Anyone interested in Bitcoin?

[altoid]

I just came across with the Ted talk about Bitcoin, and finally took a deeper look in this virtual currency last night, and apparently people can make money out of bitcoin mining. The explanation on Wiki became too technical for me for a non-programmer.

Since there are a lot of IT people in this forum. Can anyone explain to me how the bitcoin mining works (plain english plz) and if you see it an investment opportunity?

[Triangle]

At this point, you should be a professional if you intend to make money off mining. There's now specialized hardware to do it orders of magnitude more effective.

If you feel like it, you can speculate by buying some Bitcoins and holding them. I'd start using them for private purchases before diving into it as an investor.

[altoid]

I am still confused with how the system works. So in the beginning, the creator released 21M bitcoins and hide them behind certain data block? I just can't picture how the mining works, compared to mining of gold or silver.

The exchange rate between USD and Bitcoin is quite volatile, from $2 to above $200. I will be pretty hesitant to invest at this time.

[DutchGirl]

I also heard that people have now dedicated whole specialized and very fast and smart computers to the mining of bitcoins. Since they're competing for the coins, the amount of coins per time unit and per computer has decreased to an amount where it's not very useful anymore to mine, as an amateur / as someone doing this 'for fun'.

I don't fully understand how anyone could see real value in bitcoins, to me it seems a bit like the tulip bulb craze in Holland a few hundred years ago . But I might not understand human nature or the bitcoin system well enough. For me, this not-understanding is a good reason to stay away from it.

[Triangle]

@DutchGirl: You are exactly right about the specialists competing for coins. If you use your own computer to mine for Bitcoins, you won't find a single coin in 100 years. 1/2 of the 21M Bitcoins have already been found, the difficulty is extremely high now.

@altoid: The way mining works is that a mathematical puzzle is proposed, and whoever finds the answer first and can prove it, gets awarded that coin (in effect, the answer is a "deed of property" to that coin). Every so often, the puzzle gets harder. The puzzle itself consists of finding a cryptographic hash. These are specially designed to be extremely hard to guess, so they take a lot of time to find.

Bitcoin was started in 09. Buying into it now is very risky and speculative. Certainly not an ERE type investment, where you want secure returns. If you love speculating or want to start a tech company, then it might be a good choice. For regular users, Bitcoin will be useful in the future if it succeeds, no matter if you invest now. It might be the next Paypal with lower fees, for example. Paypal is useful even if you didn't invest in it in the first years.

[mikeBOS]

I don't really see it as an investment opportunity any more than any other currency trading. And given its volatility I wouldn't store wealth in bitcoins.

Though I do imagine that a secure, untraceable currency that allows for anonymous monetary transactions will always have uses, so I don't see it going away anytime soon.

[Triangle]

I agree on "it's not an investment" (like gold isn't), and it's not a good store of value right now.

Bitcoin is not actually anonymous or untraceable. It's whole premise is that every transaction ever is public to everyone on the system. It's just that it doesn't say "Alice gave Bob 5 Bitcoins", it says "<random hash> gave <random hash> 5 bitcoins". You'd then have to find out who owns those hash addresses. So it's really pseudonymous, not anonymous.

[BecaS]

This:

"I don't fully understand how anyone could see real value in bitcoins, to me it seems a bit like the tulip bulb craze in Holland a few hundred years ago . But I might not understand human nature or the bitcoin system well enough. For me, this not-understanding is a good reason to stay away from it."

And this:

"I agree on "it's not an investment" (like gold isn't), and it's not a good store of value right now."

Bitcoin is interesting... rather fascinating to watch. I suppose, per examples given above, that there are those with sophisticated computing systems at their disposal, or they are using Bitcoin in ways that the average consumer/trader does not need, then Bitcoin has value. Otherwise, for the larger segment of the population, it's interesting to watch as an alternate currency whose rise and fall, as well as the legal entanglements that it may or may not encounter, provides an interesting insight into our global economy and into the place where international law intersects with the internet and electronic currencies.

In other words, IMHO, it's an exotic financial/legal barometer. For the moment that may be its biggest relevance to those who are not involved.

Bitcoin kind of wigs me out a little bit... not sure why... perhaps because it *is* an alternate currency. Its very existence seems to make traditional currencies challenged by global financial upheavals seem even shakier.

Of course, that's just me. Avogadro's number and moles freaked me out in high school chemistry as well, until a kind classmate told me to think of their relationship as 12 eggs in a dozen.

Eventually Bitcoin will be related to and defined in terms of some more familiar currency entity, and we'll all go "ahhh!"

Or not.

[workathome]

Sold out my bitcoins and litecoins for some Amazon gift cards. Right now, as others have stated, you're going to be losing money trying to start a mining operation. Electricity costs can be reduced with ASICs which are creating an exponential growth in difficulty - that is, the investment that you make in hardware is going to take exponentially longer to pay off as difficulty ramps up. The difficulty is directly related to the net processing power of mining networks, which are being dominated by specialized processors.

[JohnnyH]

Impressive, "Bitcoin: 1, FBI: 0"
http://www.acting-man.com/?p=26429

Also the price has fully recovered from the crash, back to $140... Damnit, I was seriously considering mining back when price was $8!

[mountainFrugal]

Also the price has fully recovered from the crash, back to $140... Damnit, I was seriously considering mining back when price was $8!

The archives are great. $140... if only! haha. @JohnnyH are you still around? Did you get some bitcoins at $140?

[fingeek]

$30 and didn't HODL

[suomalainen]

You needed diamond hands, not paper hands. Sadness.