32 Replies Latest reply on Jun 19, 2017 12:32 PM by stocks45

    BitCoin - new kind of money?

    Active Contributor

      bitcoin.org

       

      anyone tried it?

        • Re: BitCoin - new kind of money?
          Elite Contributor

          I have read about bitcoins, but have never been tempted to buy them.

           

          “Bitcoin is an innovative payment network and a new kind of money.” (They have an entertaining video.)

          http://bitcoin.org/en/

           

          “Although bitcoin is promoted as a digital currency, many commentators have criticized bitcoin's volatile exchange rate, relatively inflexible supply, high risk of loss, and minimal use in trade.”

          http://en.wikipedia.org/wiki/Bitcoin

           

          “What is a bitcoin really worth? CoinDesk thinks it has the answer. Today they introduced a bitcoin price index, which aims to establish the price reference for industry participants and accounting professionals.”

          http://allthingsd.com/20130911/whats-a-bitcoin-really-worth-coindesk-thinks-it-h as-the-answer/

           

          “Bitcoin users will be able to cash in their bitcoin accounts starting in October, as a company called Bitcoiniacs plans to install the first bitcoin ATM in Vancouver, Canada.”

          http://rt.com/business/bitcoin-atm-canada-vancouver-717/

           

          Will any of the above help to stabilize the exchange rate or increase the supply? I don’t know, but I am still not a buyer. However, I will admit that it is an interesting concept ... peer-to-peer technology to operate with no central authority or banks managing transactions.

            • Re: BitCoin - new kind of money?
              Active Contributor

              Torrent has proven the enormous power of peer to peer concept, so the delivery backbone is very capable. Security is also not an issue. The way bitcoins are created makes sense. When tesla car was in its infancy nobody was taking it seriously, until they took one third of market from ford and gm. same could happen with bitcoins. thank you for links i will be studying this phenomenon to get ready for next tesla in currency

            • Re: BitCoin - new kind of money?
              Bogey101 Contributor

              http://en.wikipedia.org/wiki/Silk_Road_(marketplace)

               

              The anonimity of bitcoin lends itself to rampant illegal activity. Silk road's discovery has not helped.

               

              Message was edited by: Bogey101

               

              Message was edited by: Bogey101

                • Re: BitCoin - new kind of money?
                  Active Contributor

                  Well, while we are watching BitCoin, here is another interesting concept to consider:

                  "http://www.forbes.com/sites/karstenstrauss/2013/09/13/the-secret-technology-that -attracted-76-million-and-could-eat-amazons-lunch/"

                  "

                  The Secret Technology That Attracted $76 Million And Could Eat Amazon's Lunch

                  "

                  • Re: BitCoin - new kind of money?
                    Active Contributor
                    • Re: BitCoin - new kind of money?
                      Active Contributor
                        • Re: BitCoin - new kind of money?
                          Active Contributor
                            • Re: BitCoin - new kind of money?
                              Elite Contributor

                              If bitcoins ever get valued at a stable price relative to dollars, the goverment will have to tax transactions that take place in bitcoins.

                               

                              If the goverment did not do that, a busiiness could accept part of their payments in bitcoins, knowing what the exchange rate should be. If the bitcoin transactions are not taxed, the business could make huge untaxed profits. By the same token, individuals could be paid part or all of their salaries in bitcoins and avoid paying taxes.  And sales that take place using bitcoins would not generate sales tax.

                               

                              You can't avoid paying taxes by taking payments in Euros instead of dollars. So you should not be able to do so by taking payments in bitcoins. It looks to me like bitcoins will no more than another foreign currency if and when a stable exchange rate is established.  But I do see an issue or two.

                               

                              Dollars have value because someone did something to earn them. Joe works 40 hours a week and gets paid $800, so he's making $20 an hour (ignoring taxes for the moment). That means when Joe goes out and buys a pair of shoes, he decides between the $60 and the $100 shoes based on the fact that he needed to work two additional hours to pay for the $100 shoes. So how do bitcoins get a value? No one works to earn them from what I have read so far. If the assigned value does not represent labor, what does it represent?  Gold had a value because you can work some number of hours and buy an ounce of gold you can hold in your hands. Buying bitcoins is like buying ghosts.

                               

                              Bill

                               

                              .

                                • Re: BitCoin - new kind of money?
                                  sobo93 Senior Contributor

                                  I like what you said Bill. But its simply a vitual currency, its like buying virtual gold. Its changing dollars into another private currency that happens to be untaxable and easily transferable. I think that the pizza parlor that accepts bit coins is doing work to earn those bit coins. Currency is simply a recipt of value, the senerio you've described sounds kind of like a chicken or the egg question to me.

                                    • Re: BitCoin - new kind of money?
                                      Elite Contributor

                                      Sobo93,

                                       

                                      You said the magic word, "untaxable".  If there is ever a stable exchange rate between dollars and bitcoins, the goverment (both state and federal) is absolutely going to have to tax transactions that take place in bitcoins.  If you knew for certain that every bitcoin was worth $50 and you were getting paid $1,000 a week, would you want to be paid 20 bitcoins a week and pay no taxes or $1,000 a week and pay 25% or so in income tax?  It would take about two weeks for EVERYONE in the United States to start getting paid in bitcoins.  This assumes you could walk into any bank and change bitcoins into dollars.  The goverment clearly can't allow a tax free, underground economy to develop and that's exactly what would happen if bitcoins were generally accepted as currency and the trasactions were not taxed.

                                       

                                      Bill

                                        • Re: BitCoin - new kind of money?
                                          Lyn Elite Contributor

                                          Bill_Novak wrote:

                                           

                                          The goverment clearly can't allow a tax free, underground economy to develop and that's exactly what would happen if bitcoins were generally accepted as currency and the trasactions were not taxed.

                                           

                                          Bill


                                          There is already a sizeable underground economy in this country.  Many are paid in cash, under the table ... and laugh all the way to the bank.

                                           

                                          It's long been my opinion that if the government could curtail that, we could go a long way toward solving our tax problems.

                                            • Re: BitCoin - new kind of money?
                                              Active Contributor
                                                • Re: BitCoin - new kind of money?
                                                  Elite Contributor

                                                  Rustam and all,

                                                   

                                                  It's interesting that the first link in the paper you referenced, bitcoin.org, is down.

                                                   

                                                  This whole thing still looks like smoke and mirrors to me. I read the original paper and it seems to be no more than a theoretical exercise. Until there is some established method to put bitcoins on your computer by buying them with dollars and then convert bitcoins back into dollars after they've been used to pay for something, the whole system is meaningless.  I can’t add bitcoins to my Schwab account and I can’t walk into the grocery store and use them, so why would I want to accept them as payment for anything?  Why would anyone accept them as payment?

                                                   

                                                  But my biggest problem is that nothing I have read tells me how a bitcoin is created in the first place. If a bitcoin is to have value, it can’t magically appear out of thin air. Things that magically appear with no one doing anything to earn them are valueless.That’s why you can’t sell bottled air unless you’re in the business of selling bottles.  So the only way for bitcoins to have value is if they’re purchased with and valued in units of currency.  If you want to consider bitcoins to be like a foreign currency, that’s fine, but every single foreign currency has an established exchange rate with the dollar. If that were not the case, no one would accept that currency in payment. And until there is an established exchange rate between the bitcoin and the dollar, bitcoins will not be accepted in payment for anything.

                                                   

                                                  Bill

                                                    • Re: BitCoin - new kind of money?
                                                      TheFutureWay Elite Contributor

                                                      Agreed - looking at it from an asset protection & payment option it does NOT provide any benefit to me, since there are already many more tried & true options.

                                                  • Re: BitCoin - new kind of money?
                                                    dailybread Elite Contributor

                                                    Lyn wrote:

                                                    It's long been my opinion that if the government could curtail that, we could go a long way toward solving our tax problems.

                                                     

                                                     

                                                     

                                                     

                                                    H.R. 25

                                                     

                                                    http://www.govtrack.us/congress/bills/112/hr25

                                                     

                                                    http://thomas.loc.gov/cgi-bin/bdquery/z?d112:h.r.25:

                                                     

                                                    http://www.fairtax.org/site/PageServer

                                                      • Re: BitCoin - new kind of money?
                                                        Active Contributor

                                                        Today Bloomberg TV discussed the bitcoin

                                        • Re: BitCoin - new kind of money?
                                          Elite Contributor

                                          Here's another article on Bitcoins.

                                           

                                          http://techcrunch.com/2014/03/04/fools-and-their-bitcoin/

                                           

                                          Apparently hackers have been able to steal bitcoins by hacking into several exchanges.

                                           

                                          I still feel the same way as I did when I previously posted in this thread.  Until someone is able to explain to me how bitcoins get created and what makes them valuable, it all looks like smoke and mirrors.  If I walk into a bitcoin exchange with a cashiers check for 10,000,000 dollars and say "I want to buy 10,000,000 dollars worth of bitcoins.", what exactly happens to the ten million dollars?  If I walk into that same exchange two weeks later and say "I have 10 million dollars worth of bitcoins and I'd like to turn them in and get paid in dollars.", can I do that?  Where did the bitcoins I just bought for ten millions dollars come from?  Are they "magically" created by the bitcoin exchange as needed?  If they are, the the bitcoins I just bought are backed by dollars and the exchange should hold that ten million dollars so that those bitcoins can be redeemed at some point in the future.

                                           

                                          Everything comes back to having a stable exchange rate between dollars and bitcoins and being 100% certain that a hacker can't steal your bitcoins by hacking into the exchange or hacking into your computer or your smartphone for that matter.  And this whole thing about bitcoins being tax free is clearly a joke. If bitcoins become an accepted currency, transactions that take place in bitcoins will be taxed just as transactions that take place in any currency are taxed.  The idea that someone could buy a $30,000 car and avoid paying sales tax by paying in bitcoins is almost as silly as the idea that income tax would not be owed by anyone who gets payed a salary in bitcoins instead of dollars.  If that is the case, I want all of the transactions on my Schwab cash account to take place in bitcoins so I don't have to report anything to the IRS or pay any taxes on the profits. And I want my rollover IRA account converted to bitcoins so I don't need to report withdrawls from the account as income. If something along those lines was allowed to happen, the goverment and the entire economy would collapse in less than six months since no one would be paying any local, state, or federal taxes and dollars would be worthless.  No one would be willing to accept dollars for anything since they'd have to pay taxes on the transaction.  The goverment can't allow a total collapse of the financial system and that's exactly what would be caused by a tax free currency.

                                            • Re: BitCoin - new kind of money?
                                              Lyn Elite Contributor

                                              Isn't the Bitcoin now pretty much dead?  It took a vicious plunge last month, and now the Mt. Gox bankruptcy.

                                               

                                              Sounds to me like the epitome of "Funny Money."

                                               

                                               

                                               

                                              http://www.usatoday.com/story/money/markets/2014/02/28/bitcoin-mt-gox-collapse-j apan/5891841/

                                                • Re: BitCoin - new kind of money?
                                                  two-ten-tim Senior Contributor

                                                  Lyn wrote:

                                                   

                                                  Isn't the Bitcoin now pretty much dead?  It took a vicious plunge last month, and now the Mt. Gox bankruptcy.

                                                   

                                                  Sounds to me like the epitome of "Funny Money."

                                                   

                                                   

                                                   

                                                  http://www.usatoday.com/story/money/markets/2014/02/28/bitcoin-mt-gox-collapse-j apan/5891841/


                                                  According to Kitco News, Bitcoin is alive and well, reporting yesterday that "The Bitcoin market has been able to move past the uncertainty created by the closure of one of the biggest Bitcoin exchanges in what one expert said is a natural process of a maturing marketplace."  It went on to say that "...Bitcoin soared to a session high of $701.32 per coin, a gain of 57% from last week's low of $445.92 per unit."

                                                   

                                                  So I guess the answer to your question is no, it's not dead, it just in the process of maturing. 

                                                   

                                                  Here's the link to the report:

                                                   

                                                  http://www.forbes.com/sites/kitconews/2014/03/03/price-of-bitcoin-recovers-monda y-as-the-market-matures-expert/

                                                   

                                                  In other news, Reuters reported today that another exchange, Flexcoin in Alberta Canada, announced that it was closing down after being hacked for $600,000.  It said it didn't have the resources to recover from the attack but said Bitcoins stored offline in "cold storage" (whatever that is) were safe from the attack and would be returned to users.

                                                   

                                                  My opinion is Bitcoin is just the latest incarnation of the 17th Century Tulip bubble.  It appears the bubble hasn't popped just yet but it will eventually.

                                                    • Re: BitCoin - new kind of money?
                                                      Lyn Elite Contributor

                                                      two-ten-tim wrote:

                                                       

                                                      My opinion is Bitcoin is just the latest incarnation of the 17th Century Tulip bubble.  It appears the bubble hasn't popped just yet but it will eventually.


                                                      I think that's a good assessment.  Bitcoin is just a weed masquerading as a flower.

                                                       

                                                       

                                                        • Re: BitCoin - new kind of money?
                                                          Lyn Elite Contributor

                                                          Bitcoin CEO found dead: 'Everything has its price'

                                                           

                                                          “Everything has its price.”

                                                           

                                                          The prophetic words are a sad epitaph on the life of a young digital-currency executive who may have killed herself amid the stress of a challenging, high-pressure industry.

                                                           

                                                          After Autumn Radtke, the American CEO of First Meta, an exchange for virtual currencies such as Bitcoin, was found dead in her Singapore home last week, speculation immediately turned toward suicide.

                                                           

                                                          As law-enforcement officials await toxicology reports, friends said they should have seen the signs of stress and realized that she was reaching out for help.

                                                           

                                                          “Everything has its price,” Radtke, 28, said in commenting on an Inc. magazine essay she posted online titled ‘‘The Psychological Price of Entrepreneurship.”

                                                           

                                                          The article details the unrelenting financial and psychological toll of launching a successful startup.

                                                           

                                                          “It was clear that she was a brilliant mind and a humble, giving person,” Radtke’s friend Krystal Choo, who founded the online travel firm ZipTrip, said in a Facebook post. “For the past couple of days I have been asking myself if I simply and massively failed in recognizing what could have been a call for help.”

                                                           

                                                          Another Radtke friend, model Katie Stone, posted a heartfelt tribute to her friend on Facebook.

                                                           

                                                          “Appreciative of what we take for granted,” Stone wrote. “You were just smarter that way than anybody else. You were a sister to me and I am at a loss,” Stone wrote.

                                                          Radtke ran a Singapore-based virtual-currency company at a time when the region was discouraging digital-currency exchanges.

                                                           

                                                          Her death came amid a run of bad news for the Bitcoin virtual currency, largest of all the collapse of Japan’s Mt. Gox exchange, and the disappearance of $400 million from its account.

                                                          Regulators and law enforcement have become increasingly aggressive in investigating Bitcoin and related exchanges.

                                                           

                                                          On the day that Radtke was discovered in her Singapore apartment, Vietnam’s communist government said trading in bitcoin and other electronic currencies is illegal, and warned its citizens not to use or invest in them.

                                                           

                                                          Late last year, China banned its banks and payment systems from handling bitcoin. Thailand earlier put a blanket ban on its use.

                                                           

                                                          http://nypost.com/2014/03/06/friends-mourn-loss-of-bitcoin-ceo-found-dead/

                                                            • Re: BitCoin - new kind of money?
                                                              Active Contributor

                                                              What a tradegy...

                                                               

                                                              beautiful young people die and the cause of that continues to corrupt this corrupted world:  http://www.coindesk.com/price/

                                                    • Re: BitCoin - new kind of money?
                                                      Elite Contributor

                                                      I did some research on bitcoins and even tried a little bitcoin mining since I wanted to be certain I understood what was going on.

                                                       

                                                      I believe that due to a design flaw, bitcoins must necessarily fail as a currency.  The problem is that the transaction log contains every single transaction for every single bitcoin.  When bitcoins were first conceived, you could mine bitcoins with a computer using the CPU. As the size of the transaction log increased, mining needed to be done with a GPU.  Now it has to be done with an ASIC chip.  Mining will not continue forever, but it does give an indication of how quickly the database is growing. I installed mining software and, with an 8 core CPU, I was unable to mine at anything approaching a rate that would have generated a penny a week in value. My GPU mined about 6 times faster than my CPU and it was still unusable for creating any measurable value in 24 hours.

                                                       

                                                      How many people in the world are using bitcoins for anything?  I'm guessing it's less than 10,000. If bitcoins became an accepted currency, that number could easily increase to 300,000,000 or more just in the United States and Europe. In addition, it's reasonable to assume that each person using bitcoins would create at least 100 times as many transactions per year as a typical bitcoin user does today.

                                                       

                                                      That means that the transaction log would be growing at a rate at least 3,000,000 times faster than it's growing right now. If bitcoins can be used in China and India, add another factor of 10 to that and make it at least 30,000,000 times faster.  And I used what I think are conservative numbers, the real increase in growth rate of the log could be 10 to 20 times what I came up with in this estimate.  The design of the security system which requires that every transaction that has ever occurred be preserved forever in the transaction log is just not sustainable.

                                                       

                                                      Bill

                                                        • Re: BitCoin - new kind of money?
                                                          Lyn Elite Contributor

                                                          Bill -

                                                           

                                                          You're right on track with this article from December 2013:

                                                           

                                                           

                                                          http://stormcloudsgathering.com/bitcoin-what-youre-not-being-told

                                                           

                                                          In its current form the Bitcoin system is able to facilitate transactions without a centralized database by requiring each client on the network to download a copy of the blockchain. What's the blockchain? The blockchain is a record of every transaction ever made using bitcoin from 2009 to present. With every transaction this file gets bigger. You can find a record of the blockchain size over time at blockchain.info.

                                                           

                                                          At first the file size was negligible. It stayed below 1 gigabyte until mid 2012. However with increased interest in the currency the blockchain began to grow exponentially. By September of 2012 it had jumped to 2 gigabytes, in September of 2013, just one year later, the file was over 9 gigabytes, and by the end of November it had passed 11 gigabytes. If interest in the currency continues to increase and the number of transactions continues to grow at its current rate the blockchain will easily reach 50 gigabytes within a year and 250 gigabytes within 2 years.

                                                           

                                                           

                                                          What are the chances that the structure could be streamlined and thus eliminate the blockchain?

                                                            • Re: BitCoin - new kind of money?
                                                              Elite Contributor

                                                              Lyn wrote:

                                                               

                                                              What are the chances that the structure could be streamlined and thus eliminate the blockchain?

                                                               

                                                              I don't think it can happen. The problem is that the blockchain is the only thing preventing fraud. It's both the strength and the weakness of bitcoins.  I have not given this a lot of thought, but how do you create a currency that has no physical form and is not backed or controlled by any institution or government and still prevent counterfeiting?  I keep coming back to the question of why an electronic currency has a value if no one is standing behind it.

                                                               

                                                              Bill

                                                                • Re: BitCoin - new kind of money?
                                                                  Lyn Elite Contributor

                                                                  Bill_Novak wrote:

                                                                   

                                                                  I keep coming back to the question of why an electronic currency has a value if no one is standing behind it.

                                                                   


                                                                  Exactly.  No one stands behind it, and there is no inherent value to begin with, that I can see.  I don't see any need for it in the first place.  All existing currencies can be transformed into "electronic" currency very easily, and they do have verifiability and relatively stable value.

                                                                    • Re: BitCoin - new kind of money?
                                                                      buyhighsellLow Senior Contributor

                                                                      Ebay jsut recently endorse bitcoin - several relatively large companies seem to be willingly stand behind acceptance of it inclding DELL...

                                                                       

                                                                      i still do not get it... but i did not get it when Twitter first came about... there is now bitcoin ATM machine

                                                                        • Re: BitCoin - new kind of money?
                                                                          Lyn Elite Contributor

                                                                          Bitcoin is a moving target.  Why bother?  It changes constantly  Take a look at the chart ...

                                                                           

                                                                          http://www.coindesk.com/price/

                                                                            • Re: BitCoin - new kind of money?
                                                                              stocks45 Elite Contributor

                                                                              Whats new with bitcoin today?

                                                                              anyone here use them?

                                                                              Where can you spend them?

                                                                               

                                                                              1 Bitcoin equals

                                                                              2705.40 US Dollars so how do you buy something for $500? fractional bitcoins?

                                                                               

                                                                              Fidelity CEO Talks 'Love' For Bitcoin, Why Blockchain Will 'Change' Markets 

                                                                              http://www.coindesk.com/fidelity-ceo-talks-love-bitcoin-blockchain-will-change-m arkets/

                                                                                • Re: BitCoin - new kind of money?
                                                                                  JAY_in_NJ Senior Contributor

                                                                                  I don't touch them.

                                                                                   

                                                                                  Jay

                                                                                  • Re: BitCoin - new kind of money?
                                                                                    SeaProbe Contributor

                                                                                    I've owned some bitcoins for a couple of years now. Shift offers an ATM/debit card that links to Coinbase so bitcoins can be spent anywhere Visa is accepted. I signed up for and activated the Shift card, with a one time fee of $10 for the physical card. BitPay has a prepaid Visa card in over 100 countries (load with BTC, spend in any currency).

                                                                                     

                                                                                    The downside to using the debit card is that IRS is currently treating BTC as a physical good, with a gain/loss required on each transaction, creating a major headache at tax filing time. So I just stopped using the Shift card until and unless the IRS makes the rules more realistic.

                                                                                     

                                                                                    And yes, there are several denominations, following (loosely) the metric standard, with milli- and micro-bitcoins, down to eight decimal places.

                                                                                     

                                                                                    Since this thread started, Japan has passed legislation to recognize and accept BTC as legal payment. China has heavily regulated it, but it is widely used (in fact, Japan only recently surpassed China as the source of the majority of transactions). The US and Eurozone are neck-and-neck behind Japan, so this is certainly a global phenomena. The UN is using BTC to distribute funds to refugees. There is a LOT more news and background at CoinDesk.com

                                                                                     

                                                                                    Beyond BTC proper, Ethereum is a smart transaction token, eerily similar to a paper I wrote back in grad school (long before there was a block chain, of course).

                                                                                     

                                                                                    All of that said, I cannot call BTC investment. It is highly speculative, leveraged, and more akin to a lottery ticket than it is to owning shares in a company that has revenue and cash flow. For me, I am just holding them and ignoring the wild gyrations.

                                                                                      • Re: BitCoin - new kind of money?
                                                                                        stocks45 Elite Contributor

                                                                                        Thanks I did not know about the taxable event using a debit card with bitcoin.I have read the coindesk sites info.

                                                                                        Iam not looking at bitcoin as a investment I thought the article about how block chain could be a next generation clearing mechanism for stocks interesting.

                                                                                        Yes they are starting to become a valid and more recognized form of currency.

                                                                                        http://www.coindesk.com/fidelity-ceo-talks-love-bitcoin-blockchain-will-change-m arkets/