I'm glad I'm not the only one who gets this. Bitcoin has inflation built in, the early adopters (and founders) have tons of Bitcoins for relatively no investment. You need a 200 dollar powerbill to mine any these days, and no, charging for expedited transactions does not make up for the imbalance. It's a scam, though not built like normal pyramid scams.
Actually you're wrong, mining is trying to race to solve a a crypto problem to be awarded new Bitcoins by a central authority, that somehow Bitcoin users believe does not exist.

Transaction processing fees (for expedited processing) is what you're describing.

It's about as much of a "scam" as being early adopters of gold, back when it first became a popular measurement of wealth. Gold is harder to mine today than it was from the beginning, and the early adopters were probably well advised to store their gold for the future, since its value increased as more people started using it to facilitate trade.

Bitcoins (and the algorithm used to make them) are designed to mimic this property of precious metals.

If there is a central authority responsible for the distribution of bitcoins then I'd like you to present it to me. Until you've demonstrated this, I'll continue to assume that Bitcoin creation is handled by the decentralized network.

The process of mining Bitcoins can best be compared to the process of mining a precious metal. Unlike fiat currencies, which are created, distributed and protected by a central authority such as the Federal Reserve, Bitcoins are "harvested" by individual "miners" that solve algorithms in order to generate Bitcoin "blocks". There can only ever be at most 21 million Bitcoins in circulation, most of which still haven't been mined. As demand for Bitcoins increases (if it does, which it has so far), the amount of Bitcoins in circulation should also increase due to increased mining. Due to the work involved in mining the coins, however, this should never result in hyperinflation, just like gold or silver doesn't hyperinflate.

In the end, the value of Bitcoins will be determined by market adoption by both producers and consumers. Due to the high publicity and larger user base Bitcoins have received in the last few months, I'd consider adoption of the currency by retailers a good business decision, since the Bitcoin network is starving for goods and services that can be bought directly with BTC. I'll certainly look into it if and when I start my own software company.

The issue of Bitcoins being "unreliable" is really irrelevant to the discussion. As long as there's an exchange service like Mt. Gox available to buy your Bitcoins for "real" currencies, I can't see why GoG, for instance, couldn't simply exchange all their Bitcoin income to Dollars if they so wish.

What is Mt. Gox's CAPITAL?

What will happen if there is a rush to convert Bitcoins to dollars, or euros, or zlotys, or Swiss francs, or some other conventionally exchangeable currency?

And don't tell me there will not be a run on the bank. There will be as soon as one person believably questions Mt. Gox's capital sufficiency.

It's goddamn tulip mania all over again. Only Bitcoins are an even more useless representation of wealth, because you can't plant them to get pretty flowers.

That's a bad analogy. The process of mining gold wasn't designed by people that were the first in. The process is just the best that anybody has managed to figure out to mine it.

Additionally, unlike bitcoins, gold has some intrinsic value to it. Granted the amount used in industrial processes results in far less of the value than the fact that it's yellow and shiny, but there are real uses for gold, such as in electronics and some gold salts as medicine.

Bit coins have no value and so eventually when this thing crumbles, the early adopters will end up making a profit leaving others having little if any of the benefit.
The same thing that happened during the great depression when there was no FDIC or NCUA insurance to get people their money back. Except it will be much faster. The only saving grace will be that it's not likely to affect as many people.

Just imagine what would happen to the dollar if all of a sudden the US government decided that people didn't have to take it as payment for their debts and the US government didn't require it for taxation. In that case you'd be in a very similar place to where bitcoins are, except probably a little better off due to the tradition of using dollars.

Oh I know the gold thing is a popular trope trotted out to defend Bitcoin. No, it's not the same, yes there have been gold rushes in the past, but gold has been treasured for thousands of years and I'm pretty sure it'd be impossible to point out the first instances or that there was a concept of "early adopter" as there was no written history that far back. There will be one BitCoin rush, ever, and it already happened. It's nothing like gold, opals, or diamonds. No one is going to find another BitCoin mine.

No central authority? Really? He who writes the software makes the rules and is the authority. I'm sorry to burst your bubble on this one. Someone decided the max number of BitCoins, it wasn't you, I'd posit said individual is the authority. Said decision is not the only one made by himself or by a very small group.

If you like BitCoin, knock yourself out, it's no worse than trading penny stocks I guess. But don't try and bullshit us, early adopters have way more value than anyone entering the system can possibly have today making it essentially worthless as a currency. Among other problems no one's doing anything useful to earn BitCoins, people trade actual labor for dollars (though much of said "labor" is of questionable worth, the majority of it produces something), BitCoins do nothing but waste electricity.

I think the pump and dump a couple days ago should show anyone just what BitCoin is about. It's a pretend, unregulated investment in nothing really.

Was it a pump and dump? I thought a large part of that had to do with that exchange being down and being misconfigured to slam in the transactions anyways rather than rejecting them.

But, probably a pump and dump would be somewhat less concerning than an architectural flaw that large.

Given the recent massive swings in bitcoin valuation any merchant who chooses to accept bitcoins as payment would have to be fucking insane. Additionally, as bitcoins are inherently deflationary by design this makes them completely unsuitable for use as currency, and basically relegates them to being a (unregulated) commodity for speculators, which comes with the joys of massive swings in value, bubbles, and plenty of pump-and-dump schemes.

The people using bitcoin at the moment can basically be divided into clever assholes and clueless suckers.

http://www.dailytech.com/Digital+Black+Friday+First+Bitcoin+Depression+Hits/article21877.htm


They've been media whoring this crap (or someone has, at any rate) for around 2 months now to pump it. It's garnered like 8 front page Slashdot writeups and who knows what else. And Friday someone dumped it.

Misconfigured my ass.

It was mis-configured. A properly configured exchange would have safeguards against that sort of scenario. An exchange shouldn't be down for several days, unplanned, then suddenly come roaring back to life with all the cued orders.

I wasn't aware that there was also a formal pump and dump going on. In retrospect, I'm a bit embarrassed that I didn't recognize it as a pump and dump rather than just fanboyism.

Well, I suppose from the perspective of a proper exchange, yeah it was misconfigured (or more likely, mis-designed). A real exchange shuts down after a certain threshold of value lost is met, this one didn't do that either, in addition to the things you mentioned. Whether it was written by naive morons or they were in on it, it was a useful tool either way.

Your point was definitely the right one though, I hadn't realized that there was such a significant pump and dump going on. Being born when I was, I've watched quite a few asset bubbles grow and collapse, it's hard sometimes for me to tell the difference between an overly enthusiastic fanbois of a particular technology and a huckster.

I feel a wee bit bad for the people that don't realize that there's still a bubble in both the US equities and housing markets. And not only have neither completely popped, they're bubbling over at a significant clip. I just wish I had some idea as to when.

With Bitcoins, it's kind of an odd phenomenon because it's both a bubble in an entire asset class and subject to a ponzi like action as well.

The problem with housing was well illustrated during the sub-prime mortgage crisis. People weren't selling houses to people who couldn't afford them because they wanted to, they were doing it because there's not enough buyers. We literally have more housing than we need and we build more faster than any of it falls down (despite popular belief building practices are pretty damned good especially for wood homes, though you can still get contractors that don't care and do a bad job). We literally are running out of buyers, we produce way more widgets than there are people to consume them due to the shrinking middle class.

I'm like you, I pity those that think that we've hit bottom on the mortgage bubble, it's going to get far worse.

To be fair, there are a lot of BitCoin fanbois, the idea is constructed so it pushes the right buttons on a lot of people (just like a lot of anti tax groups/scams). Also, study after study seems to confirm that all primates fail at assessing the same economic deal types every time and will typically pick the bad value (they think they are getting good value). So if a scam takes advantage of this it'll work very well. At any rate, the fanbois are just useful idiots in this case (they're probably rather rational people who consider themselves smart, and probably largely are, but in this case they're just plain dumb/ignorant), they mask what's going on and provide extra push for the pumping side of the scheme (not only that, they'll often buy during the dump). But in this case it seems rather clear that someone pulled a fast one, honestly they made most pump and dumpers look like chumps, I was kind of impressed despite myself.

It mystifies me how anybody could not know that we haven't hit bottom. The only two ways in which this can play out in the long run are either long term stagnation in housing prices or the bubble bursting again. Either way, the numbers clearly favor holding out.

Your point here is one that's bothered me for some time. If we've got depressed prices and we want the prices to remain where they are or go up to handle the cost of the mortgages that we're propping up, then why in heaven's name would we be cheering about housing starts? We've only got so much space as it is and many of our problems come from that sort of thinking. Historically only a small fraction of Americans actually owned homes. Personally, I'd rather have a Condo.

Normally, I'm fine with the lulz of lessons learned the hard way, but I'd have to be a heartless bastard to do any chuckling over this. Even if it is painfully obvious how this is going to play out. I just don't want to be on the hook again for their stupidity.

Since it will mean a near or total collapse of what remains of our economy right as the world finally realizes that peak oil is real and is happening, yeah I'm with ya. (Please no one say coal, lol, I will make some serious fun of you if you do.)

Coal!
It's the old new bitcoin! Let's go out and mine some? ;)

*leans back, fetches some popcorn and happily watches orcishgamer making fun of him*
Couldn't resist, sorry.