Hi I appreciate further clarifying.
I see so Bitcoin is more like a competing currency rather than new money model.
So bitcoin creators want to rely eventually on existing banks to lend Bitcoin as basically a new currency ?
I thought bitcoin was deeper than just another currency using the existing model ? Maybe I am missing key advantages of bitcoin over existing currency creation method , but I am still learning. It is little disappointing if Bitcoin is just another currency as then why just not use existing ones ?
While Bitcoin is in many ways just another currency, it differs from fiat money in than no government (or anyone else) can decide to issue more of it, and there is only so much of it that can ever exist. In this respect it is more like commodity money, but unlike commodity money, the number of bitcoins that will ever exist and the rate at which they will be distributed is known in advance, and as a result its value is not subject to supply shocks. These are features which no form of money has ever had before.
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y so doing, they have helped Bitcoin become what it is now and what it will be in the future (hopefully, a ubiquitous decentralized digital currency). It is only fair they will reap the benefits of their successful investment.
How is exactly Bitcoin "decentralized" ? You speak of existing Banks creating Bitcoin out of no where similarly to the existing model. That would mean centralized Bitcoin creation at selected existing Banks.
No. Bitcoins cannot be created by banks (or anyone) out of thin air. When a bank (or anyone else) loans bitcoins to other people, it must
already own these bitcoins. What happens is Alice deposits some bitcoins in her bank account, then the bank loans those same bitcoins out to Carol figuring that Carol will pay them back before Alice tries to withdraw her bitcoins. This is basically how fraction reserve banking works already, except in this case if Alice tries to withdraw her money and the bank doesn't have it, there is no way for the government to bail them out, and the bank is instantly bankrupt. Alice will probably be able to eventually get her money from Carol, but whether she does or not, nobody will ever be using that bank ever again. So it is most unlikely that banks will act as irresponsibly with bitcoins as they do with fiat money.
Also seems like in the Bitcoin model the creators of Bitcoin or existing Banks will act the equivalent of "central banks" as individuals will not be able to do that eventually... except for the existing "developing" state with the lottery.
Futher from ( https://en.bitcoin.it/wiki/FAQ#How_are_new_Bitcoins_created.3F
) seems like at the moment bitcoin is being created through a "lottery" and those having most PCs participating are most likely to have more coins. However this "lottery" is a temporary mechanism as the main goal is to get existing Banks( or new specialized Bitcoin Bank ) issue these coins similarly to existing currencies ? Yes / No ?
No. Bitcoin mining is not a "lottery", it is actually more like a business. What miners are really doing is verifying transactions and securing the Bitcoin network, and they receive a payment for providing this service. The payment currently consists of "new" coins, however there is only a limited amount of coins that can be created this way, which is why miners also receive transaction fees. Eventually, when the "new" coins run out, the whole network will be supported entirely by transaction fees (the way it should be) and the economy will be a totally closed system (again, the way it should be). The whole "new coins" business is just a way to bootstrap the economy by distributing the initial coins to the people who contribute the most resources to the network, which is the fairest way of doing it.
If banks will create Bitcoins out of nowhere do you plan for an option to increase the Bitcoin supply beyond 21 million in the future when banks have adopted Bticoin and now need more Bitcoins to meet demand for new coins, similarly to the existing money model ? Yes ?
No. If large-scale adoption by banks increases the demand for bitcoins, no new bitcoins will or even can
be created to meet the demand. Instead, the value of individual bitcoins will increase, exactly the same as if it were a scarce commodity like gold.