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57

If you bought a bar of gold at $1200 / ounce, then the price of the gold drops to $600 / ounce, you wouldn't actually lose any money at all unless you decided to sell your gold at that time. However, if you wait until the price of gold rises to $1800 / ounce, then sell it, you will gain money. The key is an ounce of gold is still an ounce of gold, ...


27

If you bought one bitcoin and the price goes down, you still have one bitcoin. If the price goes up...still one bitcoin. This is just like everything else, including groceries, gasoline, gold, stock certificates, etc... Measurements of value in fiat (such as dollars) does not affect the amount something you own, only the price at which you will be able to ...


25

The Scenario is confused, because it assumes that there is only one side to a trade. The scenario assumes that the money goes "into the Bitcoin economy" when people buy bitcoins. This is confusing, because it sounds as if there were only one side to the trade. You will find that the scenario doesn’t imply Bitcoin to be a Ponzi scheme, once you take a closer ...


13

tl;dr- This is called a capital loss. You're said to realize the capital loss if you sell the Bitcoins at the lower price, such that you lost money due to having bought/sold them. However, note that this isn't legal advice and I'm unsure about what the current legal statutes are surrounding Bitcoin. Bitcoin's a capital asset (at least conceptually; dunno ...


11

Satoshi created a system that: Allowed users to trust transactions without having to trust any single entity. Opened it up so that anyone could participate and exchange computation power for Bitcoins. Is designing with a fixed size (21 million Bitcoins), he created an incentive for users to get involved early while Bitcoins are relatively cheap to generate; ...


11

The answer is not unique to bitcoin. It would be the same if you're dealing with (non-crypto) foreign currency, stock, a stock derivative or commodity or commodity futures. When you buy something like the above, you are giving up your "real money" (fiat currency) to take possession of said commodity/stock/bitcoin/etc (let's call these assets in general). ...


10

This more of a question about excel than it is actually about Bitcoin. But the answer is actually pretty easy. The first thing is that the data that you want to import from the web may not be easily isolated, so you might have to import much more data than you want into a second excel sheet, then link the cell with the data you are interested to a cell in ...


10

Bitcoins are no different from any other commodity in this regard. We say that the price of a car is $45,000, but that doesn't guarantee that you can sell one for $45,000 unless you can find someone willing to buy one for $45,000. When we say some particular number is the price, we mean that's basically the number that buyers and sellers both agree that it ...


9

The value of a Satoshi is fixed. The key word is "currently" (smallest currently possible). If the divisibility is ever increased, a Satoshi will still be exactly 0.00000001 BTC, even though there exists unit representing an even smaller amount. There would need to be new names for these new denominations that are even smaller than a Satoshi, but dSatoshi ...


9

Yes, you lose a quantity of your money, at the time you gave it away in exchange for the bitcoin you received. Subsequent changes in the exchange rate only vary the hypothetical value of what you would get if you wanted to trade back.


8

Blockchain.info reckons the network used 156.51 megawatt hours of electricity in the last 24 hours. This random physics page I googled up reckons a car driving at 40mph takes 100kW (so, 2.4 MWh in 24 hours). So by these (very) rough figures, running the Bitcoin network takes about as much energy as driving 65 cars. How many vehicles are used in the ...


8

This is really asking about basic trading economics: if I have some new product X, what price does it have? I can set a price and see if anyone buys it. If not, I might lower the price or auction it to see what someone might pay for it. That is the starting value, but it doesn't really mean much as it hasn't been field-tested (so to speak). If others think ...


7

Bitcoin is a decentralized digital currency. It is meant to be resistant to corruption and external control. That is the reason it was created. Bitcoin achieves this only through the approach where consensus of the ledger is achieved by performing work. Bitcoin is vulnerable -- this consensus mechanism can be blocked by anyone with 51% of the mining ...


7

There are really only two things driving the increase in price you are talking about. Supply and Demand Greed and Fear Supply and demand is simple, there is a virtuous cycle at work here: Increasing demand drives price increase due to limited supply Increasing price drives increasing demand as knowledge spreads in the media Repeat Greed and Fear are ...


7

A Ponzi scheme is characterised as follows (this is according to Wikipedia, rather than for example the US Department of Justice, which would focus more on the criminal culpability in its definition): A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital ...


6

The value of Bitcoins will fluctuate against the dollar -- for a number of reasons, including the price rising as the result of speculation or from demand for the currency. The price can and has dropped -- for various reasons as well. If you want to hold bitcoins, then you expose yourself to those fluctuations. If you simply want to use bitcoins for ...


6

If the global network difficulty is D and the difficulty of shares in the pool is d, then the probability that a share will lead to a valid block is d/D. The reward in this case is B, so the average reward per share is B*(d/D). If the operator's average fee is f (so for example f=0.01 means 1% fee), the average reward miners get per share submitted is (1-f) *...


6

As famous as it is, I believe Silk Road isn't the reason for Bitcoin's existence or its success. There are plenty of private individuals who value Bitcoin for international money exchange, its low cost trading capability, its irreversability, its lack of a central authority and its upper limit on the number of bitcoins. If you analysed the transactions ...


6

Whether it fluctuates or not depends on how you express value. If you happen to be one of them American folks, who use dollars to express value, then a fixed amount of money in other currencies (such as euros or bitcoins) will fluctuate. But similarly, a $10 dollar bill will fluctuate in value, if you express value in euros or bitcoins (basically, that is ...


5

The system is using integers to represent amounts. 1 satoshi is the smallest unit (integer one). The satoshi is the base unit of the protocol (not the bitcoin). It would be very hard to change this to support more decimals, but it seems also extremely unlikely that the need arises. With 21 millions bitcoins (i.e. 2,100,000,000,000,000 satoshi) in total, ...


5

A Bitcoin can be used to permanently trace the association between different public keys. For example a user can send a transaction to a second user and publicly and permanently link the accounts. This may have utility in Web Of Trust scenarios. The low value bits of an individual bitcoin can cheaply store metadata. Saving them as a collectors item Sharing ...


5

Bitcoins have value because they are useful. They have useful properties. This answer expands on this at length. As for what the author wrote in the very beginning, you can read the announcement of Bitcoin v0.1. Bitcoin was worth very little for the first year. In this thread, written 16 months after Bitcoin's launch, you can read the conversation ...


5

Basing on this set of data from XKCD, world's GDP is $62,900,000,000,000, If all of it was expressed in 21 million bitcoins, then each bitcoin would be worth $2,995,238.10, so roughly 3 million dollars.


5

I think a more reliable way is to compare it to gold, since the exact value of currency in the world is very difficult to calculate. It's estimated that 171,300 tonnes of gold have been mined in human history, which is roughly equivalent to 5.5 billion troy ounces. 5.5 billion oz/21 million bitcoin = 261.9 oz/bitcoin The value of one ounce of gold is ...


5

Taking your questions in order: How yet another "currency" will solve anything, or what Bitcoin is supposed to be solving? Because this is a currency that has different properties that avoid the properties of other currencies that create these problems. For example, the supply of Bitcoins is fairly precisely defined and nobody can devalue them through ...


4

You can find graphs charting this relationship at http://bitcoinx.com/charts/. (scroll down) Network hash rate and exchange rate are certainly correlated, but the relationship is very complex, I think it would be inaccurate to say that one depends on the other. In general, if price increases due to an outside factor (eg. new adopters buying Bitcoins) hash ...


4

The left Y-axis applies to the lighter colored volume bars from the bottom of the chart which denote the trading volume in BTC. Alternatively you have the option to display these volume bars in the respective other currency (USD in this case), if you select the "Volume in Currency" checkbox at the left of the page. A volume bar shows how many units of the ...


4

It's a chicken vs egg problem. If only one person had ever mined, or that one person only enable a small number of people to mine, Bitcoin would have likely never grown at the rate it has. We'd call it a centralized system, and it'd be little different from any other centralized currency contrived in the past several decades. Its electronic transmission ...


4

The system is protected by an incentive mechanism. As Satoshi said in the paper itself: He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth. This means that if someone has access to a supercomputer, more ...


4

Amounts in a Bitcoin transaction are set in bitcoin. That is, if you want to receive $5, when the current bitcoin price is $234.97/bitcoin, then you might make a request for 0.0212 bitcoin inside the QR code. If the price changes between you making the request and the other person sending bitcoin, then you will still receive 0.0212 bitcoin, but it might be ...


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