I just discovered and have started learning more about bitcoins. It seems like a fascinating idea to me. However, I wonder just how viable of a currency it may become?
I really don’t know much about their history or anything really, other than just a few things I’ve read on wikipedia and the bitcoin wiki. It seems a lot of bitcoins are used for illicit and illegal activities. But is there an actual legitimate future for them?
No.
I’ve been following Bitcoins for a while. The idea of a peer to peer digital commodity that doesn’t rely upon a central authority is definitely interesting, but Bitcoins have several huge flaws that keep them from ever being a viable currency:
Inherently deflationary – if you’re not a Libertarian goldbug, you probably know that moderate inflation is not a bad thing. It gives people an incentive to spend or invest money instead of just hoarding it, and helps account for the fact that new people are entering the economy. Dictating a fixed supply means that it makes more sense to hide them under your mattress than to spend or lend them.
The implementation is not scalable – as currently implemented, every Bitcoin client has a complete record of all transactions everywhere. This works for a proof of concept case that hardly anyone uses, but would be a disaster on a global scale.
No advantage to consumers – people often make the analogy to digital cash, which is pretty apt. If you drop a hundred dollar bill on the ground and someone else picks it up, kiss it goodbye. Now imagine you want to buy something online – paying with cash doesn’t seem like a great idea, does it? That’s the biggest problem with bitcoins, IMO. Using my Visa is free (for me), and gives me a 800 lb gorilla I can sic on shady online retailers should they decide not to mail me the goods I bought. Buying the same thing with bitcoins is like mailing someone cash and hoping they don’t rip you off.
What’s funny about Bitcoins is that they’ve attracted enough attention that they have a significant real money value, despite being backed by nothing other than Internet Libertarian fervor. This has now created a ripe target for hackers and scammers, who rip these guys off on a regular basis. Hundreds of thousands of dollars stored on horribly coded sites on insecure web servers, confidence scams, Ponzi schemes, you name it, these guys have fallen for it. It would be sad if they weren’t so willfully stupid.
At this point there’s also something of a stigma attached to bitcoins because a lot of the people who are enthusiastic about them are more than a little loony. That’s not helping, and difficult to overcome.
Bitcoin miner here. I make $1-$2 a day at it…not much, but its fun to play with. Enough income that my biz partner doesent bitch when I buy another video card to slap in an old box for another mining rig. I load up old crappy machines and start them mining. (I own a computer shop so cheap old junk machines are a dime a dozen)
I think there is alot of good potential here…but its going to take a much broader grass roots effort to accept BC on a large scale.
Alot of the folks who play in this realm right now are the “gubmint bad, wanna hide my money where the feds cant find it types.” Bitcoins are fabulous for that. Go to an exchange, buy $1K in bitcoins, its off the radar just like a pile of cash. Nobody to serve a warrant to for its seizure, etc, etc. A techie swiss bank account of sorts. Granted most of the places that accept BC on any meaningful level are dealing in shady if not outright illegal goods. Because the transaction logs are public, I’m sure there is a way for merchants to show a history (as yet unimplemented) of repeat transactions to validate their consistently providing product.
I’ve been following that saga via the Something Awful bitcoin thread. Those people (bitcoiners, not goons) are so goddamn dumb it’s unbelievable. Anonymous guy is offering a “high yield investment plan”, where you give him your bitcoins and he pays you 7% interest, compounded weekly. How is he going to make a sustained 3200% annual return on his investment? How are you going to get your money back if he just steals it, since the currency is irreversible by design and you don’t know who he is? Who cares! Free money! Look, he paid those guys last week, didn’t he? People ended up giving him $5 million worth of bitcoins. :smack:
Shockingly, one week he just stopped paying out interest and kept everyone’s coins. Investors were stunned. Bystanders were amused. The sound of palms smacking foreheads rang across the Internet.
I mean, seriously, how stupid can you be?
That’s precisely the situation online sellers are in, when dealing with credit cards and PayPal. It hasn’t stopped them; instead they factor it into their costs and risk assessments.
It’s possible Bitcoin (or something like it) will find a market where that doesn’t matter much. Low-cost ebook or song downloads for example. At some price point, $0.99 or $0.25 or $0.05 presumably the consequences of being ripped off are low enough that buyers are willing to take a chance.
I don’t know the answers, but it’s an interesting experiment.
I have seen places offering various porn items for .5 BC or less. Couple burned DVD’s in a DVD mailer, maybe a buck in cost. I could see where disks full of pirated music or ebooks could go the same way.
Why does it have to be porn or pirated stuff? I expect the credit card transaction costs on a $0.99 itunes store purchase are significant.
How many dollars/pounds does it cost in electricity to mine one bitcoin? Seems to me that it was set up to make the early adopters very “rich” and to ensure that those who bought in later had to purchase their bitcoins from the early adopters, hence the ridiculous increase in exchange rate as more people joined up, followed by a massive crash in value as the early adopters cashed out and with each subsequent loss of confidence (scam, hack or theft), not to mention that the price seems to dip at remarkably regular intervals which seem to tally with the end of school/college vacations and around Christmas time, suggesting the majority of people are simply involved because they see it as a way to make money by doing no work and once they can no longer get the “free” (its not free though, electricity and hardware cost money, but the costs are not readily apparent) money, which will happen as the rate of discovery slows down with the generation of each new bitcoin.
It is almost as if someone sat down and worked out exactly how to scam Ron Paulites, and then did it, and now those that bought it have to keep going because otherwise they have to admit that they got taken for a massive ride.
From what I understand, unless you have a really good bitcoin mining rig, or are “off the grid,” you’ll never even break even on the electricity costs. Regular CPUs, even quad-core ones, just aren’t efficient at the type of hashing that needs to be done on them. And it takes a LOT of CPU power…you can’t really just have it go in the background of your regular PC and expect to do much else with it.
Certain GPUs are a lot better than CPUs, and in theory you can come out ahead with those rigs, but if you don’t already have that GPU you’ll have to buy it, and yes, the prices of them have gone up since bitcoins started. So you buy that GPU for $150 (total guess on the price, might be more), how many days before that pays for itself? Factor in the electricity costs, and I wouldn’t be surprised if you go a whole year before you make a single dollar of profit, going by drachillix’s estimate of $1-$2 worth per day.
Ah, so it’s a conspiracy between the power companies and the GPU makers?
Makes me wonder how many bit coins are being mined at employers’ expense?
The lease for my shop includes electricity 
FWIW, Apple doesn’t send every 99-cent charge to its merchant service and then gets a fee on it. It aggregates the sales every day or so for fewer per-transaction fees. (Quick cite, 5th paragraph)
Just watched a network analysis and economic analysis lecture on bitcoins (here, one hour long) and basically bitcoin fails for anonymity, it is subject to massive deflation and will in fact collapse eventually through bitcoins being lost from the system (HDD crashes, users abandoning system, user deaths, forgotten passwords…etc).
The network analysis was quite interesting, and the lecturer managed to identify wikileaks address from the transactional data, and then find all the addresses that donated to wikileaks and the transactions that wikileaks made.
Some of the solutions they suggested basically amounted to setting up a central bank for bitcoin with the power to inflate the currency to keep it alive…which is ironic.
The big problem is that no corporation will use bitcoin because of the potential for industrial espionage through network analysis, they would be giving out all the transactions and this is commercially sensitive information.
If the value was sufficiently stable, I think something like bitcoin would make sense for online micro-transactions. Kids for example could use it to purchase in-game upgrades or digital media without having to have access to their parents’ credit card.
Another application, again if the value were stable, is global money transfer. Rather than pay Western Union, individuals who trusted each (e.g. family) could instantly send money for free anywhere in the world. Of course, this does require a pretty robust series of currency exchanges, which is where all the problems are going to come in, but the bitcoins themselves could be easily moved around. (Probably too easily, from governments’ point of view.)
Thanks for all the info guys! I didn’t know that bitcoins were such a libertarian slanted idea. It makes sense of course.
Also funny about people getting scammed out of their bitcoins. Why would anyone give anyone else their bitcoins? The whole point of the thing to me is that you don’t have to deal with banks anymore.
I first heard about bitcoins in October 2011, and got hooked on the idea. I am not a loony libertarian, but I AM a nerd, and what intrigued me were the cryptographic ideas behind bitcoin. Skip the sermons on the evils of fiat money and talk to me about the SHA-256 algorithm and blockchain integrity, baby!
I have spent the last year setting up ever more powerful bitcoin mining rigs in my spare room. It has now become clear to me that I spent far too much on capital costs, and that I won’t break even. But the daily revenue does exceed the electricity costs by quite a bit - I’m currently getting about £8 a day - so at least I’ll keep mining until it’s no longer profitable, to minimise my losses. Also I’ll be able to get some money back from reselling the hardware. So it won’t have been TOO painful an experience.
I’d like to clear up a few points from other posters:
Deflation - well, not exactly. It is true that there is a cap on the total number of bitcoins that will ever exist - about 21 million - but as long as they are actually being generated faster than they are being lost (due to people losing the private keys for the addresses at which they’re stored), the supply is still expanding. Also, bitcoins getting lost is not really a problem for the system as a whole. Bitcoins are divisible to 8 decimal places, and I’m told the code can easily be changed to increase that divisibility. So the BTC economy could still function even if there were only a dozen bitcoins.
Blockchain bloat - the official bitcoin client does require you to store the entire transaction history on your hard drive. I believe it’s already around 2GB at the moment and that’s only going to get worse. But several alternative ‘thin’ clients exist - I’m using one called ‘Electrum’ now. These work by storing the blockchain on several dedicated servers and you just need to access those. Of course it means you’re no longer quite as autonomous as you might have hoped, but it isn’t a single central authority holding the blockchain either, so I think it’s a reasonable compromise.
Profitability of mining: it has been pointless to mine with CPUs for a long time now. GPUs are where it’s at, especially high end AMD ones like the 5970. They DO use a helluva lot of electricity, so you’d have to do some calcs before you invest in the hardware. Several people developed custom FPGAs for bitcoin mining over the last year or so. These lower the power requirements by about a factor of ten.
But the latest development on the horizon is ASICs developed by an outfit called Butterfly Labs. They’ve raised probably a half million bucks or so from people eager to purchase their ASICs when they’re ready. They claim they’ll start shipping in October. If they’re on the level, it’s pretty much game over for GPU miners like me, unless I sell my rigs and join THAT bandwagon. I’m being cautious for now. BFL have made FPGAs before this, so I don’t think they’re a scam, but they may be making unrealistic claims for their developing ASICs.
Pirateat40s Ponzi scheme: I have nothing to say to the people who put money into it, other than this:
Hahahahahahahahahahahahahahahahahaha!
What’s the hell’s it FOR anyway? As Giraffe alluded to, it seems that the benefits are all for the merchants rather than their customers. But I think one possibility is subscription based web-applications. At least, when I finally get MY app together, and it’s worth asking money for, I’ll be offering a hefty discount for people to pay me in BTC.
Sorry, rambled a bit.
Lets set the dope straight.
To understand Bitcoin you need to understand how FIAT money is created from private owned banks out of air based on an old scam that they are still getting away with running.
Its like when they print glass pearls and gave to the indians.
This is acctually very interesting.
Watch Money as debt, here is a small part 1 of 5.
Than you need to understand how the Federal reserve are a private owned bank created by private banks and how this happened.
Than the results of such system.
The same is true for most countries. As the bankers have corrupted governments.
This is what happened in Canada:
And its happening all over where these banks appear.
Financial Armaggedon? Fed May Be Printing Money “Under the Table”
A spokesman for the Denver/Kansas City Branch of the Federal Reserve Bank has refused to comment about former St. Louis Fed Chief, William Pooles, comments stating that the Fed is “printing money,” with no backing. The news is particularly bad for China and Saudi Arabia, holders of huge amounts of US debt, who may now fear that the US intends to inflate its way out of debt.
A year later. It turned out to be true!
They create money under the table. More money out of air to those who created them.
When you know that the FED was created by those banks, it all makes sense that they save their own skin. Bailing out themselves on the expense of everyone else.
With Bitcoin such shit would not be possible, everyone sees and knows how much money there is all the time.
Bitcoins can not be created out of air. They are created out of energy.
They are not created with a debt that must paid.
To lend out a Bitcoin you must have that Bitcoin.
They are not created by private companies (banks.)
Anyone can start to create a Bitcoin by contributing power to the network anywhere in the world noone is left outside.
Thus Bitcoin is the worlds first currency not owned by banks or a single country but by people all over the world.
And the world needs a neutral currency.
This means that it doesnt matter if that currency increase in value. No export industry of any country is affected.
Lets look at what printing money out of air allows:
This also allows banks to print money and bribe politicians and people such as Mark Zuckerberg.
And these are the banks that we have let create and endless new amount of money.
Libor scandal: They still have a banking cartel.
“We should be outraged going nuts about this!”
This is how the Libor scandal affects you.
Now when it comes to credit cards…
You pay hidden fees on everything you buy. The fees are charged the merchant who put in in the price of the product you buy.
These fees goes straight into the pockets of to the worlds richest people.
Those who need the money the least of everyone in the world.
And they even rigg the fees!
July 14–Visa, MasterCard and 13 of the country’s biggest banks have agreed to pay $7.25 billion to settle accusations by retailers that they engaged in price-fixing on credit card transaction fees.
The settlement, on behalf of about 7 million retailers, could be the largest antitrust class-action settlement in U.S. history
Those who own everything!
The four companies that control the 147 companies that own everything.
And in their system you do not even own your own hard earned money!
Thats why they want to get rid of cash.
Some people you do not know and can not control, decides what people all over the world can do with their money. No country laws apply, because the money is in a private owned system.
Bitcoin is the worlds first none private owned money system.
And they keep a recored of everything you, your politicians, your jurry and everyone in the world ever buy. Giving them information to bribe/control politicians and sell that information.
Your Credit Card Is Spying on You
Data Mining CEO Says He Pays For Burgers With Cash To Avoid Junk Food Purchases Being Tracked
Bitcoin is the only good electronic money we have. And the good thing is, those who have some balls and risc trying it could get rewarded handsomely t if it takes just 1% of the market, each Bitcoin will be worth $5000-$50 000. If it grows as big as Facebook, each coin will be worth $5000.
And this without it being a pyramid scheme. As there is no single private interest the fees are way lower than creditcards. When you compare a credit card fee with Bitcoin the fees are hundred thousand percent higher than with Bitcoin.
As for early adoptor advantage. Lets compare with those who created FB and have stocks in FB. They can earn money on those stocks forever.
Those who created Bitcoin, can only use their coins once.
Than they do not have them anymore.
If you get $100 worth of Bitcoins and buy something worth $100.
There is only one who loses out. The banks, who can no longer charge a transaction fee everytime you and people all over the world buy things.
And do you really want to give the banks an endless amount of money, when you could just use a system that is a close as free as possible…
Bitcoin, is also the only currency in the world that can be sent to someone with the help of Facebook, email, sms & twitter.
And will Bitcoin take off?
This is what AMERICAN BANKER says:
Lightning Fast, Dirt Cheap: Bitcoin Shows What Banking Could Be!
Because this is how a bank transaction works:
SWIFT or IBAN wire transfers are not completely free of vulnerabilities. Every intermediate bank that handles a wire transaction can take a fee directly out of the wire payload (the assets being transferred) without the account holder’s knowledge or consent. In many places, there is no legislation or technical means to protect customers from this practice.
Bitcoin is the only digital currency that we can own.
There are enough Bitcoins to cover the need for the world for thousands of years.
There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin design.
Thats 14 times more divisible than all the gold ever mined in the entire human history if you where to compare with gold divided in tiny tiny parts.
As long as there are atleast two people who have a copy of the blockchain, containing all transactions Bitcoin can be brought alive and these are spread all over the earth since its the worlds first decentralized currency system.
Be sure to check out this globe with google chrome browser.
It only shows those who use the standard client at a certain hour.
http://www.weusecoins.com/globe-bitcoin/
Today many use for example blockchain.info.
As for the “big” problem with transactions…Sorry but the problem will be solved.
Just as people said, we will never go to the moon, youtube is not possible. Wikipediea will not work. What is internet good for. There will only be a single computer.
FB is not possible etc etc.
Well you look it up yourself.
Here is how to counterfeit dollars.
If you ever go to russia. 50% of the dollars or more might be counterfeit.
**Here is how to counterfeit Bitcoins
**
You cant, because every Bitcoin is public.
http://bitcoinmedia.com/how-to-counterfeit-bitcoins/
But dont put all your money in Bitcoin. Expect the value to go up and down.
But there is a quite big announcement comming up that should bring stability.
As money goes. Bitcoin is the most interesting thing that has ever happened to humans in thousands of years.
Fiat money is worth whatever you can get for it, or in other words if a delusion is universal who gives a shit? Right now I’d say the USD is a hell of a lot more reliable and universally accepted than bitcoin.