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Bitcoin - P2P currency
bamccaig
Member #7,536
July 2006
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I've got the bitcoin client running now. After letting it sit for quite some time, it has downloaded 107,000 blocks. According to this site the current total is 118287 blocks. So apparently I've almost downloaded enough blocks to actually start using it.

The thing is, relatively recently there were far few blocks: "As of October 30th 2009, there are about 26000 blocks." If it already takes ages to download all this junk, and it's going to grow much bigger, then this system is really going to be pain to use.

(while typing this, my download has stalled somewhat. It's still at roughly 107k.)

I don't think the mining is actually the way you're supposed to get bitcoins for practical use though. You would get bitcoins the same way you get dollars or euros: either from work, business, or by buying them with existing currency. I consider the mining as more or less a controlled way to "mint" the bitcoins. Participating in mining is optional though, AFAIK. It's a possible way to contribute and maybe even make a little bit of money in the process, depending on the speed and consumption of your computer.

NiteHackr
Member #2,229
April 2002

This is funny, bitcoins are starting to look like some sort of pyramid scheme, everyone is running these miners but nobody is actually spending them. ;)

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Edgar Reynaldo
Major Reynaldo
May 2007
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I just wonder who the fool(s) is(are) that originally gave bitcoins value by backing them up with real money. I mean, who pays for useless cpu/gpu consumption anyway?

"A fool and his money are soon parted."

Dustin Dettmer
Member #3,935
October 2003
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They're also backed with real services:
https://en.bitcoin.it/wiki/Trade

I count probably around a 100 on that page.

Edgar Reynaldo
Major Reynaldo
May 2007
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Right, but somebody had to give bitcoins actual value by backing them up with money or goods, and everyone who did that essentially gave away their money.

Matthew Leverton
Supreme Loser
January 1999
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The fools aren't the ones who were first to buy ... they are the ones who are last to buy.

Jonatan Hedborg
Member #4,886
July 2004
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Right, but somebody had to give bitcoins actual value by backing them up with money or goods, and everyone who did that essentially gave away their money.

Some people would call it a risky investment ;)

I imagine it started with people trading work-time and things like steam games (buying as a gift to someone) on the bitcoin forum. Money is always a matter of trust.

-------
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Edgar Reynaldo
Major Reynaldo
May 2007
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Maybe what I said earlier was wrong. I guess a bitcoin is like a share of a stock. Someone initially said something along the lines of "I have 10000 bitcoins, and I will sell them for a dollar each," and so they made $10000 for nothing (because the earliest blocks were much easier to make). But the difference between a bitcoin and a stock share is that you don't really own anything with a bitcoin unless other people are willing to pay you for them.

Is there a graph somewhere of the value of a bitcoin versus time? That might be interesting to see, especially whether they are being devalued as more blocks are discovered.

bamccaig
Member #7,536
July 2006
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It's really no different than two people deciding to trade work for beer... The only difference is that the bitcoins weren't purchased, but generated. However, they were generated over a long period of time at the expense of power and clock cycles, and limited in number, to prevent them being devalued by inflation. All it really takes to give something value is for two or more parties to agree to consider them valuable; therefore, they are willing to offer goods or services in exchange for that thing.

But the difference between a bitcoin and a stock share is that you don't really own anything with a bitcoin unless other people are willing to pay you for them.

How is that any different from a stock?

Elverion
Member #6,239
September 2005
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There's a graph on Mt Gox. https://mtgox.com/trade/history

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Edgar Reynaldo
Major Reynaldo
May 2007
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bamccaig said:

How is that any different from a stock?

The difference is that if you own a stock share, you own a portion of the company. If you own a bitcoin, you only own what people are willing to give you for it. Of course with a stock you can only get what people are willing to pay you for it as well, but at least you own something tangible instead of something that is made up.

bamccaig
Member #7,536
July 2006
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The difference is that if you own a stock share, you own a portion of the company. If you own a bitcoin, you only own what people are willing to give you for it. Of course with a stock you can only get what people are willing to pay you for it as well, but at least you own something tangible instead of something that is made up.

AFAIK, a stock is more or less a pretend stake in the company. The value comes from your ability to sell it (and to some extent, maybe having a say in how the company operates, but the majority of votes always seem to be owned by the monopoly guy anyway). The stock is only valuable because other people consider it valuable; presumably rich people that want a say in how the company operates, and smaller fish trying to make money off of those rich people competing for a bigger say.

Matthew Leverton
Supreme Loser
January 1999
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instead of something that is made up

All money is made up. Assuming it is not possible to game the system, a bitcoin is as sound as any modern currency. The $100,000 you keep in your sock drawer as USD could be worth nothing tomorrow.

Edgar Reynaldo
Major Reynaldo
May 2007
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All money is made up.

Sure, but not all value is. If you own stock, you own a stake in buildings, equipment, inventory, customer base, so on... If you own a bitcoin, well, good for you.

{"name":"603929","src":"\/\/djungxnpq2nug.cloudfront.net\/image\/cache\/3\/d\/3da15913f3133f5b503f6589e50074b2.png","w":654,"h":404,"tn":"\/\/djungxnpq2nug.cloudfront.net\/image\/cache\/3\/d\/3da15913f3133f5b503f6589e50074b2"}603929

If you had bought in by October of last year, you could have made 10x your money back in February. I wonder what precipitated the large jump in perceived value over the last quarter and a half?

NiteHackr
Member #2,229
April 2002

A bitcoin is a form of currency, or they're trying to be one anyhow. It is not stock. Period.

Edit: Here, educate yourselves: How Stocks and the Stock Market Work

Edit2: To summarize, if you own a share in a company, you own a percantage of that company, something tangible. So long as you own the shares, you get a percentage of that companies profits. If the company earns $7,500,000 and there are 10 shares, each share will get $7,500, paid out yearly.

A bitcoin is only worth anything as currency if people are willing to trade goods in exchange for these. If someone offers me bitcoins for anything I wish to sell, I'll tell 'em where to shove 'em. ;)

--
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https://nitehackr.github.io/games_index.html

Arthur Kalliokoski
Second in Command
February 2005
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video

[EDIT]

"A fool and his money are soon parted."

A fool and his money are soon partying.
FTFY

“Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as "bad luck.”

― Robert A. Heinlein

Billybob
Member #3,136
January 2003

For people concerned about disk-space and bandwidth usage, here is a passage from Satoshi's paper:

Quote:

Once the latest transaction in a coin is buried under enough blocks, the spent transactions before
it can be discarded to save disk space. To facilitate this without breaking the block's hash,
transactions are hashed in a Merkle Tree [7][2][5], with only the root included in the block's hash.
Old blocks can then be compacted by stubbing off branches of the tree. The interior hashes do
not need to be stored.

A block header with no transactions would be about 80 bytes. If we suppose blocks are
generated every 10 minutes, 80 bytes * 6 * 24 * 365 = 4.2MB per year. With computer systems
typically selling with 2GB of RAM as of 2008, and Moore's Law predicting current growth of
1.2GB per year, storage should not be a problem even if the block headers must be kept in
memory.

Another interesting quote:

Quote:

The incentive may help encourage nodes to stay honest. If a greedy attacker is able to
assemble more CPU power than all the honest nodes, he would have to choose between using it
to defraud people by stealing back his payments, or using it to generate new coins. He ought to
find it more profitable to play by the rules, such rules that favour him with more new coins than
everyone else combined, than to undermine the system and the validity of his own wealth.

weapon_S
Member #7,859
October 2006
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That last quote is indeed interesting. I think it is a very smart principle.
But reading the white paper[1] I get the feeling that in theory all transaction data could be distributed, inevitably creating 'orphans' (for certain transactions are not known to some part of the system), but in practical ideal situations ALL transaction history (albeit compressed) exist on ALL nodes.
I can picture this leading to some inefficiencies, which would be fixed by either building a large verification-dedicated network of probably one owner (which de facto would create a centralized system[2]); or more blatantly 'fixing' the problem by refactoring into a centralizzed system; keeping the stories about a "free alternative form of currency".

References

  1. I think it was; I recognize the quotes.
  2. Correct me if I'm wrong. I don't exactly understand the verification system, but if a large network would 'outsource' primarily to its own nodes and plays by the rules, it would become an 'indisputable authority'; even though it's verified by nodes outside this 'monopoly-network'. Normal nodes wouldn't have data on as much transactions as the 'monopoly-network'
Dustin Dettmer
Member #3,935
October 2003
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I just wonder who the fool(s) is(are) that originally gave bitcoins value by backing them up with real money. I mean, who pays for useless cpu/gpu consumption anyway?

Maybe people who are tired of paying for useless paper bill manufacture by the state.

Arthur Kalliokoski
Second in Command
February 2005
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The University of Texas just bought nearly 1.0x10^9 US dollars worth of gold bullion, quite possibly prompting other money managers to do the same. TFA states that there's 100 times as much "money" as there is gold in the world.

http://www.zerohedge.com/article/golden-tipping-point-university-texas-takes-delivery-1-billion-physical-gold

The shit's gonna hit the fan now.

“Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as "bad luck.”

― Robert A. Heinlein

Billybob
Member #3,136
January 2003

For those interested in how Bitcoin handles bugs in its code, this was a revealing incident in its recent past:

Strange block 74638

In summary:

Someone found an overflow bug in the code and used it to give themselves 184 billion BTC. The client was patched, the block chain forked, and eventually the "good" block chain overtook the bad one. That transaction, becoming invalid, was erased and most other valid transactions were incorporated into the good block chain.

Dustin Dettmer
Member #3,935
October 2003
avatar

:o
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weapon_S
Member #7,859
October 2006
avatar

NiteHackr
Member #2,229
April 2002

Well, if the price of gold is anu indication, you may soon find that bitcoins will soar in value as the US dollar collapses. People exchange their soon to be worthless cash for gold for a reason. ;)

--
Deluxe Pacman 1 & 2 (free) with source code available
https://nitehackr.github.io/games_index.html

Thomas Fjellstrom
Member #476
June 2000
avatar

Neil Roy said:

People exchange their soon to be worthless cash for gold for a reason.

Gold currently has a similar problem. Its value is artificially inflated, and they don't actually have the amount of gold they've "sold" to people. Good luck collecting. If you have gold certificates, you're going to want to make sure you get them to give you the actual gold at some point, or your certificates will become more worthless than the currency you used to buy it.

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Thomas Fjellstrom - [website] - [email] - [Allegro Wiki] - [Allegro TODO]
"If you can't think of a better solution, don't try to make a better solution." -- weapon_S
"The less evidence we have for what we believe is certain, the more violently we defend beliefs against those who don't agree" -- https://twitter.com/neiltyson/status/592870205409353730



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