Posted on 12/20/2017 5:23:41 AM PST by a fool in paradise
A short primer on Bitcoin:
Bitcoin was designed as a response to the 2007 financial crisis and the poor job the central banks have done in “controlling” the economies of the world.
The premise is that people should be able to transfer money to and from each other without the intervention of a third party. An example is that you write a check to a second party. Your check is written on an account at a bank that “knows” you and can confirm that the money exists to cover the check. The money is then transferred to another bank who verifies the identify of the second party and puts the money in their account. All along the way, each bank is paid for their service.
This scalping is much more evident when transmitting large sums of money around the world. In addition to being expensive, this process is lengthy. You might think that sending money via wire is immediate. Its not.
What bitcoin does to solve these issues is that use a distributed ledger (copies of all of the bitcoin transactions) to act as the intermediary. You no longer have to confirm your identify to anyone else. The ledger knows who you are through your “address.” The same holds true for the second party.
In a transaction you both agree on the “price” to be paid. The transaction, consisting of your address, my address and the transaction information, is distributed to the “blocks.” These blocks are put through a series of calculations that identify each party, and their balances. They “confirm” that the transaction is valid. After a number of these confirmations, the transaction is recorded in the distributed ledger and the “funds” are applied appropriately.
This process is paid for with a fee attached to the transaction. The process of confirming a transaction is called mining. Generally speaking, the entire process takes minutes. Sometimes if the system is congested it takes longer. You can also impact the time aspect by paying a larger fee.
The “value” of the bitcoin is the value that one party puts on the “coin” versus what someone else will pay. That part is so simple it really confuses people.
The reason why the price keeps going up is that there are a limited number of bitcoins that can every be created. That is is controlled by the open source code of the system.
Here are the things that make the whole process interesting for some, and scary for others: There is no one in control of bitcoin. It is not backed by a government. You cannot turn to someone if it gets stolen. (Not hacked. The bitcoin system itself is pretty much unhackable. Exchanges get hacked—the bitcoin themselves do not.)
The system is open. The code is open. If you try to counterfeit any bitcoin, the network will kick it out.
The process is what they call “trustless” and “frictionless.” What they mean by this is that you DON’T have to trust your counter-party. The system will act as the arbiter of whether or not the transaction is valid. It is frictionless because you can move money without the intervention or help of a third party. The entire process is peer to peer.
Now, that explains how it works. Why is valued so high? What do you get when you pay $16,900 (right now.)? The people who talk about this as if it is a stock are way off base. The people who think of it as currency are closer, but its still not there. It is more like “money” but since it has to be between two peers, it is not as useful as $100 bills.
The value proposition is what most people have a problem with. While the people screaming about it today want to make their 1000% in a week, that is simply not going to happen.
Bitcoin is the price of admission to the new transaction system of the future. In order to transact, you are going to need access to the network. Bitcoin, divisible down to 8 places is how you do these transactions.
Thats it in a nutshell. I sure others can add or debate what I am writing. I hope this helps.
Jeez. If my math is right (big if), that’s 6.3% of the entire bitcoin stash.
Worm farm, a scheme!? I now have worms all over the place. But so dam hard to catch! :-)
What I recall of the airplane pyramid scheme scandal was that a boss would get his staff to join it, with pressure, and the lowest employees were coerced last so they’d be the stuck suckers.
That's what's known as a mike drop at the end of a stadium-sized pump and dump.
winner
Cryptocurrencies are a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.
One of their advantages is that they use decentralized control as opposed to centralized electronic money/central banking systems.
In centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers.
(Which can create enormous problems, from artificial deflation to hyperinflation, not based on the market, but on the fickle wishes of government acting in its own interest.)
In case of decentralized cryptocurrency, companies or governments cannot produce new units. Within cryptocurrency systems the safety, integrity and balance of ledgers is maintained by a community of mutually *distrustful* parties referred to as miners: members of the general public using their computers to help validate and timestamp transactions, adding them to the ledger in accordance with a particular timestamping scheme. Miners have a financial incentive to maintain the security of a cryptocurrency ledger.
Most cryptocurrencies are designed to gradually decrease production of currency, placing an ultimate cap on the total amount of currency that will ever be in circulation, mimicking precious metals.
Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies can be more difficult to seize by governments.
Cryptocurrencies such as bitcoin are pseudonymous, though additions such as Zerocoin have been suggested, which would allow for true anonymity.
In any event, to answer your question, cryptocurrencies users create value for their individual stakes, and they each have a vested interest in maintaining the value of their holdings. This avoids the many pitfalls of other fiat currencies, controlled by governments.
“I am getting out simply because I want to spend more time with my family.”
My wife wanted to jump onto a similar scam back in the 80’s.
Ya had this list of 5-10 whatever people and you’d give each a dollar (or $10).
When I finally convinced her to NOT give strangers money; but to start her own using relatives as second level recipients; the light came on.
“But it will break the chain!”
Who cares? you know NONE of these folks. Start your own with YOU at the top (middle, bottom, whatever)
What 'backs' the US dollar?
What ‘backs’ the US dollar?
++++
LOL. Nothing of course. And I’m a bit wiser vis a vis Bitcoin than I was this morning. So I’m withdrawing my question.
Thanks for your response.
When the value of the goods and services is dwarfed by the value of the “coin” used to purchase them, it’s time to bail out of the coin. While these cryptos once served a purpose for those stuck in worthless paper currencies, the last ship from that fleet is setting sail as we speak.
US Dollar is “backed” by a $20 trillion dollar debt.
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