Core ideas of Bitcoin

[genjix]

What are the core ideas? Don't get bogged down in details- it's for non-technical people.

- Distributed. We set the rules.
- Microtransactions.
- Transactions cost nothing.
- Anonymous

How would you phrase this to the common man? I've heard the gold farming analogy for mining, but how about for everything else?

How would you best explain distribution while allaying any security fears?

[marcus_of_augustus]

- anonymous, secure, free electronic transactions
- limited supply (i.e. cannot be printed out of thin air), not controlled by banks

[Hal]

I would focus on two ideas:

How are bitcoins created?

Everyone on the network competes to be the first solve a computationally hard puzzle. The winner is rewarded with 50 new bitcoins. Puzzle difficulty is automatically adjusted so it takes about ten minutes to get a solution, creating a slow, manageable increase in the supply of bitcoins. The 50 bitcoin reward gets halved every four years, so the total number of bitcoins that will ever be created stays under 21 million.

How are bitcoins transferred?

Bitcoins are associated with cryptographic public keys controlled by the person who owns them. To transfer them to someone else (i.e. to make a payment) he broadcasts on the Bitcoin network a digital signature identifying the bitcoins he is transferring, along with the public key of the new owner. This information is stored in a distributed database maintained by the Bitcoin network that records the public keys that own every bitcoin. Bitcoin software validates the digital signature and updates the database to record the new owner of the bitcoins. He will then be able to transfer them to someone else in the future.


Note that I am not trying to explain how these two ideas are connected, via the block chain. That's just too hard to get across quickly.

[jib]

- Microtransactions.
- Transactions cost nothing.
- Anonymous

I disagree partially with all of these points.

Bitcoin isn't completely anonymous, unless you go to some effort to launder your money. Anyone can look at the block chain and trace the addresses a particular coin has passed through. And sometimes from this, and from the times and amounts and any other useful information you might have, it's possible to guess things about where the coin came from and what people did with it.

Transactions don't cost nothing. At the moment most of them are free, but it's certainly not a "core idea" of Bitcoin. Very small transactions or very complex ones won't be processed without a fee. In the future, the fee structure could be very different, as the reward from mining will be a lot smaller without fees.

The Bitcoin protocol itself won't be useful for micropayments if it's widely used, because it's not very scalable (every node in the world receives every transaction in the world), it's too slow (it can take minutes or sometimes more for a transaction to be confirmed at all, and longer if you want more confirmations), and because transaction fees will probably rise in the future. Micropayments aren't a "core idea" of Bitcoin.

[genjix]

forget mining. It's too much of a hang-up for new people when it's a minor thing (for them). If they need to know more they can do research to find out.

Bitcoins are associated with cryptographic public keys controlled by the person who owns them. To transfer them to someone else (i.e. to make a payment) he broadcasts on the Bitcoin network a digital signature identifying the bitcoins he is transferring, along with the public key of the new owner. This information is stored in a distributed database maintained by the Bitcoin network that records the public keys that own every bitcoin. Bitcoin software validates the digital signature and updates the database to record the new owner of the bitcoins. He will then be able to transfer them to someone else in the future.

Maybe you don't realise how technical sounding that is. Let me highlight all the problem language:

Bitcoins are associated with cryptographic public keys controlled by the person who owns them. To transfer them to someone else (i.e. to make a payment) he broadcasts on the Bitcoin network a digital signature identifying the bitcoins he is transferring, along with the public key of the new owner. This information is stored in a distributed database maintained by the Bitcoin network that records the public keys that own every bitcoin. Bitcoin software validates the digital signature and updates the database to record the new owner of the bitcoins. He will then be able to transfer them to someone else in the future.

And it's very hard to follow.

I'd rather pick 4 core ideas, forget everything else and drive those sole points home. No need to talk about the distributed blockchain, public keys or mining.

[marcus_of_augustus]

Bitcoin isn't completely anonymous, unless you go to some effort to launder your money. Anyone can look at the block chain and trace the addresses a particular coin has passed through. And sometimes from this, and from the times and amounts and any other useful information you might have, it's possible to guess things about where the coin came from and what people did with it.

Addresses are unlimited and not attributable to a physical person so wouldn't that be like trying to trace quicksilver running through a horsehair cushion? Single bitcoins remain whole for how many transactions exactly? .... or as a SA once said, trying to "pick fly-shit out of spilled pepper."

So I'd said 99.99% anonymity which is pretty good for a digital transaction.

[grondilu]

It's just like a normal bank, with the folowing differences:

- there are several bank accounts per person.  You can actually create as many bank accounts as you want.
- accounts are anonymous.  Nobody can know who own a bank account, unless you publish the account number and declare it is yours.
- owning a bank account consists of having a mathematical key associated to it.  This key allows you to transfer bitcoins from this bank account to another.  You must keep this key secret and store it on your PC.
- all transactions between bank accounts are public.  Every transaction is stored on everyone's PC.
- every 10 minutes or so, someone is elected to play the role of a central bank.  He clears the transactions, checks balances, and creates a few new bitcoins for himself.

I doubt I could make it less technical.

[theymos]

Addresses are unlimited and not attributable to a physical person so wouldn't that be like trying to trace quicksilver running through a horsehair cushion? Single bitcoins remain whole for how many transactions exactly? .... or as a SA once said, trying to "pick fly-shit out of spilled pepper."

So I'd said 99.99% anonymity which is pretty good for a digital transaction.

Bitcoin's anonymity is not nearly that strong. See https://en.bitcoin.it/wiki/Anonymity

The only core idea is decentralized transaction verification.