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Author Topic: Im confused, where is this money coming from?  (Read 3757 times)
wildboy211
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June 25, 2011, 03:31:24 AM
 #1

When someone "mines" for bitcoins, where does the money come from? I know back in the old days, when the U.S. printed money, they had gold to back it up. What is backing bitcoins? Could someone explain it in laymans terms?
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June 25, 2011, 03:33:16 AM
 #2

When someone "mines" for bitcoins, where does the money come from? I know back in the old days, when the U.S. printed money, they had gold to back it up. What is backing bitcoins? Could someone explain it in laymans terms?
The money comes from the effort of their mining and the value in the blocks they've mined. It's the same as when someone mine's gold -- the value comes from the effort of their mining and the rarity of gold. BitCoins don't need to be backed because they're scarce. You only need to back something that's not scarce. (That's why gold itself doesn't need to be backed.)

I am an employee of Ripple.
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bitrebel
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June 25, 2011, 03:33:25 AM
 #3

Lots of computers acting simultaneously to create worthless posts.  Embarrassed

Why does Bitrebel have 65+ Ignores?
Because Bitrebel says things that some people do not want YOU to hear.
d.james
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June 25, 2011, 03:33:51 AM
 #4

There's no value, you got goxed!

You can not roll a BitCoin, but you can rollback some. Cheesy
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killer2021
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June 25, 2011, 03:35:33 AM
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It comes out of thin air. Thats how bitcoins are put into circulation in the first place. The only thing backing bitcoin is confidence that people place in it. Confidence is the same reason fiat currency has value. Remember, current fiat currencies are backed by NOTHING as well. They put confidence because of several high quality value - primarily that bitcoins are finite, easy to transfer, anonymous. Unlike traditional fiat currency, the government cannot print bitcoins into oblivion. Thats why bitcoins goes up in value year over year while fiat goes down in value year over year. Bitcoin is a far superior system than fiat currency.

http://www.youtube.com/watch?v=FTOhti7wxXk




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finack
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June 25, 2011, 03:36:23 AM
 #6

When someone "mines" for bitcoins, where does the money come from? I know back in the old days, when the U.S. printed money, they had gold to back it up. What is backing bitcoins? Could someone explain it in laymans terms?

It's backed by Advanced Micro Devices (AMD) commercial paper.
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June 25, 2011, 03:38:30 AM
 #7

No money, paper, plastic, gold or silver has "real value."
The value is stored due to limited supply and the fact that other people will accept it.

Just < 3 weeks ago people were panic-buying expecting the price to quickly double again.
Now it's more stable so the community has time to build better sites, and / or cry about GETTING gOXED!   Cheesy

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joepie91
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June 25, 2011, 03:41:20 AM
 #8

It's backed by the evil souls of unborn babies.

No, but really, it's not backed by anything except for a promise and/or belief you can exchange it for other things. However, neither is fiat currency. The gold standard ("back in the old days") has been abandoned a long time ago.

Like my post(s)? 12TSXLa5Tu6ag4PNYCwKKSiZsaSCpAjzpu Smiley
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I just can't wait for fall/winter. My furnace never generated money for me before. I'll keep mining until my furnace is more profitable.
killer2021
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June 25, 2011, 03:43:35 AM
 #9

No money, paper, plastic, gold or silver has "real value."
The value is stored due to limited supply and the fact that other people will accept it.

Just < 3 weeks ago people were panic-buying expecting the price to quickly double again.
Now it's more stable so the community has time to build better sites, and / or cry about GETTING gOXED!   Cheesy

Thats an important thing to remember.

Fiat currency is backed by NOTHING. So you can't use that excuse as a reason not to use bitcoin since fiat is backed by nothing and created out thin air just like bitcoin. The major benefit is the fact that bitcoin is open source and everyone has agreed that the bitcoin money supply will creat at xyz rate. Compared to the government where they just print it up non stop to fund wars, welfare systems and other such projects. As a result, fiat continually loses value over the long term. If someone had $100 in USD in 1913 and held that cash then the value of that money would be worth the equivalent of 4$ today or a 96% loss of value. These days fiat loses about 10% of its value per year. Thats why gas, food, housing, healthcare etc all goes up every single year. When you use bitcoin, this does not happen. Rather, bitcoin adjusts to inflation since dollars are losing value while bitcoin is gaining value due to limited supply.


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pennytrader
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June 25, 2011, 03:45:31 AM
 #10

Bitcoin is the gold

please donate to 1P3m2resGCP2o2sFX324DP1mfqHgGPA8BL
Enochian
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June 25, 2011, 03:47:38 AM
 #11

The money comes from the effort of their mining and the value in the blocks they've mined. It's the same as when someone mine's gold -- the value comes from the effort of their mining and the rarity of gold. BitCoins don't need to be backed because they're scarce. You only need to back something that's not scarce. (That's why gold itself doesn't need to be backed.)

My poo is scarce.  There is a limited supply of it produced over time.  Therefore my poo is a valuable currency that need not be backed by anything.  Smiley

Realistically, Bitcoins have value not because they are scarce, but because there is demand for them.  

This demand is created because Bitcoins are cool, and you can have fun buying things with them, and playing with all the Bitcoin-related Web charts and the open source software and the crypto.

You could fork Bitcoin right now, and have your own identical system, and the coins in it would be just as rare and difficult to produce as Bitcoins are.  They would also be worthless, unless you could make them cool, and make it possible for people to have fun doing things with them.

Bitcoins, like stocks, are a "psychological market."  When stock is issued, the company gets its money from the initial sale, and no matter what happens to the stock value, the company never has to give the money back.

You can't do anything with the company, unless you have control, so for the average stock owner having less than 51%, the stock trades in its own little world, supported only by the belief that its value bears some relationship to the value of the company whose name is printed on the financial statement.

Bitcoins are like that.  Should people ever become bored with Bitcoins, or not be able to do things with them they find satisfying, like thumb their nose at the government while buying Alpaca Socks, they will quickly become worthless.







 
relmeas
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June 25, 2011, 03:48:54 AM
 #12

from new people who believe bitcoins are worth anything.

you know like in that thing, forgot how its called ....
BCEmporium
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June 25, 2011, 03:50:05 AM
 #13

No money, paper, plastic, gold or silver has "real value."
The value is stored due to limited supply and the fact that other people will accept it.

Fixed.
The only thing that matters actually is if other people will accept it, the need for being limited would put all fiat currencies out of commission.
killer2021
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June 25, 2011, 03:53:12 AM
 #14

No money, paper, plastic, gold or silver has "real value."
The value is stored due to limited supply and the fact that other people will accept it.

Fixed.
The only thing that matters actually is if other people will accept it, the need for being limited would put all fiat currencies out of commission.

but people accept bitcoin because they know its limited and impossible to counterfeit/double spend.  

Not sure if you are aware but having a fiat currency being put out of commission is actually rather common. Its called hyperinflation. Its happened to hundreds of currencies. The latest example being Zimbabwe.

http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation

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wildboy211
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June 25, 2011, 03:53:43 AM
 #15

No money, paper, plastic, gold or silver has "real value."
The value is stored due to limited supply and the fact that other people will accept it.

Fixed.
The only thing that matters actually is if other people will accept it, the need for being limited would put all fiat currencies out of commission.

Makes sense. I actually understand now.
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June 25, 2011, 04:07:49 AM
 #16

No money, paper, plastic, gold or silver has "real value."
The value is stored due to limited supply and the fact that other people will accept it.

Fixed.
The only thing that matters actually is if other people will accept it, the need for being limited would put all fiat currencies out of commission.

Makes sense. I actually understand now.

Actually, the fact is you do need a limit to your fiat currency, otherwise you destroy its value and can only convince people to keep using it by lying to them at every opportunity, with a gun backing it up (that would be the purpose of legal tender laws).

Bitcoin is not a backed currency, but it's also not a fiat currency - We discuss this issue in our first episode of BitTalk (shameless plug), as it's pretty commonly mis-understood.



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mikeintimesaves9
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June 25, 2011, 04:10:34 AM
 #17

My poo is scarce.  There is a limited supply of it produced over time.  Therefore my poo is a valuable currency that need not be backed by anything.  Smiley

No hard feelings, friend, but I just registered the domain EnochainPooExchange.com...you know just in case your "currency" is accepted on SilkRoad.

For tips: 1FQyGK4xS1JZUL4mFnKkiU9cHvVL5TfC4v
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June 25, 2011, 04:10:51 AM
 #18

When someone "mines" for bitcoins, where does the money come from? I know back in the old days, when the U.S. printed money, they had gold to back it up. What is backing bitcoins? Could someone explain it in laymans terms?
You've actually got it backwards (don't feel bad, they teach it wrong or not at all in school) - Gold *is* money, and has been since the founding of the US at least - Eventually paper was issued to represent claims to physical gold, and then eventually when it was discovered that the system was insolvent (they printed more dollars than they had gold) there was a rush to sell dollars for gold while the price was artificially low (being held low by the gold standard @ 35 dollars per troy oz, despite the massive increase in the supply of dollars).

It's very basic supply and demand
The supply of gold stays mostly the same (it increases about 2% per year, or something similar), but during massive "quantitative easing" (money printing), the supply of dollars goes up dramatically.  Those new dollars dilute the purchasing power of every dollar that came before, which makes every dollar in existence worth proportionally less.

So it wasn't even that gold was getting more expensive, so much as an oversupply of dollars causing the value of the dollar to go down.  Obviously the US couldn't lose all of its gold (not that it's valuable or anything...), so they simply made it illegal for anyone to own gold, and where before you could take 35 US dollars to a branch of the treasury and exchange it for one oz of gold, now you weren't even allowed to own it.

Getting back to your post, you say "back in the old days, when the US printed money" let me stop you right there, in the truly good old days the US COINED money, which is a completely different thing.   Coined money is the ONLY true payment in full - Because even if a 20 dollar bill stops being valuable, would a 20 dollar US gold coin be worthless?  

Paper is a promise taken from a liar.

BitTalk
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A Show for the Bitcoin Universe, Fresh Episodes Weekly!
Episode 3 out now at BitTalk.tv

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killer2021
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June 25, 2011, 04:12:54 AM
 #19

When someone "mines" for bitcoins, where does the money come from? I know back in the old days, when the U.S. printed money, they had gold to back it up. What is backing bitcoins? Could someone explain it in laymans terms?
You've actually got it backwards (don't feel bad, they teach it wrong or not at all in school) - Gold *is* money, and has been since the founding of the US at least - Eventually paper was issued to represent claims to physical gold, and then eventually when it was discovered that the system was insolvent (they printed more dollars than they had gold) there was a rush to sell dollars for gold while the price was artificially low (being held low by the gold standard @ 35 dollars per troy oz, despite the massive increase in the supply of dollars).

It's very basic supply and demand
The supply of gold stays mostly the same (it increases about 2% per year, or something similar), but during massive "quantitative easing" (money printing), the supply of dollars goes up dramatically.  Those new dollars dilute the purchasing power of every dollar that came before, which makes every dollar in existence worth proportionally less.

So it wasn't even that gold was getting more expensive, so much as an oversupply of dollars causing the value of the dollar to go down.  Obviously the US couldn't lose all of its gold (not that it's valuable or anything...), so they simply made it illegal for anyone to own gold, and where before you could take 35 US dollars to a branch of the treasury and exchange it for one oz of gold, now you weren't even allowed to own it.

Getting back to your post, you say "back in the old days, when the US printed money" let me stop you right there, in the truly good old days the US COINED money, which is a completely different thing.   Coined money is the ONLY true payment in full - Because even if a 20 dollar bill stops being valuable, would a 20 dollar US gold coin be worthless?  

Paper is a promise taken from a liar.

+1.


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June 25, 2011, 04:13:43 AM
 #20

BitTalk.tv is up for me

BitTalk
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Episode 3 out now at BitTalk.tv

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