Independent Bitcoin token money: a profound survey

terrorworld · 01-05-2012, 01:11 AM

I admit that I first thought that the Bitcoin alternative online 'money' (token exchange currency) is nonsense, like many others, because it seemed to me being 'money out of thin air resp. from using electric current (by Bitcoin Mining)' to me, after watching some superficial YouTube videos reporting about it. Now I've changed COMPLETELY my opinion about it - in deed I'm rather enthusiastic about it now

A very good Bitcoin Wiki can be found here (you can find the Bitcoin client there for your computer, too):
https://en.bitcoin.it/wiki/Main_Page

Here's a short survey about it:
From https://bitcointalk.org/index.php?topic=7269.0 (at https://bitcointalk.org/ you can find additional infos):
[I hope I don't hurt anyone's copyright here! Please complain if so!]
What BitCoin is: An agreement amongst a community of people to use 21 million secure mathematical tokens - "bitcoins"-as money, like traditional African and Asian societies used the money cowry. Unlike the money cowry:
there will never be more bitcoins [than 21 mio.]
they are impossible to counterfeit [the whole thing is based on laws of mathematics, not on trust in persons]
they can be divided into as small of pieces as you want
and they can be transferred instantly across great distances via a digital connection such as the internet.
This is accomplished by the use of powerful cryptography many times stronger than that used by banks. Instead of simply being "sent" coins have to be cryptographically signed over from one entity to another, essentially putting a lock and key on each token so that bitcoins can be securely backed up in multiple places, and so that copying doesn't increase the amount you own.
Because bitcoins are given their value by the community, they don't need to be accepted by anyone else or backed by any authority to succeed. They are like a local currency [such currencies exist, e.g., in Germany: Chiemgauer, Rheingold, Amper-Taler etc.] except much, much more effective and local to the whole world.
Also good: Wikipedia article [in many countries you can forget the comment 'The rights about it are not clear yet.' They are (it's like regional currencies, or tokens). - Central banks like the ECB are not part of the state by the way, though they've got the right to print 'paper money'].
[It isn't a 'legal payment medium', but the money on the bank accounts is not, either!]
Most important bitcoin trader at this moment: https://mtgox.com
(in Germany there's the rather new https://www.bitcoin.de/de)
Bitcoin payment 'world leader': https://bit-pay.com/home.html (with free online shop bitcoin plugins, for Magento [the Community Edition is free/Open Source], OpenCart, ZenCart).
Offline Bitcoins (print and redeem Bitcoins) at: http://bitcoin.world.eu.org/
---Bitcoin mining is not as easy as some people think: I've read that a new standard laptop would need ca. 5 years to create 1 BTC now! You normally need special expensive hardware for Bitcoin mining. Often the price for electric current can be higher than the value of 1 newly made BTC. ---
How to set up secure bitcoin savings:
see https://bitcointalk.org/index.php?topic=5194.0
- And finally:
Get bitcoin capital for your project or organisation at:
https://glbse.com/

In effect it's like homebanking - but with a token 'money' independant from banks and governments.
How about taxes: As much as I know so far it goes this way: If you make profits by selling Bitcoins (and earning Dollars, Euros etc.) at a Bitcoin trader then you've got to pay taxes based on this.

Additionally: Going back to https://bitcointalk.org/index.php?topic=7269.0 in a more profound way:
As an example of how effective the community is at "backing" the bitcoin: on April 4th 2011 30,000 bitcoins were abruptly sold on the largest BitCoin exchange, consuming nearly all "buy" offers on the order book and dropping the price by nearly 1/3. But within a couple of days, the price on the exchange had fully rebounded and bitcoins were again trading at good volumes, with large "buy" offers slowly replacing the ones consumed by the trades. The ability of such a small economy (there were only 5 million out of the total 21 million bitcoins circulating then, or about 3.75 million USD worth at then-current exchange rates) to absorb such a large sell-off without crashing shows that bitcoins were already working beautifully.
What problem BitCoin solves: Mathematically, the specific implementation of the bitcoin protocol solves the problem of "how to do all of the above without trusting anyone". If that sounds amazing, it should! Normally a local currency has to trust all kinds of people for it to be able to work. So does a national currency. And in both cases, that trust is often abused. But with BitCoin, there's no one person who can abuse the system. Nobody can print more money, nobody can re-use the coins simply by making a copy, and nobody can use anyone else's coins without having direct access to their keys. People who break its mathematical "rules" simply end up creating a whole different system incompatible with the first. As long as these rules are followed by someone, the only way BitCoin can fail is for everyone to stop using it.
This marvelous quality of not having to trust anyone is achieved in two ways. First, through the use of cutting-edge cryptography. Cryptography ensures that only the owner of the bitcoins has the authority to spend them. The cryptography used in BitCoin is so strong that all the world's online banking would be compromised before BitCoin would be, and it can even be upgraded if that were to start to happen. It's like if each banknote in your pocket had a 100-digit combination lock on it that couldn't be removed without destroying the bill itself. BitCoin is that secure.
But the second way of securing the system, called the blockchain, is where the real magic happens. The blockchain is a single, authoritative record of confirmed transactions which is stored on the peer to peer bitcoin network. Even with top-notch digital encryption, if there was no central registry to show that certain bitcoins had already been "paid" to someone else, you could sign over the same coins to multiple people in what's called a double-spend attack, like writing cheques for more money than you have in your account. Normally this is prevented by a central authority, the bank, who keeps track of all the cheques you write and makes sure they don't exceed the amount of money you have. Even so, most people won't accept a cheque from you unless they really trust you, and the bank has to spend a lot of money physically protecting those central records, whether they are kept in a physical or digital form. Not to mention, sometimes a bank employee can abuse their position of trust. And, in traditional banking, the bank itself doesn't have to follow the rules you do--it can lend out more money than it actually has.
The blockchain fixes all these problems by creating a single master registry of the already-cryptographically-secured bitcoin transfers, verifying them and locking them down in a highly competitive market called mining. In return for this critical role, the BitCoin community rewards miners with a set amount of bitcoins per block, taken from the original limited quantity on a pre-agreed schedule. As that original amount gradually runs out, this reward will be replaced by fees paid to prioritise one transaction over another--again in a highly competitive market to ensure the lowest possible cost. The transactions are verified and locked in by the computational work of mining in a very special way so that no one else can change the official record of transactions without doing more computational work than the cumulative work of all miners across the whole network.
In conclusion: All this mathematical technology may be a bit of a mouthful, but what it means in practice is that BitCoin works just like cash. Bitcoin transactions are intentionally irreversible--unlike credit cards or PayPal where chargebacks can invalidate a payment that has already been made. And there are no middlemen. Transactions are completed directly between the sender and the receiver via the peer to peer network.
Because of BitCoin's intricate design, the network remains secure no matter where or how you process bitcoin transactions. Which is incredible--no one else has ever tried to create a system that worked this way! All previous monetary systems have relied on trusting somebody, whether it was the king, town hall, the federal reserve, or banks. BitCoin doesn't. It's guaranteed instead by the laws of mathematics, and that's why it has everyone from technologists to economists very excited. I'm sure you have lots more questions, so scan the index below to see if they've been asked before, then dive in! The so-called "canonical" threads linked from this index are considered newbie-friendly zones; outside of them you're welcome to try your own luck.

terrorworld · 01-05-2012, 08:16 AM

Now who's already trading with, respectively accepting the Bitcoin as a payment method ?!
Here you can find a list:
https://en.bitcoin.it/wiki/Trade

'Real world' acceptance (of physical Bitcoins) is of course very small yet:
https://en.bitcoin.it/wiki/Real_world_shops

terrorworld · 01-05-2012, 08:30 AM

Sorry but this link mentioned above
GLobal Bitcoin Securities Exchange (GLBSE)
https://glbse.com/
(getting Bitcoins capital for projects and organisations)
doesn't work any more. (I don't know why

)

herzmeister · 27-05-2012, 12:14 AM

yup, some threads already, Bitcoin ftw...

A non-debt-based monetary system is the most important thing we must re-establish nowadays. Gold/Silver is fine too, but we live in the digital age now and send money around the world instantly. Maybe there can be both.

If there should be shortages in supply of these commodity-based currencies, people can also additionally use local barter and exchange systems for some ad-hoc liquidity (but such systems are limited in reach and are based on trust, and thus don't allow anonymity and businesses that require a certain discretion).

Such a dual system provides abundance for everyone and makes recessions impossible and a thing of the past. See also http://www.scribd.com/doc/84816011/B...and-Yang-Money (Bitcoin would be a patriarchical currency here, but one of the best we've ever had at that, because it's controlled by code that's open source, and not by an authoritarian government or central bank).

Monetary freedom ftw, we don't need central banking. I hope more and more people will wake up to these fundamental truths.

Screw Banks - YouTube

Bernard Lietaer: Money diversity - YouTube

living99 · 28-05-2012, 03:20 PM

Quote:

Originally Posted by terrorworld

Sorry but this link mentioned above
GLobal Bitcoin Securities Exchange (GLBSE)
https://glbse.com/
(getting Bitcoins capital for projects and organisations)
doesn't work any more. (I don't know why

)

Just discovered torproject.org. It uses an 'Onion router' that allows users to browse anonymously, by concealing their IP addresses. Utilises the Bitcoin digital cash system to allow users to pay online anonymously also. Just beginning to use it but beats FB/Google etc. Can be downloaded for Windows and Mac. Apparently some sites are disturbing; avoid them if so.

living99 · 29-05-2012, 11:55 PM

Quote:

Originally Posted by living99

Just discovered torproject.org. It uses an 'Onion router' that allows users to browse anonymously, by concealing their IP addresses. Utilises the Bitcoin digital cash system to allow users to pay online anonymously also. Just beginning to use it but beats FB/Google etc. Can be downloaded for Windows and Mac. Apparently some sites are disturbing; avoid them if so.

Just been advised that Tor is anything but anonymous.

herzmeister · 30-05-2012, 12:22 AM

Silk Road eh?

You have to understand how the internet works, and learn to use the right tool for the right job.

The internet cannot work without IP addresses. Somehow you always have to connect to somewhere.

TOR picks random entry and exit nodes, which necessarily can see the communication, but not who sent the original request.

There are other approaches, like for example a friend-to-friend web of trust. With these, you'd connect to trusted friends instead of random nodes. The friends may be able to see what you're doing, but the rest of the web can not.

terrorworld · 20-07-2012, 05:18 PM

Don't blame me if they 'don't work' - I haven't tested any yet.

Here's the URL where I have found them:

https://casascius.com

herzmeister · 20-07-2012, 11:26 PM

They're nice, I got some too. They come with a hologram with the private key printed inside, so if it's broken, it's likely that the coin has been compromised.

But still, bitcoins are meant to be used digitally. Physical bitcoins are just a gimmick. You still have to trust the issuer (Casascius in this case) that he didn't keep a copy of the private key, and trusting someone (be it Casascius or a central bank) defeats the whole idea of Bitcoin.

The Casascius coins are great to show around and explain Bitcoin though. Some people need something tangible. You can also order "broken" coins (cheap) that have a destroyed hologram, and the private key is visible and crossed out. All good visual aids.

01-05-2012, 01:11 AM	#1
terrorworld Senior Member Join Date: Dec 2010 Posts: 513	Independent Bitcoin token money: a profound survey I admit that I first thought that the Bitcoin alternative online 'money' (token exchange currency) is nonsense, like many others, because it seemed to me being 'money out of thin air resp. from using electric current (by Bitcoin Mining)' to me, after watching some superficial YouTube videos reporting about it. Now I've changed COMPLETELY my opinion about it - in deed I'm rather enthusiastic about it now A very good Bitcoin Wiki can be found here (you can find the Bitcoin client there for your computer, too): https://en.bitcoin.it/wiki/Main_Page Here's a short survey about it: From https://bitcointalk.org/index.php?topic=7269.0 (at https://bitcointalk.org/ you can find additional infos): [I hope I don't hurt anyone's copyright here! Please complain if so!] What BitCoin is: An agreement amongst a community of people to use 21 million secure mathematical tokens - "bitcoins"-as money, like traditional African and Asian societies used the money cowry. Unlike the money cowry: there will never be more bitcoins [than 21 mio.] they are impossible to counterfeit [the whole thing is based on laws of mathematics, not on trust in persons] they can be divided into as small of pieces as you want and they can be transferred instantly across great distances via a digital connection such as the internet. This is accomplished by the use of powerful cryptography many times stronger than that used by banks. Instead of simply being "sent" coins have to be cryptographically signed over from one entity to another, essentially putting a lock and key on each token so that bitcoins can be securely backed up in multiple places, and so that copying doesn't increase the amount you own. Because bitcoins are given their value by the community, they don't need to be accepted by anyone else or backed by any authority to succeed. They are like a local currency [such currencies exist, e.g., in Germany: Chiemgauer, Rheingold, Amper-Taler etc.] except much, much more effective and local to the whole world. Also good: Wikipedia article [in many countries you can forget the comment 'The rights about it are not clear yet.' They are (it's like regional currencies, or tokens). - Central banks like the ECB are not part of the state by the way, though they've got the right to print 'paper money']. [It isn't a 'legal payment medium', but the money on the bank accounts is not, either!] Most important bitcoin trader at this moment: https://mtgox.com (in Germany there's the rather new https://www.bitcoin.de/de) Bitcoin payment 'world leader': https://bit-pay.com/home.html (with free online shop bitcoin plugins, for Magento [the Community Edition is free/Open Source], OpenCart, ZenCart). Offline Bitcoins (print and redeem Bitcoins) at: http://bitcoin.world.eu.org/ ---Bitcoin mining is not as easy as some people think: I've read that a new standard laptop would need ca. 5 years to create 1 BTC now! You normally need special expensive hardware for Bitcoin mining. Often the price for electric current can be higher than the value of 1 newly made BTC. --- How to set up secure bitcoin savings: see https://bitcointalk.org/index.php?topic=5194.0 - And finally: Get bitcoin capital for your project or organisation at: https://glbse.com/ In effect it's like homebanking - but with a token 'money' independant from banks and governments. How about taxes: As much as I know so far it goes this way: If you make profits by selling Bitcoins (and earning Dollars, Euros etc.) at a Bitcoin trader then you've got to pay taxes based on this. Additionally: Going back to https://bitcointalk.org/index.php?topic=7269.0 in a more profound way: As an example of how effective the community is at "backing" the bitcoin: on April 4th 2011 30,000 bitcoins were abruptly sold on the largest BitCoin exchange, consuming nearly all "buy" offers on the order book and dropping the price by nearly 1/3. But within a couple of days, the price on the exchange had fully rebounded and bitcoins were again trading at good volumes, with large "buy" offers slowly replacing the ones consumed by the trades. The ability of such a small economy (there were only 5 million out of the total 21 million bitcoins circulating then, or about 3.75 million USD worth at then-current exchange rates) to absorb such a large sell-off without crashing shows that bitcoins were already working beautifully. What problem BitCoin solves: Mathematically, the specific implementation of the bitcoin protocol solves the problem of "how to do all of the above without trusting anyone". If that sounds amazing, it should! Normally a local currency has to trust all kinds of people for it to be able to work. So does a national currency. And in both cases, that trust is often abused. But with BitCoin, there's no one person who can abuse the system. Nobody can print more money, nobody can re-use the coins simply by making a copy, and nobody can use anyone else's coins without having direct access to their keys. People who break its mathematical "rules" simply end up creating a whole different system incompatible with the first. As long as these rules are followed by someone, the only way BitCoin can fail is for everyone to stop using it. This marvelous quality of not having to trust anyone is achieved in two ways. First, through the use of cutting-edge cryptography. Cryptography ensures that only the owner of the bitcoins has the authority to spend them. The cryptography used in BitCoin is so strong that all the world's online banking would be compromised before BitCoin would be, and it can even be upgraded if that were to start to happen. It's like if each banknote in your pocket had a 100-digit combination lock on it that couldn't be removed without destroying the bill itself. BitCoin is that secure. But the second way of securing the system, called the blockchain, is where the real magic happens. The blockchain is a single, authoritative record of confirmed transactions which is stored on the peer to peer bitcoin network. Even with top-notch digital encryption, if there was no central registry to show that certain bitcoins had already been "paid" to someone else, you could sign over the same coins to multiple people in what's called a double-spend attack, like writing cheques for more money than you have in your account. Normally this is prevented by a central authority, the bank, who keeps track of all the cheques you write and makes sure they don't exceed the amount of money you have. Even so, most people won't accept a cheque from you unless they really trust you, and the bank has to spend a lot of money physically protecting those central records, whether they are kept in a physical or digital form. Not to mention, sometimes a bank employee can abuse their position of trust. And, in traditional banking, the bank itself doesn't have to follow the rules you do--it can lend out more money than it actually has. The blockchain fixes all these problems by creating a single master registry of the already-cryptographically-secured bitcoin transfers, verifying them and locking them down in a highly competitive market called mining. In return for this critical role, the BitCoin community rewards miners with a set amount of bitcoins per block, taken from the original limited quantity on a pre-agreed schedule. As that original amount gradually runs out, this reward will be replaced by fees paid to prioritise one transaction over another--again in a highly competitive market to ensure the lowest possible cost. The transactions are verified and locked in by the computational work of mining in a very special way so that no one else can change the official record of transactions without doing more computational work than the cumulative work of all miners across the whole network. In conclusion: All this mathematical technology may be a bit of a mouthful, but what it means in practice is that BitCoin works just like cash. Bitcoin transactions are intentionally irreversible--unlike credit cards or PayPal where chargebacks can invalidate a payment that has already been made. And there are no middlemen. Transactions are completed directly between the sender and the receiver via the peer to peer network. Because of BitCoin's intricate design, the network remains secure no matter where or how you process bitcoin transactions. Which is incredible--no one else has ever tried to create a system that worked this way! All previous monetary systems have relied on trusting somebody, whether it was the king, town hall, the federal reserve, or banks. BitCoin doesn't. It's guaranteed instead by the laws of mathematics, and that's why it has everyone from technologists to economists very excited. I'm sure you have lots more questions, so scan the index below to see if they've been asked before, then dive in! The so-called "canonical" threads linked from this index are considered newbie-friendly zones; outside of them you're welcome to try your own luck. __________________ 'He who does not notice in a certain age that he's surrounded mostly by idiots he does not notice for a certain reason. ' Curt Goetz 'The most dangerous enemy of truth is the compact majority.' (Henrik Ibsen) Last edited by terrorworld; 01-05-2012 at 01:16 AM.

01-05-2012, 08:16 AM	#2
terrorworld Senior Member Join Date: Dec 2010 Posts: 513	Online shops etc. accepting Bitcoins Now who's already trading with, respectively accepting the Bitcoin as a payment method ?! Here you can find a list: https://en.bitcoin.it/wiki/Trade 'Real world' acceptance (of physical Bitcoins) is of course very small yet: https://en.bitcoin.it/wiki/Real_world_shops __________________ 'He who does not notice in a certain age that he's surrounded mostly by idiots he does not notice for a certain reason. ' Curt Goetz 'The most dangerous enemy of truth is the compact majority.' (Henrik Ibsen)

01-05-2012, 08:30 AM	#3
terrorworld Senior Member Join Date: Dec 2010 Posts: 513	GLBSE: A broken link mentioned above Sorry but this link mentioned above GLobal Bitcoin Securities Exchange (GLBSE) https://glbse.com/ (getting Bitcoins capital for projects and organisations) doesn't work any more. (I don't know why ) __________________ 'He who does not notice in a certain age that he's surrounded mostly by idiots he does not notice for a certain reason. ' Curt Goetz 'The most dangerous enemy of truth is the compact majority.' (Henrik Ibsen)

30-05-2012, 12:22 AM	#7
herzmeister Senior Member Join Date: Jan 2009 Location: Germany Posts: 1,160	Silk Road eh? You have to understand how the internet works, and learn to use the right tool for the right job. The internet cannot work without IP addresses. Somehow you always have to connect to somewhere. TOR picks random entry and exit nodes, which necessarily can see the communication, but not who sent the original request. There are other approaches, like for example a friend-to-friend web of trust. With these, you'd connect to trusted friends instead of random nodes. The friends may be able to see what you're doing, but the rest of the web can not. __________________ ...: Between the iron gates of fate, the seeds of time were sown :...

20-07-2012, 05:18 PM	#8
terrorworld Senior Member Join Date: Dec 2010 Posts: 513	Physical Bitcoins do exist now, too: Don't blame me if they 'don't work' - I haven't tested any yet. Here's the URL where I have found them: https://casascius.com __________________ 'He who does not notice in a certain age that he's surrounded mostly by idiots he does not notice for a certain reason. ' Curt Goetz 'The most dangerous enemy of truth is the compact majority.' (Henrik Ibsen)

20-07-2012, 11:26 PM	#9
herzmeister Senior Member Join Date: Jan 2009 Location: Germany Posts: 1,160	They're nice, I got some too. They come with a hologram with the private key printed inside, so if it's broken, it's likely that the coin has been compromised. But still, bitcoins are meant to be used digitally. Physical bitcoins are just a gimmick. You still have to trust the issuer (Casascius in this case) that he didn't keep a copy of the private key, and trusting someone (be it Casascius or a central bank) defeats the whole idea of Bitcoin. The Casascius coins are great to show around and explain Bitcoin though. Some people need something tangible. You can also order "broken" coins (cheap) that have a destroyed hologram, and the private key is visible and crossed out. All good visual aids. __________________ ...: Between the iron gates of fate, the seeds of time were sown :...