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What Is a Bitcoin, Really?

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Re: What Is a Bitcoin, Really?

#41

Post by Sammi »

leni536 wrote: post #5
ghshephard wrote: post #4

Useful 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.

Yeah, it should be something like: "A private key is nothing but a number roughly between 1 and 2^256, that is only known by you. This number is usually pseudorandomly generated by your bitcoin client, but it could be generated in any way. The important thing is that it is an uncommon large number, that others will not be able to easily guess."

Re: What Is a Bitcoin, Really?

#42

Post by michael_nielsen »

diminoten wrote: post #35

I became familiar with what Bitcoin actually was via an article posted here about 7 or 8 months ago. It was a very long article, but it started from zero assumptions and worked through designing a crypto currency, bringing up each problem and then explaining how Bitcoin solves that problem. I wish I could supply a link to it - maybe someone else has the article?

Possibly you're thinking of my article "How the Bitcoin Protocol Actually Works": http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-a... It was on the HN front page 7 months ago.

Re: What Is a Bitcoin, Really?

#43

Post by conroe64 »

aggronn wrote: post #29
jdreaver wrote: post #16

Earlier quoted context omitted.

> Ah, yes. This is classic. The orthodox economists might tell you that Bitcoin shouldn't have any value at all. Yet, I can sell 1 BTC and pay for months of gas. I'd rather have a running car than an economist's opinion. I still don't understand how economists can say that BTC has no "intrinsic value," so should be worthless, but the fiat currencies around the world are just dandy. The whole concept of "intrinsic val…

> I still don't understand how economists can say that BTC has no "intrinsic value," It really annoying to me that people keep putting up this straw man. What economist is saying that BTC has no intrinsic value and is thus worthless? Really? You learn in ECO101 that currency only has value because of what you can exchange it for. Money demand is not a fringe concept in economics--its a core concept that anyone in any…

This one does...

http://smilingdavesblog.blogspot.hk/2012/08/bitcoin-all-in-o...

Re: What Is a Bitcoin, Really?

#44

Post by jc123 »

aggronn wrote: post #29
jdreaver wrote: post #16

Earlier quoted context omitted.

> Ah, yes. This is classic. The orthodox economists might tell you that Bitcoin shouldn't have any value at all. Yet, I can sell 1 BTC and pay for months of gas. I'd rather have a running car than an economist's opinion. I still don't understand how economists can say that BTC has no "intrinsic value," so should be worthless, but the fiat currencies around the world are just dandy. The whole concept of "intrinsic val…

> I still don't understand how economists can say that BTC has no "intrinsic value," It really annoying to me that people keep putting up this straw man. What economist is saying that BTC has no intrinsic value and is thus worthless? Really? You learn in ECO101 that currency only has value because of what you can exchange it for. Money demand is not a fringe concept in economics--its a core concept that anyone in any…

> You can make the argument that the long term value of BTC is zero because there's nothing that guarantees it continued existence, like US law guarantees the existence of the dollar.

The Internet guarantees the continued existence of BTC.

Re: What Is a Bitcoin, Really?

#45

Post by jc123 »

ghshephard wrote: post #4

Useful 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…

> "A private key is nothing but a large pseudorandom number roughly between 1 and 2^256

Note: Nearly every 256-bit number is a valid private key. Specifically, any 256-bit number between 0x1 and 0xFFFF FFFF FFFF FFFF FFFF FFFF FFFF FFFE BAAE DCE6 AF48 A03B BFD2 5E8C D036 4141 is a valid private key.

The range of valid private keys is governed by the secp256k1 ECDSA standard used by Bitcoin.

Source is the Bitcoin wiki, https://en.bitcoin.it/wiki/Private_key which surprisingly isn't listed as one of the references in the post.

Re: What Is a Bitcoin, Really?

#46

Post by micahammon »

gaelow wrote: post #32

A bitcoin is a commodity. A small piece of a complicated crypto system you can buy or decipher or even trade for goods (in very few and restricted cases) and has practically no use apart from storing it in the hope to get a benefit in the near future by selling it at a higher price. Have you got an old VCR? Well, a bitcoin is just like that, or it will be soon (Only you can't burn a bitcoin in the hope to get some he…

Besides ease of international transactions, consider that only 41% of adults in developing nations have bank accounts and only 7% of adults in developing nations have credit cards. With Bitcoin and perhaps technology built around it, they can now have access to banking-like features, but without the credit profile which they probably lack, and importantly they can join the digital age and conduct transactions online without the need for credit cards.

Re: What Is a Bitcoin, Really?

#47

Post by [deleted] »

ericecook wrote: post #40
ap22213 wrote: post #7

I 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…

I would argue that most of the perceived value right now is speculative. The actual benefits over using USD in transactions is marginal, for most use cases. IMO, the speculation comes from the enormous potential of the idea. What is something you can do with an electronic currency, not tied to a single government, which has a great deal of value to the average person? I don't know the answer to that question, but I s…

[deleted]

Re: What Is a Bitcoin, Really?

#48

Post by sirsar »

justinreeves wrote: post #19
sirsar wrote: post #12

Earlier quoted context omitted.

> 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. It's not common yet, but I have in fact saved money by buying with bitcoins, because the merchant passed on some of the savings. > Isn't it just easier to buy things with Dollars? Sure, if you're allowed to, and you have that preference, why not? Bitcoin can faci…

>> What happens when the value of a coin is less than the mining costs or ledger maintenance? > There are transaction fees that go to the block miner. The issue here is that they go to the person who mined the block originally, but they aren't passed on to those who are simply running the client to maintain the ledger. With the increased difficulty in mining, it's very unlikely for anyone without a large investment i…

You are mostly correct, but I'd like to make some clarifications.

>they aren't passed on to those who are simply running the client to maintain the ledger.

The word "maintain" is ambiguous here. When I run bitcoin-qt on my computer, I have the whole blockchain locally, and I relay blocks created by others, but I do not "maintain" the blockchain in the sense of adding or subtracting from it beyond the transactions I create myself to spend my own money.

>With the increased difficulty in mining, it's very unlikely for anyone without a large investment in hardware, that you're ever going to make money on the fees.

Correct, so I don't mine.

>It provides no incentive to run the full client to help the network confirm transactions.

Again, "help" is a bit ambiguous. When I run bitcoin-qt, I relay transactions, but I do not contribute any processing power to confirmations. "Confirming" a transaction means including it in a block, an d only miners create blocks.

Now, it is a bit of a problem that there is little to no incentive to run a validating client, i.e. one that accepts transactions, verifies that they are cryptographically and monetarily valid, and passes them on to other people. We shall see if another cryptocoin solves this issue.

Re: What Is a Bitcoin, Really?

#49

Post by tabrischen »

ap22213 wrote: post #7

I 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…

You're not the only one. I've been following bitcoin for a while now, and still learning little nuances of the bitcoin protocol everyday.

For instance, I just learnt recently that there's transaction cost associated with each transaction, and if you set the transaction cost to zero, the transaction may take a while to get accepted (or never) into the blockchain because of the reduced incentive to miners.

This comes as a bit of surprise to me because one of the popular benefits of bitcoin touted by advocates is the reduced transaction fee over traditional means of monetary payments, but I guess that's a fault in my own understanding as 'reduced' does not mean 'none'.

The complexity of the concept is a barrier to the mass adoption of bitcoin. Wallet and payment merchants make it easy for people to use bitcoin without understanding the underlying technology, however I believe there's still a perception problem. People are hesitant to use things they can't wrap their minds around, especially when it's tied to money.

We need more articles like this that can ELI5 to lower that barrier.

Re: What Is a Bitcoin, Really?

#50

Post by justinreeves »

sirsar wrote: post #48
justinreeves wrote: post #19

Earlier quoted context omitted.

>> What happens when the value of a coin is less than the mining costs or ledger maintenance? > There are transaction fees that go to the block miner. The issue here is that they go to the person who mined the block originally, but they aren't passed on to those who are simply running the client to maintain the ledger. With the increased difficulty in mining, it's very unlikely for anyone without a large investment i…

You are mostly correct, but I'd like to make some clarifications. > they aren't passed on to those who are simply running the client to maintain the ledger. The word "maintain" is ambiguous here. When I run bitcoin-qt on my computer, I have the whole blockchain locally, and I relay blocks created by others , but I do not "maintain" the blockchain in the sense of adding or subtracting from it beyond the transactions I…

Thanks for that, I was struggling for the right words when I was writing the post.

I would really like to see another crypto currency come out that addressed the validating client issue. I think that could also get more people interested in it too, since they would be earning money just by running the client.

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