Bit Coin..why it matters

[dixiegrrrrl]

Almost everything you wanted to know about Bit Coin..
why it is becoming more popular
how it works
.
.

A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers.

Political idealists project visions of liberation and revolution onto it; establishment elites heap contempt and scorn on it.

On the other hand, technologists – nerds – are transfixed by it. They see within it enormous potential and spend their nights and weekends tinkering with it.

Eventually mainstream products, companies and industries emerge to commercialize it; its effects become profound; and later, many people wonder why its powerful promise wasn’t more obvious from the start.

What technology am I talking about?
Personal computers in 1975,
the Internet in 1993,
and – I believe – Bitcoin in 2014.

http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/

[tridim]

1. Bitcoin matters like Amway matters.

[dixiegrrrrl]

2. What part of the article supports your statement?

Tossing out random generalized comments does not create the atmosphere of a thoughtful discussion.

[tridim]

3. It is common knowledge that Bitcoin is a pyramid scheme. nt

[caraher]

4. I knew next to nothing about bitcoin

Having read the article, I'm not much more enlightened. Which is not to say it was a bad one - I just didn't get it. (Financial articles tend to make my eyes glaze over...) My main takeaway was that, if it works as advertised, it might prove a superb alternative to existing payment systems, and could open up new areas of commerce. It didn't do much to address fears of a downside, though.

I don't think anything is "common knowledge" about something this new.

[dixiegrrrrl]

6. Thank you for reading the article before commenting.

It is nice to be able to have intelligent discussions on DU instead of "seagull" comments.

My eyes tend to glaze also. However, I have been following Bitcoin for the last few months, intrigued by the implications,
both pro and con.
One of the issues: will the gov't treat it as money, since it can be used to purchase stuff,
or as a commodity, since the value of one coin changes over time, thus would it generate profit and losses by coin purchasers.

As money, it does threaten current money transfer providers, who make a profit from financial exchanges.

Just to make things interesting, there are other "crypto-currencies" in the pipeline.

[caraher]

7. I guess government and I are in much the same boat then

It seems like most of my previous exposure to Bitcoin involves stories about the value of a Bitcoin, which places it firmly in the commodity category. And that's one reason I paid little attention to it - I'm not very interested in stories about what speculators are interested in, and I got the strong impression that this sounded like the latest bandwagon bubble fad.

Governments probably won't look upon it kindly as money, since that's traditionally under their purview. And I do worry that if it functions as an alternative currency, it might represent just one more way to starve government (i.e. "we the people&quot by evading taxes.

[dixiegrrrrl]

9. It took me a bit of time to realize

that one does not have to buy "a whole" bit coin in order to use it...one can buy any amount, as the article says.
So it serves as a unit of money, even at the penny level
while also serving as a unit of stored value, like gold, with a fluctuating price.

The original idea is that only so many Bitcoins will be created, that unlike the fiat dollar, it will not be mined/created indefinitely.

Will be interesting to see how the crypto currencies develop.

[KoKo]

5. It's an idea to get away from currency strangleholds

promoted mostly by libertarian technology millionaires and billionaires who hate the US Federal Reserve and Monetary Regulations used by other countries.

The potential for abuse is strong: Drug Money Laundering , Secret funding for all kinds of Illicit/Illegal activities that are now under the radar and, worst of all, that ordinary investors could get caught up in a bubble over this and be wiped out. There is no regulation on Bit Coin. Buyer Beware. It's the latest scam to innocents who think they can make big bucks on it investing or trading it along with the criminal elements.

It's the latest "Gold Bug Fever," but with even worse outcome. It could turn out like Confederate Currency after the Civil War ended or Beenie Babies.

Just saying...

[wercal]

8. Interesting article

Especially the points about why a vendor would accept bitcoin. But at the end of the day, that vendor is likely to immediately convert that bitcoin back to dollars....making it similar to a pre-paid credit card in a lot of ways.

I still don't understand who 'controls' the algorithm that modulates the rate of mining. And more importantly, what stops them from arbitrarily changing the algorithm (or a hacker doing the same).

Its an interesting concept - and I can see it becoming a better medium for web transactions...but only because people can immediately convert them back to dollars. I'm not sure people will ever have enough faith to use bitcoins like a normal currency - holding retirement savings in bitcoin for example.

[paulkienitz]

10. count me as one nerd who isn't transfixed

There are billboards popping up in my area that show a bitcoin logo and say "The revolution has started. Where do you stand?" Where I'm standing is, at a good safe distance from the sign by the cliff that says "watch for falling currencies".

Krugman was right: bitcoin has solved the transactional part of a digital currency, but not the value part. Any value it holds is entirely speculative, with nothing underlying it.

Buying bitcoins is like buying stock in a hot company with no assets or revenue. It's like buying bonds from a popular issuer who never promised repayment. It's like buying commodity shares in neutrinos.

It looks good now because its designed-in scarcity makes it naturally tend to rise in price as people buy in. Considered as a currency, it has built-in deflation (which, by the way, would make it a terrible idea to use it as an economy's primary money). So as soon as anyone pays real money for it, it immediately becomes a bubble. But because of the lack of a base of real value, when this bubble pops, there's nothing to stop the price falling all the way to zero.

[wercal]

12. My question would be - Who Paid for the Bitcoin Billboards?

Bitcoin is supposed to be some open source code and an algorithm to modulate the rate new coins are 'mined'....and its supposed to be dependent on all users cooperating together and using this algorithm...but at some level, some entity has to 'control' bitcoin's algorithm...and doesn't the bitcoin 'ledger' have to use and pay for bandwidth to be on the web? It seems to me that somebody has to 'own' Bitcoin, and that entity could change the rules - they could modify the algorithm to create more Bitcoin in the future.

The existence of billboards, that somebody had to pay for, reinforces this notion. It has to be more than just open source code. Somebody has to still be very much in control of the entire system....that doesn't bother me - but the idea that this entity is not made public does bother me.

[paulkienitz]

19. no, nobody controls it

The algorithm is open and distributed and works without any central authority. Technically, that's the breakthrough that revolutionized the field, and it's that decentralization which makes it so appealing to techno-libertarians. And as long as no hacker busts open its infrastructure, it's protected from after-the-fact meddling. Considered as a technical proof of concept, it's an impressive achievement. (As a financial instrument, though, it's still vaporized snake oil.)

The billboard makers are either opportunists riding the bubble, or evangelical suckers who think they're getting in on the ground floor of The Future.

[wercal]

21. Who puts out the updated versions of Bitcoin?

They are on version 8.6......who updates it? Is there some sort of collective that 'agrees' to these changes...or is there one entity that posts these on the Bitcoin website? And the link to the website is below....who pays for the domain name, etc, to keep it up and going.

I think the answers to my questions lie with the 'exchanges' that are sometimes independently set up to trade bitcoins. These entities have a vested interest in keeping Bitcoin going, and may finance the website/billboards/upgrades.

Then I read that so far, 45% of these exchanges have closed - taking people's bitcoins with them. Vaporized Snake Oil is a very appropriate statement. I like the concept, but I think it has too many problems.

http://bitcoin.org/en/version-history

[dixiegrrrrl]

22. Good question........apparently there is a bitcoin Foundation

https://bitcoinfoundation.org/

and it suggests that the people behind Bitcoin are members of the Foundation Board:
https://bitcoinfoundation.org/about/board

[wercal]

23. Interesting

Their communications director's bio boasts she used to be a legislative assistant for 'a congressman'...upon further research - Peter Roskam, R-Illinois.

[bemildred]

11. I blow hot and cold on this.

It is a form of fiat money, but with constraints on quantity. Bitcoins aren't just printed.

And it is digital cash, a bearer instrument.

The idea is discussed in Cryptonomicon: http://en.wikipedia.org/wiki/Cryptonomicon

It seems to me, if it gets much traction, it is a direct threat to the existing governmental currency scheme, and I expect it to be resisted vigorously, if it takes off.

And it thwarts some sorts of surveillance, and as mentioned makes fraud more difficult. But it also makes transactions more opaque to LEO. You know people exchanged Bitcoin, you have no idea why.

As an idea, I like it, but I think it's going to be an ugly fight.

And if it does not take off, you got nothing.

I think there will be imitators.

[pscot]

13. Have you read Cryptonomicon by Neal Stephenson?

A bitcoin scheme is at the heart of it. Plus it's a great read.

http://www.reddit.com/r/scifi/comments/1b1qq1/digital_currency_ten_years_before_bitcoin_neal/

[truedelphi]

15. I love N Stephenson

Thanks for mentioning this book of his.

[dixiegrrrrl]

16. I have the book....

and my son has been nagging me to read it for more time that I want to admit.
Now might be the right time.

[bemildred]

20. Cryptonomicon is worth slogging through, also "The Diamond Age".

In particular, of his, for the frenzies of nerd explanation he gets into. As novels, they are so-so and generally aimed at fellow nerds (in particular adolescent people with penises), but is pretty good on gender issues and progressive social values. I suspect he has some Libertarian tendencies.

If you slog through the story line, and grok the technical rambles enough, you get a much better idea of what is on the table with these technologies as they mature, something you are unlikely to get anywhere else in a vernacular exposition.

[truedelphi]

14. As a co owner of a business that has Chinese customers, we

Are interested in bitcoin.

Biggest fear I have is that of our government deciding to "protect us" from it.

France and South American nations are also big on bitcoin, but so far we don't have customers in any of those places.

[dixiegrrrrl]

17. The Feds are acting against bitcoin in some cases but FOR it in others...weird

check this out:

Feds to flog off $28m in Bitcoin from Silk Road drug souk seizure
Calling it a biz 'designed to broker criminal transactions' doesn't stop them cashing in.
American officials are preparing to sell off $28m worth of Bitcoin
which was seized during the operation to shut down the Silk Road online drugs market last year.
http://www.theregister.co.uk/2014/01/17/feds_prepare_to_sell_28million_worth_of_bitcoin/

But, then....

Feds shut down payment network Liberty Reserve. Is Bitcoin next?

Federal prosecutors have shut down Liberty Reserve, an alternative payment network that they say was a $6 billion scam "designed to help criminals conduct illegal transactions and launder the proceeds of their crimes."

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/28/feds-shut-down-payment-network-liberty-reserve-is-bitcoin-next/

I would think the devil is in the details of each story.
Soon as the Feds sell the stuff in the first story, they have legitamized Bit Coin.

[blkmusclmachine]

18. ,

,

[Mira]

24. Thanks Dixiegrrrrl - timely and enlightening. n/t