How Does Bitcoin Really Work?

[fog37]

Hello everyone,

I am determined to clearly understand bitcoin. This is what I know so along with my dilemmas:

• Bitcoins are a virtual currency with encryption. The exchange of bitcoins is decentralized in the sense that there is/are no institutions like banks that validate the exchange of bitcoins. Everyone can see every bitcoin transaction happening in the world
• Individuals can exchange bitcoins and the transactions get recorded on a block in a chain of blocks. The new block is timestamped.
• Nobody knows the true identity of the parties involved in the transaction but each party has a unique and numeric personal identifier.
• Every transaction, before it is added to a block chain as a new block, must be validated. Bitcoin miners validate the transactions and get rewarded with freshly minted bitcoins as well as a commission from the parties involved. Bitcoin mining is kind of like a competition: the miner with the most computing power gets to validate and post the transaction as a block first receiving the new bitcoins.
• The total number of bitcoins must always remain below a certain number (21 millions?). Why so? Is that requirement to keep things in check?
• Talking about safety: a bank can generally be trusted even with its slowness and annoying fees. But is a peer to peer network really trustworthy? I guess hackers can be a threat to both systems (blockchain and regular banking).
• Anyone can see (but cannot change) all the bitcoin ledgers, which are essentially databases. Only the bitcoin miner can change the ledgers. But could the bitcoin miners engage in criminal behaviors? Ok, corruption happens in banking and in the government too...

Is this all correct?

So, bitcoin mining is really making bitcoins out of nothing. I guess the same is done with traditional currencies when the central bank prints new bills when it needs to. It used to be that there was a correlation between the money and the amount of gold a country had but that must be an ancient fact since a country can make new money at the cost of making the currency's purchasing power weaker against other international currencies...

Thank YOU

 

[jack action]

I'm an amateur as well, but here's my take on it.

Bitcoins are a virtual currency with encryption.

Nope. Bitcoin is a blockchain, that basically holds encrypted data, which could be currency transactions. Other blockchains can store other information than currency transactions (Ex.: Ethereum).

each party has a unique and numeric personal identifier.

I think it's more each transaction has a unique identifier (public key). The transaction represents the data stored (say a number of bitcoins), thus anyone who possesses the corresponding private key can read the content of the data stored.

Every transaction, before it is added to a block chain as a new block, must be validated. Bitcoin miners validate the transactions and get rewarded with freshly minted bitcoins as well as a commission from the parties involved. Bitcoin mining is kind of like a competition: the miner with the most computing power gets to validate and post the transaction as a block first receiving the new bitcoins.

The data doesn't have to be validated per se. Imagine there is a ledger where anyone (who knows how to write) can write to it. Let's call them miners. So people who don't know how to write say "I want something written in the ledger" and miners take those transactions and build a block. Building the block depends on the previous blocks as well. Knowing the inputs of a block, one can easily find if a corresponding output is valid after the mathematical manipulations.

But for a miner to be able to add its block to the blockchain, the output - which is basically a very large integer - must fall below a certain value. So the data is encrypted with a different nonce as many times as needed to fall below that value. The first miner who gets it will add the block to the blockchain and gain the reward. This introduces the competitive factor which ensures that many miners will try to fill in the ledger.

Every block also contains a record of which Bitcoin addresses are entitled to receive the reward. This record is always the first transaction appearing in every block. The number of Bitcoins generated per block starts at 50 and is halved every 210,000 blocks (about every 4 years). This is how Bitcoins are created. This decreasing-supply algorithm was chosen because it approximates the rate at which commodities like gold are mined (thus the term miner).

The threshold value is constantly adjusted such that solving the problem takes about 10 minutes. The protocol for mining cryptocurrency is more or less arbitrary and differs for different cryptocurrencies. The important thing is that everyone follows the same protocol for a given cryptocurrency.

The total number of bitcoins must always remain below a certain number (21 millions?). Why so?

Speculated justifications for the value of "21 million" are that it matches a 4-year reward halving schedule; or the ultimate total number of Satoshis that will be mined is close to the maximum capacity of a 64-bit floating point number. Satoshi has never really justified or explained many of these constants. The last Bitcoin should be mined in 2140.

As for security, you can read about the weaknesses of the system. Ways to reverse the transactions are the most theoretical ones.

So, bitcoin mining is really making bitcoins out of nothing.

Not really, as it requires electricity to mine not only a fixed amount of bitcoins, but an amount that gets reduced every 4 years. Thus, the value of Bitcoins has to be linked to the cost of electricity somehow. Just like the cost of gold as to be influenced by its mining cost, which requires more and more resources with time as there is less and less to be mined.

But there is speculation that can increase the value "out of thin air". Just like for gold or paintings.

Good source: https://en.bitcoin.it/wiki/Main_Page

 

[fluidistic]

On mobile can't answer properly.
You do not need the private keys to see the content of the data stored in the blockchain. So if you're curious enough you can go check the amount of BTC the creator of scihub received since she accepted such donations.
There is no anonymousity either, in that the nsa/cia/police or government for short can (and do) ask exchange platforms the identity attached to the trades made in them. There are other cryptocurrencies where nobody can decrypt the blockchain, so nobody but you knows the amounts traded and with whom (others might see the number of transactions), see Monero.
The tokenomics of BTC are made such that it will become scarcer over time, because people are either dying without telling anyone their seedphrase, or because they are losing their seedphrase and the total amount is capped. In the last 30 years of mining, less than a single BTC will be mined. Just imagine what it means to own a BTC today, and to give it to your grand children.
BTC sucks as a currency compared to other more modern cryptocurrencies. But people made a common agreement, and are still faithful to it, that its token is worth ''something''. If the demand for it stays constant over time, its price will increase over time. But, unless things fade, it seems it is becoming more popular over time, hence.the price might go much higher than nowadays (warning, this is not a finqncial advice, do your own reaearch).

 

[fog37]

Wonderful reply. Thank you jack action.

To get in the bitcoin game, not as a miner, I guess it is just about downloading the right software and then we can view all the existing blockchain ledgers like anybody else.

Thanks!

 

[russ_watters]

For the business theory side:

• Bitcoins are a virtual currency with encryption. The exchange of bitcoins is decentralized in the sense that there is/are no institutions like banks that validate the exchange of bitcoins. Everyone can see every bitcoin transaction happening in the world
• Individuals can exchange bitcoins and the transactions get recorded on a block in a chain of blocks. The new block is timestamped.

This is commonly over-stated. Banks aren't required for storage or peer-to-peer exchange of paper money either, nor is a ledger required. Banks or currency exchanges are required for normal electronic currency exchange and storage. For bitcoin, in theory they are not required for storing and exchanging. In reality, they are required for exactly the same reason normal currency requires it: security (both in storage and exchange) and convenience.

Note, one criticism of our banking system is that there is no cash in a box with your name on it at your bank and even if there was, it could still be stolen. There is only a digital record that a certain amount belongs to you. A bitcoin exchange can be similar; you don't necessarily have a direct connection/access to any bitcoin when you store it in an exchange. It's just a number on your screen in the same way your normal bank account balance is just a number on the screen to you. So the question is: how much do you trust your bank? Which you ask next...

• Talking about safety: a bank can generally be trusted even with its slowness and annoying fees. But is a peer to peer network really trustworthy? I guess hackers can be a threat to both systems (blockchain and regular banking).

Is this all correct?

Encrypted peer to peer networks are generally trustworthy (secure). But any enterprise involving people has potential to not be trustworthy. As judged by userbase, lack of trustworthiness with bitcoin is evidently a feature, not a bug. In theory bitcoin banks could become trustworthy, but in reality if the trustworthiness situation improves, you'll just end up right where you started, using bitcoin via normal banks, with no added value to using bitcoin.

And the "slowness and annoying fees" part is backwards when comparing normal banks to bitcoin banks.

So, bitcoin mining is really making bitcoins out of nothing. I guess the same is done with traditional currencies when the central bank prints new bills when it needs to.

Sort of. Being able to directly mine currency (instead of mining gold and exchanging it for currency) is one of the main unique features of bitcoin. But for most people now that feature doesn't really mean anything because most users aren't miners. So instead of governments creating money from nothing (but other resources), you have Chinese server farms creating money from nothing.

It used to be that there was a correlation between the money and the amount of gold a country had but that must be an ancient fact since a country can make new money at the cost of making the currency's purchasing power weaker against other international currencies...

True. And we function fine without that basis. That part's an entirely different discussion, but to keep focused, yes, lack of "hard" backing is a feature normal money and bitcoin have in common.

 

[russ_watters]

Not really, as it requires electricity to mine not only a fixed amount of bitcoins, but an amount that gets reduced every 4 years. Thus, the value of Bitcoins has to be linked to the cost of electricity somehow.

That's an interesting take. Early on when nobody could figure out what to do with it, and mining was easy, I wonder if that was true? But moving forward I can see that the cost could become linked strongly with the cost of electricity. That would seem to create a major (even fundamental) sustainability problem for such digital currencies.

Other currencies are of course made from energy (and paper/fabric/ink/labor), but their value isn't tied to those things.

 

[jack action]

That would seem to create a major (even fundamental) sustainability problem for such digital currencies.

Other currencies are of course made from energy (and paper/fabric/ink/labor), but their value isn't tied to those things.

Just thinking out loud, but that is what can make it more valuable than "paper money".

Governments (and others) literally manipulate the value of money constantly. We have to trust the people who make those decisions.

With Bitcoins, when the mining will end, the only source of income for miners will be transaction fees. People will just pay for a service (keeping the books) where the price should be aligned with the overall computing cost. Being a miner will just be another job like being an accountant, a bank teller, or a money printer.

But it's just a thought.

But people made a common agreement, and are still faithful to it, that its token is worth ''something''.

This is true for any currency.

 

[fluidistic]

Right, this is true for any currency.

Bitcoin was created because banks could not be trusted in the first place (aside from buying illegal cigs, just kidding). Centralization is a problem that's mostly overcome with many cryptocurrencies.
Some cryptocurrencies are also much more effective than banks for money transfer, visa, mastercard, western union, you name it. For example stellar lumens (the token is XLM), virtually free and instant (as well as lower volatility than btc). There is also Nano (no transacrion fee) and algorand.

 

[fluidistic]

Right, this is true for any currency.

Bitcoin was created because banks could not be trusted in the first place (aside from buying illegal cigs, just kidding). Centralization is a problem that's mostly overcome with many cryptocurrencies.
Some cryptocurrencies are also much more effective than banks, visa, mastercard, western union, you name it. For example stellar lumens (the token is XLM), virtually free and instant (as well as lower volatility than btc). There is also Nano (no transacrion fee) and algorand.

Governments can be understansly reticent wirh this technology, because it would mean any tax payer could see and track where his money goes, and corroborrate official figures.

 

[BWV]

Bitcoin is a speculative asset, not a currency
Link

A currency is an instrument which is used to facilitate transactions between parties. It is a medium of exchange meant to help buyers and sellers to find the right price at which transaction can take place. It is at this price that economics says the market has “cleared.” Clearing is important because it helps to bring transparency and predictability to the marketplace, which in turn strengthens social reciprocity and encourages more transactions. However, when a currency cannot be accurately valued, this clearing mechanism does not work anymore (Weimar hyperinflation being the classic example). That is the point when things become irrational, such as aggressive bidding for fear of more currency in circulation (inflation) or refusing to use the currency in anticipation of less currency in circulation (deflation). In terms of Bitcoin being labeled a currency, suffice it to say that we see several issues speaking against such viability. First, there currently exists no commonly accepted valuation model for Bitcoin. Second, unlike precious metals, highly volatile Bitcoin has no history of being accepted as money and it lacks any time-tested store of value credentials (accepted intrinsic worth), both of which are key currency attributes. Third, all else being equal, Bitcoin would have potentially material deflationary consequences. Digital production is programmed to stop when the total number of Bitcoins reaches 21m (16.5m have been “mined” already). If Bitcoin had to be used to facilitate all transactions in the world, that would lead to a contracting world economy very similar to the austerity policies imposed on Greece, but on a much larger (global) scale. In contrast, consider that central banks have the mandate not only to ensure the stability of the financial system, but to manage their respective nations’ fiat money supplies with a view to achieving inter alia price stability, i.e., to prevent either excessive inflation or deflation. Fourth, we are of the opinion that the same fears of deflation, which were used as a rationale for the US to abandon the Gold standard in 1971, would embolden authorities to prevent Bitcoin from becoming a currency.1 Based on historical precedents, it is not unthinkable that in times of economic or financial crisis, political and regulatory pressure on an unwanted currency would increase, possibly in a similar manner as in the US in 1934, when the Gold Reserve Act of 1934 was ratified, nationalizing all gold and subsequently revaluing it by 69% in US dollar terms.
The finite limit of Bitcoins has additional drawbacks. The majority of coins are expected to be “mined” in the next 20 years which, in the absence of a large-scale hardware revolution, will lower the individual incentive for “miners” to perform the computationally intensive settlement process. Although - due to the generous “mining” system - Bitcoin transactions and the energy to “mine” them are currently cheap for the individual buyer and seller, the process itself is incredibly energy intensive. Currently, Bitcoin’s aggregate energy consumption is estimated to be around 16.3 Terra Watt/h (180 Kw/h per transaction), although there are only roughly 5 million people using Bitcoin2. “Mining” becomes more profitable the higher Bitcoin prices rise. That said, “miners” have to invest heavily into technology to keep pace with other “miners.” When most Bitcoins are in circulation, the “miners” will need to be explicitly compensated by transaction fees which are unlikely to be lower than current transaction fees.3 Based on generous estimates, Bitcoin can currently handle around 7 transactions a second4. Its rival Visa can currently handle around 65,000 transactions a second. Transaction capacity will depend on future hardware possibilities, but without radical scaling (huge, unearthed economies of scale), it is unlikely for Bitcoin to come anywhere near established payment systems. We believe that although more and more vendors will accept Bitcoins, this is happening mostly from a marketing perspective and this trend is most likely to reverse once the Bitcoin price would enter bear market territory. In a related and most germane manner, the enormously high Bitcoin price volatility makes it unsuitable for a reliable day-to-day exchange medium.

 

[Leo Liu]

You might want to take a look at BTC whitepaper:
https://bitcoin.org/bitcoin.pdf

 

[CynicusRex]

Money corrupts; bitcoin corrupts absolutely.​

Disregarding all of bitcoin's shortcomings, a financial instrument that brings out the worst in people—greed—won't change the world for the better.
https://www.cynicusrex.com/file/cryptocultscience.html

 

[jack action]

Money corrupts; bitcoin corrupts absolutely.​

Disregarding all of bitcoin's shortcomings, a financial instrument that brings out the worst in people—greed—won't change the world for the better.
https://www.cynicusrex.com/file/cryptocultscience.html

Nice article. Although, the one big advantage of an unregulated system is that you don't have to use it or you can get out of it whenever you want to. you cannot do that with the government and its laws. Sure, all these laws are supposed to be for the greater good, but in the end - as you say in your article - greed takes over rather quickly.

Like everyone, I want to be part of a system I am fond of, where every person gets their fair share. But this is more about choosing who you are dealing with rather than what system you use. And if I can't find that, I personally prefer doing nothing surrounded by systems I chose not to be part of than being forced to contribute to a system I dislike.

 

[fluidistic]

Money corrupts; bitcoin corrupts absolutely.​

Disregarding all of bitcoin's shortcomings, a financial instrument that brings out the worst in people—greed—won't change the world for the better.
https://www.cynicusrex.com/file/cryptocultscience.html

Let's see how el salvador and Cuba (the latter apparently will regulate other cryptocurrencies) do, compared to sinking deeper over time. Wikipedia claims that BTC is their official money.

Bitcoin might be used by greedy people but not all, of course. Even its creator, which would be a billionnaire if he sold his btc at current orice (of course impossible), didn't sell any of his BTC (except for some donations years ago). Either lost his seedphrase, died, etc. (All speculation), but it doesn't seem like he wanted to do a ponzi or rug and pull (as is routinely done in the cryptocurrency world).

Many people are investing in BTC because they think its value will increase over time, unlike the US dollar (and more so than any plan any bank can offer). The goal is not greed but a better future, be it to buy a property, sending kids to college or having a better retirement. For greed nowadays you have to take a look at less known cryptocurrencies.

 

[PeroK]

I have no idea what bitcoin is or what it's for. Is there any purpose in my learning about it or am I better off in my current state of ignorance?

 

[BWV]

I have no idea what bitcoin is or what it's for. Is there any purpose in my learning about it or am I better off in my current state of ignorance?

Wait for the history book after it collapses

Until then, your time is better spent elsewhere

 

[CynicusRex]

Let's see how el salvador and Cuba (the latter apparently will regulate other cryptocurrencies) do, compared to sinking deeper over time. Wikipedia claims that BTC is their official money.

Bitcoin might be used by greedy people but not all, of course. Even its creator, which would be a billionnaire if he sold his btc at current orice (of course impossible), didn't sell any of his BTC (except for some donations years ago). Either lost his seedphrase, died, etc. (All speculation), but it doesn't seem like he wanted to do a ponzi or rug and pull (as is routinely done in the cryptocurrency world).

Many people are investing in BTC because they think its value will increase over time, unlike the US dollar (and more so than any plan any bank can offer). The goal is not greed but a better future, be it to buy a property, sending kids to college or having a better retirement. For greed nowadays you have to take a look at less known cryptocurrencies.

§1 “Bitcoin law protests break out in El Salvador as Central American neighbours wait to see its success”: https://www.euronews.com/next/2021/...central-american-neighbours-wait-to-see-its-s

§2 “Bitcoin might be used by greedy people but not all, of course.”
Not all, but the majority, because crypto“currencies” inherently incentivize greed. Whereas with the dollar, not all, but the minority. And yes, I realize there is a foreign exchange (Forex) market as well. However, I haven't yet seen any spam or aggressive Forex cultists trying to get me to buy the dollar or any other currency.

§3 Which is exactly the same allure that gets people into other multi-level marketing pyramid Ponzi schemes: the promise of getting rich easily. The sole reason for buying crypto“currencies” is “number go up” because it doesn't produce any products or services at all (or products that don't improve society whatsoever, or that can't already be done superiorly by non-blockchain technology). An actual investment would be investing in schools, libraries, companies that 3D print houses, et cetera.

I strongly recommend the conversation between Milner Aviv, a former bitcoin maximalist, and Patrick Luberus, a current “crypto” believer, to learn why all contemporary crypto“currencies” are inherently flawed. A review about the podcast episode, by Stephen Diehl:

This is the singularly best podcast I've ever heard between a crypto skeptic and a believer. @milner_aviv really dives into a Socratic discussion about the central economic problem of negative-sum investment schemes. Absolutely worth a listen.

The podcast:

[The first hour or so sounds like just another coin advertisement, keep listening, it gets a lot better.]

 

[jack action]

I have no idea what bitcoin is or what it's for. Is there any purpose in my learning about it or am I better off in my current state of ignorance?

It certainly isn't an investment.

What I like about it is the concept of creating a free market for the bookkeeping part of transactions. The "bookkeepers" of this regulated world (banks, credit cards, online payment systems, etc.) can charge what they want and can also choose which transactions they process. It is complicated to become a "bookkeeper" and only a few are allowed to manage this system. But anyone can [rather easily] become a bookkeeper for cryptocurrencies and do transactions other won't do or charge lower fees when others exaggerate.

To me, it's exactly like choosing to do transactions by barter, not in the sense you're not using currency, but because you're not using regulated currency, controlled by some middleman.

If you're happy with the middlemen you have and the services they render, then there is not really a point in wasting time with cryptocurrencies.

I haven't yet seen any spam or aggressive internet cultists trying to get me to buy the dollar or any other currency.

But you have a choice.

Which is exactly the same allure that gets people into other multi-level marketing pyramid Ponzi schemes;

But Ponzi schemes existed with fiat money before cryptocurrencies. Does it mean fiat money is a scam that should be eradicated? People buy drugs with cryptocurrencies. But they were buying drugs before cryptocurrencies with fiat money as well.

The sole reason for buying crypto“currencies” is “number go up” because it doesn't produce any products or services at all

The sole reason for buying “art pieces” is “number go up” because it doesn't produce any products or services at all ... therefore art is a scam and artists should be ashamed of themselves?

 

[fluidistic]

I have no idea what bitcoin is or what it's for. Is there any purpose in my learning about it or am I better off in my current state of ignorance?

It is becoming widely spread and used, not a niche anymore. I think you should learn about it if you're curious. But don't stop at bitcojn only, check what other popular cryptocurrencies offer and how they work, too.

 

[PeroK]

It is becoming widely spread and used, not a niche anymore. I think you should learn about it if you're curious. But don't stop at bitcojn only, check what other popular cryptocurrencies offer and how they work, too.

In the lingo of my adopted city it looks "well dodgy" to me.

And in the lingo of my native Scotland it looks like "a pig in a poke".

 

[fluidistic]

§1 “Bitcoin law protests break out in El Salvador as Central American neighbours wait to see its success”: https://www.euronews.com/next/2021/...central-american-neighbours-wait-to-see-its-s
View attachment 288329

§2 “Bitcoin might be used by greedy people but not all, of course.”
Not all, but the majority, because crypto“currencies” inherently incentivize greed. Whereas with the dollar, not all, but the minority. And yes, I realize there is a foreign exchange (Forex) market as well. However, I haven't yet seen any spam or aggressive Forex cultists trying to get me to buy the dollar or any other currency.

§3 Which is exactly the same allure that gets people into other multi-level marketing pyramid Ponzi schemes: the promise of getting rich easily. The sole reason for buying crypto“currencies” is “number go up” because it doesn't produce any products or services at all (or products that don't improve society whatsoever, or that can't already be done superiorly by non-blockchain technology). An actual investment would be investing in schools, libraries, companies that 3D print houses, et cetera.

I strongly recommend the conversation between Milner Aviv, a former bitcoin maximalist, and Patrick Luberus, a current “crypto” believer, to learn why all contemporary crypto“currencies” are inherently flawed. A review about the podcast episode, by Stephen Diehl:The podcast:

[The first hour or so sounds like just another coin advertisement, keep listening, it gets a lot better.]

Let's see how the world goes. I reiterate that I don't think that a get-rich-quick scheme is valid anymore for BTC (it surely was back in the days... and even the creator of physicsforums had some of the wave left to to surf :) ), it's a long term "investment" with the hope (but not certainty, of course), that the purchasing power will increase rather than decrease over time. There are plenty of other cryptos for the get-rich-quick, but BTC is an old cow.

Now that I think about it, when I wanted to send money to a cryptocurrency website to buy some crypto, my bank refused the transfer, saying that they won't send any money to these kind of websites. Google and reddit showed me that this is typical of European banks. BTC is not illegal, yet banks forbids you to transfer funds to websites that allow cryptocurrency trading. Now, that's probably illegal... but good luck fighting the richest people one can ever imagine. These banks, however, do not mind if you spend your money in real ponzi schemes, waste it in the casino or in bets, but man, crypto, that's a NO-NO. You see, this is against these kind of injustices that crypto is useful.

Look at the poor people of many countries, and/or Cuba where there are economic sanctions against the people, who didn't do anything wrong. They should have the human right to bypass this economic blockus, and receive money from outside, something banks won't allow but crypto would, etc. Isn't that solving real world problems for the benefit of humanity?

 

[russ_watters]

Nice article. Although, the one big advantage of an unregulated system is that you don't have to use it or you can get out of it whenever you want to. you cannot do that with the government and its laws. Sure, all these laws are supposed to be for the greater good, but in the end - as you say in your article - greed takes over rather quickly.

Like everyone, I want to be part of a system I am fond of, where every person gets their fair share. But this is more about choosing who you are dealing with rather than what system you use. And if I can't find that, I personally prefer doing nothing surrounded by systems I chose not to be part of than being forced to contribute to a system I dislike.

I hear Zimbabwe has some nice anarchy.

It certainly isn't an investment.

What exactly to you mean by that? Seems like a lot of people are using it as investment/betting vehicle. I'd be interested to know how much Bitcoin is held for investment vs how much is circulating.

 

[russ_watters]

Look at the poor people of many countries, and/or Cuba where there are economic sanctions against the people, who didn't do anything wrong. They should have the human right to bypass this economic blockus, and receive money from outside, something banks won't allow but crypto would, etc. Isn't that solving real world problems for the benefit of humanity?

I'm having trouble following that. Are you saying we should send Bitcoin to Cuba[ns]? How? Why? You phrased the last bit as a question, but please answer it; what problem are you trying to solve and how, exactly?

This thread - and crypo in general - all has a very vague/bizarre counter-culture vibe to me.

 

[fluidistic]

I'm having trouble following that. Are you saying we should send Bitcoin to Cuba[ns]? How? Why? You phrased the last bit as a question, but please answer it; what problem are you trying to solve and how, exactly?

This thread - and crypo in general - all has a very vague/bizarre counter-culture vibe to me.

I am saying that family members who want to send money to their relatives in Cuba should be able to do it without much hassle. Replace Cuba by Argentina if you want, that's also relevant. (don't tell me Western Union is an alternative there, I've been there and it was a nighmare, almost a job (hours of waiting queue, a single place in a whole big city... and sometimes no cash, have to come back another day) just to withdraw anything (the upper limit was so absurd you couldn't even pay a monthly rent)). If crypto can solve this problem, then hurray.

Regarding countries that have economic blokus because governments messed up, the poor people shouldn't be the ones that must endure toughness (morally, at least. Legally of course things might be messed up). If crypto can help them, then hurray.

 

[russ_watters]

I am saying that family members who want to send money to their relatives in Cuba should be able to do it without much hassle... (don't tell me Western Union is an alternative there, I've been there and it was a nighmare, almost a job (hours of waiting queue, a single place in a whole big city... and sometimes no cash, have to come back another day) just to withdraw anything (the upper limit was so absurd you couldn't even pay a monthly rent)). If crypto can solve this problem, then hurray.

Again, how? If you send a Bitcoin to a Cuban, what can they do with it? Buy groceries? Pay rent? Heck, what fraction even has internet access?

If crypto can help them, then hurray.

Again, how?

This all sounds very misguided to me; first-world[counterculture] answers to 3rd world problems. Like sending donated laptops to Africans who have neither electricity or internet access.

 

[fluidistic]

Again, how? If you send a Bitcoin to a Cuban, what can they do with it? Buy groceries? Pay rent? Heck, what fraction even has internet access?

Again, how?

This all sounds very misguided to me; first-world[counterculture] answers to 3rd world problems. Like sending donated laptops to Africans who have neither electricity or internet access.

That's the idea, i.e. that local stores accept cryptocurrencies (preferably not only BTC, Cuba apparently won't goof like el salvador there).

For Argentina, it's not a 3rd world country, but a country where people are used to tolerate lack of liberty. If crypto spreads, it will also help a lot the general population I think.

 

[jack action]

I hear Zimbabwe has some nice anarchy.

Anarchy is a society being freely constituted without authorities or a governing body. Zimbabwe does have a governing body and It has very repressive laws. It is the complete opposite of anarchy; It's what you have in the "free world" (restrictions & obligations) elevated to the power of ten.

It certainly isn't an investment.

What exactly to you mean by that? Seems like a lot of people are using it as investment/betting vehicle. I'd be interested to know how much Bitcoin is held for investment vs how much is circulating.

Speculating isn't investing, it's gambling. You can gamble about anything. Investing is putting money into what has an actual value (assets or revenues). Just buying and reselling a currency (or a painting or a vintage car or whatever), each buyer paying more than the one before until the last idiot gets stuck with it is not what I would consider as an investment.

Again, how? If you send a Bitcoin to a Cuban, what can they do with it?

If you send US dollars to a Cuban, what would he do with it? He would trade it (even if it is not the country's official currency). He would do the same with bitcoins.

What @fluidistic is saying is that you cannot send easily US dollars to Cuba because banks (and others) cannot process the transactions by law. Or maybe a bad government could intercept the transaction and keep it for itself. Sending Bitcoins from US to Cuba is probably illegal too, but because anyone can do it with an Internet connection, it is easy to do without all the paperwork.

It's all about if you think the law is fair or not. And if you think the law is necessary, maybe it causes unwanted collateral damages to innocent victims. Cryptocurrencies could theoretically help.

 

[Hornbein]

I imagine in southern China a vast array of gerbils running inside of wheels, powering bitcoin.

 

[Tom.G]

I imagine in southern China a vast array of gerbils running inside of wheels, powering bitcoin.

Makes about as much sense as the rest of it!

 

[CynicusRex]

To me, it's exactly like choosing to do transactions by barter, not in the sense you're not using currency, but because you're not using regulated currency, controlled by some middleman.

If you're happy with the middlemen you have and the services they render, then there is not really a point in wasting time with cryptocurrencies.But you have a choice.

But Ponzi schemes existed with fiat money before cryptocurrencies. Does it mean fiat money is a scam that should be eradicated? People buy drugs with cryptocurrencies. But they were buying drugs before cryptocurrencies with fiat money as well.

The sole reason for buying “art pieces” is “number go up” because it doesn't produce any products or services at all ... therefore art is a scam and artists should be ashamed of themselves?

§1 Most people prefer middlemen. What happens when you pay for a product using crypto“currencies” without a middleman and the product is never sent? Your money is gone. A middleman can mediate the trade and reverse the transaction.

§2 “But Ponzi schemes existed with fiat money before cryptocurrencies. Does it mean fiat money is a scam that should be eradicated?”
Fiat money is just that, money. Crypto“currencies” are the scam.

§3 “The sole reason for buying “art pieces” is “number go up” because it doesn't produce any products or services at all ... therefore art is a scam and artists should be ashamed of themselves?”
The primary reason to buy art, for the majority of people, is aesthetics. Those who buy it for money laundering or financial speculation should question their priorities, yes.

 

[fluidistic]

§1 Most people prefer middlemen. What happens when you pay for a product using crypto“currencies” without a middleman and the product is never sent? Your money is gone. A middleman can mediate the trade and reverse the transaction.

§2 “But Ponzi schemes existed with fiat money before cryptocurrencies. Does it mean fiat money is a scam that should be eradicated?”
Fiat money is just that, money. Crypto“currencies” are the scam.

§3 “The sole reason for buying “art pieces” is “number go up” because it doesn't produce any products or services at all ... therefore art is a scam and artists should be ashamed of themselves?”
The primary reason to buy art, for the majority of people, is aesthetics. Those who buy it for money laundering or financial speculation should question their priorities, yes.

1. Many people do, sure. In my book dealing with a bank can be called greed, after all it's for your own benefit while you know that banks are evil and caused the 2008 crisis and are not trustable, at least according to Satoshi Nakamoto. But sure, one should always have the choice to either deal with a bank or not (and take the cryptocurrency route for instance). I'd rather pay someone to verify a smart contract than to deal with our archaic banking system as of today, if I had to use a 3rd party (I'd rather not, of course).

 

[jack action]

Most people prefer middlemen. What happens when you pay for a product using crypto“currencies” without a middleman and the product is never sent? Your money is gone. A middleman can mediate the trade and reverse the transaction.

If you cannot do something - whatever it is - without a middleman, it is just a question of time before the middleman will abuse his power. The harder it is to become a middleman (high skills required, few positions available, etc.), the quicker it will happen and the harder it will hit you.

You must be able to do what you want to do without a middleman to keep your autonomy. But if it is advantageous to use one, I don't see anything wrong with doing so.

The primary reason to buy art, for the majority of people, is aesthetics. Those who buy it for money laundering or financial speculation should question their priorities, yes.

The primary reason to buy cryptocurrency is to use it as currency. Those who buy it for money laundering or financial speculation should question their priorities, yes.

That statement could be said about anything.

 

[CynicusRex]

If you cannot do something - whatever it is - without a middleman, it is just a question of time before the middleman will abuse his power. The harder it is to become a middleman (high skills required, few positions available, etc.), the quicker it will happen and the harder it will hit you.

You must be able to do what you want to do without a middleman to keep your autonomy. But if it is advantageous to use one, I don't see anything wrong with doing so.

The primary reason to buy cryptocurrency is to use it as currency. Those who buy it for money laundering or financial speculation should question their priorities, yes.

That statement could be said about anything.

§1 That's an extremely cynical view, and a fallacy at that.
§2 Whether one has to use a middleman or not barely has anything to do with autonomy.
§3 “Among those who do trade cryptocurrencies, the top reasons cited are that it’s easy to make trades, it’s exciting to invest in and there’s potential for high growth in a short period of time, according to the survey.” —https://www.cnbc.com/2021/08/24/1-i...ryptocurrencies-many-for-ease-of-trading.html

 

[jack action]

I'm not promoting investing in cryptocurrency. Just like I'm not promoting buying US dollars, euros, or pesos for the sake of buying currencies. That being said, some people make a profit doing that, at the expense of many others who lose money doing the same.

 

[fluidistic]

This MIT course https://ocw.mit.edu/courses/sloan-s...-s12-blockchain-and-money-fall-2018/index.htm contains a chapter on Bitcoin. It seems to contain the link to some books (like https://csrc.nist.gov/CSRC/media/Publications/nistir/8202/draft/documents/nistir8202-draft.pdf) for those really interested in it.