And note that “bad for buyer” is a simplification here. Sure, it’s bad for a buyer in the sense that he might get ripped off by a seller, but it also means that untrustworthy buyers can opt to take on risk by paying with Bitcoin.
Imagine that you are an honest merchant in, say, Nigeria, and you’re trying to order something on the internet to be shipped to you. Most sellers aren’t interested in your business, since the risk of fraud is just too high. But if you pay with Bitcoin, all of a sudden you’re the one taking on the risk and you’re the one who stands to lose if the seller is dishonest. That may well be a choice you want to make, and it’s one that traditional credit card companies don’t offer. You generally have to do something like a wire transfer, which is slow and expensive.
I know we’re supposed to avoid financial terms but it’s hard to explain this without them.
Bitcoins are fiat currency. There’s essentially nothing backing them up. They’ve just been declared to have value and a lot of people accept them as having value.
There’s nothing that unusual with this. A dollar is fiat currency. It only has value because the American government says it does. The only thing that’s unusual about bitcoins is they’re a fiat currency without a government.
Normally, the problem such a currency would face would be getting over-issued. With fiat currency, somebody has to be making the decision about how much of the currency is issued - too much and it loses its value. With most fiat currencies, that decision making body is the issuing government.
Bitcoins have gotten around this issue by having bitcoins created by a difficult mathematical process. It’s transparent in the sense everyone can see how they’re being created. So nobody can simply claim they have a bunch of new bitcoins.
This mathematical process for generating bitcoins keeps the number of them in existence limited and prevents them for losing their value from over-issue. But the mathematical process is not otherwise producing information of value to anyone.
Thanks, everybody. I find that I’m having to relearn a lot of stuff in this Internet Age. The old ways don’t work any more, and my past successes are based on what are now obsolete and dated principles. I got nothing now. People born to this technology have no obstacles to this new way of thinking, while I’m having trouble understanding the need for a lot of today’s products, like Twitter.
No, I don’t prefer manual typewriters to computers. My useful knowledge base and skill set was rendered irrelevant only about ten years ago.
Look up Silkroad if you’ve never heard of it, it is what caused the initial uptick in bitcoin value. After that investors and speculators caused the value to climb higher.
By value I mean the exchange rate with USD.
Although bitcoin boosters probably hate to admit it, the initial adoption and continuing demand for bitcoin is mostly customers of the darknetmarkets buying drugs. So for your question why would anyone want bitcoins, well you can’t use anything else to buy on them.
There’s another huge difference between bitcoin and other methods of paying for things online.
Haven’t you ever hesitated to sign up for some service because you were afraid it would be difficult to cancel the subscription, or hesitated to buy something (which is itself legal) from a shady looking website that might be careless (or outright dishonest) with your credit card info?
When you give a site your credit card info or your checking account info, you are giving them permission to take money from you. You are trusting them to take only as much as you have agreed upon.
It’s really absurd when you think about it. Imagine if you had a safe full of gold, and you wanted to give a small amount of it to some stranger. Would you hand them the combination to the safe, turn around and leave the room while they take what they want? And let them keep the slip of paper with the combination on it?
With bitcoin, you are not giving other people permission to take from you, you are giving them a specific amount, and that’s all.
Sort of. Bitcoin is like inter-account transfers. You can subscribe to (legitimate) magazines and the like with a bank transfer. Further - this is why PayPal has a use case. You don’t give a sleazy web site your credit card details anymore. You go to the PayPal portal, and your credit card details never get to the web site. An important difference is also that credit cards allow for automatic renewal - which the magazines love. So they encourage their use. Credit cards are also - well credit cards. They float you a loan for the period up until they are due. Bitcoin won’t.
There is no reason why you could not have a credit card for Bitcoin - which would have exactly the issues you point out. The Bitcoin zealots probably think that once Bitcoin rules, Visa and Mastercard will have to use Bitcoin too.
Bitcoin has the opposite problem with fraud - any fraudulent transaction cannot be reversed. Even an inter-bank account transfer can be unwound - but Bitcoin cannot. There are pros and cons to this. Overall Bitcoin behaves like cash in this respect.
Well, you could reverse a bitcoin transaction just by making another transaction in the other direction. The catch is that you’d have to get the other party to agree to it.
Calling them “miners” is confusing. Call them accountants instead.
Bitcoin has a big ledger of all the transactions. An accountant adds the newest transactions. The accountant then gets paid 25 bitcoins.
All the hashing and cryptography keeps the accountants from cheating.
Now, why does Bitcoin have value? The founder of the silkroad drug market put a lot of work into making Bitcoin valuable. He convinced people to sell drugs for Bitcoins.
So if someone can buy $100 of drugs for 100 Bitcoins, people believe 1 Bitcoin is worth $1.
More people start selling things at that rate, and pretty soon a lot of people think 1 Bitcoin is worth $1.
Then Bitcoin started getting publicity. More people wanted to buy them. Someone set up an exchange, where people could sell Bitcoins to each other. It was like ebay, people could ask any price they wanted.
People started asking higher prices for Bitcoins, and other people bought them. People raised the price a little more, and people still bought them. So the price went up and down, up and down. At one point it was around $1200. Currently it’s around $400 a bitcoin.