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Bitcoin.org

Bitster

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I found your forum because of a Google Alert I had setup for 'bitcoin'.
Yes, bitcoin might be essentially useless at this point. Useless in the sense that you can't buy dinner at Olive Garden with it. But it has the potential to be very useful for micro-payments. Imagine someone wanted to thank you for a particularly insightful forum post with a small tip of 10 cents or less. Under current widely accepted online transaction systems that isn't viable. Bitcoin transaction costs are viturally zero however. Now I can tip you even 5 cents and the transaction costs don't overwhelm the tip.

Anyway somebody thinks it might be useful someday. This is the price action in bitcoin vs. USD the last few months:



Oops! Can't post images. Well, the price has gone from 6 cents to 10 cents in the last three days and volume is about 10x normal. Trading takes place at a site called MTGOX.
 

BirdOPrey5

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Is this the image you were going to post?



I'm an electrical engineer by schooling and general internet addict so I'm fairly technical minded. I read up on Bitcoin at that site and I have to say it just doesn't make a lot of sense (no pun intended)... This graph shows its value to USD but it's not "backed" by USD- it's backed by products for sale on various websites, of which I've never actually seen a site (like Amazon) that advertises they take bitcoins. When it comes down to it what makes this a real currency other than someone just saying it's a real currency? The system in place to generate bitcoins as mathematical problems get solved by computers is super cool but why is it any different then credits people earn here on this forum called "Gameroom Cash"?

Let's say someone wanted to send me 5 cents (I once had someone send me 1 cent by paypal and paypal took the 1 cent as a transaction fee :squint: so I know it's a problem) how would I ever get that 5 cents into my bank account? It looks like I'd have to just wait until I ever got enough to buy something from a bitcoin store?

PS- I have removed any posting restrictions from your account. Feel free to post pics and/or links.
 

Bitster

New member
Thanks BOP5, this was the chart:



You are correct, bitcoin is not 'backed' by anything other than the mutual agreement of everyone involved that it is worth 'something', that something currently being about 10 cents as indicated by the trading at mtgox.com

Of course, the US dollar is no longer backed by anything either, other than the 'promise' of the US government to exchange it for... for what I'm not sure. It used to be gold. Now it's just a promise. Oh yes, they promise to accept it for payment of taxes I believe.

This is true of all fiat currencies as I understand it. The difference with bitcoin is it has some significant advantages over the fiat currencies:
1) once all approx. 21 million bitcoin are in circulation there will be no more. That means no inflation
2) related to the first one, bitcoin is not under the control of any government agency and all that implies
3) a lot of people are excited about bitcoin because of the potential anonymity of transactions
4) the biggest advantage I see at this point is the micro-payment transaction cost advantage. True, you do have to use PayPal to get into the bitcoin economy initially, and to get out of it again (mtgox and other sites can do this for you), but once you are in that economy you can spend, spend, spend without incurring PayPal fees.

Think of it this way. Let's say one of the big game developers on Facebook started accepting bitcoin for virtual goods. They can now offer their virtual goods at a much lower price, thus increasing the number of people who can participate in the virtual goods market and the number of transactions they will instigate. Currently, I have to really love an app to make a transaction of several dollars through PayPal to buy some virtually stuff. But if I've already got a bunch of bitcoins in my bitcoin wallet I'm more likely to spend the nickel or dime to buy the virtual product.
 

BirdOPrey5

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Think of it this way. Let's say one of the big game developers on Facebook started accepting bitcoin for virtual goods. They can now offer their virtual goods at a much lower price, thus increasing the number of people who can participate in the virtual goods market and the number of transactions they will instigate. Currently, I have to really love an app to make a transaction of several dollars through PayPal to buy some virtually stuff. But if I've already got a bunch of bitcoins in my bitcoin wallet I'm more likely to spend the nickel or dime to buy the virtual product.
But if there are only 21 million bitcoins released is there really enough to sustain a massive e-economy? There are over 500 million facebook users, if even 1/10th of them wanted to send 1 bitcoin there wouldn't be enough. :shrug:

Are you connected with the project? Do you know how the 21 million number was decided?
 

Bitster

New member
frank_c: that's the beauty of bitcoin, it's not under the control of anybody. It's sort of like Napster for money, it is peer-to-peer without any middleman.

BirdOPrey5: I don't know how the 21 million number was arrived at but it has some technical basis in the way the currency is issued. I'm not a techie so I can't really explain it. I'm not connected with the development of bitcoin, I'm just a guy who read an article on it a few weeks ago and got very, very excited about it once I grasped the implications. The article has subsequently be reprinted here: http://www.bitcoinblogger.com/2010/09/bitcoin-electronic-currency-future-of.html

Regarding there not being enough currency to go around, it currently is divisible to 8 decimal places, so 21 million coins would actually be a limit of 2,100,000,000,000,000, whatever that is. So things could be priced at 1 bitcoin, but also at 0.01 bitcoin, or even 0.0000001. As demand for bitcoins increased, their value would increase, and prices would go down (price deflation) when priced in bitcoins (or BTC).
 

BirdOPrey5

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Setting prices of things at 0.0000125 bitcoins is going to get old fast... they should have just used the familiar "dollars and cents" notation and offered 21 trillion bitcoins (or whatever the number should be) instead.
 

Bitster

New member
Setting prices of things at 0.0000125 bitcoins is going to get old fast... they should have just used the familiar "dollars and cents" notation and offered 21 trillion bitcoins (or whatever the number should be) instead.
I suppose if it ever achieved widespread acceptance users would develop a nomenclature around smaller fractions of bitcoins (bitcents, bitpence, etc.)

Here's a summary of the amount of activity in the bitcoin economy:

http://www.stumbleupon.com/su/2Z0rOH/bitcoinwatch.com//r:t

In the last month the price has continued to increase and is now bumping up against $0.30 from $0.11 back in early October (mtgox.com), so that would account for a large part of the increase of the economy in USD terms.
 

BirdOPrey5

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I ran the bitcoin software for a few days and didn't see much happen... it should be a bit more interactive for those of us with little patience.
 
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