3 ms·

I still don't understand how a nonexistent coin could be worth anything. No really. How does solving an algorithm translate into value?

by Yuioup 14y ago

niggler 14y ago
Value, be it in gold or silver or USD or EUR or bitcoin or cars or art, is a perceived phenomenon. Something has value because others are willing to trade it for goods and services (or for other forms of value). Gold and silver are trusted stores of value because they have been used in that capacity for centuries (and for a very long time, USD were silver certificates so there was real metal backing the paper) The underlying value of BTC, IMO, is the anonymity feature (the ability to conduct commerce without a clear centralized record identifying you by name). Once that is compromised, it's not clear what value BTC will have.
- ragmondo 14y ago
  Anonymity is not really the selling feature of bitcoin - in fact it really only offers pseudo-anonymity. The fact that no-one else can just "print" bitcoins, and that you can transfer funds at internet speed to anybody else anywhere in the world and that (after a short time), the transaction cannot be reversed are the main utilities.
  - jaimebuelta 14y ago
    Yes, I think it is possible, in the long run, to figure out who's behind a wallet, assuming that the Bitcoin use is frequent and convenient (meaning no-super-high-inconvenient-counter-measures are used, but a regular use of currency) In that case, my concern is that I think it will be possible to determine ALL the transactions of that wallet. Making it even less anonymous than regular currencies. I could be missing something, but if confirmed, that could be a problem for using Bitcoin as a regular currency
    - Nursie 14y ago
      There are various laundering schemes, and there's nothing stopping you using new wallets constantly. But yes, in effect, every transaction is traceable and public, AFAICT.
      - jaimebuelta 14y ago
        Yes, I understand that there are things that you can do. But, as those are in the way of convenience, we can assume that not everyone will take the extra effort to create constantly new wallets, etc. So, in case someone can trace you to a wallet, that someone can know all your transactions (of course, only the transactions for that wallet), which is a huge potential privacy risk.
Nursie 14y ago
It doesn't. 'Value' comes from people's perception. The fact(s) that they can't (until the crypto is broken) be counterfeited or double spent (within reason/time limits), and that there are a limited amount ever, and that transfer is decentralised and unregulated, these things give them value to some people. The actual hashing work done is useful to provide the above features. IMHO it is not useful in and of itself. Note that I'm not really an advocate of bitcoins either, but I have taken a bit of time to try and understand them. The limited quantity and decentralisation are not positive features of a currency (again, IMHO)
Ntrails 14y ago
I still don't understand how a piece of rock could be worth anything. No really. How do some carbon atoms translate into value? Value is a transient concept, many things we assume to be inherently valuable are simply based on the assumption everyone else will continue to value them as much (or more) as they do now.
- Yuioup 14y ago
  Yes but there is nothing backing up the solving of the algorithm. The rock came from somewhere and can be put back to be picked up again. A bitcoin comes from nowhere and is a magnetic action away from being wiped into nothing. Bitcoin is b<censored>t, a nonsense bubble waiting to burst. The emperor is wearing bitcoin.
  - Ntrails 14y ago
    Houses crumble, cars break down, money burns. Just as possible to be wiped into effectively nothing. Yet these things retain value. I don't think that bitcoins are worth what people are willing to pay, but then I feel the same about diamonds.
VLM 14y ago
A year or two ago a group in .ch (which is not China, BTW) organized a group buy of Debian logo'd swiss army knives. I got in on the deal and unfortunately ended up paying well over 50% the cost of the knife in various transfer fees. So my "$25 knife" or whatever it was ended up costing me about $50. First I needed to convert from dollars to euros, then an international xfer, then into something kinda like a cross between what americans would call paypal and a checking account I believe it was the iban system where I basically sent money to a number almost exactly like paypal would send money to an email addrs. Nobody would do stuff like this unless they were desperate or crazy or just didn't care so the financial cartels tacked on incredible fees at each step. Oh if only we could have made a transaction with BTC. It takes about 5 minutes to make a BTC transaction so the currency risk is pretty minimal compared to the 50%+ fees from traditional currency changers. Given those numbers, even during an active crash its safer/cheaper to use BTC than traditional forms of transfer. Anyway the value of a bitcoin solely due to transfers is (how much money the world is transferring across borders with BTC today) / (how many BTC are available for that kind of transfer/trading today) with a correction factor for velocity of money today. So if a billion bucks a day flows outta $dying_country and there's ten thousand BTC in the trading pool being used to transfer the money, and the velocity of money is the btc change hands a thousand times a day, then the price delta due to Cyprus/whatever would therefore be "about" $100 per individual BTC on top of whatever existing value due to other transfers and such. These numbers are pretty well made up but this is generally where very long term price estimates end up. So assuming BTC someday approaches 1% of paypals volume, then given paypals well known transfer volume stats, and some realistic estimates of the BTC trading pool size, the price per BTC would be... Much like EE work this valuation benefits from a hydrologic comparison. So given hoover dam, how much does a gallon of water weigh? Well if you know how many pounds of water fell over the dam per day, and you know how many gallons of water fell over the dam per day, and one day's worth of water takes exactly one day to fall over the dam, then a gallon of water would seem to weigh x pounds...
- Nursie 14y ago
  Wowsers. Whereas I've sent money between accounts in all sorts of countries for next to nothing. I think whoever organised your group buy screwed up, badly. And by the sounds of it so did you.
deleted 14y ago
[deleted]

I still don't understand how a nonexistent coin could be worth anything. No really. How does solving an algorithm translate into value?

by Yuioup 14y ago

I still don't understand how a nonexistent coin could be worth anything. No really. How does solving an algorithm translate into value?

niggler 14y ago

Value, be it in gold or silver or USD or EUR or bitcoin or cars or art, is a perceived phenomenon. Something has value because others are willing to trade it for goods and services (or for other forms of value). Gold and silver are trusted stores of value because they have been used in that capacity for centuries (and for a very long time, USD were silver certificates so there was real metal backing the paper) The underlying value of BTC, IMO, is the anonymity feature (the ability to conduct commerce without a clear centralized record identifying you by name). Once that is compromised, it's not clear what value BTC will have.

ragmondo 14y ago
Anonymity is not really the selling feature of bitcoin - in fact it really only offers pseudo-anonymity. The fact that no-one else can just "print" bitcoins, and that you can transfer funds at internet speed to anybody else anywhere in the world and that (after a short time), the transaction cannot be reversed are the main utilities.
- jaimebuelta 14y ago
  Yes, I think it is possible, in the long run, to figure out who's behind a wallet, assuming that the Bitcoin use is frequent and convenient (meaning no-super-high-inconvenient-counter-measures are used, but a regular use of currency) In that case, my concern is that I think it will be possible to determine ALL the transactions of that wallet. Making it even less anonymous than regular currencies. I could be missing something, but if confirmed, that could be a problem for using Bitcoin as a regular currency
  - Nursie 14y ago
    There are various laundering schemes, and there's nothing stopping you using new wallets constantly. But yes, in effect, every transaction is traceable and public, AFAICT.
    - jaimebuelta 14y ago
      Yes, I understand that there are things that you can do. But, as those are in the way of convenience, we can assume that not everyone will take the extra effort to create constantly new wallets, etc. So, in case someone can trace you to a wallet, that someone can know all your transactions (of course, only the transactions for that wallet), which is a huge potential privacy risk.

Nursie 14y ago

It doesn't. 'Value' comes from people's perception. The fact(s) that they can't (until the crypto is broken) be counterfeited or double spent (within reason/time limits), and that there are a limited amount ever, and that transfer is decentralised and unregulated, these things give them value to some people. The actual hashing work done is useful to provide the above features. IMHO it is not useful in and of itself. Note that I'm not really an advocate of bitcoins either, but I have taken a bit of time to try and understand them. The limited quantity and decentralisation are not positive features of a currency (again, IMHO)

Ntrails 14y ago

I still don't understand how a piece of rock could be worth anything. No really. How do some carbon atoms translate into value? Value is a transient concept, many things we assume to be inherently valuable are simply based on the assumption everyone else will continue to value them as much (or more) as they do now.

Yuioup 14y ago
Yes but there is nothing backing up the solving of the algorithm. The rock came from somewhere and can be put back to be picked up again. A bitcoin comes from nowhere and is a magnetic action away from being wiped into nothing. Bitcoin is b<censored>t, a nonsense bubble waiting to burst. The emperor is wearing bitcoin.
- Ntrails 14y ago
  Houses crumble, cars break down, money burns. Just as possible to be wiped into effectively nothing. Yet these things retain value. I don't think that bitcoins are worth what people are willing to pay, but then I feel the same about diamonds.

VLM 14y ago

A year or two ago a group in .ch (which is not China, BTW) organized a group buy of Debian logo'd swiss army knives. I got in on the deal and unfortunately ended up paying well over 50% the cost of the knife in various transfer fees. So my "$25 knife" or whatever it was ended up costing me about $50. First I needed to convert from dollars to euros, then an international xfer, then into something kinda like a cross between what americans would call paypal and a checking account I believe it was the iban system where I basically sent money to a number almost exactly like paypal would send money to an email addrs. Nobody would do stuff like this unless they were desperate or crazy or just didn't care so the financial cartels tacked on incredible fees at each step. Oh if only we could have made a transaction with BTC. It takes about 5 minutes to make a BTC transaction so the currency risk is pretty minimal compared to the 50%+ fees from traditional currency changers. Given those numbers, even during an active crash its safer/cheaper to use BTC than traditional forms of transfer. Anyway the value of a bitcoin solely due to transfers is (how much money the world is transferring across borders with BTC today) / (how many BTC are available for that kind of transfer/trading today) with a correction factor for velocity of money today. So if a billion bucks a day flows outta $dying_country and there's ten thousand BTC in the trading pool being used to transfer the money, and the velocity of money is the btc change hands a thousand times a day, then the price delta due to Cyprus/whatever would therefore be "about" $100 per individual BTC on top of whatever existing value due to other transfers and such. These numbers are pretty well made up but this is generally where very long term price estimates end up. So assuming BTC someday approaches 1% of paypals volume, then given paypals well known transfer volume stats, and some realistic estimates of the BTC trading pool size, the price per BTC would be... Much like EE work this valuation benefits from a hydrologic comparison. So given hoover dam, how much does a gallon of water weigh? Well if you know how many pounds of water fell over the dam per day, and you know how many gallons of water fell over the dam per day, and one day's worth of water takes exactly one day to fall over the dam, then a gallon of water would seem to weigh x pounds...

Nursie 14y ago
Wowsers. Whereas I've sent money between accounts in all sorts of countries for next to nothing. I think whoever organised your group buy screwed up, badly. And by the sounds of it so did you.

deleted 14y ago

[deleted]