I’m walking down a street. I find a USB drive just sitting in the middle of the sidewalk. I pick it up, take it home, and stick it in my computer (the wisdom of doing so notwithstanding).
Let’s say this drive contains the keys or whatever for millions of dollars in bitcoin. How would I recognize this? I assume I won’t see an icon of a gold coin labeled “Bitcoins” and a text file with detailed instructions on how to redeem them for cash.
If you see a file called wallet.dat, you may be rich.
You won’t find Bitcoins. What you would find is the wallet they are kept in. In particular the wallet’s private key.
The Bitcoins themselves only exist in the transaction log of all Bitcoins (the Block Chain.)
This contains a log of every wallet that each Bitcoin has ever been in - and thus which one each is in now. What you need in order to create transactions, and thus modify the block chain’s description of which wallet a Bitcoin is in now in (ie to move a Bitcoin from one wallet to another), is the ability to create orders that are encrypted with the owner wallet’s private key. A wallet (the thing on the USB stick) is really nothing more than the wallet id, and its private key. It is a bunch of bits. You can’t know what Bitcoins the wallet contains without checking the current block chain - but there are tools that will let you do this by accessing the current Bitcoin state. So, in order to discover if the USB stick contained anything of value you would need to recognise the contents as a Bitcoin wallet, and then use one of the tools to determine if the wallet referenced anything of value. You probably don’t have the only copy of the wallet. Other copies of the wallet will enable whoever possesses them to similarly create transactions to move the Bitcoins to other wallets.
It is like finding a bank private box key on the street. If you recognise it as a bank box key, you can go to the bank, and open the box. The box might contain bundles of cash, gold bars, or just someone’s old porn collection. But it is now available to you to move somewhere else or leave it where it is. There can be other copies of the key.
To add to the above analogue of Bitcoin with a bank’s secure boxes, the bank will only allow you to move things from one box you have a key for, to another one. But you don’t need a key for one you put stuff in - boxes have a posting slots. The bank will keep a log of those movements. However it won’t ask who you are, or do any id checks on you. You can get your own box with a key anytime you want. If you have a key or keys, that is all they care about.
I know I’ve asked this before but can’t remember if I got a concise answer. What then exactly are these things? Merely worthless props for the media to photograph and gussy up their articles about them?!
Mostly props. But in some cases they are tokens on which - somewhere - is printed a private key giving access to a wallet containing a bitcoin (or as many bitcoins as th token represents). So possession of the token really does give you possession of the corresponding bitcoins.
Obviously, anyone who has the private key that controls a wallet can issue a physical bitcoin which records that key, so there is no monopoly on the issue of physical bitcoins. Equally obviously, it is possible to issue physical bitcoins which have no private key, or a fake private key, or to issue more than one physical bitcoins all of which have the same genuine private key, which obviously is only of value to the first person to try and use it. So physical bitcoins are attended with a high possiblity of fraud, and are rarely if ever used as a medium of exchange.
What are US dollars? Pieces of paper and coins? No. The vast majority of money in the economy only exists as records in bank computers. If the computers say someone gave you $10, that person has $10 less and you have $10 more, on the strength of that computer record (and the implicit system of trust placed in those systems, backed up by the explicit system of prisons and police firearms our sovereign Federal government sees fit to maintain, sometimes via the administrative entities known as states). Paper and coin currency only exists for the convenience of people making small transactions, and could be done away with entirely and not change the fundamental nature of our currency one bit.
What gives US dollars value? Not gold. Not land. Not wheat. Trust. People trust that US dollars will remain valuable decades from now, and so are willing to take them as payments for goods and services, and to pay down debts. We’ve tried other ways of running an economy, and that is the best one.
My point is, US dollars are a lot more similar to Bitcoins than they are different. The main thing that makes Bitcoins interesting is the block chain, which has already been explained, and the fact the block chain is not run by any central authority.
If you have a lot at a time that they have a high value they look like the stuff that dreams are made of.
If you have few at a time that the have low value they look like an expired coupon and a few Canadian coins that the vending machine won’t accept.
