your own money and not anyone else's?
I'll go out on a limb and say "no you don't". All your money already is "a series of ones and zeros". Your employer tells the bank "lower the number in my account, and add the same number to @accalia's account". When you pay with your card for something that costs a non-integer amount of dollars, your "dollars" are converted to "pennies" and the required amount is subtracted from your account. There's no "physical" money involved.
So arguing that Bitcoin is less real than dollars because they're purely digital is nonsense. Most of the formal economy of the world is already digital.
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Ultimately money is
trust,a medium of exchange.FTFY.
But you touch on an important point. For there to be a medium of exchange, an agreement between a minimum of two parties must exist on the value of that medium before it can be used for exchange, and thus in at least that moment in time, for those people, that medium is, by definition, money (as @frostcat pointed out earlier). The basis of that agreement is trust, which takes the form of a belief that the medium is either useful to the person receiving the medium either as is (e.g., receiving sheep, the person intends to cut the wool off and create a coat from it for the coming winter) or, most often, what @accalia covers next:
When i accept payment for my time i am trusting that the money will be negotiable for a certain value of stuffness at a later point.
whether that payment is in gold, or sheep, or dollars, or pesos, or gold pressed latinum, or even bitcoin, what really backs it is trust. large currencies (USD/GBP/EUR to name three big ones off the top of my head) have this trust because of the governments that back them. sheep, and gold have this trust because they are things that we can trust someone else will want.
To expand on this, degree of trust (also called by some confidence) determines the extent to which that particular medium of exchange can be used as money. No trust = as far as you're concerned, it's not money. If you have little trust, you will be rather unwilling to accept it for exchange unless you had some place you were reasonably certain you could exchange it for something you would rather have. The large currencies @accalia mentions above have a lot of trust, as even if the money loses exchange value there is someplace you are reasonably certain will still exist (the government backing the money) that will exchange it for something that is valuable. That's why when people lose confidence in that backing government, and watch the money become worthless (per hyperinflation example in an earlier post).
So arguing that Bitcoin is less real than dollars because they're purely digital is nonsense. Most of the formal economy of the world is already digital.
True, but see above. Bitcoin doesn't have trust to any large degree because it lacks any backing from someone widely trusted. THAT is what makes it less than "real" dollars.
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My main point was a penny is a physical thing
True, but it's also the value representation, which is what I was talking about.
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A Bitcoin is infinitely divisible. So you need a representation that can handle infinite precision. Which is impossible.
Practically speaking, there reaches a point where there's not any point, so to speak, to dividing it any further. Let's call that 1/100 of a (US) cent, just so we have something to compare against. Google says 1BTC = 237USD at the moment, so unless you want to buy a few seconds of electricity for an Arduino there's not much point in going more than about 7 or 8 decimal points, at the moment. That is trivially storable in any decimal data type; the language I work with, as I have said before, contains a decimal (not floating point) type that can accurately store 50 digits of precision, up to 10 of which can be to the right of the decimal point. (And of course, with the use of a multiplier, we can get 49 decimal places, which is likely to be enough for a reasonable time frame.)
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Do you ask your bank to transfer the physical bills you deposited to different branches and ATMs so you can take out your own money and not anyone else's?
Sometimes it's fun to cash a nice big payroll check. :) I worked for a consulting firm as recently as 2005 that paid me in actual checks instead of direct deposit, like it was 1980 or something.
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Checks are even worse! Checks are only backed by the person giving them to you! If the person doesn't have the funds to clear the check, no one is going to step in to pay you. You may still hold the debt over them (and they'll be breaking the law), but suing someone who doesn't have money is not very profitable.
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Checks are only backed by the person giving them to you!
True. And the corporation backing these checks was trustworthy enough.
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Fun fact: My government taxes checks (actually debits and credits, and yes, it's as ridiculous as it sounds), so people try to avoid cashing them in and instead use them to pay other things, deferring depositing them until they're set to expire and you know you won't have anyone else to pass them too. So down here, the check's not even backed by the person that gave them to you, but by whoever originally wrote them.
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[quote="accalia, post: 57, topic:49113]
how do you verify that this 0.01BTC is part of a valid BTC and that this particular 0.01BTC is yours to trade?Because somehow it can be verified. I don't care enough to check the details.
[/quote]Grossly simplifying, you can think of it as a double-entry ledger stored in Git. Every change gets hashed, based on all the ones before it. This is called the blockchain. Like Git, the fact that each hash is a content+history hash means that you can't modify a parent or grandparent commit without breaking the whole history from that point onwards. (So no modifying a 3 year old entry to assign one billion bitcoins to your 3 day old address - that will corrupt your local copy of the blockchain and you can't pull any more of it until you remove that entry).
In order to prevent some nefarious individual from writing "@accalia transferred all her bitcoins to @FrostCat" each "entity" in the blockchain is represented by a public key (that's called your "address"). Each transfer request must be signed by the private key associated with that public key / address. That makes it possible to verify each entry in the ledger (for certain rather-too-weak-for-most-people's-tastes values of "verify").
Now, a double-entry ledger is no use unless someone is actually checking it (otherwise, you could just write
now(), all-the-money, in-my-sack, signed meand be done). So the Bitcoin protocol actually specifies that the only way to generate bitcoins is to validate pending entries in the blockchain. In order to prevent that same nefarious individual from validating his own entry, Bitcoin requires that each block of transactions that is validated be accompanied by a proof-of-work (find some text such thathash(new-blockchain-hash + magic-text)starts withNzeros; whereNvaries depending on how fast people are validating new transaction blocks)†.May my confusion be yours
† Yes, this means that if you are lucky you can validate garbage - you just have to get the proof-of-work out before any of the other poor suckers can do so and the money is yours BWAHAHAHAHA**
**Yes, there are probably more WTFs associated with the protocol, but no one has been able to find them yet. (That I know of)
Side note: Now I know what everyone's been complaining about with nested quotes ... surprisingly obnoxious.
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"making more" is the very definition of inflation
No, inflation is where more units of currency are required today than were required last year to pay for the same basket of goods and services.
Creating more money does not necessarily cause inflation, because the inflation rate depends not only on the absolute quantity of money in circulation but also on the rate at which it circulates, and in which markets.
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Grossly simplifying, you can think of it as a double-entry ledger stored in Git.
@blakeyrat-"approved"!
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Creating more money does not necessarily cause inflation
While this is true, governments have a tough time not crossing that line.
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A Bitcoin is infinitely divisible.
Not so. The present protocol allows for a granularity of 0.00000001 BTC. Achieving finer divisions than that would require a protocol upgrade, achieving which would need consensus across millions of bitcoin clients - not impossible, but likely to cause a lot of trouble in practice.
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That's what I've been trying to say; because it's not backed by anything, there's no security to its value. At least the dollar and gold are backed by something; in the case of the latter, it's backed by it being a tangible resource.
You're getting confused. Being backed by something isn't necessarily a help, or at least not as much as you might hope for.
Basically, what you work with in something that is a currency (or other medium of exchange) is value; e.g., 3.7 ounces of gold has a certain value. This value is established by agreement between lots of people, and both changes over time and varies between people. When the value you put on something is substantially different to that put on it by many others, you've got a market opportunity. (Someone in a desert puts higher value on water than someone in Seattle or Manchester.)
Part of that value is the intrinsic value and that's something which tends to only change slowly: the value of a sheep is pretty close to its intrinsic value, and it is generally thought of as a good. But with currencies the intrinsic value is quite a lot different to the total value. Gold has intrinsic value — it can be used for making teeth and pretty things and in electronics and some other industrial uses — but that's got almost nothing to do with what it costs you to get some. This means that investing in gold is not nearly as safe as you might thing: you can lose a lot of (abstract concept) money by buying when the price is high and selling when it is low. (The intrinsic value effectively acts as a floor on the price; it's very rare that anything sells at a discount to the actual intrinsic value.)
Bitcoins? They have value because people think they have value. They don't have intrinsic value, but that's not very important other than to note that that means it is possible to lose everything. However, as noted above, intrinsic value isn't a guarantee that you won't make a stinking loss anyway. (And no, I don't want anything to do with buttcoins.)
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it's very rare that anything sells at a discount to the actual intrinsic value
Low-denomination coins are a notable exception, oddly enough.
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Bitcoins ... don't have intrinsic value
It's arguable that they do to at least some extent, because the proof-of-work calculation involved in creating them consumes electricity; nobody is going to mine bitcoins if doing so costs more in electricity charges than the bitcoins so mined would be worth.The degree of difficulty of the proof-of-work gets automatically adjusted to keep the expected mining rate roughly constant, so the actual amount of electricity required also depends on the number of competing miners, which does make the "intrinsic value" calculated by this method wildly variable.
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It's arguable that they do to at least some extent, because the proof-of-work calculation involved in creating them consumes electricity; nobody is going to mine bitcoins if doing so costs more in electricity charges than the bitcoins so mined would be worth.
I don't think that's intrinsic value; it's just the cost of making them. Nobody else gets any kind of value from that cost of production (especially as the electricity supplier and the hardware supplier aren't particularly interested in getting bitcoins for their contribution) nor can they ever be used as anything except bitcoins.
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Sadly, I'm not entirely sure what linen is to start with.
Flax plant.
UK notes are largely cotton paper though cite. We'll be moving to polymer soon though.
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how do you verify that this 0.01BTC is part of a valid BTC and that this particular 0.01BTC is yours to trade?
Because all past transactions are publicly available in the blockchain. Miners sign the transactions with a prove of work, and in return receive an amount of 'mined' bitcoin, as well as any transaction fees included in the signed transactions.
A Bitcoin is infinitely divisible. So you need a representation that can handle infinite precision. Which is impossible.
As I understand it, there actually is a limit to bitcoin subidivision - 1e-9, IIRC.
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So, people here claim that US dollars are backed by the government. Can someone explain how it works, now that the gold standard has been abolished?
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Can someone explain how it works, now that the gold standard has been abolished?
I believe "Fiat Money" is the google search term you're after. Short answer:
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@anonymous234 said:
Why do you think gold is so valuable?
Gold is a tangible thing though. I don't understand (or care) why its value fluctuates, but it's still a real thing.
No-one's ever explained to me, without sounding like a moron, how a computer runs some program for some time and magically creates a virtual currency which can be exchanged for real currency.The short explanation is that the "official ledger" of bitcoin contains verified transactions. "Mining" bitcoins, is the process of performing transaction verification. In exchange for verifying transactions in the "system" you're paid for it.
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So… how did the first Bitcoin come to be?
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(Of course that's small beans compared to the Mac Classic, which would happily track times back to 32768 BCE.)
FTFY
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I believe the first 20 exist by definition.
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So… how did the first Bitcoin come to be?
No idea, I was just explaining how the concept of mining works as I understand it in as simple of terms as possible. I'm not a digital currency expert by any stretch. It probably got declared to exist by Satoshi Nakamoto.
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Bitcoin is a
to getting Dogecoin.
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So, people here claim that US dollars are backed by the government. Can someone explain how it works, now that the gold standard has been abolished?
The faith and credit refers to internationally (inside the US, the dollar is legal tender, which makes the faith and credit statement really irrelevant). Externally, it means that US dollars that are spent in foreign places, will be redeemed by the US government for fair exchange--always.
The gold standard is really an anachronism; its basis was the idea that every country accepted gold in exchange. With the advent of fiat currencies and fiat exchange systems, gold is really no longer needed as an intermediary. We now exchange value directly.
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I haven't been following bitcoin - is the stock market still considered stable compared to it?
Does this count as stable? :<stupid discourse turning my emoticons into ugly images>-P
I really like the idea of bitcoin, but there are clearly a lot of issues that need to be solved...
The main problem is it relies on software. Software is virtually guaranteed to have bugs, and here a bug means losing all your money. Oh noes. Even with a formally verified "bitcoinlib", an OS flaw could easily leak your private keys.Possible "solutions":
- Fix all bugs in all software. Good luck.
- Use highly impractical methods like having a separate encrypted OS for running bitcoin programs, to minimize the chance of problems.
- Store your private keys on dedicated, secure hardware like the Trezor.
- Depend on third party companies like Coinbase or Kraken store your bitcoins.
I think it all boils down to the last two choices.
Now before you say "but third party bitcoin companies get hacked all the time!!!".
Well, crappy ones do, i.e. 90% of them. But if they are actual registered companies, licensed to handle money, backed by a larger company, employ security researchers to do proper penetration testing <giggity>, use cold storage, have a bug bounty program, or even have full insurance, there's no reason why it would happen. It's just a matter of teaching the users not to trust "Uncle Joe's Totally Safe Bitcoin Storage".
For example, and to show it's not hindsight: over a year ago I named Coinbase, Kraken and Bitcoin-central as secure and they haven't lost money yet.
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Low-denomination coins are a notable exception, oddly enough.
Leave it to government to take something with intrinsic value and find a way to lessen the value.
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Grossly simplifying, you can think of it as a double-entry ledger stored in Git. Every change gets hashed, based on all the ones before it. This is called the blockchain. Like Git, the fact that each hash is a content+history hash means that you can't modify a parent or grandparent commit without breaking the whole history from that point onwards. (So no modifying a 3 year old entry to assign one billion bitcoins to your 3 day old address - that will corrupt your local copy of the blockchain and you can't pull any more of it until you remove that entry).
So I'm going to go out on a ridiculous limb here.
What happens 10 years from now when there are thousands (or even millions) of hashed transactions? 20 years from now?
My dollar printed in 1939 that I use to buy some kleenex to wipe my nose with takes the same amount of time to transact with as the one printed this year. With Bitcoin, I can see a point in time in the future where it will take too long to calculate a transaction.
Example: stock market, where buying and selling stock has reached the point where seconds count sometimes. If it takes 5 seconds to calculate that your transaction is valid and the window of opportunity was 3 seconds, guess what?
And, as pointed out by @svieira, you can't just truncate the number of hashes, as that makes your current store of bitcoins invalid.
Grandson tries to cash in on my bitcoin inheritance to him: "Please come back next week when our quantum computer has verified your transaction..."
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With Bitcoin, I can see a point in time in the future where it will take too long to calculate a transaction.
Block difficulty attempts to keep block hashes around 10 minutes on average. You don't hash the transaction itself, you hash the header of the block (80 bytes) and you attempt to find a hash that is lower than a certain number, called the target which is re-calculated every 2016 blocks, which should correspond to ~2 weeks. If it takes longer than two weeks to hash 2016 blocks the target is increased. Less and it is decreased.
The real problem is if hashing power gets high enough that the target becomes low enough that even trying every 4 byte number you can't find a hash that is lower than the target. I'm not sure what the program can do to fix that problem other than a manual code fork to deal with that block specificallyLol never mind, the header changes whenever you accept a new transaction into the block so you can just accept another transcation into the block you're calculating.
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It didn't really overlap much with the period during which it was easy to turn Bitcoins back into dollars.
It kinda did, since the whole thing was a fucking rollercoaster, you could wake up one day to people selling like crazy, and buying like crazy in the afternoon. If you didn't dump everything at once, you could sell quite a number - probably not enough to make you a millionaire, but racking in a few tens of thousands was rather tangible.
If you didn't end up getting scammed out of all of them, that is.
No-one's ever explained to me, without sounding like a moron, how a computer runs some program for some time and magically creates a virtual currency which can be exchanged for real currency.
They created the currency, and people agreed it has some value - the problem is now, how to distribute it fairly? If you have a country or something, you can just pump it to a central bank and things go from there - here, they just picked something that was - in theory - supposed to be achievable for everyone.
Of course people went smart and started creating dedicated circuits and stuff, so the whole mining concept ended up going to shit, but hey.
And you can hold both in your hands; you can't hold a Bitcoin
Does it matter? A hundred dollar bill in itself is not worth a hundred dollars in raw materials. You're technically holding maybe $2, the rest is imaginary.
I have lots of paper bils that used to be worth at least my monthly paycheck back in 1990s, now I can use them as toilet paper because people collectively decided they're worthless now.
Of course that's small beans compared to the Mac Classic, which would happily track times back to 32768 BC.
Guess we should all get back to using Mac Classics now. You know, in case LHC breaks and takes us all back in time to the beginnings of humanity, at least we'll have a decent clock.
money needs to be backed by something (resource, legislation, whatever) that guarantees it has value;
It's backed by the fact that you can trade it for something of value. Bitcoin kinda fits the definition, despite the wildly varying exchange rate - but then again, if people collectively decided to fuck Switzerland, the frank would plummet too.
You can argue that Bitcoin shouldn't be money and most people would probably agree
The concept was cool - nearly instant worldwide transfers with low processing fees, not tied to your identity. The implementation ended up fucked, happens.
Not to mention that, eventually, someone somewhere will mine the last Bitcoin. What happens then? With no way to generate more, it'll lose its value, and eventually be worthless. OK, thanks to inflation, the dollar loses value too, but at least with the dollar, you can always make more; there's no limit (well, except for the practicalities of coins, notes, and database field sizes).
What? Inflation lowers the value of money. If we stopped printing dollars, the dollar would rise in value, since it's now a scarce resource.
I guess. But then you'd end up with trading 0.0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000001 Bitcoin, and quite frankly, that's just ridiculous
You'd just call them picobitcoins or something. During the great Bitcoin hype, people routinely traded in mBTC or uBTC,.
Does this count as stable? :-P
Well, it's going down at a steady rate. If you can figure out a short-sell scheme, you'll be filthy rich!
The main problem is it relies on software. Software is virtually guaranteed to have bugs, and here a bug means losing all your money. Oh noes. Even with a formally verified "bitcoinlib", an OS flaw could easily leak your private keys.
Then again, you can argue the same for banks. If their software is shit, your account can get cleared just the same.
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If you didn't dump everything at once, you could sell quite a number - probably not enough to make you a millionaire, but racking in a few tens of thousands was rather tangible.
Maybe if you could manage it person-to-person.
All of the big exchanges, you could turn your bitcoins into "dollars" in your account, but good luck getting those "dollars" back into a real bank where you could actually withdraw and spend them.
If you didn't end up getting scammed out of all of them, that is.
Yup.
Guess we should all get back to using Mac Classics now.
No; actually SQL Server is more correct here. There's no point tracking Gregorian dates to a point before the Gregorian calendar was invented. You'd want to store dates before then in Julian Day Count units.
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What? Inflation lowers the value of money.
Isn't that what I said?
@RaceProUK said:thanks to inflation, the dollar loses value too
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Isn't that what I said?
Uh, maybe. But then you argue:
What happens then? With no way to generate more, it'll lose its value, and eventually be worthless.
which is the exact opposite of what happens. When you can't just print more money, and the amount of people who want your money keeps increasing (and due to population growth, that's the natural thing to happen - of course with Bitcoin people might just get over the fad, but we're talking general case), your money rises in value.
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Fiat money - Wikipedia
