(Deeeeeeeeep sigh)
I’m so sorry, everybody.
(Don’t get me wrong, I know perfectly well that banks are fuckers, and one nice thing about bitcoin is how it makes money transfers easy, quick and (almost) fee-free. But… another deeeeep sigh. )
OK to give credit where it’s due, that’s awfully pretty. I think I can see me there! :waves at self:
There are only three things I’m aware of coming up in the next few months.
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There’s some Bitcoin Conference happening in London. I might go just to put some names to faces. It’s being organised by three blokes who are currently in quite a bit of hot water with the Bitcoin community for their perceived ineptness in clearing the rubble from Bitcoinica’s crash landing. They also operate the exchange I use to cash out my mining proceeds, and have had numerous run-ins with British banks. Whose fault this is, I do not know. But I’m skeptical any of them would have an announcement coming up that would bring stability!
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Butterfly Labs starts shipping out their ASICs. This might bring stability for two reasons. Firstly, so many peeps, myself included, are skeptical they’ll actually deliver the goods, so it would reduce some uncertainty there. Secondly, when everyone turns on their ASICs the network hash rate will probably go up by a factor of five in a couple of months. Higher n.h.r. means more security for the network, means more confidence in Bitcoin as a stable currency.
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The block reward halves in December 2012. At least the Mayans were right concerning my mining rigs - it’ll very probably be the end of the world for them. But I don’t see this affecting stability in any way.
Well, it’s certainly the most interesting money-related thing to happen to the nerdosphere since mathematicians started muscling in on economics. Which turned out well.
Yes, the reason Bitcoin will succeed is because FIAT MONEY is controlled by a MEAN BANKER who once pushed an orphan down and SPAT on him. Never mind the deflation issues, the fact that consumers have no incentive to use it over a safer mechanism (e.g. credit cards), the fact that it isn’t backed by anything, the security issues, or the wildly fluctuating exchange rates. As long as FIAT money is bad, Bitcoin is good.
Fin.
By Jove, you’ve sold me on it… I’ll have 10 of your finest bitcoins sir!
Does anybody know if bitcoins are considered to be “money” by governments? Are BC transactions taxable anywhere? Is gambling or playing poker for bitcoins on the internet subject to laws or regulations?
Can someone explain what bitcoin mining is?
They’re not the ones who don’t know what “compounded weekly” means. The stated annual return is actually ~7.25%, the difference being the interest earned throughout the year on interest already calculated.
It’s the digital equivalent of counterfeiting, seemingly limited to brute-force tactics that cost as much as the coins you’re creating. It’s kind of like hiring a skilled jeweller to enscribe $2 coins by hand.
Basically you use your computer’s CPU or GPU to run math problems and discover valid bit coin hashes. You’re not really mining anything of course, your computer does math problems until you discover a valid string.
No no no. :smack:
‘Mining’ is not the process of counterfeiting Bitcoins… one of the useful nuggets in thinktank’s screed is that Bitcoins cannot be counterfeited. Mining is the process of minting the bitcoins in the first place. It’s what I was doing with my rigs in the long post I made above.
Basically, Bitcoins work by keeping a ever growing ledger of all the transactions that have taken place, so that everyone knows exactly who (or rather, which Bitcoin address) has coins, and how much they have. So for example if Joe Bloggs wants to spend 4 bitcoins from an address he has, the ledger verifies that he indeed has them, and produces a record of the transfer so everyone can see Jane Biggs now has them.
The ledger is split up into ‘blocks’ which are generated, on average, every ten minutes. The ledger is also called the ‘blockchain’. ‘Chain’ is relevant because each block also contains the SHA256 hash of the previous block’s header - that is, a string near the beginning showing that it’s continuing from the previous block.
‘Miners’ are machines which generate new blocks. To do this they have to solve a complicated maths problem which ensures that blocks can only be generated at a certain rate (it has an adjustable difficulty so that if tons of people suddenly start mining, after a while the problem becomes more difficult). Basically in order for the Bitcoin system to function, these blocks have to keep being generated. The complicated cryptography bit ensures that people can’t just make up any old shit and stick it in the blockchain, or all the other miners reject it.
From the system’s point of view, the purpose of mining is not to make the miner money, it’s to secure the blockchain. But since the computations require time and effort and electricity and hence money, the people who have mining rigs need to be compensated in some way, or nobody would mine. Hence the mining reward - each block includes a ‘transaction’ that generates 50 BTC and awards it to the miner that generated the block. This has a second useful effect… it distributes the money amongst many people, who can start trading with each other. If the first block had simply awarded 21 million bitcoins to the inventor, they’d then be stuck owning a ‘fortune’ in coins that, since nobody else would have them, would have no economy in which to be worth anything.
This might be the biggest grey area slowing the growth of the bitcoin economy, every merchant is thinking, ‘what are my nation’s tax authorities going to say about this and how much paperwork is it going to bring down on me?’
My not-very-educated guess on this is that so far the Bitcoin economy is so tiny that governments mostly don’t know about it, and in so far as they do, they don’t YET care. Of course they WILL start caring once it takes off. The sensible thing for them to do would be to treat bitcoins as taxable exactly like they do their own national currencies. Instead we’ll probably get hysterical tales about Silk Road, gnashing of teeth from tabloids, and ‘something will have to be done’. Because people are fucking idiots, and politicians are particularly stupid people.
Phew. All my money is already tied up in Militia scrip, ammo, and Ron Paul posters.
I think thinktank60’s post single handedly proves how looney bitcoins really are. Aw well.
The stated weekly return was 7%. A 7% annual return might have been somewhat plausible. And yes, if people just took their interest out of the system every week, it wouldn’t be compound interest and he’d only have to come up with a 350% annual return. But I don’t believe that’s what happened: from what I read, most people continued to plug their interest payments (and even increased their investment) right back into the system to get more of that sweet, sweet free money. :smack:
In the United States, transactions do not have to involve money to be taxable. Barter is just as taxable as a sale for cash.
If you trade your cow for a bag of magic beans, the federal income tax applies exactly the same way as if you sold your cow for cash equal to the fair market value of the beans. You can’t avoid the income tax on your wages by having your employer pay you in merchandise instead of cash. You can’t avoid the income tax on the sale of your investment property by having the buyer pay you in shares of Facebook or government bonds. (There are exceptions for exchanging investment properties for “like kind” properties (known as a “Section 1031 trade”) with a ton of rules for what constitutes an exchange and what “like kind” means.)
So yeah, if you sell goods or services for bitcoins in the United States, you owe tax just as if you sold them for cash. That is not a grey area. There is no question about that. The difference is that it may be easier to cover up the transaction so that the tax collector doesn’t find out about it.
Gambling is gambling. Where gambling is illegal, it’s normally just as illegal to put up your Rolex watch, the deed to your estate, or your bitcoins as it is to put up cash.
This just got reported (bitcoin theft). I thought you guys would be interested as a followup:
Also, if you are interested in bitcoins, Planet Money did a podcast on them. Link: http://www.npr.org/blogs/money/2011/08/24/138673630/what-is-bitcoin
Do I have this right?
I build a rig capable of churning out math calculations, and turn it loose on a problem created by someone.
If I manage to find an answer, I get rewarded with a bitcoin, which can be traded, with some “merchants” for items/downloads/whatever.
How is this any different than fiat money? It seems that bitcoins are being created out of nowhere, assigned a value, and traded for goods. But at the end of the day, a computer crash, a network breakdown, or people losing interest could wipe it all out, and the person left holding the bitcoins is the loser. I can do the same thing with $100 bills. I can mail them to anyone in the world, with no traceability. Sure, the US government created the $100 bill in the first place, but someone dreamed up bitcoins, and set up that system too.
I just see no advantage to me, average person, to using them.
Not really. It is true that bitcoins can be obtained that way, but the easy ones have already been found and that’s mostly irrelevant now.
You get bitcoins the same way you get Euro or Forint or Rupee: by exchanging some other currency for them, at the going rate.
The main feature that distinguishes them from fiat currency seems to be that there is a limited number of them - limited by mathematics, not regulation. So, while fiat money can theoretically be devalued at any time by simply creating more of it, that’s simply not possible with bitcoin[1]. And it’s decentralized, so while a crash or hacked computer might wipe out your coins, it won’t have much effect on the currency as a whole.
That’s the theory, anyway. Whether or not that turns out to be true in practice, and whether or not the advantages prove to outweigh the risks, is something we’ll find out over the next few years I guess.
To the average person, the advantage is this: it has all the properties of cash, but you can send it directly over the internet.
- New bitcoins are being generated, but at a slow and predictable rate. And there is a fixed upper limit.
nm
Actually it is an arbitrary limit which could be raised by the developers, although that would require 51% of those using the client program to agree to the limit being raised.
The greatest downside to bitcoin is that it is deflationary which means there will always be a bigger incentive to hoard it rather than spend it, which means that any economy based solely on it will fail spectacularly.
As it stands the bitcoin “economy” consists of silk road, and various ponzi and pyramid schemes and is propped up by captains of industry who spend all their time dreaming up new ways to scam each other or derive profit without resorting to labour.
You may be right, but this seems somewhat speculative - there are arguments that deflation may be self limiting or somewhat irrelevant. It could affect the economy without necessarily destroying it. That’s why it’s interesting to watch; we get to find out empirically.
The bigger issue seems to me to be the chicken-and-egg problem. As you say, there’s not much you can buy with bitcoin that is not dubious or a scam. Unless and until you can use it to buy things that are ordinary, there’s just no compelling reason for most people to give it a second look.