Full disclosure: I own some Bitcoin and some Litecoin. I have done quite a bit of reading, but it is possible that some aspects of this post are slightly inaccurate, especially in the technical details.
Note for those new to Bitcoin: Bitcoin is a complicated and very new technology. Try not to have a knee-jerk reaction until you finish reading this post. There are links answering some very common questions at the bottom, but I suggest you read this post for a good overview first.
One Bitcoin is currently trading at between $300 and $400 USD.
Bitcoin?
Bitcoin is an open source software project that describes and regulates a new form of virtual currency, also called Bitcoin. If you want to check out the source code, here it is:
Source
As a virtual currency, based on cryptography, it has a number of special properties. Firstly, it fills Aristotle’s basic criteria for money in the same way that gold and US dollars do:
1.Fungible: it can be subdivided. 1 Bitcoin can be divided down into at least a hundred million “Satoshis”, the smallest unit of exchange. Even if Bitcoin replaced the entire world’s money supply, 1 satoshi would be worth about a couple of cents USD, allowing for transactions on a small scale. Additionally, up to a further eight orders of magnitude of decreasing size can be patched into the software if necessary.)
2.Portable: An unlimited number of Bitcoins can be stored on almost any electronic device (computer, laptop, cellphone) or even on paper!
3.Durable: Bitcoins cannot be destroyed, melted down, wear out or anything similar. Once you have a Bitcoin, it will exist until the end of time in theory. In practice, it exists as long as a copy of the source code and at least one computer in the world still carries the Blockchain (see below).
4.Intrinsic value: Since there is a known limit of 21 million, Bitcoin has value by scarcity.
Read more about Aristotle and money here
A diagram for ease of comparison to other forms of value storage (Bitcoin would get all ticks).
![[Image: attachment.jpg15331]](https://rooshvforum.network/attachments/attachment.jpg15331)
In addition, and unlike any other store of value, Bitcoin is a cryptocurrency. This means it has the properties:
•No transaction can ever be prevented by an authority. The software is peer to peer, so even though if the government made Bitcoin illegal, the most they could do is track down users and punish them in retrospect, they could never prevent Bitcoins being exchanged in the first place (they can’t freeze your Bitcoin account like they can with a bank).
•It is cheap. While there is a small fee for transactions, it is less than a few cents USD, and is required to incentivize miners to power the network. This fee will never be raised, nor can any government, bank or regulatory authority impose a tax on Bitcoin.
•Bitcoin is transmissible across distances that no other store of value is (besides online fiat currency). A Bitcoin user can send Bitcoins to someone standing next to them in Canada as easily as they can to someone in Africa in less than 15 minutes. Obviously, the same is not possible with gold, land etc.
•It *can be* anonymous. See Anonymity below.
Origins and Satoshi Nakamoto
Bitcoin was first proposed in a white paper released in 2008. If you’ve got some serious maths skills, feel free to take a read:
White Paper
The author published anonymously, under the name “Satoshi Nakamoto”. He then released the software for the Bitcoin protocol in 2009 (iirc). He posted on the largest Bitcoin forum in 2009 and 2010, but gradually began to tail off. When asked, he said he had “moved on to other things”. He has not posted since 2011. He handed development of the software over to a guy called Gavin Andersen. Analysis of Satoshi’s programming style indicates that he was likely not a professional programmer, but instead some kind of Maths PhD that taught himself to code for this purpose in the two years it took him to write the software. Analysis of his forum posts indicates a native level of English fluency, as well as inconsistent usage of British / American style.
The most popular theories are that Satoshi was either a British or American maths professor that deliberately altered his writing in this way to help conceal his identity or that the software and pseudonym as a whole was a collaboration between a team comprising both Americans and Brits.
Some people claim to lack trust in the software, as the unknown author means it could have been written by the NSA or someone similar with a backdoor inserted for their own benefit. This is unlikely, as the open source nature of the project means that it is highly improbable that none of the contributors or reviewers since has spotted the weakness.
However, no one knows for sure.
Satoshi Nakamoto is also now a very rich. No one knows how much mining he did himself in the early days of the software, or if he has been active buying and trading since, but it is very likely that he has hundreds of thousands of Bitcoins. There is a strange stash of almost a million Bitcoins that has yet to be touched that no one is sure if Satoshi has access to or not. This alone is worth more than $300 million USD at today’s prices. In addition, he could have any number of other accounts that were never made public.
Mining
Bitcoin is generated by mining, or “hashing”, which is where your computer runs through a ton of large (64 digit) numbers looking for one which matches a prescribed set of attributes (similar to brute force code breaking). This is to do with the white paper Satoshi released, cryptography and proof of work. I don’t understand the details that well myself. Suffice to say, if your computer finds one that fits, the system pays you out some bitcoins.
You gotta be quick though, because if someone else finds the next number before you do (which is a function of computing power and chance), then they get the payout, release that number onto the Blockchain (see below) and you have to abandon the work you were doing to start again from the new “checkpoint” that they’ve reached.
The software is internally regulating so that it released Bitcoins at a fixed amount every 10 minutes, no matter how much hashing power is working on finding the winning numbers. The payout for finding a winning number halves every once in a while, so that the input of new currency is on a curve increasing at a decreasing rate. Payout used to be 50, but is currently 25, and is going to halve to 12.5 in the not too distant future.
The final number of Bitcoins will be 21 million (or a fraction under) which will be reached in around the year 2140. Currently, more than 11 million Bitcoins are in existence.
Back in the early days, you could just run your laptop and mine some Bitcoins, but more and more people have joined in, and the computing requirements are now well above that of standard desktop computers (yes, even if you have a “sick gaming rig”). In fact, because even with a lot of computing power your chances of hitting a payout are quite small, miners form collectives called “mining pools” which increases their chance of finding a winning number, with the reward then shared amongst them proportionally as per their contributing computer power. This allows their return to be somewhat more predictable than it would be otherwise.
If you’re just hearing about Bitcoin now, don’t even consider mining unless you’re the owner of a large corporation with a couple million to throw at the project. A lot of specialized hardware is already running for guys that have been doing this for years and have you totally outmatched.
In fact, a lot of people got ‘scammed’ because they preordered Bitcoin optimized hardware called “ASIC miners”. These miners promised to return the several thousand dollar cost in Bitcoin value in just 10 days, and be profitable investments from then on. Of course, the companies that developed these things with the money raised from pre-orders then mysteriously “delayed delivery”, ran the miners themselves for massive profits, and will only deliver them once the network’s hashing power grows to such a size that the hardware is obsolete.
It’s too late for mining, don’t bother.
Once all 21 million Bitcoins have been mined, the miners will continue to provide hashing power to keep the transactions on the network flowing in exchange for the small fee (less than a few US cents) on every Bitcoin transaction.
The Exchanges
Of course, if you can’t mine Bitcoin yourself, you can either earn them in exchange for some service/product, or just buy them. The buying is facilitated by Exchanges, that are functionally identical to Stock Exchanges like Wall Street.
The largest exchange is now BtcChina. The previous largest was MtGox (“Mt” pronounced “Mount”), an American site that used to trade the collectible card game “Magic: The Gathering” (hence the name, “M(agic) t(he) G(athering) o(nline) (e)x(change)). MtGox is still considered the leader in terms of price change, but this is beginning to become less clear. Other popular exchanges include BTC-E and BitStamp (the UK version of MtGox).
The prices for Bitcoins differ slightly on the exchanges, which are moderated by a process called “arbitraging”. If a Bitcoin is $400 on MtGox and $350 on BTC-E, than I can buy a Bitcoin on BTC-E and sell it on MtGox for a $50 profit. These trades then raise the price on BTC-E and lowers it on MtGox, reducing the profitability of others doing the same and bringing the exchanges closer to equilibrium. However, this process is not without some risk, as not only does it require accounts with both exchanges and accepting the loss of exchange fees, but the volatility of Bitcoin could mean that while making the transfer from one exchange to another a rapid rise or crash could leave you stranded at a massive deficit, especially at a large volume.
Of course, as the paradigm-shifting innovation it is, Bitcoin is a real worry for banks, the government and online currency vendors like PayPal. This means that you can encounter a lot of difficulty (and / or fees) trying to transfer your funds from a traditional currency into or out of an exchange. PayPal has frozen a bunch of accounts that they’ve spotted shifting funds around for buying and selling Bitcoin. Banks have done the same, I know of a couple of cases in America and Australia. The US government shut down Dwolla (a PayPal alternative) recently too, because they were making it too easy for people to buy Bitcoin (and filling the void that PayPal left).
Personally, I think this is very very strong evidence that Bitcoin is a real game changer, but you make up your own mind. In any case, if buying Bitcoin be very cautious about how you do so.
The Blockchain
Bitcoin is recorded in the Blockchain, an online, freely available ledger of all the transactions made. You can check it out here:
Blockchain
Anyone with a Bitcoin wallet also has the Blockchain stored, and needs to keep it updated (wallets do it automatically). This is because the entire network is agreed upon which set of transactions has taken place, meaning no-one can “double spend” their Bitcoins.
The Bitcoin protocol itself makes the Blockchain and any updates to the software entirely “democratic”. That is, the version which has the support of 51% of the network is the only working version at any time. This means the major and pretty much only vulnerability in Bitcoin is if some malicious entitity or mining pool is able to grab control of 51% of the hashing power of the network, as they could then rewrite transactions or double spend Bitcoins at will. This is not a major concern however because:
1.The current network is incredibly large, and nothing short of the US or Chinese government has much chance at expending enough resources to make this possible. Eventually, this too will cease to be realistic.
2.Current mining pool operators are aware of this issue, and proactively take steps to stop people joining their pool or cut out current miners if they are reaching anything approaching critical mass. This is in everyone’s best interests (including theirs), as if they did seize control of the network then the value of Bitcoin would drop to zero and it wouldn’t matter how many transactions they could make, as everyone would boycott transactions until they voluntarily let go of their monopoly.
When making a Bitcoin transfer, you send out a request to the network and wait for enough peers to confirm its inclusion in the Blockchain that you know there is a (close to) impossible probability that your transaction will be overwritten because it is deemed invalid.
If I have 1 Bitcoin in my address, and I send it to El Mech, but then decide I’m going to be sneaky and before enough confirmations have been received I also send it to Aliblahba, at worst both of the transactions get identified as double spending and neither goes through and at best one transfer or the other gets counted as valid and is processed while the other is identified as double spending and is invalidated. Which one depends on which the closest network peers pick up on and propagate first.
To read more about a 51% attack and double spending, see here.
Anonymity
Bitcoin can be and is both 100% anonymous and 100% transparent. This is an important thing to wrap your head around, and one of the most easily misunderstood aspects of Bitcoin by the uneducated.
Bitcoin is 100% transparent because it is defined in the Blockchain. Every transaction ever made in Bitcoin is recorded there (and on every device that runs Bitcoin) for all time. At any stage it is possible to go back and check out the entire history of any wallet’s complete transaction list. Which addresses it sent to and received from, how much was transacted, when it happened. Consequently, the current balance of Bitcoin in any one wallet is also publicly available. If you want to try this out yourself, go to the Blockchain website (see The Blockchain above) and search the address I’ve listed under Tip Me (below). You’ll be able to see if any RVF’ers were kind enough to send me some, and how many.
Bitcoin is 100% anonymous because there is nothing linking any individual to a Bitcoin address (at least initially). If you don’t know who owns a Bitcoin address, unless they’ve used it for a service that ties it to other information such as their name or address (eg. if you buy something on Amazon with Bitcoin, and they store your wallet address alongside your email and postal address) and you can access that service’s information, there is no way you can find out. If you only ever use Bitcoin for face-to-face transactions, and don't tell anyone else your address, only you and the people you have transacted with will ever know that the wallet address belongs to you.
In addition, sites like The Silk Road take advantage of the fact that users can make just two transactions with a Bitcoin wallet (send money in somehow, then use it to buy something) and then never use that wallet again. Obviously this makes it difficult to tie such addresses to the end user. There are enough Bitcoin wallet addresses for everyone alive today to have more than 100 million each. Maybe one day this restriction will be a problem the world will have to cope with (kinda like the Y2K bug), but it won’t be in our lifetime.
Bitcoin anonymity can also be preserved by use of trading into Altcoins (see below).
Finally, there are also projects underway working on increasing the ability to use Bitcoin anonymously. For example, Dark Wallet.
Bitcoin is as anonymous or open as you want it to be. Do your research, and act according to your needs.
Potential and Merchant Adoption
Bitcoin is commonly known for facilitating the trade of illegal drugs on online marketplace The Silk Road thanks to its potential for anonymity (see above). After the site got shut down, the value of Bitcoin dropped from around $140 to around $100, but then quickly recovered and in less than two days was trading around $180. The FBI seized a bunch of Bitcoins from the site’s administrator Ross Ulbricht (aka Dread Pirate Roberts), which are publicly traceable thanks to the Blockchain. They haven’t done anything with them so far, but claim they will sell them at auction after the trial. If you’re interested in all this drama, Google it and you can read more. Silk Road 2.0 has just opened a couple of days ago, and is back in the Bitcoin business.
I would not be surprised to see a time when the Bitcoin comes to the RVF's aid, as it allows "subversive" places like this to transact without the approval of the government or feminists, no matter how mad they get.
However, Bitcoin is also seeing increasing adoption at vendors of more legitimate standing. As well as a few bars and pubs beginning to accept it as payment (there are a couple in the UK, and one in Beijing) as a publicity stunt, there are a growing number of online websites that will accept Bitcoin (check out the links at the bottom for one good example).
To integrate Bitcoin into your own business, check out:
Coinbase
Of course, as a peer-to-peer currency Bitcoin is being used between devotees for their own commerce all the time. If you do a bit more reading, you’ll find articles about people agreeing with their landlord to pay rent in Bitcoin, or having their salary paid in Bitcoin.
Some strong Bitcoin believers hold that Bitcoin will become globally adopted or be used as the next world reserve currency. It’s entirely possible, and the kicker is that for a planet of several billion people there are only 21 million Bitcoins to go around. Consequently, some analysts predict an eventual price of $100 000 to $1 million USD or more. If everyone in the world put 2% of their liquid holdings into Bitcoin, it would reach the $100 00 mark.
I encourage every RVF member to buy at least a single Bitcoin, as soon as you can. Anytime before they reach $500 USD is a bargain. It won’t be any great loss if the whole thing falls apart, but it could be an investment of incredible importance in 3 - 20 years time.
Altcoins
Bitcoin is the largest and most popular cryptocurrency, but a bunch of copies have sprung up, each proposing its own particular “innovations”. These copies are collectively called “Altcoins” or “alts” for short.
The largest altcoin is called “Litecoin” (nicknamed “chikun" by its devotees) and is currently worth about $3-4 USD. Bitcoin is about $300 - $400 USD, so as you can see there is still a lot of room for it to grow. Litecoin’s major innovation on Bitcoin is that there are 4 times as many that will eventually exist and transactions on the Litecoin blockchain are significantly faster. This leads many people to believe that Litecoin will stabilize at around 1-4th of Bitcoin’s value, and subsequently be used as “small change” in the real world. You might buy a house with Bitcoin, because you can afford to sit around and wait for the network confirmations, but you will buy your McDonalds drive through with Litecoin.
In addition, there is some merit to having a “backup” crytocurrency active along with Bitcoin. For example, having free and steady exchange between Bitcoin and Litecoin helps with anonymity, as if you are being tracked you can sell all your Bitcoin for Litecoin, and then immediately buy back into Bitcoin. However, your Bitcoin is now stored at a different address then before, but with no traceable record stored in the Blockchain.
There are a lot of other altcoins, none of which seems to be very different. This includes:
Namecoin
Primecoin
Feathercoin
Worldcoin
and a bunch more
I haven’t done a lot of research, but apparently Namecoin does have some relatively different properties. The rest are so small that they’re unlikely to be adopted by merchants, incredibly vulnerable to price manipulation, and likely to drop to zero or eventually be subsumed by Bitcoin.
Many of these altcoins are still minable using basic computing hardware, so look into that if you want. Be warned though, that lots of the software purporting to allow you to mine these currencies is really a virus that will instead look for Bitcoin / Litecoin wallets on your computer and steal the funds in them. Venture here at your own risk.
A really good article criticizing altcoins.
My opinion: Bitcoin has value and so does Litecoin. The rest will make one or two millionaires, and thousands and thousands of others will waste their money. Go play in Vegas if you’re into that kind of thing, it’ll be more fun.
Tip Me
I came a bit late to the Cryptocurrency party, and don’t have anywhere near as much as I’d like. More for demonstrative purposes than because I expect anyone to do so, appreciation for this post can be sent by any Bitcoin or Litecoin owner here:
BTC:
1NScWxVHqBDLCTdgfLjafMTDF32LbZPzFw
LTC:
LUNtCbe9C3WS5cBntqWanvpWtep9JuQmkR
Further Reading
A fantastic introduction to Bitcoin, particularly the opening couple of minutes
Get a Bitcoin wallet
Answers to all the common questions about Bitcoin:
Source
Is Bitcoin a Ponzi / pyramid scheme?
Where do I get free Bitcoins?
Note: I’ve tried a few of these, and they all require hours and hours of work to get a tiny output. You’d be better off working at McDonalds and just buying Bitcoins. Back in the day, while Bitcoin was still almost worthless, some of these sites gave out Bitcoins in large quantities, but those days are long gone. Don’t waste your time.
What if someone bought all the Bitcoins?
Won’t loss of wallets and the finite number of Bitcoins cause ridiculous deflation?
What if someone starts another Bitcoin?
Note: This is precisely what Altcoins are, and it hasn’t stopped Bitcoin’s rapid growth in the slightest.
The largest Bitcoin forum
The best source of Bitcoin news
Buy stuff with Bitcoin
A couple of incredible articles in favour of Bitcoin
http://www.devtome.com/doku.php?id=the_c...evolution;
http://astrohacker.com/ahc/bitcoin-is-th...ngularity/
Crazy Bitcoin millionaire gets excited about Bitcoin
Search “Keiser Report: Bitcoin Vs Banksters (E426)” on Youtube.
Buy a bit of Bitcoin quickly from Paypal just to get started
To find exchanges just Google the following names:
BTC-E
MtGox
BTCChina
BitStamp
There's a few others for different countries as well, so you can look into that specifically if you're not from China / US / UK.
May we all become rich on the Bitcoin!![[Image: banana.gif]](https://rooshvforum.network/images/smilies/new/banana.gif)
EDIT: forgot to attach signature, and appears I can't Edit to add it in? Gah.
Note for those new to Bitcoin: Bitcoin is a complicated and very new technology. Try not to have a knee-jerk reaction until you finish reading this post. There are links answering some very common questions at the bottom, but I suggest you read this post for a good overview first.
One Bitcoin is currently trading at between $300 and $400 USD.
Bitcoin?
Bitcoin is an open source software project that describes and regulates a new form of virtual currency, also called Bitcoin. If you want to check out the source code, here it is:
Source
As a virtual currency, based on cryptography, it has a number of special properties. Firstly, it fills Aristotle’s basic criteria for money in the same way that gold and US dollars do:
1.Fungible: it can be subdivided. 1 Bitcoin can be divided down into at least a hundred million “Satoshis”, the smallest unit of exchange. Even if Bitcoin replaced the entire world’s money supply, 1 satoshi would be worth about a couple of cents USD, allowing for transactions on a small scale. Additionally, up to a further eight orders of magnitude of decreasing size can be patched into the software if necessary.)
2.Portable: An unlimited number of Bitcoins can be stored on almost any electronic device (computer, laptop, cellphone) or even on paper!
3.Durable: Bitcoins cannot be destroyed, melted down, wear out or anything similar. Once you have a Bitcoin, it will exist until the end of time in theory. In practice, it exists as long as a copy of the source code and at least one computer in the world still carries the Blockchain (see below).
4.Intrinsic value: Since there is a known limit of 21 million, Bitcoin has value by scarcity.
Read more about Aristotle and money here
A diagram for ease of comparison to other forms of value storage (Bitcoin would get all ticks).
In addition, and unlike any other store of value, Bitcoin is a cryptocurrency. This means it has the properties:
•No transaction can ever be prevented by an authority. The software is peer to peer, so even though if the government made Bitcoin illegal, the most they could do is track down users and punish them in retrospect, they could never prevent Bitcoins being exchanged in the first place (they can’t freeze your Bitcoin account like they can with a bank).
•It is cheap. While there is a small fee for transactions, it is less than a few cents USD, and is required to incentivize miners to power the network. This fee will never be raised, nor can any government, bank or regulatory authority impose a tax on Bitcoin.
•Bitcoin is transmissible across distances that no other store of value is (besides online fiat currency). A Bitcoin user can send Bitcoins to someone standing next to them in Canada as easily as they can to someone in Africa in less than 15 minutes. Obviously, the same is not possible with gold, land etc.
•It *can be* anonymous. See Anonymity below.
Origins and Satoshi Nakamoto
Bitcoin was first proposed in a white paper released in 2008. If you’ve got some serious maths skills, feel free to take a read:
White Paper
The author published anonymously, under the name “Satoshi Nakamoto”. He then released the software for the Bitcoin protocol in 2009 (iirc). He posted on the largest Bitcoin forum in 2009 and 2010, but gradually began to tail off. When asked, he said he had “moved on to other things”. He has not posted since 2011. He handed development of the software over to a guy called Gavin Andersen. Analysis of Satoshi’s programming style indicates that he was likely not a professional programmer, but instead some kind of Maths PhD that taught himself to code for this purpose in the two years it took him to write the software. Analysis of his forum posts indicates a native level of English fluency, as well as inconsistent usage of British / American style.
The most popular theories are that Satoshi was either a British or American maths professor that deliberately altered his writing in this way to help conceal his identity or that the software and pseudonym as a whole was a collaboration between a team comprising both Americans and Brits.
Some people claim to lack trust in the software, as the unknown author means it could have been written by the NSA or someone similar with a backdoor inserted for their own benefit. This is unlikely, as the open source nature of the project means that it is highly improbable that none of the contributors or reviewers since has spotted the weakness.
However, no one knows for sure.
Satoshi Nakamoto is also now a very rich. No one knows how much mining he did himself in the early days of the software, or if he has been active buying and trading since, but it is very likely that he has hundreds of thousands of Bitcoins. There is a strange stash of almost a million Bitcoins that has yet to be touched that no one is sure if Satoshi has access to or not. This alone is worth more than $300 million USD at today’s prices. In addition, he could have any number of other accounts that were never made public.
Mining
Bitcoin is generated by mining, or “hashing”, which is where your computer runs through a ton of large (64 digit) numbers looking for one which matches a prescribed set of attributes (similar to brute force code breaking). This is to do with the white paper Satoshi released, cryptography and proof of work. I don’t understand the details that well myself. Suffice to say, if your computer finds one that fits, the system pays you out some bitcoins.
You gotta be quick though, because if someone else finds the next number before you do (which is a function of computing power and chance), then they get the payout, release that number onto the Blockchain (see below) and you have to abandon the work you were doing to start again from the new “checkpoint” that they’ve reached.
The software is internally regulating so that it released Bitcoins at a fixed amount every 10 minutes, no matter how much hashing power is working on finding the winning numbers. The payout for finding a winning number halves every once in a while, so that the input of new currency is on a curve increasing at a decreasing rate. Payout used to be 50, but is currently 25, and is going to halve to 12.5 in the not too distant future.
The final number of Bitcoins will be 21 million (or a fraction under) which will be reached in around the year 2140. Currently, more than 11 million Bitcoins are in existence.
Back in the early days, you could just run your laptop and mine some Bitcoins, but more and more people have joined in, and the computing requirements are now well above that of standard desktop computers (yes, even if you have a “sick gaming rig”). In fact, because even with a lot of computing power your chances of hitting a payout are quite small, miners form collectives called “mining pools” which increases their chance of finding a winning number, with the reward then shared amongst them proportionally as per their contributing computer power. This allows their return to be somewhat more predictable than it would be otherwise.
If you’re just hearing about Bitcoin now, don’t even consider mining unless you’re the owner of a large corporation with a couple million to throw at the project. A lot of specialized hardware is already running for guys that have been doing this for years and have you totally outmatched.
In fact, a lot of people got ‘scammed’ because they preordered Bitcoin optimized hardware called “ASIC miners”. These miners promised to return the several thousand dollar cost in Bitcoin value in just 10 days, and be profitable investments from then on. Of course, the companies that developed these things with the money raised from pre-orders then mysteriously “delayed delivery”, ran the miners themselves for massive profits, and will only deliver them once the network’s hashing power grows to such a size that the hardware is obsolete.
It’s too late for mining, don’t bother.
Once all 21 million Bitcoins have been mined, the miners will continue to provide hashing power to keep the transactions on the network flowing in exchange for the small fee (less than a few US cents) on every Bitcoin transaction.
The Exchanges
Of course, if you can’t mine Bitcoin yourself, you can either earn them in exchange for some service/product, or just buy them. The buying is facilitated by Exchanges, that are functionally identical to Stock Exchanges like Wall Street.
The largest exchange is now BtcChina. The previous largest was MtGox (“Mt” pronounced “Mount”), an American site that used to trade the collectible card game “Magic: The Gathering” (hence the name, “M(agic) t(he) G(athering) o(nline) (e)x(change)). MtGox is still considered the leader in terms of price change, but this is beginning to become less clear. Other popular exchanges include BTC-E and BitStamp (the UK version of MtGox).
The prices for Bitcoins differ slightly on the exchanges, which are moderated by a process called “arbitraging”. If a Bitcoin is $400 on MtGox and $350 on BTC-E, than I can buy a Bitcoin on BTC-E and sell it on MtGox for a $50 profit. These trades then raise the price on BTC-E and lowers it on MtGox, reducing the profitability of others doing the same and bringing the exchanges closer to equilibrium. However, this process is not without some risk, as not only does it require accounts with both exchanges and accepting the loss of exchange fees, but the volatility of Bitcoin could mean that while making the transfer from one exchange to another a rapid rise or crash could leave you stranded at a massive deficit, especially at a large volume.
Of course, as the paradigm-shifting innovation it is, Bitcoin is a real worry for banks, the government and online currency vendors like PayPal. This means that you can encounter a lot of difficulty (and / or fees) trying to transfer your funds from a traditional currency into or out of an exchange. PayPal has frozen a bunch of accounts that they’ve spotted shifting funds around for buying and selling Bitcoin. Banks have done the same, I know of a couple of cases in America and Australia. The US government shut down Dwolla (a PayPal alternative) recently too, because they were making it too easy for people to buy Bitcoin (and filling the void that PayPal left).
Personally, I think this is very very strong evidence that Bitcoin is a real game changer, but you make up your own mind. In any case, if buying Bitcoin be very cautious about how you do so.
The Blockchain
Bitcoin is recorded in the Blockchain, an online, freely available ledger of all the transactions made. You can check it out here:
Blockchain
Anyone with a Bitcoin wallet also has the Blockchain stored, and needs to keep it updated (wallets do it automatically). This is because the entire network is agreed upon which set of transactions has taken place, meaning no-one can “double spend” their Bitcoins.
The Bitcoin protocol itself makes the Blockchain and any updates to the software entirely “democratic”. That is, the version which has the support of 51% of the network is the only working version at any time. This means the major and pretty much only vulnerability in Bitcoin is if some malicious entitity or mining pool is able to grab control of 51% of the hashing power of the network, as they could then rewrite transactions or double spend Bitcoins at will. This is not a major concern however because:
1.The current network is incredibly large, and nothing short of the US or Chinese government has much chance at expending enough resources to make this possible. Eventually, this too will cease to be realistic.
2.Current mining pool operators are aware of this issue, and proactively take steps to stop people joining their pool or cut out current miners if they are reaching anything approaching critical mass. This is in everyone’s best interests (including theirs), as if they did seize control of the network then the value of Bitcoin would drop to zero and it wouldn’t matter how many transactions they could make, as everyone would boycott transactions until they voluntarily let go of their monopoly.
When making a Bitcoin transfer, you send out a request to the network and wait for enough peers to confirm its inclusion in the Blockchain that you know there is a (close to) impossible probability that your transaction will be overwritten because it is deemed invalid.
If I have 1 Bitcoin in my address, and I send it to El Mech, but then decide I’m going to be sneaky and before enough confirmations have been received I also send it to Aliblahba, at worst both of the transactions get identified as double spending and neither goes through and at best one transfer or the other gets counted as valid and is processed while the other is identified as double spending and is invalidated. Which one depends on which the closest network peers pick up on and propagate first.
To read more about a 51% attack and double spending, see here.
Anonymity
Bitcoin can be and is both 100% anonymous and 100% transparent. This is an important thing to wrap your head around, and one of the most easily misunderstood aspects of Bitcoin by the uneducated.
Bitcoin is 100% transparent because it is defined in the Blockchain. Every transaction ever made in Bitcoin is recorded there (and on every device that runs Bitcoin) for all time. At any stage it is possible to go back and check out the entire history of any wallet’s complete transaction list. Which addresses it sent to and received from, how much was transacted, when it happened. Consequently, the current balance of Bitcoin in any one wallet is also publicly available. If you want to try this out yourself, go to the Blockchain website (see The Blockchain above) and search the address I’ve listed under Tip Me (below). You’ll be able to see if any RVF’ers were kind enough to send me some, and how many.
Bitcoin is 100% anonymous because there is nothing linking any individual to a Bitcoin address (at least initially). If you don’t know who owns a Bitcoin address, unless they’ve used it for a service that ties it to other information such as their name or address (eg. if you buy something on Amazon with Bitcoin, and they store your wallet address alongside your email and postal address) and you can access that service’s information, there is no way you can find out. If you only ever use Bitcoin for face-to-face transactions, and don't tell anyone else your address, only you and the people you have transacted with will ever know that the wallet address belongs to you.
In addition, sites like The Silk Road take advantage of the fact that users can make just two transactions with a Bitcoin wallet (send money in somehow, then use it to buy something) and then never use that wallet again. Obviously this makes it difficult to tie such addresses to the end user. There are enough Bitcoin wallet addresses for everyone alive today to have more than 100 million each. Maybe one day this restriction will be a problem the world will have to cope with (kinda like the Y2K bug), but it won’t be in our lifetime.
Bitcoin anonymity can also be preserved by use of trading into Altcoins (see below).
Finally, there are also projects underway working on increasing the ability to use Bitcoin anonymously. For example, Dark Wallet.
Bitcoin is as anonymous or open as you want it to be. Do your research, and act according to your needs.
Potential and Merchant Adoption
Bitcoin is commonly known for facilitating the trade of illegal drugs on online marketplace The Silk Road thanks to its potential for anonymity (see above). After the site got shut down, the value of Bitcoin dropped from around $140 to around $100, but then quickly recovered and in less than two days was trading around $180. The FBI seized a bunch of Bitcoins from the site’s administrator Ross Ulbricht (aka Dread Pirate Roberts), which are publicly traceable thanks to the Blockchain. They haven’t done anything with them so far, but claim they will sell them at auction after the trial. If you’re interested in all this drama, Google it and you can read more. Silk Road 2.0 has just opened a couple of days ago, and is back in the Bitcoin business.
I would not be surprised to see a time when the Bitcoin comes to the RVF's aid, as it allows "subversive" places like this to transact without the approval of the government or feminists, no matter how mad they get.
However, Bitcoin is also seeing increasing adoption at vendors of more legitimate standing. As well as a few bars and pubs beginning to accept it as payment (there are a couple in the UK, and one in Beijing) as a publicity stunt, there are a growing number of online websites that will accept Bitcoin (check out the links at the bottom for one good example).
To integrate Bitcoin into your own business, check out:
Coinbase
Of course, as a peer-to-peer currency Bitcoin is being used between devotees for their own commerce all the time. If you do a bit more reading, you’ll find articles about people agreeing with their landlord to pay rent in Bitcoin, or having their salary paid in Bitcoin.
Some strong Bitcoin believers hold that Bitcoin will become globally adopted or be used as the next world reserve currency. It’s entirely possible, and the kicker is that for a planet of several billion people there are only 21 million Bitcoins to go around. Consequently, some analysts predict an eventual price of $100 000 to $1 million USD or more. If everyone in the world put 2% of their liquid holdings into Bitcoin, it would reach the $100 00 mark.
I encourage every RVF member to buy at least a single Bitcoin, as soon as you can. Anytime before they reach $500 USD is a bargain. It won’t be any great loss if the whole thing falls apart, but it could be an investment of incredible importance in 3 - 20 years time.
Altcoins
Bitcoin is the largest and most popular cryptocurrency, but a bunch of copies have sprung up, each proposing its own particular “innovations”. These copies are collectively called “Altcoins” or “alts” for short.
The largest altcoin is called “Litecoin” (nicknamed “chikun" by its devotees) and is currently worth about $3-4 USD. Bitcoin is about $300 - $400 USD, so as you can see there is still a lot of room for it to grow. Litecoin’s major innovation on Bitcoin is that there are 4 times as many that will eventually exist and transactions on the Litecoin blockchain are significantly faster. This leads many people to believe that Litecoin will stabilize at around 1-4th of Bitcoin’s value, and subsequently be used as “small change” in the real world. You might buy a house with Bitcoin, because you can afford to sit around and wait for the network confirmations, but you will buy your McDonalds drive through with Litecoin.
In addition, there is some merit to having a “backup” crytocurrency active along with Bitcoin. For example, having free and steady exchange between Bitcoin and Litecoin helps with anonymity, as if you are being tracked you can sell all your Bitcoin for Litecoin, and then immediately buy back into Bitcoin. However, your Bitcoin is now stored at a different address then before, but with no traceable record stored in the Blockchain.
There are a lot of other altcoins, none of which seems to be very different. This includes:
Namecoin
Primecoin
Feathercoin
Worldcoin
and a bunch more
I haven’t done a lot of research, but apparently Namecoin does have some relatively different properties. The rest are so small that they’re unlikely to be adopted by merchants, incredibly vulnerable to price manipulation, and likely to drop to zero or eventually be subsumed by Bitcoin.
Many of these altcoins are still minable using basic computing hardware, so look into that if you want. Be warned though, that lots of the software purporting to allow you to mine these currencies is really a virus that will instead look for Bitcoin / Litecoin wallets on your computer and steal the funds in them. Venture here at your own risk.
A really good article criticizing altcoins.
My opinion: Bitcoin has value and so does Litecoin. The rest will make one or two millionaires, and thousands and thousands of others will waste their money. Go play in Vegas if you’re into that kind of thing, it’ll be more fun.
Tip Me
I came a bit late to the Cryptocurrency party, and don’t have anywhere near as much as I’d like. More for demonstrative purposes than because I expect anyone to do so, appreciation for this post can be sent by any Bitcoin or Litecoin owner here:
BTC:
1NScWxVHqBDLCTdgfLjafMTDF32LbZPzFw
LTC:
LUNtCbe9C3WS5cBntqWanvpWtep9JuQmkR
Further Reading
A fantastic introduction to Bitcoin, particularly the opening couple of minutes
Get a Bitcoin wallet
Answers to all the common questions about Bitcoin:
Source
Is Bitcoin a Ponzi / pyramid scheme?
Where do I get free Bitcoins?
Note: I’ve tried a few of these, and they all require hours and hours of work to get a tiny output. You’d be better off working at McDonalds and just buying Bitcoins. Back in the day, while Bitcoin was still almost worthless, some of these sites gave out Bitcoins in large quantities, but those days are long gone. Don’t waste your time.
What if someone bought all the Bitcoins?
Won’t loss of wallets and the finite number of Bitcoins cause ridiculous deflation?
What if someone starts another Bitcoin?
Note: This is precisely what Altcoins are, and it hasn’t stopped Bitcoin’s rapid growth in the slightest.
The largest Bitcoin forum
The best source of Bitcoin news
Buy stuff with Bitcoin
A couple of incredible articles in favour of Bitcoin
http://www.devtome.com/doku.php?id=the_c...evolution;
http://astrohacker.com/ahc/bitcoin-is-th...ngularity/
Crazy Bitcoin millionaire gets excited about Bitcoin
Search “Keiser Report: Bitcoin Vs Banksters (E426)” on Youtube.
Buy a bit of Bitcoin quickly from Paypal just to get started
To find exchanges just Google the following names:
BTC-E
MtGox
BTCChina
BitStamp
There's a few others for different countries as well, so you can look into that specifically if you're not from China / US / UK.
May we all become rich on the Bitcoin!
EDIT: forgot to attach signature, and appears I can't Edit to add it in? Gah.
![[Image: 740px-Total_bitcoins_over_time_graph.png]](https://en.bitcoin.it/w/images/en/thumb/e/e3/Total_bitcoins_over_time_graph.png/740px-Total_bitcoins_over_time_graph.png)
![[Image: smile.gif]](https://rooshvforum.network/images/smilies/smile.gif)
