# Where do bitcoins come from to start? **URL:** \ **Category:** Factual Questions\ **Created:** [March 1, 2021, 8:10pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057 "2021-03-01T20:10:40Z")\ **Posts on this page:** 20\ **Page:** 7
**Author:** ![DPRK](https://avatars.discourse-cdn.com/v4/letter/d/4491bb/32.png) [@DPRK](https://boards.straightdope.com/u/DPRK)\ **Post date:** [April 28, 2021, 3:39am UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/121 "2021-04-28T03:39:15Z")
I see you have been reading _Metro 2033_ 🙂 ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [April 28, 2021, 4:54am UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/122 "2021-04-28T04:54:25Z")
I have no idea whatsover what that is, sorry. ---
**Author:** ![TheGunIsMightierThanThePen](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thegunismightierthanthepen/32/2981_2.png) [@TheGunIsMightierThanThePen](https://boards.straightdope.com/u/TheGunIsMightierThanThePen)\ **Post date:** [April 28, 2021, 5:11am UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/123 "2021-04-28T05:11:12Z")
> [@FlikTheBlue](#): > > I’m not quite sure what you mean by capital flight. Do you mean people who live in authoritarian regimes exchanging their currency for the currency of stable Western nations? Pretty much that. The currency of the authoritarian regime doesn’t necessarily have to be unstable either. For example, if a millionaire in China (where the value of the renminbi is more or less stable) really dislikes living under CCP rule and wants to move to America, but the CCP prohibits foreign currency exchanges of more than $50,000 a year, that millionaire can convert his millions to Bitcoin, move to America, and then convert it back to USD, bypassing that regulation. Here’s an article that covers this in more detail: > **[Cryptocurrencies help Chinese evade capital controls in moving money abroad](https://www.scmp.com/economy/china-economy/article/3098981/cryptocurrencies-help-chinese-evade-capital-and-currency)** > > More than US$50 billion in cryptocurrency assets have been moved abroad from China-based addresses in the last 12 months, according to a report. > [@FlikTheBlue](#): > > As far as currency control of authoritarian government, I think Bitcoins would be easier to ban, not harder, in comparison to other fiat currencies which can be hidden as paper bills if push comes to shove. The authoritarian country can ban the usage of cryptocurrencies for payments to companies within that country itself, but if they really want to stop people from funneling money out I think they have to either: - Blacklist the cryptocurrency exchanges from all incoming and outgoing web traffic - Make it a crime to conduct any transaction on a cryptocurrency exchange both of which will probably be harder to enforce, not 100% sure, but maybe someone else can chime in on this. ---
**Author:** ![CurtC](https://avatars.discourse-cdn.com/v4/letter/c/ce73a5/32.png) [@CurtC](https://boards.straightdope.com/u/CurtC)\ **Post date:** [April 28, 2021, 4:06pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/124 "2021-04-28T16:06:11Z")
In the GD Bitcoin thread, Green Wyvern posted that the cost per transaction for Bitcoin is now at $29. Who is it that pays this? If I buy a $2 cup of coffee with Bitcoins, I don’t suppose Starbucks would make me pay $31 for it, right? I think my transaction gets bundled with a few thousand others, and whoever verifies that block gets those few thousand times $29? Does this value just come out of the bucket of value that Bitcoin represents? If that’s it, what’s the long-term implication of that? ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [April 28, 2021, 4:15pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/125 "2021-04-28T16:15:03Z")
Starbucks doesn’t accept Bitcoin directly. They’re partnered with Bakkt, which is an intermediary that offers to convert Bitcoin to US dollars to load onto Starbucks cards. When you buy a $2 Starbucks cup with Bitcoins, you’re actually pre-converting some amount into dollars first. The transaction cost is presumably factored into the Bakkt business model either by passing it directly to consumers or some other way. This is true for other stores as well. Most (all?) of them are partnered with a 3rd party to handle the crypto to US dollar conversion, which is the form the stores actually accept. ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [April 28, 2021, 4:38pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/126 "2021-04-28T16:38:57Z")
That’s essentially the spark that jumped us (civilized people) from sophisticated barter to actual currency. Another thing that your example didn’t really explicitly call out but implies is that when the taxes are paid in pink seashells, some proportion of them are just kept by the tyrant, which makes the ones in circulation more valuable. Basically taxation is a sort of artificial demand above and beyond production needs. I imagine gold ended up as early currency because it was pretty, easy to work, rare and doesn’t deteriorate over time, unlike other substances like seashells, copper, etc… Bitcoins are essentially valuable because people say they are- in the purest sense. Established currencies have the weight of a government AND it’s associated economy behind it, which doesn’t mean that they’re any more or less inherently valuable, but it does mean that they’re more stable. For example, if someone gave you a bunch of Afghanis for some reason, would you keep them as Afghanis, or would you exchange them for US Dollars or Euros as fast as you possibly could? Of course anyone smart would exchange them- the Afghan government and it’s associated economy aren’t very stable, and there’s every chance that the Afghanis that were issued in their name are going to lose value in the near future when the US pulls out, or some other calamity is visited on them. Meanwhile, the Euro and US Dollar are extremely stable in currency terms- yes, their value fluctuates on the open market with respect to their countries’ economic activities and geopolitical standing, but in general only within a fairly narrow band, and changes outside that band are usually slow to happen. (not always, but usually). Bitcoins are like Afghanis, in that there’s nothing like a national government and economy lending their stability and strength to the currency- it’s far less rational than that, and the volatility of Bitcoin underscores it. ---
**Author:** ![asahi](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/asahi/32/8693_2.png) [@asahi](https://boards.straightdope.com/u/asahi)\ **Post date:** [April 28, 2021, 4:49pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/127 "2021-04-28T16:49:11Z")
Pretty much how I see it. I agree that Crypto isn’t inherently a terrible idea, but I think people are misusing it. It’s really more like a token, which has been around for quite some time - the difference being it’s a token that is widely accepted by a network of people who use the token. It’s so widespread and discussed that it gives people the idea that it’s a currency, but at least to date, a national government or central bank isn’t using it as such. I could definitely see a modified version of crypto being used as a regional alternative to dollars, baht, yuan, yen, or whatever, but they would need the technological infrastructure to support it, which doesn’t seem likely at present. So in the meantime, people are using Bitcoin as a get rich quick scheme and ‘wealthy’ criminals are probably using it to hide money. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [April 28, 2021, 9:09pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/128 "2021-04-28T21:09:00Z")
> [@TheGunIsMightierThanThePen](#): > > Pretty much that. The currency of the authoritarian regime doesn’t necessarily have to be unstable either. For example, if a millionaire in China (where the value of the renminbi is more or less stable) really dislikes living under CCP rule and wants to move to America, but the CCP prohibits foreign currency exchanges of more than $50,000 a year, that millionaire can convert his millions to Bitcoin, move to America, and then convert it back to USD, bypassing that regulation. Further, that Chinese millionaire only needs to hold onto those bitcoins for as long as it takes him to catch a plane to the US. Even a currency as volatile as bitcoin won’t change all that much over the course of a day, and even if it drops 10% or something, he might be quite happy to be able to transfer 90% of his wealth out of the country. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [April 28, 2021, 9:51pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/129 "2021-04-28T21:51:50Z")
Wouldn’t the Chinese government have restrictions on large purchases of cryptocurrency? ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [April 28, 2021, 10:28pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/130 "2021-04-28T22:28:59Z")
> [@CurtC](#): > > In the GD Bitcoin thread, Green Wyvern posted that the cost per transaction for Bitcoin is now at $29. Who is it that pays this? > > If I buy a $2 cup of coffee with Bitcoins, I don’t suppose Starbucks would make me pay $31 for it, right? The sender of the bitcoin pays it. Yes, you really would have to pay $31 for your coffee if you sent $2 to Starbucks over the bitcoin network, but Starbucks would just get the $2. I’m not familiar enough with what middleware Starbucks uses, but if you have bitcoin in a private wallet, the only way to get it into someone else’s is to pay that $29 fee. Since a bitcoin transfer also generally takes 3-4 blocks _after_ the block it’s in for people to consider it “confirmed”, you’re looking at ~40 minutes to really consider it solidly “paid”, so you might have to wait a while for your coffee too. Bitcoin is not at all optimized for quick or cheap transfers of small amounts. For large amounts, it can still be pretty efficient because the fee is not based on the _amount_ of the transaction, just on the size of the transaction encoded, which has more to do with how many source and destination accounts there are than it does with the number of coins transferred. Compare $29 and 40 minutes to the time and expense to do, say, an international wire transfer for $500k and it doesn’t look that bad. A bitcoin transaction includes information about source and destination addresses, amount, and also a transaction fee. You are welcome to offer any fee you like here. The higher the fee, the more that miners are incentivized to include your transaction in the next block. Blocks have a maximum size, so if your transaction doesn’t have a high enough fee, no one will put it in a block and it’ll just sit around waiting for transaction volume to drop enough for your fee to be enough to include it. Generally people trying to be cost efficient will set the transaction fee to be slightly less than the average of the last 10 blocks or so, and people trying to be fast will set it somewhat higher than the average of the last few blocks so it’s likely to make it into the next one. ---
**Author:** ![DPRK](https://avatars.discourse-cdn.com/v4/letter/d/4491bb/32.png) [@DPRK](https://boards.straightdope.com/u/DPRK)\ **Post date:** [April 28, 2021, 10:45pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/131 "2021-04-28T22:45:52Z")
> [@iamthewalrus\_3](#): > > Compare $29 and 40 minutes to the time and expense to do, say, an international wire transfer for $500k and it doesn’t look that bad. It does look pretty bad when, for example, a SEPA Instant Credit transfer takes seconds and costs essentially nothing. The current regulatory limit is 100000 EUR per transaction unless previously agreed between the participants, but the amount does not make the transaction cost any more or less. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [April 28, 2021, 11:13pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/132 "2021-04-28T23:13:14Z")
You Europeans with your functional and customer-friendly banking institutions. Here in the states it takes three phone calls, two faxes, the better part of a day, and $25 to wire money to someone. Which Bitcoin compares reasonably favorably with. ---
**Author:** ![EmbarrassingDad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/embarrassingdad/32/5441_2.png) [@EmbarrassingDad](https://boards.straightdope.com/u/EmbarrassingDad)\ **Post date:** [April 30, 2021, 5:34am UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/133 "2021-04-30T05:34:44Z")
I don’t know about any of that because I don’t need to. I trade bitcoin without having to deal with the crypto hassles. Just use an online thing with my phone. Prolly not allowed to say but you all know. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [May 2, 2021, 1:20am UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/134 "2021-05-02T01:20:58Z")
Bitcoin is basically using enough energy to power New York State to produce over a trillion dollars worth of nothing. ---
**Author:** ![Danger\_Man](https://avatars.discourse-cdn.com/v4/letter/d/6de8d8/32.png) [@Danger\_Man](https://boards.straightdope.com/u/Danger_Man)\ **Post date:** [May 3, 2021, 9:11am UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/135 "2021-05-03T09:11:56Z")
It is basically the price we pay for having it trustless. If we could agree on someone or a group of people/organizations to trust, that power would not need to be consumed. The question is if the value of having a trustless currency is worth that power consumption. ---
**Author:** ![DPRK](https://avatars.discourse-cdn.com/v4/letter/d/4491bb/32.png) [@DPRK](https://boards.straightdope.com/u/DPRK)\ **Post date:** [May 3, 2021, 9:49am UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/136 "2021-05-03T09:49:21Z")
It is true that the stated purpose of the bitcoins seemingly created out of thin air was to incentivize people to add nodes to the Bitcoin network. But you could hypothetically implement a similar scheme using a “trustless” distributed consensus system that does not consume hashcash power. Therefore, the energy wastage is a price the operators are paying for no reason, other than they want to specifically support Bitcoin for whatever reason. ---
**Author:** ![Danger\_Man](https://avatars.discourse-cdn.com/v4/letter/d/6de8d8/32.png) [@Danger\_Man](https://boards.straightdope.com/u/Danger_Man)\ **Post date:** [May 3, 2021, 11:50am UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/137 "2021-05-03T11:50:48Z")
What other trustless distributed consensus system can you come up with? The only one I can think of is proof of stake. The consensus system IS the main innovation of bitcoin. The rest is just an encrypted ledger using a merkle tree. ---
**Author:** ![DPRK](https://avatars.discourse-cdn.com/v4/letter/d/4491bb/32.png) [@DPRK](https://boards.straightdope.com/u/DPRK)\ **Post date:** [May 3, 2021, 12:26pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/138 "2021-05-03T12:26:21Z")
> [@Danger\_Man](#): > > The consensus system IS the main innovation of bitcoin. This is demonstrably false, with papers such as “The Part-Time Parliament” published in 1998. Not that I am arguing there is nothing original in the Bitcoin paper, but it is not the mere idea of keeping a state by mutual consensus. > [@Danger\_Man](#): > > What other trustless distributed consensus system can you come up with? The only one I can think of is proof of stake. Lamport himself has described “Leaderless Distributed Paxos” > **[Leaderless-Byzantine-Paxos.pdf](https://www.microsoft.com/en-us/research/uploads/prod/2016/12/Leaderless-Byzantine-Paxos.pdf)** > > 61.89 KB and I believe there are reasonably efficient implementations of this idea and others along similar lines. There is at least one company offering financial services software > **[Hedera](https://github.com/hashgraph/)** > > Hedera has 92 repositories available. Follow their code on GitHub. based on their “hashgraph” vector clock implementation. Wikipedia says they raised plenty of money. It’s not that there is a shortage of known algorithms to work with, though it is a long way to go from a vague idea to supplanting the Visa network. ---
**Author:** ![Danger\_Man](https://avatars.discourse-cdn.com/v4/letter/d/6de8d8/32.png) [@Danger\_Man](https://boards.straightdope.com/u/Danger_Man)\ **Post date:** [May 3, 2021, 1:20pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/139 "2021-05-03T13:20:50Z")
Sorry, I did not mean that the bitcoin paper came up with the idea of keeping a state by mutual consensus, but rather using PoW for keeping consensus (afaik). I had not heard about Leaderless Distributed Paxos before. I was not able to understand quite how it works by your abstract, but I am interested in learning more about it. ---
**Author:** ![DPRK](https://avatars.discourse-cdn.com/v4/letter/d/4491bb/32.png) [@DPRK](https://boards.straightdope.com/u/DPRK)\ **Post date:** [May 3, 2021, 2:30pm UTC](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057/140 "2021-05-03T14:30:04Z")
Sorry; I meant “Leaderless Byzantine Paxos”. In normal Paxos (as well as some other consensus algorithms like Raft), there is supposed to normally at any given time one leader that keeps pushing the current version of the state, to mitigate the fact that messages can get lost. If there is a problem with that node, the other nodes can detect this and elect a new leader. Byzantine Paxos > **[fab.pdf](https://www.cs.utexas.edu/~lorenzo/papers/fab.pdf)** > > 249.42 KB models the case where some nodes can act maliciously, or fail in arbitrary ways. Now, what Lamport seems to be saying is that a malicious leader might stall the network, or at least that this might be problematic, so he suggests instead having a “virtual leader” where each server decides what message the leader would have sent, and then they execute an agreement algorithm for this. [Previous page](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057.md?page=6) [Next page](https://boards.straightdope.com/t/where-do-bitcoins-come-from-to-start/934057.md?page=8)