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Bitcoins?

what exactly are they?

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17 replies to this topic

#1 daveh

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Posted 03 February 2014 - 04:08 PM

I have looked at Wikipedia and I am even more confused but perhaps that is simply because I am in my mid-60s.

 

Can someone please briefly explain, without getting technical, what a bitcoin actually is?

 

I wouldn't buy any, as I prefer money in the bank or hard cash, but I have seen some for sale on ebay.

 

Is it all a con, perhaps?

 

 



#2 trout

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Posted 03 February 2014 - 04:31 PM

This is skimming over it but, effectively:

 

It's a digital cryptographic currency; a finite resource through a mathematical formulae consisting of 21 million 'bitcoins'. You 'mine' them using a rig consisting of specialised hardware, for instance, and once you break a 'block' in the 'chain' it is registered to you with a private key and stored in a digital 'wallet'. The mining itself is done through a 'distributed consensus system' (peer-to-peer) ensuring the validity of the 'blockchain' and entire bitcoin environment. You then use your private key for exchange purposes.

 

Check out https://en.bitcoin.it/wiki/Main_Page



#3 daveh

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Posted 03 February 2014 - 04:41 PM

Thank you.

I have just read what you have written 3 times and I thus presume it is my advance years that are precluding me from understanding what it is about. I just cannot follow what you have stated but I appreciate you taking the time to do so,

My earlier visit to the Wikipedia page didn't help either.

 

I ask again: is it all a con?

Are there loads of people making a lot of money out there, somewhere, having taken advantage of the gullibility of others?

I can see money in my bank account but, if the relevant computer systems crash out there in the cyber world, what proof do people have that they had the bitcoins?

If I have a £10 banknote, the governor of the issuing bank promises to pay me (the bearer) the designated £10. If I have a bitcoin out there wherever "there" is, I can't walk into Tescos and buy my groceries with it and get change.

 

Maybe I was just born too early for this sort of thing !



#4 Selkie

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Posted 03 February 2014 - 05:11 PM

I'm not really sure myself, but I found this simple explanation.

 

https://medium.com/p/73b4257ac833

 

Is it a con?  I don't know. 



#5 daveh

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Posted 03 February 2014 - 06:02 PM

Selkie - thanks for that.

 

What is to stop you and I agreeing to pay each other, in the example, maybe 10 digital apples each "for services rendered"? Why not 1,000 or more digital apples instead?

We would then have them in the worldwide ledger and be able to use them to pay for goods and/or services provided by others signed up to the system.

 

I must be really dumb here because I still don't get it. I think it is all open to abuse and that some people are making loads of money whilst many others will lose loads when it all crashes.

I think I'll stick to real apples and real money for now although I do use a credit card to get loyalty points. However, with the credit card, I am usually being provided with the goods and/or services up front before I have to actually part with my apples or cash in payment.



#6 Colin

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Posted 03 February 2014 - 07:58 PM

Like all the other currency systems, it's a con.


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#7 Ghostrider

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Posted 04 February 2014 - 02:46 AM

I suspect this exact same debate raged when somebody suggested little bits of paper with pictures, numbers and writing on them had "value" dependant upon the specifics of the writing, numbers and pictures, and could be successfully used to store and transfer wealth, replacing the previous cumbersome barter system.

 

Is it a con? I don't think any more, or less than any other currency system, which doesn't give it much to live up to.


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#8 Colin

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Posted 04 February 2014 - 08:30 AM

What is interesting about bitcoins is that governments are starting to get a bit nervous about them.

I suspect that it is because people might start trading with a currency that they (governments) cannot control and, after all, how do you tax a 'number' on somebodies computer.


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#9 jambo6

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Posted 04 February 2014 - 09:05 AM

I think what Ghostie says is fairly accurate. I looked at this a couple of years ago with a view to mining them - which basically means you are outsourcing your hardware to a 3rd party to, for example, process medical research (Similar to the SETI project). They in turn pay you with fractions of bitcoins which you can then spend.

 

At some point in the last few years the algorithms for processing developed so that graphics processors rather than cpu's were the most efficient method and some of the heavy miners were building what were essentially high powered gaming pc's to mine bitcoins on. The currency has been volatile as it was a bandwagon for a while, and then there were security questions which caused fluctuations, but it sits outside any tax regime which has obvious attractions. Is it a con - no more than any currency is, maybe even a little less.


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#10 trout

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Posted 04 February 2014 - 10:51 AM

That's the thing. I'd conjecture early adopters of 'mining' operations were in a better position; more blockchains, less people mining. Though the hardware now has jumped leaps and bounds in it's potential since companies are investing in the development of chips designed for the exact purpose of 'mining'.

 

With that said, one has to weigh up the cost of said equipment alongside the electricity consumed to how many blocks one will actually manage to crack. One way around this is as jambo6 points out is to join in a collective to pool resources in cracking blockchains and sharing the bounty. No absolute guarantee and income spread between x number of people.

 

It is interesting as an aside to watch/read governments attempt to regulate this new community opensource peer-to-peer currency. As is rightly pointed out it currently isn't 'controlled' nor 'governed' by any government and is backed entirely on a mathematical formula against market fluctuations; including right down to peaks/troughs of commodities required to create the hardware from which the 'mining' takes place.

 

@daveh, there is every possibility of starting ones own currency as long as there are adopters that recognise it and accept it as a form of payment. The Brixton Pound is a real world example.


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#11 daveh

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Posted 04 February 2014 - 09:19 PM

Trout - Forvik has the Gulde as it's currency.

Might that take off also ?



#12 MuckleJoannie

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Posted 04 February 2014 - 11:18 PM

I've just been having a look on the web to see what the accounting world says about Bitcoins. HMRC are looking at accepting it as curency.

 

http://www.accountin...reatment/552697

 

At least one accounting software provider gives you the option to accept it a payment, converting it to sterling for you at the point of sale.

 

http://support.quick....uk/bitcoin.htm



#13 George.

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Posted 22 December 2017 - 04:53 PM

At the very beginning of this year 1 Bitcoin was worth around about £600. Two or three weeks ago it was valued at about £14,800 and since then it has dropped to £9,135.75 as I write. What will it do now? Will it stay down in value over Christmas and start going up in value again as we get into the new year or will it go back to what it was worth, possibly less, and stay there? Will the other cryptocurrencies stay with us, Ethereum, Bitcoin Cash, IOTA and the rest of them, and there are a good few more to be found that people are investing in and trading with, what does everybody think the result will be?

 

When will Tesco accept Bitcoin as payment in full, and the bill paid for by linking their till to your mobile phone?


Edited by George., 22 December 2017 - 04:54 PM.


#14 Frances144

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Posted 22 December 2017 - 05:08 PM

have you got any Bitcoin?



#15 George.

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Posted 22 December 2017 - 05:19 PM

Very little. Had some more about seven years ago, they stayed at the same price, a penny a time for ages so they got wasted. Ho hum, live and learn. You?



#16 Frances144

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Posted 22 December 2017 - 06:50 PM

Wow!  No, I can barely work t'net!



#17 BigMouth

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Posted 23 December 2017 - 02:42 PM

HMRC are only getting involved because it is a potential tax stream that they are missing out on.  It says something for its success though.



#18 lupine

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Posted 30 December 2017 - 02:18 AM

It's not a con, but it *is* a failure. I was messing with it in 2010 or so, and what it's ended up as is something of a laugh.

 

How to explain? Well, you have building blocks - keys ("accounts"), transactions ("payments") and blocks ("ledger pages", sort of).

 

A transaction moves bitcoins from one account to another. They're cryptographically signed by the losing key. These signatures can only be *generated* by someone with knowledge of the private component of the key, but can be *verified* by anyone with the public component (which is everyone). So, anyone can verify whether a particular transaction is valid, but only the spender can create one.

 

Blocks are a collection of transactions, put together by a miner. Transactions are meaningless until they end up in a block, Each block contains a reference to a previous block (hence "blockchain"), along with a "proof of work", which is a signature of the contents of the block (including that reference to the previous block) that costs a lot of electricity to generate, and is basically free to verify. The difficulty of the proof of work is governed by rules that try to keep the rate of generation to an average of one per 7 minutes or so.

 

Miners get two incentives for trying to create these blocks - transaction fees, and a built-in reward of newly minted bitcoins per block. This decreases over time to ensure that 21 million bitcoins is the limit. This creates competition between miners to generate blocks.

 

It's a decentralized system, so two miners may both create valid blocks at roughly the same time. The blockchain becomes a blocktree at this point - and your transaction may appear in only one of the branches. When this happens, all clients have a rule that the *longest* chain of blocks wins. More blocks are generated, with miners choosing to  base their new block on top of one branch or another, until one branch gets long enough that all miners are on it. It turns back into a blockchain at that point, and anything in the abandoned branch is treated as though it never happened.

 

While it's a tree, there's uncertainty about what has actually happened. Did your transaction happen or not? Literally, nobody knows. So a general rule of thumb is that the block containing your transaction should have another 9 blocks added onto it before you can be sure it's happened. Over an hour. Longer, if you're paranoid. This makes using them for run-of-the-mill payments awkward, but it's about OK for online shopping. Very popular with drug dealers, historically.

 

So why has it failed?

 

Blocks are created at a finite rate, and have a finite capacity. Bitcoin is full. As a result, transaction fees have soared. You might spend £30 worth of bitcoin in transaction fees while buying £10 worth of pizza.Claimed solutions to this have failed to gain adoption ("bitcoin cash") or are simply theoretical ("lightning"). The consequence of this is that you're now hard pressed to actually buy real goods and services using bitcoin. Vendors can't absorb the transaction fees, buyers are unwilling to pay them, liquidity is affected and the long transaction confirmation time makes payments for many things impractical anyway.

 

You can buy other cryptocurrencies with it, but even drug dealers are moving to alternatives. What's left is mostly speculation and legacy trade, and it *still* fills up bitcoin.

 

Oh, and it's worth noting that bitcoins are taxable in the same manner as any other capital gain. When you sell them for pounds, you need to stick it on your self-assessment form and pay tax on it. They *do* make tax evasion a little easier in some respects, but no less immoral.


Edited by lupine, 30 December 2017 - 02:25 AM.