What is a bitcoin?

[MrsIMDoc]

I have no interest in investing in bitcoin, however both my husband and I cannot figure out WHAT a bitcoin is and how they are "mined" and why they are using up so much energy.

We watched a video about bitcoin "mining" but it does not make sense.  I read that bitcoin mining is when a computer does math problem  - but who designs the math problem? I am not trying to be dense here I really just do not understand. Anyone have websites or can just explain it?

 

[Peds]

You should buy one to learn about it...

[G]

Banking on Bitcoin, a Netflix doco, was worthwhile.

[Rotish]

Bitcoin is an internet currency that allows anonymity

Mining is confusing to me as well—essentially it’s how New money comes into the market. In the beginning, mining blocks of bitcoin was relatively simple equations that any desktop computer could easily solve. But as time passes, the equations get harder and harder, now requiring millions and millions of complex equations to unlock each block of bitcoin, requiring more and more computing power (I have no idea how math problem solving can generate so much computing power, but that is not my field). The mining itself is down by software

Every transaction is logged in a digital ledger—the blockchain. The blockchain also tracks newly mined bitcoins. So the blockchain tracks who holds the money at all times. This is supposedly what makes bitcoin “safe.” To alter the ledger, you need to rewrite the blockchain code from the time the coin was mined—which would require all the computing processing power that was cumulatively used from the present time and every step backwards to the time the coin was created—essentially an impossible task.

That is as far as I understand. I personally have trouble seeing it ever succeed as a regular currency. Insane volatility, transaction fees, and every banking system in the world is going to have secure digital transactions without fees in the next decade

[MrsIMDoc]

G wrote:

Banking on Bitcoin, a Netflix doco, was worthwhile.

Click to expand...

Thank you will try to watch that.

[Zaphod]

Article I linked in other bitcoin thread is very informative without any of the nonsensical selling or ideological stuff you usually read in the "educational" articles.

[octopus85]

It's a math problem that has multiple (infinite) unique solutions, but the solutions become progressively more difficult to find as more of them are found. Each valid solution is the "currency". "Mining" is the process of setting up a computer to try to find solutions to the problem.

 

The energy consumption question is interesting. Early mining was relatively easy, capable of being done on "regular" computers. Now, the problem has gotten difficult enough that massive banks of processors are necessary to even have any hope of finding a new solution. Of course, those processors use electricity, which has a cost, so if someone mines a new solution, it costs some non-trivial amount of money. Arbitrage would tell us that the value of bitcoin is probably not much more than the cost to mine them, so we're talking 10's of thousands of dollars worth of electricity to mine just one.

It seems silly that huge quantities of high-tech computers are burning through stupid amounts of electric energy to solve a problem with no intrinsic worth. But, greenbacks have some non-zero cost associated with minting, distributing, accounting, etc, and those also have no intrinsic worth.

[jfoxcpacfp]

It is very confusing to me, too. I've been reading (listening to) the book "Digital Gold" to learn more.

[HikingDO]

Thanks octopus, your first paragraph easily summarized it in a way to help understand it for the first time! Seems crazy that people are actually buying and selling math solutions.

[djohnflatfeecfp]

https://www.youtube.com/watch?v=Um63OQz3bjo

 

https://www.youtube.com/watch?v=GmOzih6I1zs

 

Bitcoin was the first online, peer-to-peer, electronic cash system on blockchain.  It isn't the only game in town as there are hundreds of other cryptocurrencies out there, like Dentacoin.  It is still the big boy on the block though.  The value of Bitcoin isn't backed by gold or a government.  It's value comes from the fact there is a finite supply (last one to be created in 2140) and how many retailers accept it.

 

Bitcoin, cryptocurrencies and the entire blockchain world are fascinating to me.  It is estimated 2.5 billion (yes, billion) people have limited access to this financial world right now and blockchain can open it to them.  Access is limited mostly because of an inability to verify their identities.  It is also estimated blockchain and cryptocurrencies could remove $20 billion out of the financial services industry too.  Basically because the middle man is being eliminated (trust me - Goldman Sachs will still get their cut).

 

Part of the greatness of blockchain is how it is a ledger system that is constantly updating and verifying and that it is decentralized. Also, its whole concept is instead of giving away your information which helps concentrate wealth into the hands of a few (like a Zuckerberg with Facebook who resells all the personal information you gave him for free on FB), you decide the value of your information and sell it on your terms.

 

There is a ton of information out there about it, but most of it is wrong.  Heck, I barely understand it and I did a presentation on it a few months back.  All I know is I am fascinated by its potential and hope it will be more beneficial to society than FB is (there are only so many cat videos one needs to see).

 

 

[Zaphod]

Here is another good article about blockchain. http://alexedmans.com/blockchains-how-they-work-and-how-they-may-transform-the-world/

 

[hightower]

And another one

https://www.youtube.com/watch?v=Pl8OlkkwRpc

[Antares]

If you’d rather read a (very) short book, I’ll repeat a post from another bitcoin thread:

 

Books:
The Internet of Money by Andreas M. Antonopoulos
Merkle Bloom LLC (2016), 150 pages

In 2 short editions, Volumes 1 and 2

He’s an anarchist, but also an accomplished finance person and computer scientist. Lucid.

[Complete_newbie]

djohnflatfeecfp wrote:

https://www.youtube.com/watch?v=Um63OQz3bjo

 

https://www.youtube.com/watch?v=GmOzih6I1zs

 

Bitcoin was the first online, peer-to-peer, electronic cash system on blockchain.  It isn’t the only game in town as there are hundreds of other cryptocurrencies out there, like Dentacoin.  It is still the big boy on the block though.  The value of Bitcoin isn’t backed by gold or a government.  It’s value comes from the fact there is a finite supply (last one to be created in 2140) and how many retailers accept it.

 

Bitcoin, cryptocurrencies and the entire blockchain world are fascinating to me.  It is estimated 2.5 billion (yes, billion) people have limited access to this financial world right now and blockchain can open it to them.  Access is limited mostly because of an inability to verify their identities.  It is also estimated blockchain and cryptocurrencies could remove $20 billion out of the financial services industry too.  Basically because the middle man is being eliminated (trust me – Goldman Sachs will still get their cut).

 

Part of the greatness of blockchain is how it is a ledger system that is constantly updating and verifying and that it is decentralized. Also, its whole concept is instead of giving away your information which helps concentrate wealth into the hands of a few (like a Zuckerberg with Facebook who resells all the personal information you gave him for free on FB), you decide the value of your information and sell it on your terms.

 

There is a ton of information out there about it, but most of it is wrong.  Heck, I barely understand it and I did a presentation on it a few months back.  All I know is I am fascinated by its potential and hope it will be more beneficial to society than FB is (there are only so many cat videos one needs to see).

 

 

Click to expand...

This is part of the problem. People view this as just a ledger system and how it'll be disrupting financial services and how it will affect Goldman Sachs etc etc. Thats what wall street is interested in - as usual - money.

I remember when I read Nakamoto's paper - had goosebumps. If people are really interested in this read that. Very few people I want to meet in person and spend time and ask numerous questions: Satoshi Nakamoto is one. Incredible and elegant solution as non-trust math based solution to many of our trust related problems. When the code was available on sourceforge, friend and I forked it - heck I even sent him an email; never replied. He/she/them deserves a Nobel prize.

Very few give so much for nothing.

Anyways, short answer - and technical answer - bitcoin is the "currency", laying on top of Bitcoin, the blockchain software.

[Zaphod]

Complete_newbie wrote:

djohnflatfeecfp wrote:

https://www.youtube.com/watch?v=Um63OQz3bjo

 

https://www.youtube.com/watch?v=GmOzih6I1zs

 

Bitcoin was the first online, peer-to-peer, electronic cash system on blockchain.  It isn’t the only game in town as there are hundreds of other cryptocurrencies out there, like Dentacoin.  It is still the big boy on the block though.  The value of Bitcoin isn’t backed by gold or a government.  It’s value comes from the fact there is a finite supply (last one to be created in 2140) and how many retailers accept it.

 

Bitcoin, cryptocurrencies and the entire blockchain world are fascinating to me.  It is estimated 2.5 billion (yes, billion) people have limited access to this financial world right now and blockchain can open it to them.  Access is limited mostly because of an inability to verify their identities.  It is also estimated blockchain and cryptocurrencies could remove $20 billion out of the financial services industry too.  Basically because the middle man is being eliminated (trust me – Goldman Sachs will still get their cut).

 

Part of the greatness of blockchain is how it is a ledger system that is constantly updating and verifying and that it is decentralized. Also, its whole concept is instead of giving away your information which helps concentrate wealth into the hands of a few (like a Zuckerberg with Facebook who resells all the personal information you gave him for free on FB), you decide the value of your information and sell it on your terms.

 

There is a ton of information out there about it, but most of it is wrong.  Heck, I barely understand it and I did a presentation on it a few months back.  All I know is I am fascinated by its potential and hope it will be more beneficial to society than FB is (there are only so many cat videos one needs to see).

 

 

Click to expand…

This is part of the problem. People view this as just a ledger system and how it’ll be disrupting financial services and how it will affect Goldman Sachs etc etc. Thats what wall street is interested in – as usual – money.

I remember when I read Nakamoto’s paper – had goosebumps. If people are really interested in this read that. Very few people I want to meet in person and spend time and ask numerous questions: Satoshi Nakamoto is one. Incredible and elegant solution as non-trust math based solution to many of our trust related problems. When the code was available on sourceforge, friend and I forked it – heck I even sent him an email; never replied. He/she/them deserves a Nobel prize.

Very few give so much for nothing.

Anyways, short answer – and technical answer – bitcoin is the “currency”, laying on top of Bitcoin, the blockchain software.

Click to expand...

It basically just boils down to censorship (ie, the fed/irs/china cannot stop your bitcoin transaction, wont take note if over 10k, etc...), which then leads immediately to the obvious use cases of mostly nefarious activities and the keeping of capital from your authoritative government. The two quick articles I linked were super simple and very descriptive. Most other things are full of hope and prognostication about what it may be that is divorced from the reality of what it is and isnt. Just like a hammer, bitcoin and blockchain are not solutions for every problem or even better ways to do what we currently do on a currency type basis. A lot of the time bitcoin/blockchain is a terrible solution and would make things worse. Like everything, it has tradeoffs and those define where it is and isnt useful.

I think applying currency and coin to the conversation really just confuses everyone, while it has aspects of that, it certainly is not the dominant feature. As with all bubbles the use cases start to encompass everything imaginable, and it will likely end up very different in reality.