I wrote an intro to bitcoins. Want you opinions on it.

[lophie]

Hi guys. I have a very small VPN service I offer to my college mates. I introduced bitcoin payment and I raised alot of eye brows so I wrote them a small introduction. Just the info they needed to get the basic ideas. I just want your opinions on it. Thanks ^_^. So here it is:


What is bitcoin?

http://www.weusecoins.com/

Bitcoin is an independent online digital currency and payment system. You can think of Bitcoin as an alternative to PayPal or CashU

To explain the difference we give an example. In case of Cashu, Your Cashu points are equivalent to US dollars. so mostly you just see a "$" amount and not Cashu points account. To spend them you have to log-in your CashU account and send them to another CashU user (It can be a merchant or just a user). To get more credit to your CashU account, you can transfer cash to CashU or buy CashU cards and use the scratched hidden numbers on the back of the card.

In case of Bitcoins, we can say that instead of CashU holding your credit, The whole Bitcoin network holds your credit. Each and every peer in it. Then Lets just say your password to spend those bitcoins is a very lengthy one , I mean like, huge!. You have to keep the password in a file right? That is called your Bitcoin wallet.

Bitcoin is anoymous (Relativily speaking) and therefore you can open as many accounts as you want and have all of those long passwords in your digital wallet or in several ones. To send your bitcoins to another bitcoin user (For exchange of services if the other user was a merchant of some sort), You will need a bitcoin client. Such client would keep track of your coins and gives you a nice tidy interface of your contacts list and your own accounts to recieve bitcoins and send them. Some clients even have backups and many interesting features. Some of them are web-based or even run on mobile phones!

The "coins" on the Bitcoin network are generated (In a stable predictible rate) by a special type of Bitcoin users called "Miners" (Which you can be one yourself! it is not an exclusive club!). Some of these coins are offered for sale on various websites like Mt. Gox, Bitcoin-nordic and BitInstant. Because of the nature of Bitcoin's "coins" being a free market. The price fluctuates alot. So hoarding bitcoins is a risky investment. But using Bitcoin to pay for various services is fun, easy, speedy, cheap and more secure than the other alternatives .



So, what do you think? It is the first draft which I wrote in a boring class. Don't grill me alot over it >_<!

[odolvlobo]

In my opinion, the typical explanation, "Bitcoin is a peer-to-peer cryptocurrency" is too hard to understand. If I told you that "a Higgs boson is a peer-to-peer cryptoparticle", would that mean anything to you? I prefer, "Bitcoin is an independent online digital currency and payment system." Everyone understands what all those words mean.

Don't use the term "fiat currency". It doesn't mean anything to most people, and people that use the term "fiat currency" tend to be (perceived as) a little nutty.

[cunicula]

Yes, drop the term fiat currency. If you use the normal definition in economics, bitcoin is also a fiat currency. It is only the libertarian asshats who claim otherwise.

[lophie]

asshats

It took me a while to respond to the thread because I was lost in euphoria just imagining an "asshat"

[lophie]

In my opinion, the typical explanation, "Bitcoin is a peer-to-peer cryptocurrency" is too hard to understand. If I told you that "a Higgs boson is a peer-to-peer cryptoparticle", would that mean anything to you? I prefer, "Bitcoin is an independent online digital currency and payment system." Everyone understands what all those words mean.

Don't use the term "fiat currency". It doesn't mean anything to most people, and people that use the term "fiat currency" tend to be (perceived as) a little nutty.

Yup it looks much better. Thanks. 

[istar]

In my opinion, the typical explanation, "Bitcoin is a peer-to-peer cryptocurrency" is too hard to understand. If I told you that "a Higgs boson is a peer-to-peer cryptoparticle", would that mean anything to you? I prefer, "Bitcoin is an independent online digital currency and payment system." Everyone understands what all those words mean.

Don't use the term "fiat currency". It doesn't mean anything to most people, and people that use the term "fiat currency" tend to be (perceived as) a little nutty.

"Bitcoin is the worlds only free independent online digital currency and payment system."
Unlike FIAT currency (in its usual meaning.) there will only be 21 million Btc so you can be sure your coins should hold their value.
Since each can be divided in 100 000 000 pieces each that is not a problem, its more than 14 times all mg of gold ever mined in the entire history of humans.
 
According to a post by Niko here.
https://bitcointalk.org/index.php?topic=96726.msg1066383#msg1066383

[lophie]

Thank you it is very good but as you can see not every introduction is a full intro this is an introduction to Bitcoin as an alternative payment system to CashU and paypal. Every intro is intended to a specific audience otherwise it would be full of info about cryptography 

[thoughtfan]

"Bitcoin is the worlds only free independent online digital currency and payment system."
Unlike FIAT currency (in its usual meaning.)...

'Usual meaning' is potentially problematic.  There appears to me to be two distinct commonly used meanings for the term 'fiat currency', one of which is the 'normal' meaning for economists who use it to mean an 'unbacked currency'; the other is 'currency used by decree'.  Depending on which you mean, Bitcoin is or isn't fiat.

This does not seem to be an issue upon which people are happy to agree to disagree.  Among forum users here it is generally the latter meaning ('by decree) that is meant when used to distinguish Bitcoin from currencies issued by governments.  This meaning is defended passionately by those looking to dictionary definitions and the derivation of the word.

Then there are those who use the term in its more common usage outside of the Bitcoin community, which I'd guess is also overall the most common (or technically, 'usual') meaning.  I would guess it is for historic reasons that this usage has become commonpace because prior to Bitcoin the only 'unbacked' currencies that could survive were those whose use was by government decree.  They were, and some would argue, still are corollaries.  One could safely use 'fiat' to mean 'unbacked' because all surviving unbacked currencies were also 'fiat' in the stricter sense of 'by decree'.

So whilst those who use it as 'by decree' tend to think it outrageous someone could use it to mean 'unbacked' because it tarnishes the 'purity of Bitcoin' with the same brush as government issued money, those who use it in the more common (arguably sloppy) use in economist circles tend to be a bit lofty, disparaging and even insulting (see above) of those who use it as 'by decree'.

Sorry the whole of this post has been off topic.  I'm just following through from the multiple 'fiat' commentary which is actually quite funny seeing as you didn't use the term 'fiat' in your introduction in the first place.  It only came about in the form of advice not to use it!  Then everybody (including me) stuck our oar in.

...so you can be sure your coins should hold their value.

***WARNING*** Alarm bells should be ringing when you read or write something like this.  You can not be sure Bitcoin will hold their value simply because scarcity is only one factor of many that determine value (whether you mean in realtion to other currencies or to goods/services).  The scarcity element means it is not prone to the same inflationary pressures as fiat currency but be very wary of believing, let alone claiming, that this necessarily means it will hold its value.

[cunicula]

I agree with the above. Including the part about me being lofty, disparaging, and insulting. The takeaway message is do not use the term fiat. It opens a can of worms that does not need opening.

[thoughtfan]

I agree with the above. Including the part about me being lofty, disparaging, and insulting. The takeaway message is do not use the term fiat. It opens a can of worms that does not need opening.

Thanks for being a good sport, cunicula   Incidentally I was only saying you were insulting because of the specific, though novel, insult ('asshats') you used.  'Lofty' and 'disparaging' (and insulting) were what I've picked up elsewhere on the boards in my short few weeks here - and from talking to an economics teacher friend.

I agree with you (and odolvlobo) that its use in an introductory statement is not helpful.

The penny has now dropped for me that the OP had been edited before I saw it to take out the original statement referring to 'fiat' as recommended by odolvlobo so apologies to you odolvlobo for implying (by my expressed amusement) that you were being off topic in 'raising' the term.

[deepceleron]

Bitcoin is erroneously compared in the first paragraph with companies that transfer dollars. That is similar to saying "The Japanese Yen is like Western Union". Bitcoin is a currency of its own which gets its value from having a built-in transfer mechanism that allows people to send it to anyone in the world instantly without the need for, or interference by, a bank. In addition, Bitcoin's set rate of money creation is known, making it's value inflation-resistant; more can't just be printed by a government whenever they need to debase your savings to bail out their banking cronies.

If you are explaining Bitcoin to, and soliciting Bitcoin payment from, people who have never heard of it, the next thing you should address is how to get it. "So I just have to buy them?". "You might choose to do so. However, no. Do you just have to buy US Dollars? Anything you do that creates value can earn you Bitcoin: services, goods, even related money services (or as the authorities see it: prostitution, drugs, gambling and money laundering). Even running Internet services can earn you Bitcoin."

Investigating Bitcoin quickly makes people start to ponder what money actually is - like: Why does money have value? Why do we pay taxes to a government in their own currency, when they can just manufacture it themselves (Is it because inflation takes from the rich?) Is it really a "government backed" currency, or more a "government mandated" currency? - any private enterprise could take Bitcoin, but when you pay your taxes or parking tickets you must have some government-issued money to pay them.

Plus spell-check...

[Longmarch]

Plus spell-check...

Yes... Relativily -> Relatively

[deepceleron]

Plus spell-check...

Yes... Relativily -> Relatively

bitcoin -> Bitcoin
anoymous -> anonymous
predictible -> predictable
alot -> a lot

Because of the nature of Bitcoin's "coins" being a free market. The price fluctuates alot.

Fragment sentence. Not just to be ironic.

But using Bitcoin...

http://www.youtube.com/watch?v=ODGA7ssL-6g

[Roger_Murdock]

"Bitcoin is the worlds only free independent online digital currency and payment system."
Unlike FIAT currency (in its usual meaning.)...

'Usual meaning' is potentially problematic.  There appears to me to be two distinct commonly used meanings for the term 'fiat currency', one of which is the 'normal' meaning for economists who use it to mean an 'unbacked currency'; the other is 'currency used by decree'.  Depending on which you mean, Bitcoin is or isn't fiat.

So does that mean that gold is a "fiat" currency if we're using the "unbacked currency" definition? Bitcoin has more in common with gold than it does with U.S. dollars.  Bitcoin is a scarce digital commodity. It's true that Bitcoin isn't "backed," but it seems to me that the concept of "backing" only makes sense when the thing you're backing isn't reliably scarce, e.g. printed pieces of paper.  The purpose of backing is to keep the issuer honest by acting as a constraint on its ability to inflate the currency supply.  That scenario isn't possible with Bitcoin.

[remotemass]

I use: Bitcoin is digital cash.

[thoughtfan]

So does that mean that gold is a "fiat" currency if we're using the "unbacked currency" definition? Bitcoin has more in common with gold than it does with U.S. dollars.  Bitcoin is a scarce digital commodity. It's true that Bitcoin isn't "backed," but it seems to me that the concept of "backing" only makes sense when the thing you're backing isn't reliably scarce, e.g. printed pieces of paper.  The purpose of backing is to keep the issuer honest by acting as a constraint on its ability to inflate the currency supply.  That scenario isn't possible with Bitcoin.

I agree with all of that.  For the reasons you say I don't think 'fiat' could be defined in relation to whether or not it's 'backed' because it simply doesn't hold water once you start digging (if you'll excuse the mixed metaphor!).  I was responding to istar's 'usual meaning' comment to point out that outside of these circles the 'usual meaning' isn't what most of us here tend to think of it as.  I would not be surprised, should Bitcoin become established enough to be included in economics curricula, that this use of 'fiat' would fade away because in the light of Bitcoin it simply doesn't make sense.

In the meantime I think it's a good idea that we who use it as one thing know that others using the same word (or reading what we have written) may take it to mean something else.  It matters less to me who is 'right' or 'wrong' in this than that we are aware of both usages.

[cunicula]

So does that mean that gold is a "fiat" currency if we're using the "unbacked currency" definition? Bitcoin has more in common with gold than it does with U.S. dollars.  Bitcoin is a scarce digital commodity. It's true that Bitcoin isn't "backed," but it seems to me that the concept of "backing" only makes sense when the thing you're backing isn't reliably scarce, e.g. printed pieces of paper.  The purpose of backing is to keep the issuer honest by acting as a constraint on its ability to inflate the currency supply.  That scenario isn't possible with Bitcoin.

The economics definition is that gold is "commodity money" because gold has intrinsic value (it directly enters the utility function). Money which does not directly enter the utility function is called "fiat money."

State backing, etc. is irrelevant to the classification.

Of course, in bitcoin-land, fiat means something different which is not in accord with the definition in economics.

No, the economics definition will not change. These are well-defined technical terms. Money is sometimes modeled as "fiat money" and other times as "commodity money". The terms are referring to how money operates in mathematical models, not to how money operates in the real world. If you randomly revise the language, it would make communication difficult.

[lophie]

Bitcoin is erroneously compared in the first paragraph with companies that transfer dollars. That is similar to saying "The Japanese Yen is like Western Union".

Please refer to Satoshi's paper. The title says what exactly? I am not mentioning Bitcoin(s), I am mentioning Bitcoin. The payment system.

And guys thank you for not grilling me over something I wrote while I was bored in calculus class -_-, so mature of you, Oh dear forum dwellers.

[lophie]

BTW all of the spelling mistakes are because error correction doesn't work on my ubuntu netbook too lazy to fix that!

[franky1]

try replacing the word FIAT with
paper money
native currency
national currency
standard currency

think about wording it to be aimed at grade-highschool people that dont have university degree's in economics or computing