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I have a few questions about bitcoin and trying to wrap my head around it.

1) If people can generate bitcoins out of thin air on their computer how does it not mess with the value of the bitcoin?

2) I have bitcoin-qt on my computer a mac, If i ever had to reinstall my os how do i keep my wallet? is the address to my wallet generated based on my hardware or is it automatically generated to where if i reinstalled my os it would create a new one.

3) I read that bitcoin mining is pure luck. My question is what is the software mineing from and where is it collecting its data from? My bitcoin-qt software has been synchronizing with a network for a while now and i'm not sure what it is downloading.

thank you

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    Please try to avoid multi-part questions where the parts are not inter-related. In this case it would have been much better for you and the site if these had been posted as 3 separate questions. Other than that, thanks for your contribution and welcome to StackExchange!
    – David Perry
    Commented Apr 2, 2013 at 16:26

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1) There are approximately (25BTC/10min * 60min/hour * 24hours) = 3600 BTC produced per day. Compare that to the roughly 10 million bitcoins in circulation. The market price will not move significantly if all value generated by a day's mining was traded.

2) Your wallet information, including the addresses associated with your private key are all stored in a little file called wallet.dat. It's typically a few KBytes (~100KB) in size, so it's easy to transfer to another computer, or carry over to a fresh OS install.

3) Your bitcoin client is downloading all the bitcoin transaction information from the beginning of bitcoin's existence. Currently this is a fair amount of data (~7GB with indexes). Miners only use the recent transactions to form a new 'block', however they need the last known agreed-upon block to generate the next block, so technically require the entire history, or a secure representation, of the blockchain (the chain' of blocks generated by miners) . Mining a block is indeed a non-deterministic thing - it is somewhat like gambling with one's computing power. If you're mining by yourself, your chance of 'winning' is essentially this:

P(winning) = (your computing power) / (network's computing power)

However, there are ways of mitigating the variance of mining called mining pools.

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  • thanks for your response, how can i transfer my paypal funds into my bitcoin wallet?
    – Exploit
    Commented Apr 1, 2013 at 17:10
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    That's an entirely different question, which warrants .. a new question. Distilled answer: Paypal -> BTC exchange (e.g. mtgox.com) -> Your BTC wallet.
    – Rooke
    Commented Apr 1, 2013 at 17:20
  • thanks, so lets say i had 15 btc mtgox (which is an online wallet from my understanding?) and i want to convert it to usd to transfer to my bank. which would be as of today ~$1545. How long does it take? Also if say i end up making 10k usd and i transfer it to my bank wouldnt the IRC come after asking where that money came from? do they see it as a legal form of currency? sorry for all the questions.
    – Exploit
    Commented Apr 1, 2013 at 17:47
  • support.mtgox.com/forums/20105883-FAQ
    – Rooke
    Commented Apr 1, 2013 at 21:18

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