Although I really love crypto and innovative solutions with it, I am a little embarrassed to say I've never actually put a lot of effort into understanding how Bitcoin and other cryptocurrencies work under the hood. This article has pretty much cleared it for me (although I'll surely refer to Satoshi's original paper for some further clarification). Nice read.
Somewhat unrelated---I didn't know that the original Bitcoins were not spent! That's really strange to hear; I can hardly imagine a person resisting the urge to cash them in at some point (whatever the reason of resistance). Crazy stuff.
Satoshi most likely has a stash of several thousand Bitcoin that were mined using a standard miner without their tell-tale finger print. (Something about the odd nonce distribution with Satoshi's coins gives away his main set.)
Also when Satoshi left the development team in 2010 he could've been mining normally like everyone else, and he could have easily amassed 10,000+ Bitcoin in that time without it ever being linked to his early 1,000,000 coins.
I think it's likely Satoshi has cashed out millions of dollars worth of Bitcoin, just not from the pile of coins everyone is watching.
"cash them"? I think you meant "spend them".
Remember bitcoin is money, why convert it to another form of it?
How would you "cash out" bills? Convert them to gold?
The "What is money" section of the article taught you nothing?
Sorry, it was a slip of tongue and has to do with the meaning of equivalent words in my native language---what I meant to say was closer to "exchange them for a form of money you can buy a yacht with." Not sure why the hostility, though, we are all wrong sometimes.
Can't blame him. Almost everyone who talks about Bitcoin talks about it as a speculative asset, instead of a currency. People are too fixated on the fact that its price in USD jumped a lot.
I guess "cash them" means "turn the speculative good into money".
The "What is money" section seems to agree (when leaving out the word "only"):
"The real difference between Bitcoin and a national currency is that national currencies are backed by governments, whereas Bitcoins aren’t really backed by anyone other than the miners."
So, the thing that is backed by governments is money, the other thing is not.
Plot MSFT US Equity over the past 10 years and tell me how a logarithmic scale on the y axis would improve over a regular y axis?
Most stocks don't grow logarithmically, especially over shorter periods of time.
Not to go all appeal to authority, but Bloomberg and Reuters, the two top names in financial information show their charts using a regular, non logarithmic scale. If you think logarithmic is always better you should take it up with them:)
EDIT, the link below actually illustrates my point as it says that logarithmic is good for large jumps, which as I mentioned, don't usually happen over the time periods that people view returns.
It's not about the rate of the growth. It reflects better percentage movement (that's what's important).
Nominal movements in price are meaningless.
Really. Thing about it. A 100% growth at $10 is the same as 100% growth at $100 if you want to calculate revenue but it is not reflected as that in a linear scale.
Yeah, I find that most people really don't know what money is. They think the cash in their hand has some sort of intrinsic value, but can't explain it (and don't want to think about it). I know I was like that until I graduated from school and started thinking about (and researching) investing.
This is a genuine question. What do you think that money is? Because I have also asked myself that question, and I have read about it, but I don't seem to be able to give a definite answer.
It's a decentralized record of accounts (except the accounts are forgotten).
A natural step from barter is a record of who owes what (so you don't have to bring some grain just to buy 1 beer from someone you have a good trust relationship with). A natural step from there is a token representing value, and there are lots of reasons to make them portable and interchangeable.
Well, let's see if I can put this into words well enough (I'm not great at that sometimes).
In very basic terms, it's a medium of exchange.
"Money" is not some objective, universal concept (although people think it is). It's not a naturally occuring phenomenon (I think I've read about chimps using some very simple mediums of exchange in the wild, which is pretty cool, but I think it's pretty exclusive to us and chimps). It's a human creation, and a tool to make our lives easier, much like any other form of technology.
It was created as a storage of some value you produced. Basically, by doing some work for someone, or giving something to someone, there was an exchange of value -- your item or your time/effort was worth something, and it was moved from your possession to theirs. If there was no money, you would need to immediately receive something else of similar value, or else the value would simply dissapear (you did some work and got some chickens, for example, which you could eat). Unfortunately, not all work is equal, and not all items of value are equal -- if you had 1 sheep, and your buddy had a cow, and cows are worth 2 sheep at that given moment, you could not do business. It gets even more complicated when services, rather than items, are provided. So we invented a system of "owing" value.
"Money" is not defined necessarily by currency, or by gold and silver, or anything else we've used throughout history. It can be anything, physically. In fact, it probably started out when, in small tribes where everyone knew each other, people simply kept track of favors and IOUs between friends and family -- and probably grew into physical items (like gold, or even seashells and tulips) [no citation, this is just my personal thoughts] once our communities expanded to the point where people were trading with strangers, or when it became to complex to trade mental IOUs (say I gave some guy 2 sheep, now he owes me 2 sheep's worth of stuff. The guy traded some other guy 2 sheep's worth of stuff. The third guy has a cow, owes the second guy 2 sheep/1 cow, and I want a cow. He can give me a cow and all debts between the three of us are cleared. However, even this simple example is pretty complicated). The point is, "money" is a concept, not a physical object -- the physical object, whatever it may be, is just a representation.
In fact, it basically boils down to debt. This is especially true in the current economic climate (where all fiat currency is basically backed by debt rather than any tangible item) but the concept of money itself is essentially "I did some service or provided some item of intrinsic value. I was provided with X amount of money for that service or item. Now someone owes me some service or item worth what I provided earlier." Another good analogy might be a ledger of value transactions (in fact, this would probably be the simplest form of money).
And so that's why we hear things like "the rich don't work for money, they work for assets." I remember that being a hard concept to wrap my mind around until I understood money as more than just what I buy stuff with. Money is a man-made creation, is not necessarily consumable, and has no intrinsic value beyond what society defines it to have (which can change at a whim). But if you own something with intrinsic value (can be consumed or produces something that can be consumed -- like a business/product, land, etc.) you can continue to produce value that can be exchanged for whatever passes as "money."
I hope this makes sense. I think the hardest part of explaining it (and why you probably can't find a definite answer) is because it's an abstract concept.
The box is not completely accurate though. When it says:
>On the negative side, there is no one to step in and help stabilise it should things start to go wrong (for example, the various governments that printed more money to help ease the cash flow crisis in the ‘Credit Crunch’).
There are other mechanisms that don't involve the printing of money in order to stabilize the economy.
However, it is true that increasing or decresing the amount of money in circulation is a very simple way to do it. For example, bitcoin could live along with government backed money, like the greenbacks were in use at the same time as gold-backed money.
>In practical terms, the biggest difference between Bitcoin and most other currencies at the moment is the wildly fluctuating exchange rate.
This is true right now due to the fact that the whole bitcoin economy is worth only a few billion dollars, but if bitcoin succeeds in becoming the world's currency it will most likely fluctuate less than any other currency.
Could it be possible such a thing of a world's single currency? What is the subject that I should study to understand all of this and stop asking a question like that?
Finance? Economy? What branch of those? Thanks for answering or for just considering doing it.
>Could it be possible such a thing of a world's single currency?
With the world's currency, I didn't mean the "single" currency. I meant the world's currency like the gold was for many years, or the dollar is nowadays. You used to be able to go anywhere and either buy things with gold or exchange it fairly easily for local currency. Same thing happens nowadays with the dollar. However, the American dollar is losing its preponderance in world trade. The Chinese are pushing really hard to fill that spot with the yuan, this is one of the reasons behind their recent gold fever. [1] Even though, they don't have a gold backed yuan, and probably never will. Gold reserves, together with foreign exchange reserves[2] make a currency stronger, since in case that the Yuan starts to depreciate the Chinese Government can always sell those reserves and buy Yuan's increasing it's demand and consequently increasing its price.
>What is the subject that I should study to understand all of this and stop asking a question like that?
I have an economics background, and I've studied some finance, but I don't think I can give you a good enough answer. If you are really interested I rather you looked online or asked somewhere else (maybe reddit?). Nevertheless the straightforward answer is: Monetary Policy. However, in order to get into monetary policy, I believe that you'd probably need to know the basics about economics, the Mankiw is a good start [4]. Afterwards, I would suggest you to read something from Taleb, maybe The Black Swan, since economics it's full of BS, and this book will serve as a compass. Finally, I would advise you to take the class: Economics of Money and Banking [6] from Columbia on Coursera.
> It’s also possible to get wallets that are hosted online, for example, at blockchain.info
Strictly speaking their claim is that they're only hosting the encrypted version. Whether that's the case and the client doesn't phone home is difficult to tell.
Somewhat unrelated---I didn't know that the original Bitcoins were not spent! That's really strange to hear; I can hardly imagine a person resisting the urge to cash them in at some point (whatever the reason of resistance). Crazy stuff.