# Bitcoins **URL:** \ **Category:** Cecil's Columns/Staff Reports\ **Created:** [August 9, 2013, 4:26am UTC](https://boards.straightdope.com/t/bitcoins/665779 "2013-08-09T04:26:57Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Siam\_Sam](https://avatars.discourse-cdn.com/v4/letter/s/d78d45/32.png) [@Siam\_Sam](https://boards.straightdope.com/u/Siam_Sam)\ **Post date:** [August 9, 2013, 4:26am UTC](https://boards.straightdope.com/t/bitcoins/665779/1 "2013-08-09T04:26:57Z")
[Cecil’s column](http://www.straightdope.com/columns/read/3120/is-bitcoin-the-future-of-money) Thought I would mention that Thailand has outlawed bitcoins. Story [here](http://www.bangkokpost.com/business/news/362222/bitcoin-declared-illegal-in-thailand). ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [August 9, 2013, 7:16am UTC](https://boards.straightdope.com/t/bitcoins/665779/2 "2013-08-09T07:16:27Z")
Cecil sez: [quote] [ul][li]The system doesn’t work on trust, though. Each bitcoin includes a log of all previous transactions in which it’s changed hands. When a bitcoin is transferred between two parties, its transaction log is broadcast to all bitcoin participants. A subset of this group, called bitcoin miners, competes to perform what amounts to a validation test on the transaction log. This task requires a special high-powered computer rig to do the voluminous processing involved. Whichever miner is first to successfully validate the transaction log notifies the rest of the bitcoineurs, and the transaction is considered valid. This process takes between ten minutes and an hour.[/li][li]For their trouble, successful bitcoin miners earn new bitcoins. That’s how bitcoins are created, ensuring the number increases slowly. Crucially, the system is designed so total coinage will top out at about 21 million. [/ul] [/li][/quote] …at which point transactions drop to zero, since nobody will bother to validate transactions anymore. Or maybe transactions afterwards will no longer need to be validated: that sounds problematic. Or maybe fractional bitcoins are created so we never reach 21 million. Or maybe computer time necessary to validate transactions drops very low. I perceive a problem with this financial model, or perhaps Cecil glossed over some of that considerable detail. How do transactions get validated after bitcoinage is maxed out? ---
**Author:** ![Vashbul](https://avatars.discourse-cdn.com/v4/letter/v/3d9bf3/32.png) [@Vashbul](https://boards.straightdope.com/u/Vashbul)\ **Post date:** [August 9, 2013, 8:27am UTC](https://boards.straightdope.com/t/bitcoins/665779/3 "2013-08-09T08:27:16Z")
A woman with a cash register for a chest is pointing to a bitcoin on an iPad while depositing or extracting money bags from a slot. A computer shows a dollar sign while the word “casino” flashes over it. Uncle Sam strangulates an angry whipped-cream topped watermelon with a toothpick in its teeth and holding a pencil. Two death’s heads peer out from a large W. Can anyone explain today’s [Slugistration](http://i695.photobucket.com/albums/vv319/ashbul/bitcoin_zps34d96da4.jpg) and its relationship to the column at hand? ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [August 9, 2013, 10:03am UTC](https://boards.straightdope.com/t/bitcoins/665779/4 "2013-08-09T10:03:12Z")
> [@Measure\_for\_Measure](#): > > Cecil sez: …at which point transactions drop to zero, since nobody will bother to validate transactions anymore. Or maybe transactions afterwards will no longer need to be validated: that sounds problematic. Or maybe fractional bitcoins are created so we never reach 21 million. Or maybe computer time necessary to validate transactions drops very low. > > I perceive a problem with this financial model, or perhaps Cecil glossed over some of that considerable detail. How do transactions get validated after bitcoinage is maxed out? The reward for validating a block of transactions is cut in half every four years. It was originally 50 bitcoins, but dropped to 25 bitcoins as of November 2012. The estimates are that the 21 million limit won’t get hit until the year 2140. Every ten minutes, all of the pending transactions are placed in a block, the first miner to validate the block gets the reward. So right now, only 25 bitcoins are being created every ten minutes. [Here is a more detailed, but yet still readable, explanation.](http://www.forbes.com/sites/investopedia/2013/08/01/how-bitcoin-works/) ---
**Author:** ![Chefguy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chefguy/32/138_2.png) [@Chefguy](https://boards.straightdope.com/u/Chefguy)\ **Post date:** [August 9, 2013, 5:28pm UTC](https://boards.straightdope.com/t/bitcoins/665779/5 "2013-08-09T17:28:58Z")
One thing Cecil didn’t address is the following: How does one exchange bitcoins for actual cash? Is it even possible? ---
**Author:** ![gnoitall](https://avatars.discourse-cdn.com/v4/letter/g/bb73d2/32.png) [@gnoitall](https://boards.straightdope.com/u/gnoitall)\ **Post date:** [August 9, 2013, 6:24pm UTC](https://boards.straightdope.com/t/bitcoins/665779/6 "2013-08-09T18:24:13Z")
> [@Chefguy](#): > > One thing Cecil didn’t address is the following: How does one exchange bitcoins for actual cash? Is it even possible? Bitcoin [exchanges](http://en.wikipedia.org/wiki/Bitcoin#Exchanges). ETA: [Link](https://en.bitcoin.it/wiki/Currency_exchange) to bitcoin-specific wiki to answer “how does a bitcoin exchange work?” ---
**Author:** ![aNewLeaf](https://avatars.discourse-cdn.com/v4/letter/a/ac91a4/32.png) [@aNewLeaf](https://boards.straightdope.com/u/aNewLeaf)\ **Post date:** [August 9, 2013, 6:24pm UTC](https://boards.straightdope.com/t/bitcoins/665779/7 "2013-08-09T18:24:20Z")
> [@Vashbul](#): > > A woman with a cash register for a chest is pointing to a bitcoin on an iPad while depositing or extracting money bags from a slot. A computer shows a dollar sign while the word “casino” flashes over it. Uncle Sam strangulates an angry whipped-cream topped watermelon with a toothpick in its teeth and holding a pencil. Two death’s heads peer out from a large W. > > Can anyone explain today’s [Slugistration](http://i695.photobucket.com/albums/vv319/ashbul/bitcoin_zps34d96da4.jpg) and its relationship to the column at hand? “Bitcoins are an electronic currency used for a number of purposes, some of which anger the US Government” ---
**Author:** ![Heracles](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/heracles/32/487_2.png) [@Heracles](https://boards.straightdope.com/u/Heracles)\ **Post date:** [August 9, 2013, 6:54pm UTC](https://boards.straightdope.com/t/bitcoins/665779/8 "2013-08-09T18:54:40Z")
A judge in Texas [recently ruled that Bitcoin is a currency](http://www.coindesk.com/us-judge-rules-bitcoin-is-a-currency-or-form-of-money/) which can be used for fraud. Presumably, somebody will invent a tax for it pretty soon, and then people will abandon the Bitcoin. ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [August 9, 2013, 7:16pm UTC](https://boards.straightdope.com/t/bitcoins/665779/9 "2013-08-09T19:16:10Z")
> [@Measure\_for\_Measure](#): > > Cecil sez: …at which point transactions drop to zero, since nobody will bother to validate transactions anymore. Or maybe transactions afterwards will no longer need to be validated: that sounds problematic. Or maybe fractional bitcoins are created so we never reach 21 million. Or maybe computer time necessary to validate transactions drops very low. > > I perceive a problem with this financial model, or perhaps Cecil glossed over some of that considerable detail. How do transactions get validated after bitcoinage is maxed out? Transactions have a reward attached to validating them. Currently, the reward is zero in most cases but as the supply of coins dry up, the miners will mostly mine for the reward. ---
**Author:** ![Elendil\_s\_Heir](https://avatars.discourse-cdn.com/v4/letter/e/7cd45c/32.png) [@Elendil\_s\_Heir](https://boards.straightdope.com/u/Elendil_s_Heir)\ **Post date:** [August 9, 2013, 7:24pm UTC](https://boards.straightdope.com/t/bitcoins/665779/10 "2013-08-09T19:24:03Z")
[QUOTE=The Perfect Master] …God knows we all engage in transactions we’d just as soon no one knew about — arms trading, money laundering, or trafficking in endangered species and sex slaves. [/QUOTE] Emphasis added. I wish he’d added “and so forth” as a catchall. I, for one, have never done any of those things. I swear. ---
**Author:** ![Deeg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deeg/32/2955_2.png) [@Deeg](https://boards.straightdope.com/u/Deeg)\ **Post date:** [August 9, 2013, 8:15pm UTC](https://boards.straightdope.com/t/bitcoins/665779/11 "2013-08-09T20:15:44Z")
You doth protest too much. ---
**Author:** ![Otto4242](https://avatars.discourse-cdn.com/v4/letter/o/5fc32e/32.png) [@Otto4242](https://boards.straightdope.com/u/Otto4242)\ **Post date:** [August 9, 2013, 11:21pm UTC](https://boards.straightdope.com/t/bitcoins/665779/12 "2013-08-09T23:21:25Z")
> [@Measure\_for\_Measure](#): > > Cecil sez: …at which point transactions drop to zero, since nobody will bother to validate transactions anymore. Or maybe transactions afterwards will no longer need to be validated: that sounds problematic. Or maybe fractional bitcoins are created so we never reach 21 million. Or maybe computer time necessary to validate transactions drops very low. > > I perceive a problem with this financial model, or perhaps Cecil glossed over some of that considerable detail. How do transactions get validated after bitcoinage is maxed out? While he said “no fees”, this is not entirely true. Every transaction can contain an optional “fee” associated with it. This fee goes to the “miner” that validates the transaction and adds it to the blockchain. Miners will naturally prioritize transactions with higher fees and attempt to add them first. So if you want your transaction processed in a timely fashion, you add a bit of a fee. Currently, this fee is small (a few pennies, really). It’s expected to go up over time, but still be significantly lower than normal fees for cash transfers. Additionally, one other thing he said in the article was wrong as well. Specifically, this: > [@](#): > > One of the strengths of bitcoins, namely that their quantity is limited, is also a weakness. The money supply has to grow more or less in proportion to the underlying economy lest we have deflation and depression. Regulating the money supply is why you need central bankers, feckless though they sometimes are. For that reason bitcoins as currently constituted will never replace government-backed money. Unlike traditional currency, Bitcoins are digital. That is, they are made of numbers. Here’s a funny thing about numbers… You can cut them in half. Or in tenths. Or hundreds. Or quadrillionths. 21 million Bitcoins is indeed a hard limit. But that is also 2.1 billion “bit-pennies”. or 21 billion millicoins. The current protocol actually allows for 8 digits after the decimal, called the “satoshi”, which is equal to .00000001 bitcoins. Or 100 million satoshis = 1 bitcoin, if you prefer. Yes, there’s 21 million Bitcoins. But the supply of “numbers” is unlimited and can be valued at any given rate desirable. The protocol allows for decimal expansion if, for some reason, we ever have a serious need to define more than 2.1 quadrillion individual units of currency. :smack: ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [August 10, 2013, 12:32am UTC](https://boards.straightdope.com/t/bitcoins/665779/13 "2013-08-10T00:32:14Z")
Ok, so eventually you will pay a fee for every transaction in order to get it validated. Or maybe Big-Coin will do it free of charge, if costs are sufficiently low. > [@](#): > > The protocol allows for decimal expansion if, for some reason, we ever have a serious need to define more than 2.1 quadrillion individual units of currency. And 2.1 quadrillion seems like a sufficiently high number to me, assuming fractional coins have strong anti-counterfeit protection as well. Just for comparison purposes, MZM, the broadest measure of the US money supply, is 11.8 trillion dollars or 1.2 quadrillion pennies. So 10 nanocoins (equivalent to 1 satoshi) could still be worth something in a world economy. ---
**Author:** ![Elendil\_s\_Heir](https://avatars.discourse-cdn.com/v4/letter/e/7cd45c/32.png) [@Elendil\_s\_Heir](https://boards.straightdope.com/u/Elendil_s_Heir)\ **Post date:** [August 10, 2013, 1:25am UTC](https://boards.straightdope.com/t/bitcoins/665779/14 "2013-08-10T01:25:39Z")
> [@Deeg](#): > > You doth protest too much. I’ll give you a substantial amount of a valueless artificial currency to take that back. ---
**Author:** ![Among\_Liberals](https://avatars.discourse-cdn.com/v4/letter/a/6f9a4e/32.png) [@Among\_Liberals](https://boards.straightdope.com/u/Among_Liberals)\ **Post date:** [August 10, 2013, 2:28am UTC](https://boards.straightdope.com/t/bitcoins/665779/15 "2013-08-10T02:28:29Z")
If bitcoins see a massive explosion and are also adopted as common currency, we will eventually reach a point where somebody is getting excited over a .000001/coin an hour raise. Is this the future you want? ---
**Author:** ![Telemark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/telemark/32/372_2.png) [@Telemark](https://boards.straightdope.com/u/Telemark)\ **Post date:** [August 10, 2013, 2:54am UTC](https://boards.straightdope.com/t/bitcoins/665779/16 "2013-08-10T02:54:35Z")
> [@Among\_Liberals](#): > > If bitcoins see a massive explosion and are also adopted as common currency, we will eventually reach a point where somebody is getting excited over a .000001/coin an hour raise. Is this the future you want? Assuming that represents a substantial percentage raise why would anyone care what the specific numerical value assigned to it is? ---
**Author:** ![Among\_Liberals](https://avatars.discourse-cdn.com/v4/letter/a/6f9a4e/32.png) [@Among\_Liberals](https://boards.straightdope.com/u/Among_Liberals)\ **Post date:** [August 10, 2013, 3:00am UTC](https://boards.straightdope.com/t/bitcoins/665779/17 "2013-08-10T03:00:18Z")
> [@Telemark](#): > > Assuming that represents a substantial percentage raise why would anyone care what the specific numerical value assigned to it is? I know plenty of people who care about almost inconsequential raises now. ---
**Author:** ![Siam\_Sam](https://avatars.discourse-cdn.com/v4/letter/s/d78d45/32.png) [@Siam\_Sam](https://boards.straightdope.com/u/Siam_Sam)\ **Post date:** [August 10, 2013, 3:04am UTC](https://boards.straightdope.com/t/bitcoins/665779/18 "2013-08-10T03:04:27Z")
> [@Elendil\_s\_Heir](#): > > Emphasis added. I wish he’d added “and so forth” as a catchall. I, for one, have never done any of those things. I swear. Pfft. Over here, that’s just me on a slow Tuesday! ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [August 10, 2013, 3:31am UTC](https://boards.straightdope.com/t/bitcoins/665779/19 "2013-08-10T03:31:50Z")
> [@Otto4242](#): > > Additionally, one other thing he said in the article was wrong as well. Specifically, this: > > Unlike traditional currency, Bitcoins are digital. That is, they are made of numbers. > > Here’s a funny thing about numbers… You can cut them in half. Or in tenths. Or hundreds. Or quadrillionths. > > 21 million Bitcoins is indeed a hard limit. But that is also 2.1 billion “bit-pennies”. or 21 billion millicoins. The current protocol actually allows for 8 digits after the decimal, called the “satoshi”, which is equal to .00000001 bitcoins. Or 100 million satoshis = 1 bitcoin, if you prefer. > > Yes, there’s 21 million Bitcoins. But the supply of “numbers” is unlimited and can be valued at any given rate desirable. The protocol allows for decimal expansion if, for some reason, we ever have a serious need to define more than 2.1 quadrillion individual units of currency. :smack: This is beside the point. The claim made was that a fixed supply would lead to deflation and depression. The depression is arguable but the deflation is inevitable. Regardless of how you split it up, if you have a growing economy and a fixed size currency, then each unit of currency is going to be worth more tomorrow than it is today. ---
**Author:** ![Telemark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/telemark/32/372_2.png) [@Telemark](https://boards.straightdope.com/u/Telemark)\ **Post date:** [August 10, 2013, 4:24am UTC](https://boards.straightdope.com/t/bitcoins/665779/20 "2013-08-10T04:24:43Z")
> [@Among\_Liberals](#): > > I know plenty of people who care about almost inconsequential raises now. But you didn’t answer the question. Why do you think the fractional currency is a problem? [Next page](https://boards.straightdope.com/t/bitcoins/665779.md?page=2)