The Cryptocurrency thread. Internet money. Want to learn?

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airman
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The Cryptocurrency thread. Internet money. Want to learn?

Post by airman »

Who all here is into the digital currencies? Does the word 'Bitcoin' get anyone's attention?

For those who do not know, digital currency is something that's been developing for a little while. As it turns out, people like the idea of decentralization - and it works. Those of us who pay transaction fees to send money from one place to another (wire fees, paypal, money order, etc) may understand just from that. It all started with something called Bitcoin in 2009. The idea, what's the point, how it works, what keeps it secure, why it's worth actual money, and many other concepts can be pretty tough to grasp until you really read into it. It took me a little while.

The basics - coins (whether it's Bitcoin, Dogecoin, Litecoin, etc) are rewarded to individual users who donate their computational power to that coin's network. Every transaction since a coin's conception is stored in the coin's public "blockchain" (a chain of transactions of every "wallet" address ever - such as http://www.blockchain.info for bitcoin). The reason for this is security - not only are these blockchains distributed across every user of the coin (so fake transactions in a fake blockchain won't match with the majority of the network and is discarded), but the computational power you're submitting is performing some very advanced cryptographic calculations, hence the name cryptocurrency. These calculations are irreversible (for the most part, anyways - one would need billions of dollars worth of specialized computing hardware at their disposal to attempt such a task). Look up hash functions and ASIC on wikipedia if you want to know more about this in particular.

The coins have value mainly because they're worth what people are willing to trade goods and services for. This is what starts an economy. Once they have a little bit of value, long-term investors catch on and see 'Coin XYZ' has a lot of potential for long-term use (and thus expecting a price rise)- so they buy some of that coin and hold it.

Is it a scam? No. Not the major players, anyway. New "altcoins" pop up every day. Speculators take advantage of small market caps to manipulate a coin's price, start a buying rally from other speculators, then dump those coins for a profit. New altcoins typically don't last very long for this reason (as the price crashes after the dump), although dozens more pop up every day.

The part that makes digital currency interesting right now is the fact it's still in its infancy phase. If you're looking for a high-risk investment, you might want to check it out. For example, someone bought a pizza with 10,000 Bitcoin back in 2009 (~$25). Today, that same amount of Bitcoin is worth over $6 million.

I know this post is a little disorganized and it's only meant to put some information out there and tickle some people's brains. Please feel free to ask questions :) This is a ten mile-high view and I've generalized a lot. Not every coin works the same way.
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PeterLight
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Re: The Cryptocurrency thread. Internet money. Want to learn?

Post by PeterLight »

I never knew much about bitcoins. Are they still "the rave" until now?
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