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Forums - General Discussion - Help me understand bitcoin

Some time ago, I was having a discussion about the richest billionaires, Elon Musk and Jeff Bezos, after learning that the former now has a net worth of $302 billion dollars, making him the world's richest person. The article reported it as $300 billion in the headline before specifying $302 billion in the article itself. It struck me that that was $2 billion worth of rounding. At my current rate of pay, it would literally (I've done the math) take me over a million years of working just to earn a rounding error in Elon Musk's fortune, and that's without eating!

Anyway, it can't be said that I have the highest opinion of either of them, but our convo was about comparing like how Musk and Bezos made their respective fortunes because like when it comes to Bezos, I can understand where some of his fortune comes from in the sense that I buy stuff off Amazon sometimes and read the occasional Washington Post article. To me, Bezos seems like he was once a human being, then got rich off a couple clever ideas, then decided to lock in control of all clever ideas by gobbling up as many companies as possible (especially potential competitors), and now pays the Washington Post to editorialize against the Build Back Better Act because it would require him to actually pay taxes for a change. Elon Musk though to me is like a space alien. It's like he's a being from a different planet. His money comes from like selling cars I can't afford, sending millionaires to vacation in low-Earth orbit at the expense of the nation's real space program (I have the feeling we could've landed someone on Mars by now if not for the diversion of NASA resources to the private sector since the Great Recession, seriously), and investing in various cryptocurrencies, stuff like this, none of which touches my world. There's nothing he sells that I can afford, nothing he does that affects me in any way. He sells goods and services to rich people and manipulates money and that's about it, it seems. He talks like he's from another planet too. Named his kid after like a calculus formula because he's better than you and knows what the hell it means. Was he ever human? I can't tell. So this all led to me voicing confusion about what the hell cryptocurrency even is.

So more recently, I was looking to get clarity on bitcoin specifically because I saw a sign at the gas station near where I work saying that they now do something in bitcoin or have a bitcoin option or something or other like that and I was still totally confused about what that even meant. I was talking to a younger co-worker of mine about bitcoin because it's in the news a lot too and I really don't get it and she's young so I figured maybe she would. She explained it to me reasonably well, I think. (She's a very descriptive person who goes into detail and words things plainly so that even I can kinda sorta understand.) Apparently, she got invited to one of those gimmick parties like a couple years ago where they throw a party in exchange for you attending a meeting where they try to sell you something and the something in this case was a cryptocurrency called...I think it was "forester" or something like that, she said. Anyway, her explanation gave me some concept of how cryptos work. If I'm understanding correctly though, what she described to me didn't make it sound like currency even, but more like it's a kind of stock.

Apparently, cryptocurrency works like...you join a cryptocurrency social media circle, pay $25 or $300 or whatever to join, and in exchange you get the corresponding amount of whatever crypto they're doing. Let's say it's bitcoin, the most popular one. You then learn investment strategies surrounding bitcoin (or whatever) from that group and share your own insights, with the idea being to sell your bitcoin or whatever at a profit later on, i.e. in exchange for real money that has a physical form.

I have two questions:

1) Am I understanding this right? And...

2) Why? Like why does cryptocurrency exist? I mean it doesn't even seem to have comparable redeeming social value that regular stocks might on some superficial level. Like if you invest in a grocery store or buy stock in an electronics store or something, there's a corresponding institution that provides actual goods and services in the actual world. Bitcoin does none of that. There's no product or service corresponding to buying bitcoin. It seems like it's just a way millionaires and con artists have devised to make more money by manipulating money rather by contributing something to society even indirectly.

Am I getting something wrong here?



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honestly? 90% of people being idiots is a reason why it works



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It's mostly speculation of the worth of a data based coin. Which takes stupid amounts of energy to mine. And when I say stupid amounts I am talking the electricity demand of the average US State or European country. Big enough for China to ban it. Also the hardware the miners use is obsolete in 6-12 months. So just another way to destruct the environment.



Please excuse my (probally) poor grammar

All I know on it is it increases in value since I bought some. I have no idea how to mine it nor is there many options to spend it. It feels like its something that could one day implode and everyone loses their money but so far it just keeps rising in value. Some of cyrpto's have increased in value 1,000+ percent in one year. I would never feel confident enough to put too much money into it, but even buying $10,000worth of Solana on January 1st at $1.84 a piece is worth $1,295,869.57 today.



1. Bitcoin specifically is just a form of digital currency. Many people call it "digital gold". You don't really really need to join any groups to exchange for it. If you have an app that supports crypto wallets like Paypal, coinbase, cashapp etc you use the dollar to buy how much cryptocurrency you want. So if I wanted to buy a whole bitcoin i'd convert roughly $65k and own a whole Bitcoin. But you can also buy fractional amounts of it. So I can buy $5 worth of a bitcoin if I wanted to. The price of these currencies are always fluctuating based on volume, its usage etc.
2. This second question is harder to answer because there are a bunch of different cryptocurrency projects that do a lot of things. I own Bitcoin and Etherium so I can explain these. Bitcoin exists as a form of digital gold that's decentralized so it's not owned by any government or one person so people can sue it as a hedge against inflation. Etherium has it's own network that powers a lot of other crypto projects and has many use cases

edit: So the gas station you saw probably accepts Bitcoin as a form of payment. So someone could possibly use their bitcoin on their PayPal wallet or other crypto wallets to purchase items from the station.



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They essentially work as a private currency. Remember money itself is worthless and was created as a proxy to make ancient commerce more convenient 

Imagine you created an isolated community of 10k people and started your own currency named "MyCoin" to trade goods and services, it's similar and will work to anyone who accepts your "MyCoin" 

Just like any currency its value can up and down. The number of "MyCoins" available is not infinite (remember you created enough currency for 10k people) and if let's say 10 million people wants to buy MyCoin for whatever reason what's going to happen with the exchange rates? They will skyrocket, this is how so many people makes money out of criptocurrency even if they never used their bitcoind to buy a thing on their lives 



It's virtual money, based on a pyramid scheme. As long as more people buy into it, the value keeps going up.

It's not that different from gold. (although that still has some practical uses). The value of gold depends on what people want to pay for it, while it takes more and more energy to mine more gold. Instead of having the extract harder and harder to reach gold, bitcoin is based on a algorithm that gets harder and harder to find the next value. Compare it to finding all prime numbers to infinity. First ones are easy and it gets harder as you keep going.
Gold is much more environmentally friendly to mine though: The carbon footprint of a single mined bitcoin (including fees) amounts to 191 tonnes of carbon dioxide while to mine the equivalent value in gold, it would only take 13 tonnes of carbon dioxide.

Transactions in Bitcoin are part of a decentralized ledger that can't be manipulated since everyone has the ledger. You would have to change every single instance of the ledger simultaneously to perform a Bitcoin heist in such a way that everything still adds up from the start. Impossible. (so far) Transactions in bitcoin also cost a lot of energy, updating the ledger takes a lot of mathematics. 1 bitcoin transaction has the equivalent carbon footprint of 126 thousand hours of watching Youtube or 1.6 million visa transactions.

https://www.visualcapitalist.com/comparing-the-carbon-footprint-of-gold-and-bitcoin/

It's also all shrouded in anonymity. You have a key to access your bitcoin wallet. Hence it's popular in the black market and dark web. No records for tax agencies to look through, no way to trace transactions and as long as people support it and buy into it, a perfectly safe way to hide your money. So far the distrust in governments apparently outweighs the negative impact of bitcoin currencies on the environment and people keep supporting them.

If you value the future of your children, stay away from bitcoin and equivalent currencies.



IcaroRibeiro said:

...

Imagine you created an isolated community of 10k people and started your own currency named "MyCoin" to trade goods and services, it's similar and will work to anyone who accepts your "MyCoin" 

Just like any currency its value can up and down. The number of "MyCoins" available is not infinite ...

Actually that is not exactly right, but is close...  and what makes these digital currencies different then minting your own physical currency.  Anyone can make more of the same digital currency, it just takes some amount of effort (ie: compute, or storage, etc).  So, if you can do the tasks you can basically make your own bitcoin or whatever money.  The interesting part is that each new coin takes more effort to produce than the previous coin.  So those first growing their own money can mine / make a lot of coins relatively cheaply, and the longer more and more people have been making "free" coins, the more work it costs to make more coins.

As to why anyone would buy these worthless coins is beyond me...  it's just like any other market, except no real good other than these virtual coins that took some effort to produce.  In some ways it can drive technology which can be good for research into technology advances as if there were not already sufficient reasons to improve technology efficiencies.

Last edited by jlauro - on 13 November 2021

jlauro said:
IcaroRibeiro said:

...

Imagine you created an isolated community of 10k people and started your own currency named "MyCoin" to trade goods and services, it's similar and will work to anyone who accepts your "MyCoin" 

Just like any currency its value can up and down. The number of "MyCoins" available is not infinite ...

Actually that is not exactly right, but is close...  and what makes these digital currencies different then minting your own physical currency.  Anyone can make more of the same digital currency, it just takes some amount of effort (ie: compute, or storage, etc).  So, if you can do the tasks you can basically make your own bitcoin or whatever money.  The interesting part is that each new coin takes more effort to produce than the previous coin.  So those first growing their own money can mine / make a lot of coins relatively cheaply, and the longer more and more people have been making "free" coins, the more work it costs to make more coins.

So we can make a VGChartz coin? I'd buy some. 



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trunkswd said:
jlauro said:

Actually that is not exactly right, but is close...  and what makes these digital currencies different then minting your own physical currency.  Anyone can make more of the same digital currency, it just takes some amount of effort (ie: compute, or storage, etc).  So, if you can do the tasks you can basically make your own bitcoin or whatever money.  The interesting part is that each new coin takes more effort to produce than the previous coin.  So those first growing their own money can mine / make a lot of coins relatively cheaply, and the longer more and more people have been making "free" coins, the more work it costs to make more coins.

So we can make a VGChartz coin? I'd buy some. 

Sure that would be possible.  You would want enough earlier miners to create a decent base, otherwise once it's open someone with more advanced hardware (or at least scale) would be able to out mine and flood the initial currency and basically devalue you initial coins rather quickly.