Bitcoin Forum

Hi,

This is to escape from newbie jail and and at the same time get a question answered.

I have always wondered how did bitcoins or any other alt-coins have a monetary value (USD) associated with it?

Also what is the computer processing when one is mining? Is it simply other transactions?

I know this would have been asked/answered multiple times but I couldn't think of a better question to ask.

Regards,
Cow

Hello welcome to the forum! Coins get their value when they have a lot of services available and are in high demand. Yes that is correct mining is processing the transactions on the blockchain.

The more the coin is usefull, the more people want it (thus higher price)

Cryptocoins/fiat money get their value from what people are prepared to pay and trade for them. Why is a worthless piece of paper that is a $10 bill worth $10? Because people will accept it as payment for $10 worth of stuff. If somebody will accept $1100 for a 1 BTC, then it is worth that. The fluctuating price is from the market values.

International trading with Bitcoin and other currencies (£,$,€) follows "supply and demand".

It actually very easy to explain with bitcoins, because $ is also depended on nationalbond, interest rates and oilproduciton, which bitcoin right now is almost independent from.

When you see the price for BTC go up, that means that the demand is higher than the supply.
When you see the price for BTC go down, that means that the demand is lower than the supply.

Lets say a bunch of people start selling a lot of BTC, that will cause the price for bitcoin to go down.
On the other hand if everybody is holding on to their bitcoins, then will the price for bitcoin go up (since the introduction of new BTC is rather slow and constant).

About the mining, yes, the mining is processing the transaction. However there is also a small "mathematical puzzle" that needs to be solved. The more more processing power the network has, the harder is the "puzzle" to solve (aka difficulty), this will secure a constant introduction of new BTC.

Supply and demand.

https://en.wikipedia.org/wiki/Proof_of_work (special note to preceding zeros; difficulty)

Yes block of transactions is hashed as long as the low enought hash is found.

actually how many types of coins are out released already, which one is good to choose on beginning ?

Two things go into the determination of btc prices:

1. Supply and demand.
2. Perceived utility.

Perceived utility increases when people realize that more and more merchants are accepting the currency. This happens when more and more infrastructure has been developed for the network. Utility is the real good behind the options considered, what we see may not always be accurate, but it's better than nothing.

Mining:

Mining is a lottery system that awards the computer which guesses certain numbers that pertain to outputs representing transactions done in the past. The computer is awarded transfer fees (set by the transacting parties) and the release of new btc if the number guessed corresponds to the completion of a new block (2,016 transactions - programmed to happen roughly once every 10 mins). It is how btc is generated, and validated (validated because the correct answers are sent to all the other miners on the network on a real-time basis, this makes sure that everyone on the system know the latest state of affairs within the system).

bitcoin, like any other commodity, is only worth what someone else is willing to pay.


Go here and watch it in real-time:  http://markets.blockchain.info/

Coins get their value relative to what other individuals are willing to pay for them.

Thanks for opening this post ... saved me a lot of searching....

You can look at the order book on some of the crypto currency exchanges
in order to see how the price is determined.

For example:
https://btc-e.com/

There are many other crypto currency exchanges, a list with most of them is here:
https://en.bitcoin.it/wiki/Trade#Currency_exchanges