What is bitcoin and how does it work?

jes

jes

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What is Bitcoin and how does it work?

Mt. Gox, once the world’s biggest bitcoin exchange, abruptly stopped trading on Tuesday, shaking investor confidence in the digital currency that is struggling for legitimacy.
 
WHat is the subdivision of Bitcoins? How does one specify R1 in Bitcoins at $1000?
 
My biggest gripe with Bitcoin is that it's described as a currency, yet treated extensively like an investment. Given it's current volatility, it's definitely the latter. It's too unstable at this point to be called a currency.

Imagine being paid in Bitcoins for your regular job, and losing 20% of your purchasing power the next day because of the volatility? It's not like you can defer paying your rent, bills etc. until it recovers...
 
Icarium said:
My biggest gripe with Bitcoin is that it's described as a currency, yet treated extensively like an investment. Given it's current volatility, it's definitely the latter. It's too unstable at this point to be called a currency.

Imagine being paid in Bitcoins for your regular job, and losing 20% of your purchasing power the next day because of the volatility? It's not like you can defer paying your rent, bills etc. until it recovers...
Click to expand...

Welcome to the world of ZAR, the Rand. It was below 10.8 (R/$) today and 11.2 or something just weeks ago and under 7 just a short while ago. How volatile would you like!

BTC is just like other currencies, which are very much treated like investments. If ALL prices were specified in BTC then it wouldn't be volatile!
 
"Unlike traditional currencies, where a central bank decides how much money to print based on goals like controlling inflation, no central authority governs the supply of bitcoins. Like other commodities and currencies, its value depends on people’s confidence in it."

This is patently false.

Fiat currencies represent the value of the goods and services of the country they represent, and as such their value is determined by the perceived value of said economy as determined by international markets.

What economic activity does Bitcoin represent?

In this way bitcoin has a lot in common with gold. Much of gold perceived value is based on it's choice as a historical store of wealth.

To a starving man a bar of gold is largely indistinguishable from a bar of lead.

Unlike gold and lead however bitcoins have no industrial value.

One might liken bitcoins to DRM'd music, A copy protected digital resource, only without the entertainment value.
 
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