1 bitcoin worth more than dollar

First, those that get the coins first aren't "distributing" them into larger circulation. If they generate a block and get the reward, they either save the bitcoins or buy goods/services with them. This is not "distributing", but just normal trade.

Second, how else do you bring coins into the market? Be forced to buy them from the system's founder? I doubt that would catch on. Reserve a set number for each person onthe planet and give it to them when they ask for them? I don't think I could count all of the problems with that idea. Hand them out some arbitrary number of some supply in a first come first serve manner? I don't see how that would be an improvement.

The system needs people to generate blocks in order to provide the security of the system, but generating blocks has costs associated with it (hardware, electricity). Why not reward those block generators that are providing the system's security with new coins for each block they generate, at least until the number of transactions per block grow to a point that block generators can charge transaction fees?

Block generators aren't just generating blocks for the fun of it...they want bitcoins so they can spend them, which means those bitcoins will go to others, who can then further spend them, etc. Anyone can do it. GPU mining is profitable for most who wish to make the investment. There's no central authority choosing who gets to generate new blocks. Each person chooses whether they want to generate blocks or not.

If you don't want to generate blocks, but still want bitcoins, then you offer goods/services for bitcoins.

So far no one has thought of any less arbitrary way to introduce bitcoins into the network while continuing to support the security of the network at the same time.

And the term "proof-of-work" is misleading. They're generating blocks in such a way to deliberately make it difficult for someone else to attack the network by generating replacement blocks in an attempt to double-spend their bitcoins. They're not doing these calculations as an attempt to prove they're not some malicious node. Block generators do the work of creating a block, and if someone wants to double-spend their money, they have to generate that block and every single block that's been generated afterwards with at least the same total difficulty of the other blocks. This can only theoretically be accomplished if they have more processing power than the entire bitcoin network, and even then it would take a long time to do unless they had a lot more. Otherwise they just fall further and further behind as the bitcoin network block generators increase in power and the difficulty increases. Contrary to the opinions of some, these calculations are not wasteful, but are a necessary part of the system's security.

If bitcoins become so valuable, this by definition means that people are offering and trading MORE goods and services to get bitcoins, not less. Prices will adjust! Trades will continue to be made. That is not what I would call an economy grinding to a halt. This is the opposite of grinding to a halt.

You do realize that bitcoins are extremely divisible, right?

You have heard of Time Preference, right? People aren't going to stop buying goods and services altogether because they believe they could buy more in the future. Sure they'll actually save more than they would with a money that loses value over time, but they still have necessities they want to buy, and toys they want to play with now rather than later, old goods that wear out, need new cars, want a new house (or another house), etc. Why do you think people want money in the first place? To live a long destitute life and maybe spend it if they don't die first?

People have used gold as money for thousands of years...how come suddenly current generations are trying to stock up on it more than previous generations? This surely couldn't have anything to do with the insane economic environment created by the various governments, their central banks, and the giant businesses practically created by those governments!?

Bitcoins will never become "too rare" for internet transactions. The protocol currently supports the total bitcoin supply being divided into 2,100,000,000,000,000 units, and that can always be changed if most bitcoin users think they need it to be divided further.

Best description I've seen yet. Granted, I'm impressed with how much momentum they seem to have already collected, so I feel like their implementation is sound, but still tin-foily.

They are working on a real problem though. Paypal kind of works, but isn't ideal.

I'm fairly certain that more money is spent to create & manage a single US dollar in circulation than is used for a single bitcoin unit. The latter has no paper form, no need to be physically lugged around, no ongoing R&D design overhead spent on counter-counterfeiting measures, no Department of Treasury budget costs, no Secret Service budget costs, no banks or bank vaults, no armored trucks with armed guards lugging money bags... I could go on but I'll stop.

To address from a different angle, the phenomenon where you say electricity is being "wasted" to produce a bitcoin is analogous to the creation of a US dollar. Not to the using of it or acquiring of it. You can buy and acquire a bitcoin fairly quickly and cheaply, CPU/electricity-wise. Much more so than if you had to "mine" it. Much like dollars. Much cheaper/easer/faster to "buy" a dollar than to construct one out of thin air. (A legal one, anyway.)

This was an excellent explanation, and it's a really brilliant idea. And the fact that it already has an impressive perceived value (parity with USD), I would totally accept it as a form of payment. It will be interesting to see what this does over time.

I followed all kinds of links and couldn't figure out bitcoins. This link actually answered some questions. Sounds really fascinating. Definitely will look into this more.

> I tried looking it up, can't seem to understand what it really is.

Not really, but to make MORE bitcoins yourself you would need to expend a fair amount computing power that chews up a fair amount of electricity. Here's a chart showing that possibly as the price rises, the amount of computing power (and thus electricity) rises to match. http://www.bitcoin.org/smf/index.php?topic=2399.msg42269#msg...

And it can be quickly sent and received over the internet anonymously, which is something gold cannot do.

Ecosystem? How about the Payment portion of the ecosystem ... let's take a "competitor", PayPal, for example. When you send $100 to a business using your Paypal, the recipient gets $97, or less. With bitcoin, when you send $100, the recipient gets $100 (at least until fees are necessary ... but even when that starts being necessary the fees should be just a FRACTION of what Visa / MC / PayPal / etc. take.)

I'll agree that it's confusing, but I will also say that it's less confusing than our practices with mainstream fiat currency.

The only part of the economy that's "destroyed" is access to some of the bitcoins. All the goods and services that were there before the wallet is destroyed are still there after the wallet is destroyed. The effects of a destroyed wallet are limited to the owner of the wallet and their plans for the money...A good reason to learn how to backup your wallet!!

You haven't destroyed part of the economy. You've just made everyone else's bitcoins worth a little bit more.

Please tell us why it is absolute bullshit?-

(2.10.11, at around 14:10 MST): How does this have any positive karma at all?

Bitcoins are a creation by some who don't understand what a currency is. Bitcoins back to nothing and are only useful to the extent that you can fool another ideologue into taking them; for as long as they've been around, it is far, far easier to obtain goods or services with Warcraft gold or Microsoft Points, which aren't even trying to be universal currencies. (Just yesterday I was on a blog that cataloged the reasons Microsoft gave for various bannings, and selling services for Microsoft Points was a very common one. It's so easy Microsoft considers it a pestilence.)

Last time this came up on HN BitCoin's FAQ had a question directly asking what useful thing it backs to. I say "asking" because the answer was basically no answer at all. I see it is no longer there. This is because if they can't answer it, it is better for them not to bring the question up at all, so I guess it's a good move for them.

Currencies have to back to something. Dollars back to being able to pay the various governments of the US not to throw you in jail for breaking various laws (tax, fines, etc); a dollar is useful even in Africa to someone not subject to those laws, because you can trade it to somebody else who has that use. The way an economy works allows the value of a dollar to appear to become severed from its backing and just float in space, propped up only by mutual consensus, but this is an illusion. When the backing goes, so does the currency. History's full of examples, just look up "hyperinflation".

(Also note the difference between backing and rarity. Anybody can make something rare, backing means it's actually worth something even on its own.)

Bitcoins provide an interesting technology platform around which to build a currency, but trying to use them directly as currency is only slightly different than using Monopoly money, and the differences aren't relevant.

The idea is that it's not under any entity's control, and the amount of currency grows in a predictable (and decreasing) way. This should prevent the crazy inflation we've seen occur with normal currency where the government can always just print more.

But that doesn't change the fact that, since I was able to get $12.50 every 250 days and now I can get $50 every 1250 days, I'm getting less money per day than before.

I see a lot of people basically saying this same thing. It seems to me though the real question is how easily can I sell my bitcoin for a dollar?

To me at least that seems more defining as a currency rather than simply say a digital good.