Bit Coin. Please explain it to me like I am a 3 year old.

originally posted by: Trueman

originally posted by: Krakatoa

originally posted by: Trueman
a reply to: Krakatoa

You just explained that Pokemon game.

The OP did ask to have it explained as if to a 3 year old.

I must be 2 years old because I still can't play that game and no clue about bit coin yet.

me too

If one keeps the coin on paper in your home it's secure.....but I wonder what if the internet gets a shutdown type attack

originally posted by: TheConstruKctionofLight
a reply to: trollz

I amy have missed it - but someone asked what happens of your hard disk dies?

There are various ways to store bitcoin. On an actual hard drive is just one of them, but as long as you have your information backed up, you're fine. You can also use a paper wallet, or keep them in an online wallet. So anyway, hard drive failure isn't of concern as long as you take basic precautions.

originally posted by: GBP/JPY
If one keeps the coin on paper in your home it's secure.....but I wonder what if the internet gets a shutdown type attack

Same issue as electrical outage, EMP, bank failure, natural disaster, etc. What happens when you can't access the money in your bank account or use your cards?

Sorry for the late replies. When duty calls I must answer.

I am beginning to believe like Trueman and Stormdancer777, I must have the mind of a one year old, because I still don't understand how crypto currency works.

originally posted by: Krakatoa
It is easier to think of Bitcoins like gold nuggets or diamonds. Something very rare, and takes a lot of work and digging to uncover. In the case of Bitcoins, the items in question are numbers....very rare numbers that require very powerful computer systems to find. The more that are found, the less there are to find, and the harder and more expensive it becomes to find more of them (like gold or diamonds). This makes the price rise as each one becomes more valuable as more money and time is spent "digging" for them.

How were the numbers generated?
Who discovered those rare numbers?
Who determines that those numbers are rare?
What makes a group of rare numbers valuable?
Who determines the value of the numbers?

What is stopping someone else from devising a program to generate another set of rare numbers?
How do you transfer those rare numbers to another individual?

What I am hearing is much like what Muzzleflash described in Tulipmania, and Trueman with the reference to Pokeman.

If they are so valuable, why are they being sold? Obviously they are only valuable to those that have them, in their quest to sell them, because the true value of something is determined by how much someone is willing to pay.

If they are more valuable than cash, why are they taking cash for them? What am I missing?

a reply to: muzzleflash

Thats the thing though. The 'coin of imagination' argument could also be applied to fiat aka dollars. Those are not any more real in fact I would argue they are much less real seeing as they are created out of thin air and issued/stored on servers only from a centralized source.

And hey, thats 900 million does sound ridiculous. But not if say the world for example adopted bitcoin and there are less than 20 million in circulation worldwide.

Then that number is actually feasible. I do not believe this will happen. Just said it for some perspective. It is no more speculative than any monetary system or the stock market today except for an average joe can trade it without outrageous fees but i digress...

You can buy damn near any tagible resource directly with it these days. And hey, that something else to tap out is the alt market.

originally posted by: trollz

originally posted by: TheConstruKctionofLight
a reply to: trollz

I amy have missed it - but someone asked what happens of your hard disk dies?

There are various ways to store bitcoin. On an actual hard drive is just one of them, but as long as you have your information backed up, you're fine. You can also use a paper wallet, or keep them in an online wallet. So anyway, hard drive failure isn't of concern as long as you take basic precautions.

and what happens if suddenly bitcoin simply goes away, no website(s), no trading for actual currency, no word or news whatsoever.....it's called being a sucker

a reply to: NightSkyeB4Dawn

I will do my best to answer your questions more precisely just give me a moment to ETA.

So bitcoin is kind of hard to explain like I am 5 because the technical details are very complicated especially for those without advanced technical and crytographic knowledge.

1. The numbers are generated by bitcoin 'miners.' More specifically, a single bitcoin miner (which is just a computer) working on solving an algorithm.

The process is called Proof of Work. Bitcoin specifically uses the Hashcash proof of work function at the mining core to generate new blocks. This is done by miners essentially generating random 256 character cryptographic hashes until one fits so to speak. They do this utilizing the SHA-256v2 algorithm developed by the NSA.

Think of it like solving Y = Z(X) but you are only given Y. It is only possible with computing power ranging from little to immense based on the difficulty which adjusts with each block by giving miners more or less parts to the equation. Mining while possible is no longer feasible to a single user without an entire farm of dedicated equipment due to the immense computing power which is why 'mining farms' are joined where a block reward (currently 12.5 btc) is split amongst the farmers based on individual contributing computing power.

Basically, mining requires a # ton on processing power and electricity. These miners validate the entire bitcoin network (called its Blockchain) with each new block and this is where the 'proof or work' comes from. Each new block generated must also contain all of the previous blocks and their accompanying data in the form of wallets and all transactions to date. The new block is then added to the chain and it continues like that for each block.

Each block takes about 10 minutes but remember it is random so it can take 1 minute or 1 hour. When this happens, transactions get hung up while waiting on the new block for confirmation. Every block afterwards is a new confirmation for a specific past transaction. Every balance and transaction performed ever on the bitcoin network is validated and confirmed by the work done to generate each new block.

A combination of the amount processing power, electricity used, difficulty, block reward amount, and ultimately the speculative market determines the value of each coin.

The decentralized network of miners validating the entire chain with every block prevents somebody from making a program to generate false 'numbers' aka bitcoin or from sending a transaction twice aka double spending. The only way these things could be achieved is with a '51% attack.' Where a single source has control of over 51% of the combined network processing power. It cannot be done. The amount of power and electricity is immense. Well o ver 3 millions watts of electricity.

Bitcoins are stored on wallets which are simply keys on the blockchain. The public key is the wallet address and the private key is how you access any wallet. You send bitcoin by transferring from wallet address (public key) to another. This is done via the bitcoin core wallet (which stores nearly 100gb of blockchain data to sync with the network) or various web wallets already synced to the chain.

The blockchain also acts as a public ledger. Where anybody can search for any wallet address and see the balances and every single transaction in or out and where they came or went.

You are right about the true value being what people are willing to pay, currently over 2000$, but it doesnt fall to a point where electricity costs would exceed the worth or the miners would stop mining.

Yes you are correct the majority of miners mine them simply to sell for profit because why not? Like any other business. However, many many users "HODL" (wordplay on hold) their bitcoin in hordes. These are the true believers in the future of blockchain tech and strictly digital currency for its transparency, speed, and decentralization. We see bitcoin reaching 10k, maybe even 100k and beyond one day simply because it is the pioneer in the huge tech of blockchain.

They are more valuable than cash. Which is why some people are selling them for over 2 thousand dollars a pop. (There are 100 million 'satoshi's' in a bitcoin like there are 100 cents in a dollar) Only 21 million bitcoin will ever exist and currently its about 16 million.

Tidbit number 1 - naysayers fail to mention that the original creator and devs of bitcoin hold over 4 million coins which have not moved since the day they were generated. All verifiable in the blockchain. So the actual active circulation is a lot less than 16mil.

Tibit 2 - the creator goes by Satoshi Nakamoto. While there is heavy speculation it still is not known who 'they' actually are. Likely a pseudonym for a team of devs.
Since this IS a conspiracy site. I can lend to the idea it is a team of devs who made it under contract to the USgov as a means of developing and real world testing to future monetary system of the world.

originally posted by: jimmyx
and what happens if suddenly bitcoin simply goes away, no website(s), no trading for actual currency, no word or news whatsoever.....it's called being a sucker

That's like saying "What happens if people stop using money? People who use that are just suckers, cause what if it just disappears!". There's no sense to that whatsoever.
Seriously, do some research. It's not going away. It's been around for years and it's only increasing in use and popularity. It IS a currency that's being accepted around the world and recognized by governments.
I could cut a piece of paper into the shape of a dollar bill and write $100 on it, and someone else might actually consider it to have some sort of value and give me $100 for it, but that doesn't make it an actual currency. The technology behind bitcoin, its implementation and use, all give it actual real-world value, not just made-up value.

I could be wrong, but here's my take:

originally posted by: NightSkyeB4Dawn
How were the numbers generated?

By computers working out computational problems to "find" them. The more that are found, the harder it gets to "find" more, until all of them have finally been found. This prevents "miners", or people using computers to "find" them, from just suddenly mining all of them at once and crashing the price. That's why you have gigantic farms set up full of computers doing nothing but mining bitcoins.

originally posted by: NightSkyeB4Dawn
Who discovered those rare numbers?

They weren't "discovered", it's just that the technology to "mine" them was created. Read about Satoshi Nakamoto, he (or they) invented the technology.

originally posted by: NightSkyeB4Dawn
Who determines that those numbers are rare?

The technology created by Satoshi Nakamoto and raw computational power - it gets harder and harder to "mine" as time goes on.

originally posted by: NightSkyeB4Dawn
What makes a group of rare numbers valuable?

See above, as well as supply/demand.

originally posted by: NightSkyeB4Dawn
Who determines the value of the numbers?

The people buying them.
While a person can buy any dollar amount worth of bitcoin, such as 0.000003 bitcoin, there is such high demand and use for them that the current price of 1 bitcoin is currently at $2,364.11.

originally posted by: NightSkyeB4Dawn
What is stopping someone else from devising a program to generate another set of rare numbers?

Nothing, and many have. There are tons of cryptocurrencies, but the "top few" such as bitcoin/litecoin/ether are the main "legitimate" ones.

originally posted by: NightSkyeB4Dawn
How do you transfer those rare numbers to another individual?

Easily. There are several ways, but the main gist of it is someone gives you a receiving address, and you just send the amount you want to send to it. Think of it like sending an email. You put in the recipient email address, write something, and hit send.

originally posted by: NightSkyeB4Dawn
If they are so valuable, why are they being sold? Obviously they are only valuable to those that have them, in their quest to sell them, because the true value of something is determined by how much someone is willing to pay.

Because people use them. They're used all over the world. Major retailers are starting to accept them as payments. Bitcoin is a currency, and it's being used as a currency.

originally posted by: NightSkyeB4Dawn
If they are more valuable than cash, why are they taking cash for them? What am I missing?

I think there may be some confusion here about what it means for 1 bitcoin to be equal to $2,364. Pick any dollar amount... $34, for example. $34 worth of bitcoin is still $34. The price of an individual bitcoin can go up or down, but you'll always be able to buy or sell $34 of a bitcoin.

More interesting than bitcoin though is ethereum. There's something called the Enterprise Ethereum Alliance, made up of top corporations from about the world. Microsoft, BP, JP Morgan, Credit Suisse, they and many others are all working together to develop and implement blockchain technology worldwide. It's happening. Practically every day I see some new way it's being put into use. The United Nations is already using ethereum technology to send aid to refugees. Even the International Monetary Fund is trying to get in on the action.

OP, don't listen to the idiots in this thread who say cryptocurrencies are a scam or some ponzi scheme, they have no idea what they're talking about. Blockchain is like the invention of the internet or the telephone. It's already revolutionizing how things work around the world, and right now is just the beginning.

www.coindesk.com...
cointelegraph.com...
www.the-blockchain.com...
www.cryptocoinsnews.com...

originally posted by: trollz
More interesting than bitcoin though is ethereum. There's something called the Enterprise Ethereum Alliance, made up of top corporations from about the world. Microsoft, BP, JP Morgan, Credit Suisse, they and many others are all working together to develop and implement blockchain technology worldwide. It's happening. Practically every day I see some new way it's being put into use. The United Nations is already using ethereum technology to send aid to refugees. Even the International Monetary Fund is trying to get in on the action.

OP, don't listen to the idiots in this thread who say cryptocurrencies are a scam or some ponzi scheme, they have no idea what they're talking about. Blockchain is like the invention of the internet or the telephone. It's already revolutionizing how things work around the world, and right now is just the beginning.

www.coindesk.com...
cointelegraph.com...
www.the-blockchain.com...
www.cryptocoinsnews.com...

This guy gets it. And in a much more concise post than mine too!

a reply to: lightedhype
Thank you for taking so much time to answer my questions.

I think my problem is not so much understanding what it is, as why it is accepted to valuable.

To me it would be the same thing as me discovering a way to get my computer to randomly generate a grouping of numbers that look like a daisy, and selling that grouping to someone that thinks it is cute, for however much they are willing to pay for it.

It is still just a grouping of numbers and their value is only worth what someone is willing to pay, for however long it is fashionable. As soon as someone comes along and finds a way to make a combination that looks like a rose or better yet, "Jesus is coming", then the ride is over.

If only 21 million bitcoin will ever exist and currently its about 16 million, then what happens to the people that don't have bit coins? Businesses thrive off selling as much they can to as many people that they can. I know there are businesses that cater only to the haves, but the have-nots are the ones that keep your average businesses afloat. I don't see your average person risking their limited and hard earned dollars on crypto-currancies, but what does a one year old know about the finances of the world. I am still trying to understand the attraction of Twitter.

Thanks.

a reply to: trollz
Thank you Trollz but this has confused me even more.

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property. This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middle man or counterparty risk. The project was bootstrapped via an ether pre-sale during August 2014 by fans all around the world. It is developed by the Ethereum Foundation, a Swiss nonprofit, with contributions from great minds across the globe.

It seems to address some flaws in the bit coin technology.

On traditional server architectures, every application has to set up its own servers that run their own code in isolated silos, making sharing of data hard. If a single app is compromised or goes offline, many users and other apps are affected. On a blockchain, anyone can set up a node that replicates the necessary data for all nodes to reach an agreement and be compensated by users and app developers. This allows user data to remain private and apps to be decentralized like the Internet was supposed to work.

Ethereum Project

So is cypto-currancies a new toy for the programmers and developers, on their return to the top after the Silicon Valley crash? What will be the next leading derivative? Folks are always looking for that one big win.

I may live long enough to regret my skepticism, it won't be the first time I made a bad financial decision, but since my income is very limited, I only feel comfortable investing in something I can eat or drink.

I have resigned myself to being among the lowly middle class. I will never see the view from Elysium.

a reply to: NightSkyeB4Dawn

Ether isn't a "currency" like bitcoin, but rather a fuel. Think of the ethereum network like a power plant that is built to provide power to a city that has no electricity. Ether is the coal that feeds the power plant to allow it to produce electricity. Energy doesn't just come from nowhere; ether sortof powers computer applications running on the ethereum network.
HERE is a Microsoft article about why they're using the ethereum network and what it will do.

So is cypto-currancies a new toy for the programmers and developers

No... It's not a toy, nor is it new. It's being implemented and used all over the world, from private users to entire governments. It's like the advent of the internet.

originally posted by: NightSkyeB4Dawn
It is still just a grouping of numbers and their value is only worth what someone is willing to pay

Of course, but in much the same way that a dollar bill is only a piece of paper that we agree to assign a value to. If someone wanted to accept a single dollar bill for the purchase of their home, they would be perfectly free to do so. Likewise, if someone wanted to sell their car to you for a billion dollars, you'd be perfectly free to refuse to buy it. The dollar bill has its value because of the way the market works and the way in which it is used, just like bitcoin.

originally posted by: NightSkyeB4Dawn
If only 21 million bitcoin will ever exist and currently its about 16 million, then what happens to the people that don't have bit coins?

Nothing happens. Everyone in the world would still be free to buy and sell as much bitcoin as they want. You can buy 1 million bitcoins or 0.0000000001 of a bitcoin. A finite amount of bitcoin doesn't decrease availability.

originally posted by: NightSkyeB4Dawn
I don't see your average person risking their limited and hard earned dollars on crypto-currancies

Except people are. Bitcoin is being bought, sold and used every day in massive amounts. In the past 24 hours, over $7 billion in bitcoins have been sent from one person to another.

You can buy candy with it.
a reply to: NightSkyeB4Dawn

a reply to: trollz
I must know a lot of below average people, because only half of the people I asked say they have heard of bit coin, but known of them own any bit coins, and none thought it was something they felt interested in.

Admittedly I only asked about 30 people but it was enough for me to realize that maybe I am not living in a very progressive area, and that we will be a bunch of folks working hard for the rest of our lives.

I have nothing against crypto-currency, I just think that most people are not going to be very willing to invest in something they don't understand. I am not the brightest person in the world, but I am not the most unintelligent either, and this is one that just seems to elude me.

I know that some say, "no risk, no reward". I say never risk something that you can't afford to lose. I will continue to research it all, maybe with time it will sink in.

originally posted by: NightSkyeB4Dawn
a reply to: trollz
I must know a lot of below average people, because only half of the people I asked say they have heard of bit coin, but known of them own any bit coins, and none thought it was something they felt interested in.

Admittedly I only asked about 30 people but it was enough for me to realize that maybe I am not living in a very progressive area, and that we will be a bunch of folks working hard for the rest of our lives.

I have nothing against crypto-currency, I just think that most people are not going to be very willing to invest in something they don't understand. I am not the brightest person in the world, but I am not the most unintelligent either, and this is one that just seems to elude me.

I know that some say, "no risk, no reward". I say never risk something that you can't afford to lose. I will continue to research it all, maybe with time it will sink in.

Most people haven't heard of it yet. Cryptocurrencies are relatively new to people, although there is a large number of people who have known about them for years and been involved in their development. When email was first invented, nobody knew about that either.
Nobody is asking you to invest in anything, there's no reason you have to. IF you did invest in things like bitcoin or ether, you'd gain money and you'd lose money, just like any other investment. The fact still remains, people are making millions.

$100 of bitcoin in 2010 is worth $75 million today
wash ingtonpost.com

Use the internet, do some research. Check out those links I posted earlier to the news sites. Read about ethereum, bitcoin and litecoin.

a reply to: trollz

Thanks Trollz.

I am digging into it and I am determined to have much a better understanding about this cypto, block chain technology, for no other reason than it intrigues me.

I have learned a lot from all of the post here and I appreciate the time and effort that all of you have put into my request to help an old lady understand something new.

I appreciate all the information and resources that have been shared. Thanks.