BitCoin

masonic

fwor wrote: »

Of course, I understand that. But the fact is that I'm like most potential Bitcoin "investors" - I have no legitimate way to earn Bitcoin directly, and there is nothing that I want to buy in Bitcoin without going via another currency (Sainsbury's does not yet accept them, I believe), so all my transactions would have to go via an exchange, which "can do crazy things".

I guess I could suspend my concerns if Bitcoin's price were still heading for the sky, but I think I'll steer clear for now...

I'm not someone who would advocate using bitcoin in cases where there is not a need or benefit (if you didn't want Sainsbury's to know who you were and what you were spending your money on you could simply pay in cash). Nor would I advocate you convert your spending money to bitcoin. For that matter I wouldn't recommend buying it at all unless you have a particular need or interest.

ExremelyCautiousSocialist

fwor wrote: »

I have no legitimate way to earn Bitcoin directly,

I earned some BTC just signing up for signature campaigns over at bitcointalk.org services section. You get paid for posting on the forums with a shill link for a site in your signature.

masonic

ExremelyCautiousSocialist wrote: »

I earned some BTC just signing up for signature campaigns over at bitcointalk.org services section. You get paid for posting on the forums with a shill link for a site in your signature.

:rotfl: I hope you haven't been getting up to things like that on this forum.

ExremelyCautiousSocialist

No its just a thing over at those forums and accepted. Mostly crypto gambling sites trying to start out and gain traffic.


Try doing that here and they send martin lewis's henchmen to your front door.

AnotherJoe

fwor wrote: »

This is important because it must be set centrally, (No, it was set by the way the algorithm works, its inherent, and your assumption it can be changed is incorrect, because changing it would create a different currency) and it has a fundamental effect on the "value" of a coin. Make it too easy and anyone can mine hundreds of Bitcoin on their 37 year old ZX81 - so their value would drop. Make it too hard and everyone gives up, meaning no computing power to process transactions and the Bitcoin infrastructure stops working. The theory is as it gets harder the reward for a new one increases due to scarcity, cancelling the increased cost out and keeping it profitable. The snag is, if the cost to mine new coins gets too high compared to its value , yes people will give up. That doesn't necessarily invalidate the value of current coins.

So... who sets this value, and according to what authority?

As said, it was set initially by virtue of the way the algorithm works. The current difficulty is related to how many already are out there. There is a maximum number of BC that can be created.

masonic

AnotherJoe wrote: »

As said, it was set initially by virtue of the way the algorithm works. The current difficulty is related to how many already are out there. There is a maximum number of BC that can be created.

Not exactly. Earning new bitcoin is one component of the reward for mining and is not related to difficulty. The bitcoin reward for mining is fixed within the algorithm - it halves every 4 years. The difficulty of the proof of work required to mine the next block can go up or down and depends on how quickly miners have been able to mine previous blocks - it therefore scales to technological developments and the popularity of mining.

When you mine a new block it is used to enter new transactions onto the ledger. Those transaction fees go to the miner. At present they will also be awarded new bitcoin, but the amount of bitcoin awarded decreases over time until the maximum amount has been created and miners will need to make a profit from only the transaction fees, with no subsidisation from new bitcoin.

Those making transactions choose what fee they are willing to pay for the transaction. Miners are able to cherry pick those transactions with the highest fees to put onto the next block, so there is a marketplace that effectively determines transaction costs and sets this component of the reward. If those making transactions don't pay enough, then their transaction will take longer to be confirmed and could potentially never be confirmed.

Edit: Coming back to a point made by fwor, if the reward becomes too low and people give up, then the difficulty and hence the cost of mining would decrease until a balance was reached.

AnotherJoe

masonic wrote: »

Not exactly. Earning new bitcoin is one component of the reward for mining and is not related to difficulty. The bitcoin reward for mining is fixed within the algorithm - it halves every 4 years. The difficulty of the proof of work required to mine the next block can go up or down and depends on how quickly miners have been able to mine previous blocks - it therefore scales to technological developments and the popularity of mining.

When you mine a new block it is used to enter new transactions onto the ledger. Those transaction fees go to the miner. At present they will also be awarded new bitcoin, but the amount of bitcoin awarded decreases over time until the maximum amount has been created and miners will need to make a profit from only the transaction fees, with no subsidisation from new bitcoin.

Those making transactions choose what fee they are willing to pay for the transaction. Miners are able to cherry pick those transactions with the highest fees to put onto the next block, so there is a marketplace that effectively determines transaction costs and sets this component of the reward. If those making transactions don't pay enough, then their transaction will take longer to be confirmed and could potentially never be confirmed.

Edit: Coming back to a point made by fwor, if the reward becomes too low and people give up, then the difficulty and hence the cost of mining would decrease until a balance was reached.

Thanks for the corrections, but just to answer the assumptions/questions made by fwor, all of this was fixed at the initiation of the scheme, is set in stone(algorithm) and is not adjustable on the fly by a committee or authority that he or she has deduced must exist.

ruperts

If Bitcoin did 'take over' (by which I mean becomes a mainstream preferred currency), what would happen to the value of existing currencies?

ExremelyCautiousSocialist

ruperts wrote: »

If Bitcoin did 'take over' (by which I mean becomes a mainstream preferred currency), what would happen to the value of existing currencies?

Well if in your scenario its preferred by everyone i assume you mean including government? fiat becomes redundant in this scenario doesn't it? Its tricky to predict what a total crypto scenario like that looks like. Government might need to adapt how they collect tax. Banks would need to adapt services they offer.



Crypto can grow while fiat does fine for a long time yet.

masonic

ruperts wrote: »

If Bitcoin did 'take over' (by which I mean becomes a mainstream preferred currency), what would happen to the value of existing currencies?

If a cryptocurrency took over, then it wouldn't be bitcoin. Most likely it would be an alternative, controlled by the Government which would allow it to continue to control the money supply and monetary policy and hence apply stabilising forces to the economy when needed and avoid more extreme boom and bust cycles than have been experienced under such controls.

If the Government was stripped of it's sovereignty over currency, then it could cause any number of issues. Some of those issues can be gleaned from those countries that do not have their own official currency, or whose currency is not preferred by its citizens, except in many of those cases there is either tight integration with other countries using the same currency, or some mechanism to peg their official currency to the de facto currency, or a central bank to print money and afford lines of credit to struggling economies.