What is Bitcoin?

Digital Currency Information & General Chat
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FrozenIce
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What is Bitcoin?

Postby FrozenIce » 12 February 2017

it all depends on how deep you want to understand bitcoin. The way I understand bitcoin: it is an open internet protocol for money. We have had open internet protocols for sending data, email, voice, etc. But bitcoin is the first one for money.

You don't own bitcoins. You do not own what you cannot touch. And anything you can't touch can be taken from you in the blink of an eye. Faster than anything physical. By any number of possible events that can affect only you or the whole world. Might as well go for something that will still be valuable, no matter what happens.

The value of a currency is a function of the economic activities that relies upon it. I trust currency X because I know that with it I can by product Y I so desperatly need. I know I can buy prodcut Y because I estimate that there is a good chance that those who currently possess product Y will give it to me in exchange for currency X. They will accept currency X because they know they can exchange it for product Z that they need. The more "economic flow" is generated through the exchange of this currency, the more it is trustworthy, the more it gains value. The way in witch the actual token are created is irrelevant, especially in a digital currency like bitcoin or the USD, (yes the USD is mostly a digital currency). People a the Fed run their printers, bitcoin miners run an algorithm. None of those action has anything to do with the concept of value.

Let's do a thaugth experiment. Imagine that tomorrow, Walmart said that from now on they accept bitcoin. What would happen to the price of bitcoin. Intuitivaly you would probably say that it would rise. And you would be correct. Value has been created, independently of the mining or minting operation. The bitcoin you hold would gain value from the fact that you can spend it in more ways than before. It's less risky to hold you bitcoin, since you can always go to your local walmart to buy the stuff you want.

Bitcoin has value because it enables humans to exchange virtual tokens is a safe, cheap and secure way over the internet in ways other traditional currencies can't. Those token have the value it's economy dictates based on the free flow of token in the global market, the offer and the demand.

Also, mining is not the act of getting bitcoin. Mining is the action of running the bitcoin software to process transactions and store them in a safe a decentralized way. The designers of the system simply had the brilliant idea to intermingle the minting process with it. It creates a balanced system where the actors spending energy to actually run and secure the system are the one rewarded with the new bitcoins. It creates an economic incentive for miners to get involved.

I'm rambling, if you have questions, go ahead.

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Thornside
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Re: What is Bitcoin?

Postby Thornside » 15 February 2017

The main reason not everyone mines or uses Bitcoin is because people are afraid to start using it or people think it's stupid cause who actually accepts it. If we all accepted the idea of Bitcoin then it will be easier to integrate. Not only that but a lot of people will get rich off Bitcoin cause only 21 million will exist, if everyone uses Bitcoin the price of it will skyrocket cause of the 7.5 billion people can't all own one bit coin each. It will save a lot of paper and bank robbers won't exist. Only hackers will. And governments can't print all the money they want this way, it's a perfect system that most people don't like for some reason


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