Bitcoin 101
 

Anybody here want to be the professor and educate us from ground level? Data mining to earn a coin? What constitutes the value of that coin? Buying a percent of a coin? A couple of years ago Bitcoin was around 17k, today it's at 47k!

I've spent considerable time just trying to understand this concept but can't seem to grasp it.

Holding a bitcoin in your hands means what, exactly?

You cant physically hold a bitcoin, can you?

I don't know, that's why I'm asking. From what I understand, is that 81 million coins will be produced, and no more. Those coins will go to those that spend many hours and dollars through the mining process. But, yes, you can hold a physical bitcoin, but the value is not in the coin itself. Seems to me (and I have actually seen and inspected a bitcoin) that it's something of a computer chip with codes imbedded within it, that similar to a debit card you can insert the coin into a machine that tells you how many dollars you have access to.

I am probably totally off base here as I'm only guessing. This is very complicated and I am a fairly simple person.

Digital currency has been around for some time. For anyone with a Social Security Number and direct deposit, it's been the way you've been doing it for decades now. Paying with debit or credit, e-transfer, etc.
The bottom line with Bitcoin is that you need to buy it to invest in it. That whole data mining thing is a joke, in my opinion. You need racks and racks of equipment, all of the related electrical requirements, and an HVAC system designed to cool Death Valley. I know of a few people that do it. They may create a little bit of money, but it's mostly a liability. And how could they compete with some massive domestic or offshore installations, operating on an industrial scale.
So in my mind, it's just like the stock market. I don't know if I'll ever buy it. The thing is that they always put the the ultimate value of it, when quoting it, in good old US Dollars.

At its core, Bitcoin is designed to be an end around fiat currencies controlled by a central entity. Bitcoin has no corporation running it, does not run on a central computer and has no centralized organization making decisions about how or when it can be used.

It works on the concept of "proof of work." In order to mine individual coins, real work has to be done. That work is primarily by computers, but running those computers takes energy in the form of electricity, which is generated from various sources that require human input.

It has a limited supply. Only 20 million bitcoin can ever be mined. There's somewhere around 19.5 million coins in existence now, but at current pace, it will take another 120sih years to mine the last coin. That means it's scarce and can't be created out of thin air and inflated away like fiat currency.

It can't be dismantled or regulated in any meaningful way. The only way to get rid of it would be to complete terminate the internet as a whole, including all intranets and local networks. Since nobody runs it, there's nobody to go after to regulate it.

That's pretty much the basics of it. I recommend reading the white paper for more.

No product with digital currency, so by definition is a ponzi scheme.

so the "mining" has got to boil down to many calculations on currency exchange activities, whereas the trow of new investors pump up the original, prior investors.

My guessing. So if i'm wrongk, then please make-clear how.

Bitcoin is a digital currency that was created by an individual or group, which I think is independent of any government. Most currency in use is fiat money, meaning it has nothing more than the power of the military of the issuing country to back it up. Bitcoin only has value as long as there are people willing to give it value. It can be used for transactions that are outside of government control, which is why I'm a little surprised that a bitcoin ETF was approved recently. There were actual bitcoins made by some company or companies, but they are just tokens representing the digital currency. I think they have less value than an actual bitcoin.

I still don't get it. Dumb it down, wayyyy down...

The trap here is that most people are thinking of and using Bitcoin as an asset, like a stock. That's not what it was designed for. It's designed to be disruptive to fiat currency.

It has an extremely limited supply and doesn't require a federal system like SWIFT to negotiate payments between two individuals.

Right now it's used as an asset, but it's importance starts as fiats fail. It's better to think about bitcoin as an individual currency. Instead of dollars and cents you have coins and satoshis (the smallest unit of measure).

It is like any other product you buy low and hope it goes up in value and then you can sell for a profit. It is the pet rock of the digital realm

you should be aware it's highly speculative, pet rock analogy is right-on

This is the best analogy I have heard. Bitcoin is something somebody created and it caught on as a way for black market entities to engage in financial transactions without being tracked by the government. I suppose you could track the transaction where a fiat currency is used to buy the bitcoin (unless you mine it yourself, which is cost prohibitive), but after the initial purchase I don't think Bitcoin transactions are trackable by the government. I could be wrong on this, but I don't think I am.

Bitcoin only has value as long as a trading partner is willing to accept it as a payment for goods or services. It has no intrinsic value.

It is basically a high tech alternative to owning gold bullion, except gold has industrial uses and has to be physically exchanged.

Think about it.

What better way to hide illegal activities.

Trafficking.

Look beneath the surface.

That’s all I’m going to say.

I invested in it several years ago....made a little money and got the hell out. Way too speculative and the model never made any sense to me.

several years ago a guy who worked on my computers tried to get me to invest 5k in it. i had never heard of it and just couldnt wrap my head around it. i kept asking who has my money and questions like that and never got an answer that satisfied me so i passed. he told me that i was making a really monumental mistake. didnt listen and had i listened i wouldve been a billionaire. he on the other hand is living on an island in the bahamas now from what a mutual friend told me.

Partner of Sam Bankman-Fried?


:confused:

This argument is used a lot with bitcoin (or any decentralized currency) because the transactions only exist as a consensus on a digital ledger. There's only a record the transaction took place. Nothing about who the participants were or what the transaction was for.

This is unlike the SWIFT system that knows who is involved in the transaction and what goods or services are being transacted for with fairly good granularity.

That doesn't however mean that digital currencies are exclusively used by the scourge of the planet. Plenty of fraud exists within the current banking system. Because of the difficulty in even measuring fraud in an anonymous system like Bitcoin, making such a statement is itself complete speculation.

I would also point out that the same inherent issues occur where cash is transacted.

So if you have bitcoin stored on your computer, and your hard drive gets destroyed, do you lose the bitcoin you have stored?

What about if there is a war and somebody deploys an EMP pulse?

Let's say you have a bitcoin wallet at some brokerage, and their records get destroyed through hacking? How secure is owning bitcoin?

I don't like the idea of having thousands of dollars tied up on something as insecure as my computer.

Lots of stories like this and why Bitcoin specifically as a trading instrument or is the wrong way to look at it. Like Gold, Bitcoin's current performance is less about it's growth and more about the weakness of fiat currencies.

If you purchased $100.00 of bitcoin in 2010 when it started trading at $0.08, it would be worth over $50,000,000.00 today. Here's your problem though, how are you accessing it? You can't move all that bitcoin to somewhere like coinbase and cash out of it. They'll never pay you that much. You have to treat it somewhat like a stock that has a cash value and borrow against it.

Questions answered above in bold.