|
Just added explanation to the response in case some people are not convinced about bitcoin because of the Mt Gox affair. 
|
|
|
|
|
Nicolas Dorier wrote: Mt Gox Bitcoins were not real bitcoin, and thus, could be printed by Mt Gox.
I thought all Bitcoin mines were able to print their own currency. How was Mt Gox different?
How do I know if a source is not legitimate?
The report of my death was an exaggeration - Mark Twain
Simply Elegant Designs JimmyRopes Designs
I'm on-line therefore I am.
JimmyRopes
|
|
|
|
|
Good question. The difference is that, due to how BTC is designed, you can only print 25 BTCs every 10 minutes.
But to do it you have to solve first a crypto puzzle, in concurrence with all miners in the world. Which take lots of work, money, and computing power. (maybe more than 500 times the best performing computer in the world. You can verify how much on some website about bitcoin, this is verifiable.)
In other words, nobody can individually decide to add "200 BTC" to their account out of nothing, that is, without solving the puzzle.
But for Mt Gox BTC, this money had no obligation to match the number of BTC they had in the vault. It is the same as when our money was created : everybody had gold, and used bank to store them, and in return banks gave you bills... but at some points banks printed more bills than what they had in the vault.
|
|
|
|
|
Nicolas Dorier wrote: In other words, nobody can individually decide to add "200 BTC" to their account out of nothing, that is, without solving the puzzle.
I understand up to this point.
Nicolas Dorier wrote: But for Mt Gox BTC, this money had no obligation to match the number of BTC they had in the vault.
How were they different?
Nicolas Dorier wrote: at some points Mt Gox printed more bitcoins than what they had in the vault.
How did this happen? And, more importantly, how do I know that a mine I am dealing with isn't doing the same thing?
The report of my death was an exaggeration - Mark Twain
Simply Elegant Designs JimmyRopes Designs
I'm on-line therefore I am.
JimmyRopes
|
|
|
|
|
When you want to store real bitcoin you have a public/private key that represent your account.
If you loose private key, you loose money. That's why people are more confortable to store the BTC on BTC banks like Mt Gox.
If you have the private key, and the public key of an account, you are assured that you are dealing with real bitcoins. You can verify the amount on site like this one[^], it will confirm how much you have on your account. You can also code your own program to check it based on the bitcoin protocol stored on github. (The amount of money you have is tracked and synchronized across all miners in the world, and you can be one if you want)
Such site just ask to all miners what is the ledger of bitcoin, and take the version that is the most shared among miners. (The ledger is the history of all transaction that ever happened on bitcoin)
If someone decide to cheat the public ledger of bitcoin, he has to convince at least 50% of all miners in the world to take his version. Which is very hard (in fact exponentially hard with time).
On the other hand, Mt Gox BTC were not tracked by the ledger. It was simply a bill backed by BTC but "payable to the bearer on demand" exactly like a USD dollar bills was when it was backed by gold/silver. (Like this bill was)
However, nothing prevented to issue more dollar in circulation than the amount of gold that really existed. That's why the "Fractional reserve system" was created : we could have at most 12:1 bills in circulation that what really exist in gold in the vault. However such limit did not applied to Mt Gox, bitcoin being not regulated.
Now that US dollar is not backed by gold, such limit has not much sense since the federal reserve can print as much money as they need. We have the fractional reserve system, but if there is ta crash, more dollar will be printed by the federal reserve, and the money will loose value in consequence.
How to avoid to loose money like that in bitcoin: If you deal with bitcoin, manage your own keys by yourself, never give your money to "a bank".
modified 2-Mar-14 8:22am.
|
|
|
|
|
Good explanation. I would just like to add that anyone offering bitcoin services, regulated or not, under a "fractional reserve system" is essentially a scam. There is absolutely no reason for bitcoin exchanges or banks to issue more currency than they actually have, except to profit in dishonest ponzi scheme fashion. The whole point of bitcoin is to avoid such problems inherent with fiat currency :/
|
|
|
|
|
That's right. Regulated or not with fractional reserve, a bank rush will always kill a fiat currency. A fractional reserve is just a hack.
Banks have originally been created because it was more convenient and safe to transfer physically bills that real gold.
A real bitcoin is easily transferable so there is no reason for banks to exist. (In bitcoin, a bank is whoever got hold of a private key on one's behalf)
The big problem of bitcoin is that the average person is so careless with what he installs on his computer, that he can't take the responsability to keep his money if stored digitally.
But any transfer of responsability bring back a fiat currency backed by BTC...
I'm not sure how the problem can be solved... but at the same time not sure that it should be solved.
|
|
|
|
|
Very good explanation.
N.D. wrote "more dollar will be printed by the federal reserve, and the money will loose value in consequence."
Therefore the federal reserve is not alone to print, it is a little more complicated and decayed if we account of :
http://www.fraudfighter.com/counterfeit-detection-id-verification/bid/75858/How-much-fake-money-is-in-circulation
Someone said there is fake money (dollars) equal to the real currency in U.S. circulation.
So we should need to talk about the american debt ($3.66 trillions) which is not formed in banknote (paper'presidents) and certainly not backed by Gold, this participe to devalue the money.
On cheat speciality never give a date...the money change should be the fault
Bitcoin needs to be regulated? secured?...i.e. a fed bank (of world?)
Finaly if BTC will success alone, it will need to be partialy held by goverment(s) to save their money and make their legal Counterfeiting, otherwise they'll forbid to their national to play with! Pretext is now found "Mt Gox" and others coming soon!
|
|
|
|
|
Surely enough, nobody can print a bitcoin, legally or not.
But hey, no media will ever talk about that, don't they ?
And you are right, the fall of Mt Gox will likely cause bank rush in other exchange either to convert into real BTC or USD...
I'm waiting patiently the cheap bitcoins I will reap under the ash of the bang.
Bitcoin is here to stay because of its intrinsic value, regardless of bad publicity.
When the national currencies will fall under their debt, people will seek a replacement.
And the only replacement that is garanted to protect them to be abused again will be bitcoin.
|
|
|
|
|
I use it when I want to pay for a hit on my enemies, purchase drugs or when ordering trafficked women.
|
|
|
|
|
Where do I meet these women? 
The report of my death was an exaggeration - Mark Twain
Simply Elegant Designs JimmyRopes Designs
I'm on-line therefore I am.
JimmyRopes
|
|
|
|
|
When he's done with them.
|
|
|
|
|
JimmyRopes wrote: Does anyone use Bitcoin[^] and, if so, for what purpose?
For what purpose does one hold on to money?
Used it (bought software), still own a tiny amount and hope that it survives.
Bastard Programmer from Hell 
If you can't read my code, try converting it here[^]
|
|
|
|
|
How long ago did you buy it? Do you remember the price?
I am thinking of trading Bitcoin on the FX markets and do not have enough historical data to back test a system yet.
It did take a plunge but seems to have rebounded. I am a little confused about if it will act like national currencies or have it's own rules due to lack of central bank manipulation.
The report of my death was an exaggeration - Mark Twain
Simply Elegant Designs JimmyRopes Designs
I'm on-line therefore I am.
JimmyRopes
|
|
|
|
|
JimmyRopes wrote: How long ago did you buy it? Do you remember the price?
Years ago*, less than five BC. That sounds like "Wow" when you consider the top-price BC had, but it was a major meh at the time. There wasn't an official price-quote as far as I know.
*) It wasn't an eternity ago; but it's been more than 3 times 8 months[^]
A few years ago you'd need either a credit-card or a PayPal account to order something from the US, and I didn't have either. It was cool to order "a lot" of shareware-applications and to pay using my own computer.
From a binary file.
It did not beat the coolness-factor of getting "real" dollars at your bank, add in a carbon-copy paper and some cardboard to prevent people from holding it up to a lamp to see what's in there, and to seal it with lots of spit. It would get special stamps reading airmail and Priority Shipment, and an extra label for some weird customs.
JimmyRopes wrote: I am a little confused about if it will act like national currencies
You mean "fiat", and no, it's not.
JimmyRopes wrote: have it's own rules due to lack of central bank manipulation.
..and due to other features. I'm guessing that it'll be a combination of the merits and problems of the two extremes; fiat and gold.
One of the most important features of a currency is the trust that one can use it for trade. That's the habit that has keeping fiat alive; that's the argument to dismiss gold as money.
BC OTOH now has to compete with a host of new cryptocurrencies. If more currencies become available to me, each of them accepted in my habitat, where would one place their eggs? Perhaps it is impossible to generate more BC, but it is obviously possible to generate more crypto-currencies.
JimmyRopes wrote: I am thinking of trading Bitcoin on the FX markets
BC is still being introduced, and will not behave like the traditional patterns. Small events, speculation and rumours have a large impact on the price; acceptance and price change by the day, and it'll be impossible to use an AI to predict what will happen. If a single state prohibits it's use (or accepts taxes in BC), things will change very quickly.
If you want historic data, try this[^] chart. Click on "Load Raw Data" for a nice table 
Bastard Programmer from Hell
If you can't read my code, try converting it here[^]
|
|
|
|
|
Thanks for the information.
The report of my death was an exaggeration - Mark Twain
Simply Elegant Designs JimmyRopes Designs
I'm on-line therefore I am.
JimmyRopes
|
|
|
|
|
It's very useful when you need to pay for assassinations you order, illegal pharmaceuticals transactions, those kind of things.
--
If money is your hope for independence, you cannot reach it.
Being loved gives you strength,
while loving gives you courage.
|
|
|
|
|
Sign me up. 
The report of my death was an exaggeration - Mark Twain
Simply Elegant Designs JimmyRopes Designs
I'm on-line therefore I am.
JimmyRopes
|
|
|
|
|
You'll find more traces of coke on a dollar than on a BitCoin 
Bastard Programmer from Hell 
If you can't read my code, try converting it here[^]
|
|
|
|
|
Jimmy, recently I had to explain that to a lots of people in my entourage.
I wrote an entire explanation on medium[^].
It contains what I told you, plus some additional background, and in a more polished way.
|
|
|
|
|
Thanks for the information.
The report of my death was an exaggeration - Mark Twain
Simply Elegant Designs JimmyRopes Designs
I'm on-line therefore I am.
JimmyRopes
|
|
|
|
|
Bitcoin is absolutely useless for lighting cigars.
I may not last forever but the mess I leave behind certainly will.
|
|
|
|
|
Anyone noticed in movies no one seems to use Windows the most popular OS, no one use Google the most popular search engine, no one uses internet explorer the most popular browser. Fiction indeed
|
|
|
|
|
|
I guess it should have been the most popular desktop web browser.
|
|
|
|
General 
News 
Suggestion 
Question 
Bug 
Answer 
Joke 
Praise 
Rant 
Admin 
Submit an article or tip
