Bitcoin Forum
August 21, 2017, 10:42:00 AM *
News: Latest stable version of Bitcoin Core: 0.14.2  [Torrent].
 
   Home   Help Search Donate Login Register  
Pages: « 1 2 [3]  All
  Print  
Author Topic: Im confused, where is this money coming from?  (Read 3938 times)
alexmat
Full Member
***
Offline Offline

Activity: 210



View Profile
June 25, 2011, 02:15:00 PM
 #41

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?

Let's start with the first bitcoin. Suppose the bitcoin economy is worth 10 dollars and there is one coin in existence. That coin then has an inferred value of $10. Now let's say we want to verify that this coin is legitimate in an anonymous fashion. In order to do that we need to do some difficult calculations to ensure the coin is authentic. In order to finance this we create another bitcoin and give it to the person who does the work to solve the verification calculation. Now there are 2 bitcoins, but the economy is still worth $10 at the moment, so now the two bitcoins are each worth $5. Instead of paying directly for the service of verification, we paid indirectly through inflation.

So to answer your question, the money comes from the value of existing bitcoins, which are worth slightly less as we inflate (if we don't factor in btc exchange rate for a moment), but it is a situation that is well known ahead of time and accepted as part of the cost of owning bitcoins. When this process ends and there is no more inflation, transaction fees will pay for the verification since it is assumed that by then transaction fees will make up a bulk of the profits for miners anyway.

@@ BM-2cStAtc2gJmss5gr1EX8sQj3LvaaPFW2Zn @@
1503312120
Hero Member
*
Offline Offline

Posts: 1503312120

View Profile Personal Message (Offline)

Ignore
1503312120
Reply with quote  #2

1503312120
Report to moderator
1503312120
Hero Member
*
Offline Offline

Posts: 1503312120

View Profile Personal Message (Offline)

Ignore
1503312120
Reply with quote  #2

1503312120
Report to moderator
Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction. Advertise here.
1503312120
Hero Member
*
Offline Offline

Posts: 1503312120

View Profile Personal Message (Offline)

Ignore
1503312120
Reply with quote  #2

1503312120
Report to moderator
1503312120
Hero Member
*
Offline Offline

Posts: 1503312120

View Profile Personal Message (Offline)

Ignore
1503312120
Reply with quote  #2

1503312120
Report to moderator
1503312120
Hero Member
*
Offline Offline

Posts: 1503312120

View Profile Personal Message (Offline)

Ignore
1503312120
Reply with quote  #2

1503312120
Report to moderator
bitcoinminer
Sr. Member
****
Offline Offline

Activity: 322



View Profile
June 25, 2011, 02:15:47 PM
 #42

Why don't we answer the OP's original question, which was where are the mined coins coming from; how are the blocks generated and discovered, etc.

Be fearful when others are greedy, and greedy when others are fearful.

-Warren Buffett
BCEmporium
Legendary
*
Offline Offline

Activity: 1064



View Profile
June 25, 2011, 03:22:26 PM
 #43

Why don't we answer the OP's original question, which was where are the mined coins coming from; how are the blocks generated and discovered, etc.

that's simple; for the best analogy: imagine an overwhelming difficult equation that to calculate it you need a powerful grid of computing power, each solved part of that equation is "a bitcoin".
Pages: « 1 2 [3]  All
  Print  
 
Jump to:  

Sponsored by , a Bitcoin-accepting VPN.
Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!