What is bitcoin? A look at the digital currency

What is bitcoin? A look at the digital currency
In this April 7, 2014 file photo, Bitcoin logos are displayed at the Inside Bitcoins conference and trade show in New York. It's worth more than an ounce of gold right now, it's completely digital and it's the currency of choice for the cyberattackers who crippled computer networks around the world in recent days. Bitcoin has a fuzzy history, but it's a type of currency that allows people to buy goods and services and exchange money without involving banks, credit card issuers or other third parties. (AP Photo/Mark Lennihan, File)

It's worth more than an ounce of gold right now, it's completely digital and it's the currency of choice for the cyberattackers who crippled computer networks around the world in recent days.

When the attackers' "ransomware" sprang into action, it held victims hostage by encrypting their data and demanding they send payments in bitcoins to regain access to their computers. Bitcoin has a fuzzy history, but it's a type of currency that allows people to buy goods and services and exchange money without involving banks, credit card issuers or other third parties.

Here's a brief look at bitcoin:
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HOW BITCOINS WORK

Bitcoin is a that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who "mine" them by lending computing power to verify other users' transactions. They receive bitcoins in exchange. The coins also can be bought and sold on exchanges with U.S. dollars and other currencies.

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HOW MUCH IS IT WORTH?

One bitcoin recently traded for $1,734.65, according to Coinbase, a company that helps users exchange bitcoins. That makes it more valuable than an ounce of gold, which trades at less than $1,230.

The value of bitcoins can swing sharply, though. A year ago, one was worth $457.04, which means that it's nearly quadrupled in the last 12 months. But its price doesn't always go up. A bitcoin's value plunged by 23 percent against the dollar in just a week this past January. It fell by the same amount again in 10 days during March.

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WHY BITCOINS ARE POPULAR

Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators—and criminals.

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IS IT REALLY ANONYMOUS?

Yes, to a point. Transactions and accounts can be traced, but the account owners aren't necessarily known. However, investigators might be able to track down the owners when bitcoins are converted to regular currency.

For now, the three accounts tied to the ransomware attack appear untouched—and it'll be difficult for perpetrators to cash in anytime soon without getting traced.

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HOW MUCH MONEY?

Security experts say the amount of ransom collected so far appears small relative to the extent of the outbreak. Tom Bossert, President Donald Trump's adviser for homeland security and counterterrorism, says it appears less than $70,000 has been paid in ransoms.

It's possible, though, that there are unknown accounts beyond the three identified.

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WHO'S USING BITCOIN?

Some businesses have jumped on the bitcoin bandwagon amid a flurry of media coverage. Overstock.com accepts payments in bitcoin, for example.

The currency has become popular enough that more than 300,000 daily transactions have been occurring recently, according to bitcoin wallet site blockchain.info. A year ago, activity was closer to 230,000 transactions per day.

Still, its popularity is low compared with cash and cards, and many individuals and businesses won't accept for payments.

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HOW BITCOINS ARE KEPT SECURE

The works by harnessing individuals' greed for the collective good. A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction. The blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional bitcoin. As long as miners keep the blockchain secure, counterfeiting shouldn't be an issue.

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HOW BITCOIN CAME TO BE

It's a mystery. Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto. Bitcoin was then adopted by a small clutch of enthusiasts. Nakamoto dropped off the map as bitcoin began to attract widespread attention. But proponents say that doesn't matter: The obeys its own internal logic.

An Australian entrepreneur last year stepped forward and claimed to be the founder of bitcoin, only to say days later that he did not "have the courage" to publish proof that he is.


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What is bitcoin? A look at the digital currency

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May 16, 2017
The problem with blockchain security is that far as I remember it's enough for someone to own a third of the mining power in order to tamper with the blockchain. Given that Chinese mining pools account for 60% of mining and the only reason there isn't a single mining pool doing over a third of the mining is an agreement not to have that, I think that Bitcoin isn't very secure.

Bitcoin is the first cyrptocurrency created and therefore the best known. Being the first created also means it's the least technically advanced.

May 16, 2017
Transaction Maleability is the biggest problem, there have been many of them, and they have persisted since 2011 ...
http://www.coinde...ability/
That link is obviously pro bitcoin, but exchanges have been hit numerous times with hacks and thefts of large amounts of money.
Do not keep your bitcoins in an online wallet, use a secure USB style wallet and keep it offline when not using it.

May 16, 2017
The interesting thing to note is that it cuts out the middleman (i.e. banks who skim off the top on every normal transaction by providing ...what service exactly?)

The underlying principle of the blockchain is also interesting in all kinds of contexts besides currency (e.g. when you need to track some sort of valuable data and need to make sure it's legit.)

May 16, 2017
A lot of hype around the accounting aspects, but you have to wonder who will process the transactions, and the possibility of corporate mergers causing major conflicts.

In the end you'll end up with another clearing house cloud scenario, which kind of defeats the whole purpose.

Transaction vulnerability will always be a problem, it has to be transparent therefore it's vulnerable.

The whole "mining" concept has it's issues as well.

May 16, 2017
The interesting thing to note is that it cuts out the middleman (i.e. banks who skim off the top on every normal transaction by providing ...what service exactly?)


Bookkeeping.

And bitcoin does the same skimming by giving the miners bitcoins.

The whole thing is really a pump & dump scam. The system continuously adjusts the difficulty to "mine" new coins - at the beginning the difficulty was low and millions of BTC were created by made-up transactions on humble desktop computers before the whole speculator/gambler rush pumped the price up to $1,000 per BTC.

So, there are people out there with millions of BTC stocked up but they can't cash them out because that would collapse the price bubble and ruin the value - so what do they do?

Well, they attempt to create an actual need and demand for BTC by unleashing a virus that demands a ransom in BTC, and suddenly there's a real market for the currency because people -have- to buy it.

May 16, 2017
A lot of hype around the accounting aspects, but you have to wonder who will process the transactions,

Since the ledger is being verified by a lot of people there is a measure of security (except when the bitcoins are sourced in large part by one party...which could be the case with the Chinese involvement therein). But generally the transactions are at least as secure as with a bank.
(One could fiddle with the timestamp servers, but since these are also distributed that is pretty hard to do. At least no one has managed to do it, yet)

May 16, 2017
The whole "mining" concept has it's issues as well.


It's a very weird way of handling "money".

The more transactions there are, the more money gets created, but there's a limit to how much of it can exist so at some point the reward for processing new transactions becomes less than the amount of energy you have to spend because the difficulty goes up.

It's a monetary system based on make-work: you get rewards by wasting energy doing artifically difficult calculations in the hopes that the value of the tokens you gain keeps increasing forever - which they won't, because they can't.

Eventually the game runs its course and people abandon it. The early investors reap huge profits, and the late investors are left with worthless digital tokens.

May 16, 2017
...

Well, they attempt to create an actual need and demand for BTC by unleashing a virus that demands a ransom in BTC, and suddenly there's a real market for the currency because people -have- to buy it.


So, the price of bitcoin has reached $1700 because of ransomware?

May 17, 2017
...

Well, they attempt to create an actual need and demand for BTC by unleashing a virus that demands a ransom in BTC, and suddenly there's a real market for the currency because people -have- to buy it.


So, the price of bitcoin has reached $1700 because of ransomware?


Among other reasons.

When there are tens of thousands of people desperate to unlock their files, and the only way to do so is by buying bitcoins, what do you think the result is? Demand goes up, the price goes up.

In a normal situation, because the bitcoin market is a speculator bubble, trying to sell a large amout of BTC causes a collapse because increasing supply decreases prices, and when the price goes down fast it causes an avalanche of other people attempting to sell their BTC in fear of it losing more value, which causes it to lose more value, which makes the bubble pop.

If there is a "genuine" demand for BTC other than investors gambling with it, the price stays up.

May 17, 2017
The situation is similiar to the US foregin policy of forcing the international sale of oil in dollars. Other countries must buy dollars to buy oil, so the US can print more dollars without the dollar losing value.

Hence why the war in Iraq. Saddam said "Bush can shove it, we'll start selling oil in Euros".


May 17, 2017
...

If there is a "genuine" demand for BTC other than investors gambling with it, the price stays up.


At one time the price of a bitcoin was $0.001, then it was $1.10, then hit over $17.00, then over $200... $1200 ... $1900... One conclusion can be, as you say, that the only genuine reason keeping the price from dropping is the gambling. Interesting.

Jul 14, 2017
One conclusion can be, as you say, that the only genuine reason keeping the price from dropping is the gambling.


Well, technically it hasn't, as Bitcoin experiences periodic crashes in value when the gamblers get antsy and want to cash out.

It may lose 30-50% in value in a day, and then bounce back up as people rush to buy "cheap" BTC with the idea of selling it again at a higher price, which will then cause the value to crash again.

Just January this year the price crashed down to $750 going -30% in a week, yet in June it reached $3000. The trap is set, the gamblers are waiting to see who blinks. The first few to sell their BTC will recieve a high price while the rest have to sell on a falling market and most likely lose their money. That's the game.

Imagine for any real money, if the prices of goods changed 400% in six months because the money changes value. It would be more or less useless, as any savings you have may just vanish before you can spend it.

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