What Is a Bitcoin, Really?
preshing.com
What Is a Bitcoin, Really?
1–10 of 54 posts
Re: What Is a Bitcoin, Really?
#2Good article. It's clear, covers the important points, describes the basic technology reasonably well to a non-expert, debunks some common myths, and, thankfully, steers clear of "mining".
Mining is really a terrible term for the layperson that evokes thoughts of real mines that produce resources at a continuous rate. It should be called "Distributed transaction verification. And, oh yeah, by the way, verifiers have a chance to win a prize, lottery-style."
Re: What Is a Bitcoin, Really?
#3One of the most fun parts about Bitcoin for me is that there are actually infinite public ledgers available. You and your counterparty have to agree in advance on which one you're using. Bitcoiners have solved this coordination problem by saying "We mutually agree to use the public ledger which a) adheres to all the rules in the Satoshi client and b) is longest of all ledgers satisfying that constraint."
From this follows several consequences, like there being an infinite supply of cryptocurrencies which share every advantage of Bitcoin, the Satoshi client being really freaking important relative to the "protocol" (whose only authoritative description is the Satoshi client, since in the case of disagreement with the Satoshi client the network will reject you no matter how "correct" your decisions are), and the fact that the ledger which is anointed as consensus at T1 is not necessarily the same ledger which will be consensus at some future T2 when looking back at history.
Re: What Is a Bitcoin, Really?
#4Useful description, but some not 100% accurate statements:
"A private key is nothing but a large pseudorandom number roughly between 1 and 2^256"
Not sure how the "pseudorandom" came in there - the private key might be random, or pseudo-random, or entirely deterministic - it's essential property is that it's just a 256 bit sequence that is unknown to others.
"It’s perfectly safe to give your Bitcoin addresses to other people, but extremely important to keep your private keys secret. "
The essential point trying to be made here is that the Bitcoin Address won't allow people to determine your private key. but there are a lot of reasons why you would not want to give your Bitcoin address to other people - the key reason being that it allows to track you. There is one philosophy that suggests you should change your Bitcoin address on every transaction.
Overall, though, a nice introductory article to Bitcoin - I'd recommend it to others.
Re: What Is a Bitcoin, Really?
#5Useful description, but some not 100% accurate statements: "A private key is nothing but a large pseudorandom number roughly between 1 and 2^256" Not sure how the "pseudorandom" came in there - the private key might be random, or pseudo-random, or entirely deterministic - it's essential property is that it's just a 256 bit sequence that is unknown to others. "It’s perfectly safe to give your Bitcoin addresses to othe…
Just for nitpicking, a number is neither pseudorandom or random. It could be randomly generated though.
Re: What Is a Bitcoin, Really?
#6Useful description, but some not 100% accurate statements: "A private key is nothing but a large pseudorandom number roughly between 1 and 2^256" Not sure how the "pseudorandom" came in there - the private key might be random, or pseudo-random, or entirely deterministic - it's essential property is that it's just a 256 bit sequence that is unknown to others. "It’s perfectly safe to give your Bitcoin addresses to othe…
Just for nitpicking, a number is neither pseudorandom or random. It could be randomly generated though.
There is no random number generation.. not before we've managed quantum computing.
Re: What Is a Bitcoin, Really?
#7I am kind of embarrassed to admit that after all these years, I still don't understand Bitcoin. Not the underlying software and algorithms - but the concept, the system.
I can maybe see where it'd be useful in minimizing electronic transaction costs. But, most transaction costs (credit card fees) that I pay are already rolled into the price of things, so I don't benefit by purchasing them with Bitcoin. And, I guess I can see that it'd be useful to maintain anonymity, but I don't have that use case. Isn't it just easier to buy things with Dollars?
I also don't understand the dynamics of it. Doesn't it require increasingly more capital to mine coins and to maintain the ledger? What happens when the value of a coin is less than the mining costs or ledger maintenance? Or, does the coin just keep continuing to increase in value? And, if so, what's to stop people from just using another crypto-currency?
And, what is the 'value' of a coin? The article implies that the value is created by the users' trust in the value. But, is that how currencies generally work? I had assumed that currencies either have tangible value, like precious metals, or that they are abstract derivatives of another's debt (government or people).
Re: What Is a Bitcoin, Really?
#8I am kind of embarrassed to admit that after all these years, I still don't understand Bitcoin. Not the underlying software and algorithms - but the concept, the system. I can maybe see where it'd be useful in minimizing electronic transaction costs. But, most transaction costs (credit card fees) that I pay are already rolled into the price of things, so I don't benefit by purchasing them with Bitcoin. And, I guess I…
Just to add, regarding value of (real world) coins and their relationship with precious metals one can see https://en.wikipedia.org/wiki/Fiat_money
Re: What Is a Bitcoin, Really?
#9I am kind of embarrassed to admit that after all these years, I still don't understand Bitcoin. Not the underlying software and algorithms - but the concept, the system. I can maybe see where it'd be useful in minimizing electronic transaction costs. But, most transaction costs (credit card fees) that I pay are already rolled into the price of things, so I don't benefit by purchasing them with Bitcoin. And, I guess I…
The average transaction cost is around $40 right now. You have to consider that each block mines coins, and the miners are getting those at the cost of everyone else. A decentralized system will be more expensive than a centralized one. An bitcoin transaction fee is going to be about 40 cents, plus $40 per transaction for the block reward. The value of bitcoin is that you can trade resources for trust. With traditional money you have to trust that visa or your bank will not just zero out your account.
Re: What Is a Bitcoin, Really?
#10I am kind of embarrassed to admit that after all these years, I still don't understand Bitcoin. Not the underlying software and algorithms - but the concept, the system. I can maybe see where it'd be useful in minimizing electronic transaction costs. But, most transaction costs (credit card fees) that I pay are already rolled into the price of things, so I don't benefit by purchasing them with Bitcoin. And, I guess I…
Bitcoin has just one advantage, and it's not minimizing transaction fees or anonymization. It's just that it's decentralized. The big breakthrough with Bitcoin over other distributed systems is that it prevents double-spending. That's what all the mining is for: a node verifies every transaction and then cryptographically signs the result. So you get all the benefits of a decentralized system - you don't have to trust any single source of truth, and transactions are publicly auditable - without the biggest downside they usually have.