Well, after listing to Twit 's netcast on Bitcoin, I have to say the explanation is the best one so for. In fact it is so well done, either it was Leo or Steve, that you understand the real value. As a security program, it just is fantastic.
Well, think about it, mine BTC when you are checking for a virus over some virus free distributed network.
First, let's look at the valuation of BTC. It represents "honest" work. If there is any of that, you don't have any coin.
So, take the key and encrypt another step. If it is a substitute for money that is money, than I agree you have digital money which is something you can't hold in your hand. For example, my smart phone has a dead battery so now I can't spend my digital money unless I have a plastic card, just in case I can't fire up a droid and get my money.
How can you solve this problem. If you except that you need a robot to use robot money, then why don't we play with the model a little.
The coin isn't really the model, it's the box, isn't it. Where the coins are all hashed together? So we have a box full of BTC and some not so bright person come along and you offer them some. All they have to do is give you a credit card and you will sell the BTC to them. A lot easier than making BTC, buy them?
The way to exchange if you use a credit card means you have to translate the BTC to dollars at some point along the way. The card issuer is going to give you cash after you sell your BTC to the not so smart fellow. Just before the sale is ready to go through, the not so bright person decides he doesn't want any BTC because he can't always spend it.
This is exactly the way you sell debt, or securites. No taker, no value. SO the only think that makes BTC attractive is that it is buzz for the moment. That is not value, and with BTC it turns out to be a lot of work for nothing. No value. Nothing. Hint: zero.
Ok, so let's add some value and make the hash the medium of protection for data and let the data represent someone's credit card transactions. The not so bright fellow come back and sees he can buy the transaction from you before you run a customer's card and stops you.
"Here!, he says, and gives you miney. Give me the transaction and I will collect the interest instead of the card issuer. The customer says "Fine!, send me the bill every month just like the card company and I will pay you instead. But only if you give me a interest rate."
Here you have some value because you check the credit rating and find out that this person always pays he bills. She might use a credit card to pay a credit card if it comes to that. But never a skipped payment of a default. I would like to bill this person every month. Who would't.
Security is a problem. You need to keep BTC holders from spending twice. You also need to keep a card transaction from being billed by two different parties. You see now that the problems are the same so the same solution might work for both.
Now, here is the finale. You encrypt the card transaction in sequence just as you do with BTC. From now on we always know who bought my card transaction and who it was sold to later (liquidated). And who to bill for it no matter who transfer it to another card.
Here we use the exact same effort but the return can be 15% a year. To get the BTC to work, you need to have enough money, breaking it down into little decimals is just as bad as having to use a 10 million note to by a gallon of gas. And the more zeros on the right, the less value you have, So I have a real problem with trying to share 25 million BTC in a world that has the population it does.
But if we forget the work it takes to generate a BTC and use the box to collect all these credit card transactions, instead, add them all up until the box is worth $1000, and sell it, the new owner is going to have to bill all the peoplr who let their purchase on credit turn into a box that has value and appreciates with interest every year.
If you understand this then you will figure it out. The coin is not the value, it is the hash to identify the box. And you know that there me be one or twent card transactions. As long as they add up to $1000 and the debtors pay there monthly bills, whoever owns the boz gets paid every month in interest and some return principal to buy more boxes.
If we can create 23 million boxes and they represent performing loam paying interest, then a $1000 value is $23 billion plus interest in 23 million boxes. You can see where this is headed right? Instead of addion zeros on the right side of the decimal point, we are adding them on the left side always with a 1 in front.
If each box is worth $1 million of consumer debt, all performing monthly, thn you have 23 trillion dollars earning interest and the merchant got paid.
When I first heard about BTC, I loved it. But after listening to it in simple explanation, the hash is just like a stamp on an envelope, or the prepaid envelope. The important thing is that the envelope arrives, or, stated another way, it is important that consumers pay their bill from you each month. It is the hash which makes the rest work, just like a stamp. Except, this stamp is made when there are enough transactions to add up to the 1000, or the 10000 or the million.
So, I propose we call the bit coin a bit of money owed to someone else and which cannot be paid twice or duplicated and so on. BTC is really just a huge number that incorporates all the previous hashes to make other BTC. So, lets make that the process of keeping track of debts so they can be sold in an open market, the holder having a right to bill the shopper until the it is paid, or one can sell it as a performing obligation at a premium.
Conclusion: the p2p system that allows BTC to work is the same network to buy transactions with. It doesn't matter where you bought the box, it will always have the same card transactions, one or more, and the face value is a big number of performing debt. And each one of those transactions and the boxes are all hashed into the next box made.
You now have a running time stamp of card transactions that are being repaid and two people cannot be sold the same box of transactions.