Bitcoin

[MurphOnMillerAve]

What is "Bitcoin"?
Can they be exchanged for dollars? Yen? Gold ?
How is Bitcoin earned?
What happens to it if the electricity goes out?

[Rufus T. Firefly]

What happens to it if the electricity goes out?

Then it gets rather dark at night.

[MurphOnMillerAve]

Noteworthy insight. Duly noted.

[robert.]

Bitcoin is a bubble being piloted by one of Rufus's scary clowns. One day somebody will be left holding a huge bag of i told you so. Will that bag be full and worthless, empty and worthless or full and a pot of gold. You can anything you like with it. As long as the seller accepts it. You need a bitcoin wallet to guard or house your bitcoin. There is a small fee for that. It can be stolen or hacked. Bitcoin has a limited number of coins. that number has not been reached yet. When that number is reached no more will be made It is generated by very expensive computers.What that means? I don't know. We need to kidnap Wayne and drag him to Rufus's lab. Maybe then we can make it. It started off as a $3.00 gimmick. Now it's about $7,000 a coin and very spendable. I not sure if any of what i told you will really explain what it is.

[MurphOnMillerAve]

Thank you, Robert. I sure wish I understood what I just read. I'll read it a couple more times and see if there is any improvement. Then I'll ask wife to read it to see of she understands more of it now. We had just seen an episode of Big Bang, which put us on the trail once again of the Bitcoin phenomenon .
Thank you, again .
Murph

[Mitch]

Billionaire Mark Cuban advises if you invest in Bitcoin, only invest 10% and be prepared to lose it. It's like a Ponzi scheme.

[robert.]

We need a 28 year old Wayne to explain it. It's electronic, Millennail and a usable currency.

[chuck]

This may have to do until we find such a person.

Bitcoin is a "cryptocurrency". It involves using massive amounts of computing power to "mine" the coins by performing lengthy calculations to "earn" them. While it meets the formal definition of currency it is often compared to a ponzi or pyramid scheme. Other have called it a form of collective delusion. The coins have no set value other than what someone wanting to sell somethings asks and what someone wanting to buy something is willing to pay. This "value scheme" can lead to wild fluctuations. Current guestimates peg one bitcoin as worth about $10,000 (US).

Any coins you earn or trade are kept in the net as part of the block chain and you have a digital wallet to verify you are the owner and you use this digital id to perform transactions.

The open source software is in charge, no central authority. The only "regulation" is whatever is built into the software. This makes it impossible to tax/track. Outright fraud is covered by the complexity of the mathematics and computer power required to mine or try to steal or forge coins (been tried, the perp's work was detected and the coins erased). I suppose a very large corporation or a G10 government could turn it's raw computing power to effectively mine the remaining coins and bring the "experiment" to a halt.

The main game changer has been retailers willing to accept bitcoins for purchasing stuff. Prior to this the main users were usually involved in some form of illicit dealings (gambling, drugs, weapons trafficking) or bored hackers that viewed this as an elaborate game.

[MurphOnMillerAve]

That's very helpful, Chuck. Thank you so very much.
So if I understand correctly, Bitcoins have as much value and validity as web-folks are willing to say and believe such "currency" has. Once confidence in their existence and value were to be sullied, or worse, their value would evaporate.

How'd I do?

[chuck]

As far as the "currency" aspect is concerned that's correct. This is like anything else that's a commodity. It only has value so long as at least two people believe it does.

I suspect that the people that developed this did so to:

a) show it could be done (the math/encryption is incredibly sophisticated and robust)

b) it demonstrated that you could create an "open" currency system that wasn't tied to a single organization/country and have global/fair rules and high security

Flip side is that these "bitcoins" have absolutely no backing in reality other than abstract math. We're not talking about anything physical (e.g. gold, diamond, oil) or even something tied to a "gross domestic product" or some other measure of economic strength. They believe these coins have "value" because they believe these coins have value. As long as people are willing to trade for them, they do. When they stop believing they don't.

Physical stuff like precious metals or other commodities have some intrinsic value which we can argue over just how much value they have. We can argue over the "value"/health of the economy.

[robert.]

Not much baking in our greenbacks. At some point a bottle of cheap booze might have more value

[up148]

Very interesting, as I never understood it or even totally understand it now. I thought it was just electronic money transferring and holding that was real, sort of like money in your Paypal account or ???? But, that is obviously not true.

I have a train buddy in another state, who started a new company a couple years ago that made machines (I thought) for bitcoin transactions and everything was going well, until the government shut them down for more than a year. Company went caput due to the partners needing an income stream. Never really understood the governmental problems or exactly what his company did, but it was 100% Bitcoin that he thought was the best thing since sliced bread.

But, he was always pursuing leading edge new ideas (lottery mentality), but a sharp man with lots of common sense and college degreed. But, also an opportunist, speculator and much more unconventional in his thinking, than my conservative manner. I used to think he'd be a great success at something, but it doesn't seem it turned out that way. He's now buying out inventories from stores and companies that are closing (for many reasons) and selling it through his eBay store. I wish him well.

BH

[chuck]

Core of our economy (and most others) is credit, but not in the way most people think/understand.

Root word for "credit" is credo, "I believe", aka I believe in (God, New England Patriots, ...) .. or in this specific case of monetary transactions I believe you will pay me or do whatever we agreed to. We are used to having put up something (collateral) as a backstop in case the deal goes south but that's not absolutely necessary (but probably prudent).

Bitcoin has no collateral per se. It's basically belief. I think this is where the "collective delusion" description of the system has its roots.

[MurphOnMillerAve]

.....
Flip side is that these "bitcoins" have absolutely no backing in reality other than abstract math. We're not talking about anything physical (e.g. gold, diamond, oil) or even something tied to a "gross domestic product" or some other measure of economic strength. They believe these coins have "value" because they believe these coins have value. As long as people are willing to trade for them, they do. When they stop believing they don't.
.....

This I can really wrap my li'l pea-pickin mind around and grasp. Perfect. You are an excellent teacher, sir!

[MurphOnMillerAve]

Core of our economy (and most others) is credit, but not in the way most people think/understand.

Root word for "credit" is credo, "I believe", aka I believe in (God, New England Patriots, ...) .. or in this specific case of monetary transactions I believe you will pay me or do whatever we agreed to. We are used to having put up something (collateral) as a backstop in case the deal goes south but that's not absolutely necessary (but probably prudent).

Bitcoin has no collateral per se. It's basically belief. I think this is where the "collective delusion" description of the system has its roots.

Further perspective, which is very clear. Thank you, again, Chuck.