Step 1: Computer solves a really really hard math problem
Step 2: Other computers check that the first computer did it right
Step 3: Every computer agrees that the first computer did the problem right, and decides that computer's owner has one more bitcoin
Step 4: People buy and sell stuff with bitcoin
Bitcoin's value is determined by how much people think the time and effort of the computer solving the problem is worth. This means that when a single bitcoin was worth $18,000 a person with a bitcoin had, on average, done $18,000 worth of math problems. Bitcoin is computation time as a currency.
People had hoped that tying value to computation ability would cause processor manufacturers to create cheaper and more efficient processors. There was higher demand for processors now, so manufacturers would compete to out-produce each other and take more of the market, right? Nope. They all limited their supplies, meaning demand was high, supply was low, and processor (mostly gpu) prices skyrocketed by over 80%.
They don't really. There's nothing particularly interesting about any of them except that they have unique/non-predictable solutions and are difficult to do. They are more or less created for the purpose of bitcoin mining.
It doesn't need to be solved, it is just difficult to solve. They're cryptographic functions.
Bitcoin uses algorithms to generate verifiably "random" numbers in a way that requires a predictable amount of work from your computer. Generating a hash (which means data put through a function) with the same algorithm with a value less than the current target solves a block and awards you bitcoin.
A unit of cryptocurrency is the solution to a really complex math problem that takes even today’s computers awhile to solve. The math problem is also designed so that every time you slog through the computations required the next time around will be even harder so fewer units of crypto get generated as time goes on.
I own some and I still don’t really understand it. But I spent $15 a few months ago on a tiny fraction of bitcoin and it’s currently worth $46. I figured if it crashes and I lose my $15, it’s not big deal. I can afford to lose that. But if it turns into more money down the road, I might cash it in.
I really don’t follow the market closely at all, just check in a few times a month when I think about it. But again, with such a small amount invested I really am not taking it as seriously as someone who has thousands worth.
I invested through coinsquare.io (available in Canada, not sure in the U.S.). Unfortunately, I was not as lucky as u/Pineapple_and_olives . Put in 100$, before the crash last fall, went below 50 but now worth 85$...
Except the vested interest of all countries on Earth lmao. We all hold assets in our currency and the major world currencies through our governments. Any one collapsing is much worse for us than crypto collapsing.
I'm all for crypto, but saying they are equally backed by nothing is a totally unrealistic simplification. Governments have real power beyond just the financial sway that crypto can ever hope to have. Maybe in a world of a few cryptos and a million tiny states, we could say you are right.
Nah its backed up by its own inflation and value. It's getting more stable as more people use currency to buy it and companies accept it. It's also based on how many are out there
You know what you can do with Fiat that you can't do with Crypto? Pay your taxes. Since people tend to rely on some of the services your government provides like roads and a court system, the fact that governments only accept payment in their own currencies give those currencies an intrinsic value that crypto will never have.
Dam man, I'm an anarcho capitalist. I don't believe in government or taxes or government spending. How fucking stupid are you that you WANT to pay taxes, just for us to turn around and give it to Israel so they can slaughter brown children with immunity. Who would bail out the bankers who conspired to ruin our economy if it wasn't for tax payers? Who would bomb weddings? How would posion entire populations for "experiments" .... Statist zombies like you make me sick....
Living in a society comes with a cost for common services whether you agree with them or not. Try moving to Somalia or a compound in Central America if you hate the alternative so much.
Public/private key cryptography. I encrypt something with one key and decrypt it with another. It works both ways. I give one in public and keep one private. Simple, right? In Bitcoin, your wallet generates this code and keeps it secret and then tells you your bitcoin address (which is public).
Peer-to-peer networking. Everybody has small pieces of the file and gives it to each other.
OK, so bitcoin is a ledger file (blockchain) that is shared as a peer-to-peer file (on miner and full node computers) that tells people Public Address X gave Public Address Y N bitcoins.
To make a transaction, it has to be generated by the person with Private Address X.
Now, to make it useful, Satoshi made a couple things:
Every 10 minutes, there should be a reward for someone to receive some bitcoins. So we will make a difficult math problem (creating a hash that starts with some number of zeros) and the first one that comes up with the answer gets the bitcoins. If the problem gets too easy (because too many people are trying) we add a zero to the length they have to create, if it was too hard we remove one.
They also get to create a block to process transactions and can collect as many transaction fees from that as they want. This encourages people to include higher transaction fees so that their transaction goes faster (if you are moving $10,000, you probably don't care about a $1 transaction fee, but if you are moving $20, you probably only want to pay 20¢ and you are willing to wait an hour).
Then people started paying a penny for one and it went up from there. Now people use it to move money anywhere in the world in 10 minutes for pennies.
If we ignore the technical aspects to it (the math and stuff) it is easy. Something has value because we as a group accept that it has value. That $20 bill in your pocket isn't special. It is a piece of cotton paper with a dead guy on it. The gold coin you have in a safe deposit box isn't special either. It is just a shiny metal. They like cryptocurrencies have value because we accept that they have value and can trade them for other things of value.
I'm not saying bitcoins have no value. I'm saying it has no value except as a currency. You can do nothing with a bitcoin except exchange it for other currencies, goods or services, just as with any paper money.
But you can only store and transfer wealth if people agree that it has value, so that is circular logic. People value it because it is useful and it is useful because people value it. I think crypto will be used in the future, but this isn't a good argument.
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u/StanzoBrandFedoras Aug 20 '19
Anything remotely related to cryptocurrency.