Bitcoin: What is it, in Plain English

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raddle
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Re: Bitcoin: What is it, in Plain English

Post by raddle » Sun Dec 08, 2013 2:02 pm

infecto wrote:
Alex Frakt wrote:A ponzi scheme for internet libertarians or a way for criminals to launder money. Or both.


Not that btc is the next big thing buts thats a bit of an ignorant statement. First, its crude to call those that use btc are internet libertarians or criminals. Its also a difficult comparison to say its a ponzi scheme. I am not here trying to sell the idea of btc or to even say its a good idea but calling it a ponzi scheme would be the last thing I would call it. Lastly, using the the normal definition of money laundering, I am not even sure how btc could make it much easier. Yes the transactions are near impossible to trace but so is cash and thats why btc does nothing to make laundering easier. Now if by btc you mean strip club, I understand how it can be used to launder.


Another great blast from the past...

infecto: 1
Alex Frakt: 0

If everyone who posted in this thread had been able to keep an open mind, they all could have been early adopters.

ourbrooks
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Re: Bitcoin: What is it, in Plain English

Post by ourbrooks » Sun Dec 08, 2013 3:45 pm

All is not lost. There are still Namecoins, Litecoins, PPcoins, all of which are considered as major cryptocurrencies by the founders of Bitcoins. Then, there are the new comers: Terracoin, Liquidcoin, Phenixcoin; the list goes on and on and there are more every day. Actually, depending on how original you want to be, it can be as little as half an hours work to come up with a new one. The argument that these are all next to worthless now doesn't hold; Bitcoins were next to worthless when they came out as well.

Actually, I do know a surefire way to make money in cryptocurrencies: Start a high priced newsletter about them. It'd have to come out daily or hourly to keep up, though.

fatlever
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Re: Bitcoin: What is it, in Plain English

Post by fatlever » Mon Jun 05, 2017 1:57 pm

raddle wrote:
infecto wrote:
Alex Frakt wrote: A ponzi scheme for internet libertarians or a way for criminals to launder money. Or both.
Not that btc is the next big thing buts thats a bit of an ignorant statement. First, its crude to call those that use btc are internet libertarians or criminals. Its also a difficult comparison to say its a ponzi scheme. I am not here trying to sell the idea of btc or to even say its a good idea but calling it a ponzi scheme would be the last thing I would call it. Lastly, using the the normal definition of money laundering, I am not even sure how btc could make it much easier. Yes the transactions are near impossible to trace but so is cash and thats why btc does nothing to make laundering easier. Now if by btc you mean strip club, I understand how it can be used to launder.
Another great blast from the past...

infecto: 1
Alex Frakt: 0

If everyone who posted in this thread had been able to keep an open mind, they all could have been early adopters.
Lol,

infecto: 2600
Alex Frakt: 0 and :oops:

The sad part is over the years, without really researching any of this a lot of bogleheads have labeled bitcoin was a modern tulip frenzy or ponzi scheme or at best a digital currency that is in a bubble.

It’s crazy how closed minded or risk averse most of us (including me) are. I read this when I joined in 2011 and a small amount would be a fortune right now. Every year you think you missed the boat and every year the value of cryptos explode. A lot of people still think we are only in the early adopter phase right now.

Maybe this could be a big speculation frenzy that may last a decade OR it could be that these blockchains and digital tokens are the future platforms for the movement and exchange of value that allow the building of contracts between people, companies, devices and even act a decentralized ledgers of various data.

fatlever
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Re:

Post by fatlever » Thu Oct 12, 2017 6:22 am

Alex Frakt wrote:
Sun Sep 04, 2011 2:31 pm
LadyGeek wrote:It looks like the exchange rate is around 8 USD. Mt. Gox (USD/dwolla/SEPA)
So down around 50% since the thread was started.
Bitcoin at $8 was a tulip. Now $5150 . :oops:

investor4life
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Re: Bitcoin: What is it, in Plain English

Post by investor4life » Thu Oct 12, 2017 5:37 pm

Here are a bunch of relatively easy-to-understand articles on Bitcoins and blockchain technology that, taken together, make for some fascinating reading.

https://spectrum.ieee.org/static/specia ... hain-world


Enjoy!

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LadyGeek
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Re: Bitcoin: What is it, in Plain English

Post by LadyGeek » Thu Oct 12, 2017 7:29 pm

Thanks! I added the article to the wiki: Bitcoin ("External links")
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

user9532
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Re: Bitcoin: What is it, in Plain English

Post by user9532 » Thu Oct 12, 2017 10:22 pm

The general understanding about bitcoin is that the bitcoin algorithm is robust. But are there holes in the algorithm?

Let’s consider two assumptions in bitcoin (1) the assumption that the total number of bitcoins that will be generated is fixed to 21 million, and (2) bitcoin encryption is unbreakable.

Let’s look at the first assumption in a little detail and look at the algorithm.

A bitcoin miner gets newly generated bitcoins as a reward for successfully validating a bitcoin block (i.e. finding the hash that meets the target difficulty). During the initial days of bitcoin, the reward was 50 bitcoins for every block validated. When the number of blocks validated reached 210,000, the reward became half, i.e. 25 bitcoins. This process continues, and for each 210,000 blocks validated, the reward becomes half (it takes several years to reach 210,000 blocks). At the 33rd such occurrence, the reward becomes (near) zero. If you do the math you will see the total bitcoins that will ever be generated will be 21 million (you can create a spreadsheet to see this – use only 8 decimals).

Pretty solid logic. Right?

But where did the 210,000 come from?

The 210,000 is just a number hard-coded within the software code. The code is publicly available and you can change that number. The only condition is that a majority of the bitcoin mining community should agree to such a change. What if a group of people or a nation acquires 50% of mining power? They can change that number to whatever they want. If you change that number to a million, how many bitcoins will that result? How will that affect bitcoin value? There is no guarantee this won’t happen.

Now, let’s look at bitcoin encryption. Bitcoin is an implementation of blockchain technology. Blockchain is created using three technologies: (1) peer-to-peer networking using TCP/IP, (2) hashing using SHA-256 algorithm, and (3) asymmetric encryption using ECDSA (elliptic curve digital signature algorithm). Hashing and encryption are cryptographic techniques. These cryptographic techniques work because, using today’s computing technology, it will take hundreds or even thousands of years to break the math behind them.

But that is going to change. A new form of computing called quantum computing is in the works. Although it is mainly in the concept stages now, many experts believe it will become a reality in the next 5-10 years. Quantum computing will come with enormous computing power rendering today’s cryptography useless.

Check out these links to get a better understanding.

https://motherboard.vice.com/en_us/arti ... apocalypse
https://motherboard.vice.com/en_us/arti ... uting-now-
https://motherboard.vice.com/en_us/arti ... ter-is-now

In order for bitcoin to survive in an era of quantum computing, you need to recreate the wheel and come up with new cryptographic techniques that will survive the power of quantum computing. But what will happen to the bitcoins you already own? The private key evidencing your bitcoin ownership will suddenly become just 64 worthless random characters. Think about that.

hilink73
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Re: Bitcoin: What is it, in Plain English

Post by hilink73 » Fri Oct 13, 2017 12:13 am

user9532 wrote:
Thu Oct 12, 2017 10:22 pm

The 210,000 is just a number hard-coded within the software code. The code is publicly available and you can change that number. The only condition is that a majority of the bitcoin mining community should agree to such a change. What if a group of people or a nation acquires 50% of mining power? They can change that number to whatever they want.
"Could" is the magic word here.
The Bitcoin "community" as a whole isn't even able to go through with a much needed hardfork to reduce transaction speeds and costs.
Which shows that the 50% mark is a mere dream at least today.

Btw. BTC reached almost $6000 (on Bitfinex that is).
Exciting times.



Thanks for the links.
Probably that best way forward would be implementing quantum computing safe algorithms from now on...
Not sure if anybody got the message just yet.

jb1
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Re: Bitcoin: What is it, in Plain English

Post by jb1 » Fri Oct 13, 2017 6:48 am

Imagine if someone bought $100 worth when this thread started

Nate79
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Re: Bitcoin: What is it, in Plain English

Post by Nate79 » Fri Oct 13, 2017 10:15 am

jb1 wrote:
Fri Oct 13, 2017 6:48 am
Imagine if someone bought $100 worth when this thread started
Yes, hindsight is 20/20.

fipt2030
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Re: Bitcoin: What is it, in Plain English

Post by fipt2030 » Fri Oct 13, 2017 11:06 am

It's more likely he 10-20M now

How about investing in similar currencies which are cheap to acquire with increasing values and market share like Xplay

fatlever
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Re: Bitcoin: What is it, in Plain English

Post by fatlever » Wed Nov 29, 2017 11:35 am

Leesbro63 wrote:
Mon Jun 20, 2011 1:28 pm
[Note: restarted thread, check posting dates]

What, in plain English, IS bitcoin? And how can I as an investor or consumer benefit?
I love looking back at this thread from 2011. This OP was probably the most intelligent question to ask when Bitcoin was $8 and even now.

The easy answer without doing any research, getting some Bitcoin, making some transactions was to call it a tulip and a ponzi scheme. A lot of people here have been calling it a bubble all the way from $8 to $11,000 . I wonder if people will keep saying this if it goes to $50K or $100K?

What's also interesting to me is just like there are people who think Bitcoin is a scam, there are hardcore Bitcoin believers who believe government issued fiat is a scam and Bitcoin is real money. What if the numbers on the sides flip in a generation?
Alex Frakt wrote: A ponzi scheme
SP-diceman wrote:
Wed Jun 22, 2011 10:08 am
It’s the 2011 version of The Holland Tulip Mania.

Iridium
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Re: Bitcoin: What is it, in Plain English

Post by Iridium » Wed Nov 29, 2017 6:10 pm

fatlever wrote:
Wed Nov 29, 2017 11:35 am
<Snip>
The easy answer without doing any research, getting some Bitcoin, making some transactions was to call it a tulip and a ponzi scheme. A lot of people here have been calling it a bubble all the way from $8 to $11,000 . I wonder if people will keep saying this if it goes to $50K or $100K?

What's also interesting to me is just like there are people who think Bitcoin is a scam, there are hardcore Bitcoin believers who believe government issued fiat is a scam and Bitcoin is real money. What if the numbers on the sides flip in a generation?
I would call it a bubble even if another zero gets added to the price. The original vision of a frictionless digital currency has been compromised due to mismanagement by the Bitcoin Core developers. The entire network burns enough electricity to power a small country to enable 300K transactions per day, with no ability to scale. So, right now you have a digital currency that has such have transaction costs that it only makes sense to transact large amounts of money at a time. As more and more people get drawn in with the hype cycle, the network will become more and more congested and less liquid. If the numbers flip between BTC and fiat, the network would totally fall over. Just imagine what a mess payday would be if even a million people drew their salaries via BTC. It would take over 3 day just to process payroll, if the network did nothing else (i.e. no transactions to spend salaries). Maybe the Lightning Network will save the day, but I think there is pretty good reason to believe that it's still quite a ways off. Until that time, people are buying into a 'currency' that is increasingly hard to spend. Given that other crytocurrencies are far more useful and do not share the same scalability issues, I am left believing that most people currently buying into BTC are doing so because the price has been been increasing, rather than any intrinsic utility in it as currency, because the later has actually been decreasing.

I feel slightly better about other crytocurrencies, but even there, the problem being solved in all public block chains is how to transact without trust. There are far more efficient, scalable, and robust algorithms, if you can add just a bit of trust to the system. In the developed world, with good court systems, clearinghouses and insurance, trust should not be that expensive. I am about 50/50 on whether block chain actually solves a real problem in the developed world, or whether it will mostly kick the financial sector into shaking off its old ways and getting innovative with the services they offer.

Valuethinker
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Re: Bitcoin: What is it, in Plain English

Post by Valuethinker » Wed Nov 29, 2017 6:22 pm

Iridium wrote:
Wed Nov 29, 2017 6:10 pm
fatlever wrote:
Wed Nov 29, 2017 11:35 am
<Snip>
The easy answer without doing any research, getting some Bitcoin, making some transactions was to call it a tulip and a ponzi scheme. A lot of people here have been calling it a bubble all the way from $8 to $11,000 . I wonder if people will keep saying this if it goes to $50K or $100K?

What's also interesting to me is just like there are people who think Bitcoin is a scam, there are hardcore Bitcoin believers who believe government issued fiat is a scam and Bitcoin is real money. What if the numbers on the sides flip in a generation?
I would call it a bubble even if another zero gets added to the price. The original vision of a frictionless digital currency has been compromised due to mismanagement by the Bitcoin Core developers. The entire network burns enough electricity to power a small country to enable 300K transactions per day, with no ability to scale. So, right now you have a digital currency that has such have transaction costs that it only makes sense to transact large amounts of money at a time. As more and more people get drawn in with the hype cycle, the network will become more and more congested and less liquid. If the numbers flip between BTC and fiat, the network would totally fall over. Just imagine what a mess payday would be if even a million people drew their salaries via BTC. It would take over 3 day just to process payroll, if the network did nothing else (i.e. no transactions to spend salaries). Maybe the Lightning Network will save the day, but I think there is pretty good reason to believe that it's still quite a ways off. Until that time, people are buying into a 'currency' that is increasingly hard to spend. Given that other crytocurrencies are far more useful and do not share the same scalability issues, I am left believing that most people currently buying into BTC are doing so because the price has been been increasing, rather than any intrinsic utility in it as currency, because the later has actually been decreasing.
That's the key and you've nailed an important point-- it's actually getting worse as transactions slow down.

With financial assets, positive price momentum creates more positive price momentum.

The absolute biggest trend followers of them all, the hedge funds, are getting on board, scrambling for ways to get traction. The "market cap" has reached a size where it is "investable" and that means professional fund managers are chasing it. It's no longer just a punters and hobbyists market.

Meanwhile, they are advertising CFDs (Contracts for Difference) to trade cryptocurrencies on the London Underground-- historically that's been a good sign of the top (dot com boom, commercial property boom, commodities etc.).

My guess is it has quite a ways to run because of the "investable" factor above.

I feel slightly better about other crytocurrencies, but even there, the problem being solved in all public block chains is how to transact without trust. There are far more efficient, scalable, and robust algorithms, if you can add just a bit of trust to the system. In the developed world, with good court systems, clearinghouses and insurance, trust should not be that expensive. I am about 50/50 on whether block chain actually solves a real problem in the developed world, or whether it will mostly kick the financial sector into shaking off its old ways and getting innovative with the services they offer.
I don't actually know what those Somali immigrants are paying Western Union to send money home, but I suspect it is 10-20% of transaction value.

Remember these are the same guys who Skype home. As do the Filipinos on all the merchant ships of the world.

There are some big inefficiencies out there. Even in the developed world. There are huge back office costs associated around any fund manager, any stockbrokerage, any retail bank-- just enormous amounts of cost, if someone can find a way to take them out.

So there is a "there, there". What I don't know is whether crypto is the way to solve it.

DrGoogle2017
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Re: Bitcoin: What is it, in Plain English

Post by DrGoogle2017 » Thu Nov 30, 2017 12:57 am

From what I’ve read from IEEE magazine, it’s a ledger, you need the crypto to access the ledger, that’s why you need computing resource to mine it.

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DWesterb2iz2
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Re: Bitcoin: What is it, in Plain English

Post by DWesterb2iz2 » Fri Dec 01, 2017 5:38 am

I have not seen a link to Patrick O’Shaughnessy's set of podcasts, Hash Power in this thread. The first one in the series explains bitcoin/bock chain really well. It's dense material, but really clearly presented here. Link below.

http://investorfieldguide.com/hashpower/

IMO
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Re: Bitcoin: What is it, in Plain English

Post by IMO » Fri Dec 01, 2017 1:55 pm

This seem like a resurrected old thread, but the thought of "What is Bitcoin?" is very important when you look more at the psychology and sociological aspects of the "Bitcoin craze."

Listened to a Clark Howard podcast, and he simple explained it like most people do, saying it's a type of "cryptocurrency." He wasn't promoting it, but that's not the point of my post.

I found only after researching it to some extent, that explaining it to someone else, such as one's spouse/family/friends is very difficult. Concepts of bitcoin miners, ledgers, etc are not likely understood well by the average person (such as myself really). But I think what the typical person gets out of the thought is that it is some new version of "internet money." And when that is coupled with the astronomical run up on bitcoin prices, many people are lured into the "investment" because they see how the internet has become such and integral part of our daily lives over the last decade+.

The thought being that maybe they don't really understand what exactly a bitcoin is, but they do understand (or should I say they feel emotionally) that because this is connected to the internet it MUST be the start of the next best thing. Failing to jump on board, even if they don't understand it, would be foolish because they will lose out on the massive profits to be made by getting in early on the new technology.

Seems that understanding what exactly a bitcoin is or isn't, is probably irrelevant to many who want to make a quick buck or get in early to the future of how "money" will be in the future.

Seems in the past there was that same sort of thing with the dot.com craze. You didn't really need to understand it, you just knew you had to get in early to make the big bucks.

So maybe we are in a bit of a "bitcoin.com" craze. Maybe it will pan out to be the next big thing a decade from now, or maybe it won't. But do you want to risk not getting in early?

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