Bitcoin - Decentralized Digital P2P Cryptocurrency

I'm not sure how many of you have heard about Bitcoin but I decided it was about the right time to create an ATS thread about Bitcoin and try to explain a bit about it in a venue where I'm sure lots of people will find it fascinating and brilliant. Some of this information has been taken from my Bitcoin information website and it's not plagiarized.

The first thing you need to understand about Bitcoin is that it's a digital commodity. It's similar to gold in the fact that only so much of it can ever exist. Unlike gold though the value is held as digital information (bits n' bytes). It is also similar to cash in the fact that you can make direct exchanges without the requirement of any type of middle-man.

Bitcoin (currency code: BTC) is implemented with reliable P2P technology and robust cryptographic encryption security. You can send and receive Bitcoins to anywhere in the world at any time of day so long as you have an internet connection. All your coins are stored as data on your computer, or they can be held by 3rd party wallet services.

There is no centralized banking institution that controls the production of Bitcoins. Due to this decentralized approach it means that Bitcoin transactions are relatively anonymous like cash. And since transactions are directly between peers it means that your account can't be frozen and the amount of fees incurred are drastically reduced.

Transparent and decentralized technologies that take power away from the minority elite who wish to influence or manipulate flawed systems in society are a form of evolution to avoid the constraints placed upon us. Open source, P2P, User-Generated Content Ecosystems, these are all prime examples of human evolution through technological development.

Bitcoin is very desirable and realistically viable in a modern day technological society which embraces open source and P2P ideology. It is not just a new type of currency, it is a technology that will enable us to pave our path towards freedom, and out of engineered debt. Lets look at the advantages covered so far:

• All your coins can be stored as data on your computer, or held by 3rd party wallet services.
  
• Direct peer-to-peer transactions at any time, to and from any where in the world.
  
• No need for a middleman and all the associated problems like frozen accounts and fees/taxes.
  
• There's no central financial institution that can control the production of Bitcoins.
  
• The P2P infrastructure allows for quick international transactions that are highly anonymous.
  

So how does it achieve all this? How do you get Bitcoins and how do you use them? Are they safe, reliable and technically feasible? Will they last in the future? Well instead of re-writing all these answers here you can read more about what Bitcoins are and how they work on this page:
About Bitcoins

I thought bitcoin was an interesting idea at first.

Until This happened:

Inside the Mega-Hack of Bitcoin: the Full Story

The storm had been building for over a week now. Last Monday at around 5 p.m. 25,000 Bitcoins were transferred from 478 accounts on the currency's largest exchange -- Mt. Gox. But that was just the beginning. Now Mt. Gox is admitting to a major breach and has shut down, in an unprecedented action. In all, approximately $8.75M USD worth of Bitcoins appear to have -- at least temporarily -- been stolen in the intrusion.

Ooops. Think I'll stick with precious metals, rare earths, and oil.

reply to post by silent thunder


That is an independent Bitcoin exchange based in Japan in quite frankly I'm surprised so many people put so much trust into it. It has no direct connection to Bitcoin and says nothing about the security of Bitcoin as a currency, but it says everything about the security of that exchange. I would recommend VirWoX if you want a trust worthy exchange.

reply to post by ChaoticOrder


Interesting, thanks.

Personally I just feel its too untested and there are too many things that can happen, as above. I think the system has an internal elegance but I'm not sure it can be made both safe and practical enough to get a mass audience. We shall see.

reply to post by silent thunder

Personally I just feel its too untested and there are too many things that can happen, as above.

Well it has lasted a couple of years now.

I think the system has an internal elegance but I'm not sure it can be made both safe and practical enough to get a mass audience.

Practicality is the foundation of Bitcoin.

reply to post by ChaoticOrder


I'm waiting for the day ATS stars can be used as digital currency kinda like the way ATS points could be used for certain profile mods....


I hadnt heard of bitcoins untill now... seems like it would be easy to exploit. If it is used as some type of digital currency for the trade of data or media then it would have to have some type of real currency exchange rate wouldnt it?

I thought P2P was already free

I'm still not 100% convinced of any benefits associated with using Bitcoins over our standard currency.

I understand the concept of decentralising currency away from the big banks, but I don't see how this will solve anything.

The problem with a lot of the Global Governments is that they've been printing out money that has no value associated with it. The gold standard gives currency its worth, but aside from that it's all just 1's and 0's on a computer screen.

Bitcoins, to me, suffer from this same issue. I understand the whole concept of 'mining' bitcoins, but I don't understand how leaving your computer to calculate endlessly for days gives Bitcoins any real value.

Also, seeing as they're not controlled by any sort of legal governing body, from my point of view the risk of having them stolen is higher.

If someone is taking money from bank accounts, that person is hunted down, tried and punished (Not all the time, but in an ideal world, that's what should go down). But seeing as Bitcoins are not legal tender, then when something like the hacks posted above happen there is no real consequence of that. The hacker gets hold of the bitcoins they want and that's it. It's the users fault for losing their money, when sometimes, as shown above, it's not their fault at all.

I'm not convinced enough to try it.

reply to post by Havick007

I'm waiting for the day ATS stars can be used as digital currency

Haha. Well they already sort of are. You "pay" respect to a post by giving it a star.

I hadnt heard of bitcoins untill now... seems like it would be easy to exploit.

That's what I thought at first. But I've come to understand they are quite secure.

If it is used as some type of digital currency for the trade of data or media then it would have to have some type of real currency exchange rate wouldnt it?

It is digital currency but it isn't restricted to data or media. It could be used to purchase anything where the seller is accepting Bitcoins. You can already buy food and even accommodation in some places. It does have a dollar worth and can be exchanged for "real" money. One BTC is currently worth about $14.

I thought P2P was already free

You are misunderstanding the definition of P2P, it is simply a technology that enables peer-to-peer networks which are hard to attack or take down. One of the reasons Bitcoin is quite resilient.

reply to post by SnedsDawg

Bitcoins, to me, suffer from this same issue. I understand the whole concept of 'mining' bitcoins, but I don't understand how leaving your computer to calculate endlessly for days gives Bitcoins any real value.

Bitcoins don't need to be backed by a commodity like gold because they are in themselves a commodity. They probably do get some of their value from the electricity it costs to make them, but the real value is in supply and demand. Demand will go up when more merchants start accepting Bitcoins.

Also, seeing as they're not controlled by any sort of legal governing body, from my point of view the risk of having them stolen is higher.

You could encrypt your wallet and store it on a flash drive then hide that flashdrive in the same place you hide all your other valuables. Then even if a criminal does get the flashdrive and find your encrypted wallet file he still wont be able to decrypt it 99% of the time depending on how you encrypted it.

Now if you're talking about the actual Bitcoin network being exploited it is very unlikely. I wont get into the technical details because it's beyond the scope of this discussion and quite honestly I hardly understand it myself. IMO it would have been broken a long time ago if it were to going to happen. The cryptographic concepts involved are theoretically sound.

reply to post by ChaoticOrder


Ahh ok, hmm i should probably read up on the whole subject abit more before i make comments sorry.

Yikes 1BC to $14 - thats a big exchange difference. Although how inflated are the Bitcoin prices. Otherwise i hope they start trading on the Forex eventually


Yeah with the P2P i was thinking in the context of media... the pirate way aarrgg

The Lindon currency in Second Life had a few big crashes growing up, considering all the technical and legal challenges they have done a great job to keep it going and it is appearing more stable after some hard lessons. I have been impressed with the ideas behind Bitcoin as it is getting back to the core concepts of transactions in this digital age. Cutting the banks out of the loop is a big plus as they have held a monopoly for all digital transactions for a while. If you are thinking of diversifying some of your capital I could think of worst investments. I would be cautious about putting all your money into it as it will take some time to battle harden all the loose ends. It is defiantly one to watch as technology continues its charge.

reply to post by Havick007

Yikes 1BC to $14 - thats a big exchange difference.

Yes, it is a big difference, but there will only ever 21 million BTC in existence, and there is currently about 6 or 7 million floating around. The US dollar is worth a lot less because there is a lot more of it. From my website: "Because only so many Bitcoins can exist, people worry they can get lost over time, or that a few entities might gain and withhold a large amount of Bitcoins, but the value of Bitcoin will always adjust according to the total size of the circulating money pool. Bitcoin has a precision of 8 decimal places, so even with a very small amount of Bitcoins in existence, the value can still adjust accordingly."

I looked into testing out bitcoin, yet there was just not enough online venues that accepted it (ones I trusted at least). I was expecting more support for it at least in the tech community, yet even there it was lacking. Also I was worried about it being too quickly inflated and it's value declining in comparison to the dollar.

I can see a strong potential of it becoming a more mainstream digital currency one day. Yet it will only take a couple high profile bitcoin exchange or network thefts to seriously and possibly permanently damage consumer trust in bitcoin. I'm sure there are very good safeguards in place to prevent this, even then, these safeguards need to be 100% reliable against emerging exploits, hacking attempts and thefts.

Bitcoins are still a fiat currency and are backed by nothing tangible. Scarcity can't add value as they can make as many bitcoins as they like. Saying it has value is based on supply and demand is also bunk due to the fact that no one will take it seriously as a currency. The US dollar has some value because our government has the ability to tax its people for income, Bitcoin is just more made up numbers on a computer somewhere. As i've posted on one of my own threads, the "value" of the bitcoins were jumping around like crazy due to market manipulation. As there are less coins its very easy for one person to go in buying and selling large amounts of them to swing the market either way. Some motivated indivduals did some digging and found that silkroad.org was being hosted on the same servers as the bitcoin market, basically linking bitcoin to illegal drug trade. Anyone that puts there assets into bitcoins over precious metals or other tangible goods that can be used for barter is making a big mistake. Below is a link to one of my threads, I suggest you read the comments brought up by others.

www.abovetopsecret.com...

reply to post by wiandiii

Bitcoins are still a fiat currency and are backed by nothing tangible. Scarcity can't add value as they can make as many bitcoins as they like. Saying it has value is based on supply and demand is also bunk due to the fact that no one will take it seriously as a currency.

What is gold backed by? Why does it have value? Isn't the value of gold dictated by supply and demand? Would you consider gold a currency?

edit: they can't make as many as they like. 21 million is the max. Mining wont work after that.

basically linking bitcoin to illegal drug trade

So we should all stop using cash because people use it to fund crime?

reply to post by ChaoticOrder


Lol its a computer program so of course they can make as many as they like, one line of code can change the max amount. Gold or any other physical good is a finite resource therefore it does have value as there is only so much of it. I have added more content in my first post for you to read thru.

It seems too shady to me that both the bitcoins and the silkroad came up at the same time.

reply to post by wiandiii

Lol its a computer program so of course they can make as many as they like, one line of code can change the max amount.

You clearly don't even understand the basics of Bitcoin if you are going to say things like that. The rules (protocols) of bitcoin are decided by the entire network. I recommend that learn more about Bitcoin before making completely baseless claims as if they were fact.

edit: and let me make this clear. I'm not saying it's impossible to change the max amount, but I'm saying it will never happen because the network wont let it happen. It defeats the point of Bitcoin being a commodity.

]Bitcoins don't need to be backed by a commodity like gold because they are in themselves a commodity. They probably do get some of their value from the electricity it costs to make them, but the real value is in supply and demand. Demand will go up when more merchants start accepting Bitcoins.

The electricity used to "mine" them has no transferable value. Thats just like saying the computers that print digital money at big banks and the federal reserve electrical source adds value to our US dollars.

edit on 25-7-2011 by wiandiii because: trying to figure out this kooky qoute function

reply to post by wiandiii

The electricity used to "mine" them has no transferable value. Thats just like saying the computers that print digital money at big banks and the federal reserve electrical source adds value to our US dollars.

Bitcoins are designed so that the computing power required to "mine" them is very high (and the difficulty increases with time). It can be very costly yo run a GPU at full capacity for excessive amounts of time, and you need a good set up to actually make a profit. Furthermore, I believe the cost of printing money is taken into consideration.

From bitfreak:

Bitcoins are generated via a complex algorithm that works towards "solving" a block, this process is known as "mining". Using a GPU instead of a CPU can be up to 100x faster at generating hashes. If you aren't using the right equipment, it can cost more in electricity to mine Bitcoins than what the Bitcoins are actually worth.

You may be asking if simply running your computer to create money out of thin air is a scam, but they also create regular money out of thin air, and there is no end to how much they can inject into the money pool. You can make a profit in mining Bitcoins if you have the right set up, but the Bitcoins will not come free. It's just like mining gold, which is also a commodity. You pay for all the mining equipment, and then expect to make a profit, like any business.

reply to post by ChaoticOrder


You obviously don't know how computer programs work. They can be modified at any time, the "network" is all code. Despite that one entity, like our gov, with alot of money could come in and buy every single bitcoin. For that matter they could come with some real heavy hardware servers and mine all the rest of the existing qouta of bitcoins. After that they would either have to change the max amount of bitcoins or let it die.