Topic Wiki

Editor’s note: I know enough about this topic to be dangerous, but I’m not a true expert so please feel free to add to or edit anything in this wiki that will improve it. The FAQs contain many oversimplifications but that is intentional to make the information relatable to the audience. Thanks!

Frequently Asked Questions

What are blockchains and bitcoins and what is the difference?
A blockchain is the fundamental element in a crypto currency system. A blockchain is an accounting ledger. Each block contains a bunch of journal entries (i.e. a chronological record of transactions) that gets encrypted (by miners) but can be downloaded and read by anyone on the network. Why the blockchain ledger is secure and how we can vouch for its integrity is a slightly more advanced topic.

An accounting ledger typically keeps track of money, and a blockchain is no different. But the only type of money that it can accurately track is digital money that lives on the blockchain network. So dollars, euros, etc are out. The digital money that lives on the blockchain is called a crypto currency, and the most well-known one at this time is Bitcoin.

Currently there are a few major blockchain networks: the Bitcoin Network, the Ethereum Network, and the Litecoin Network. Each one has its own currency, which are Bitcoin, Ether, and Litecoin, respectively.

I’m just a simple DDFer and not an accountant + cryptographer + hacker all at the same time. Can you make this a little simpler to understand?
Let’s try an analogy. There is a certain website called Dansdeals.com and it has quite a following. Some of the followers are just users/readers but others are more active and produce value for the website. When they provide value, they earn currency for their work – called “EQP” and “HT”. So we have something we will call the Dansdeals Blockchain Network that is simply a record keeper of various ongoing deals and it issues a native currency that is fractionable (10,000 EQP = 1 HT). This is similar to the Blockchain network recording financial transactions and issuing bitcoins. The ones who work for the network (miners) earn bitcoins and everyone else needs to buy it to participate.

The analogy improves if you imagine that the Dansdeals website visitors have to pay a small amount, let’s say 5 EQP, in order to access a deal or a code that is recorded on the network. If the website has 30,000 followers who love deals, but only 1,000 active members who earn EQP, then you can see that there is a need for a marketplace to be created where you can buy EQP for later use.

Of course, websites are not networks, and this analogy is far from perfect. But useful.

How much is a Bitcoin worth
No one knows. A few people are speculating its worth based on the potential that Bitcoin will one day become a major world currency that people use in their daily lives. Most people though are speculating its worth based on what the next new investor will pay them for it (google “Greater Fool Investing”).

Even if a crypto currency becomes dominant, who says it will be Bitcoin? Maybe it will be Schmitcoin?
This is completely possible. Bitcoin and Ether are the most likely at this point, but their long term survival is not at all guaranteed.

So why all the fuss about Bitcoin? Shouldn’t we wait for Schmitcoin and its cousins to come out?
You could, but you don’t want to ignore how hard it is to start up a network from scratch. It may be that as little as one person can create rival code to compete with the existing digital currencies and blockchains, but one person is not a network. You need a lot of highly technical and motivated people to join you and also to invest their time, energy, and money in making that network run. It’s a highly specialized group of people, and most of the people who would fit that profile are already tied up with an existing network. So it’s not impossible, especially in the long-term, but even if it does happen it would be unlikely to pop up overnight and so Vegas odds for Bitcoin are way shorter.

Let’s go back to the Dansdeals analogy. Imagine that Dansdeals is not the only such website, and there are other websites in existence that provide similar services. For the sake of the analogy let’s call them MMS and OMAAT. They too have big enough followings to survive independently, and even though each one offers a slightly different flavor that differentiates them, anyone on one of the networks could also get their most important needs met on one of the other networks. In this analogy, do you think it’s worth collecting EQP/HT or not? After all, Schmansdeals.com could open up one day and all the business could move there.

The argument for the difficulty of starting up a rival blockchain network is much stronger than in the analogy (especially if we start to include “smart contracts” in the discussion), but the basic idea that you need a critical mass of follows to be successful and compete with existing rivals is the same.

« Last edited by yuneeq on December 25, 2017, 01:05:21 AM »

Author Topic: BitCoin Master Thread  (Read 347633 times)

Offline Emkay

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Re: BitCoin Master Thread
« Reply #1020 on: May 02, 2018, 01:30:38 AM »
I guess we can put this n00b in the scam column.  :)
http://www.msn.com/en-us/money/savingandinvesting/buffett-explains-something-people-still-dont-understand-about-bitcoin/ar-AAwBfVZ?ocid=ientp
Yup, calling something a scam when he clearly said a half dozen times he has no idea what it is and how it works.

Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #1021 on: May 02, 2018, 08:37:47 AM »
Yup, calling something a scam when he clearly said a half dozen times he has no idea what it is and how it works.
His point is it has no intrinsic value.
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Offline henche

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Re: BitCoin Master Thread
« Reply #1022 on: May 02, 2018, 09:05:47 AM »
Yup, calling something a scam when he clearly said a half dozen times he has no idea what it is and how it works.

I'm not sure what you mean if you think he "has no idea what it is and how it works." Which part do you think he doesn't know?


Offline yuneeq

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Re: BitCoin Master Thread
« Reply #1023 on: May 02, 2018, 09:22:59 AM »
I guess we can put this n00b in the scam column.  :)
http://www.msn.com/en-us/money/savingandinvesting/buffett-explains-something-people-still-dont-understand-about-bitcoin/ar-AAwBfVZ?ocid=ientp

He never called anything a scam.
All he said is that putting money into crypto is speculation, not investing. And he’s right about that.
Similarly, he wouldn’t invest in tech companies for a long time because he said he didn’t understand them well.
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Offline Yitzshpitz

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Re: BitCoin Master Thread
« Reply #1024 on: May 02, 2018, 09:54:05 AM »
He never called anything a scam.
All he said is that putting money into crypto is speculation, not investing. And he’s right about that.
Similarly, he wouldn’t invest in tech companies for a long time because he said he didn’t understand them well.


+1

He had opportunities to invest in Apple and Google when they were starting out and chose not to. Obviously in retrospect that was a mistake. Even great investors miss out on potential opportunities. The point is that there are many big investors who feel strongly for bitcoin and there are others who are against it and dont see the value. Warren Buffet is of one opinion

Offline henche

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Re: BitCoin Master Thread
« Reply #1025 on: May 02, 2018, 10:26:30 AM »

+1

He had opportunities to invest in Apple and Google when they were starting out and chose not to. Obviously in retrospect that was a mistake. Even great investors miss out on potential opportunities. The point is that there are many big investors who feel strongly for bitcoin and there are others who are against it and dont see the value. Warren Buffet is of one opinion

Well, invest is the wrong word, but yes, there are many savvy people who think you can make money by buying Bitcoin.

Each year by the superbowl, there are many savvy people who think you can make money betting one way or the other.  Lots of money.  Buffet's point is that is not investing, that is speculating.

Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #1026 on: May 02, 2018, 10:54:55 AM »
He did not call it a scam. I put him in the scam column. His point is it has no intrinsic value. The same point that has been made in this thread.
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Offline yuneeq

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Re: BitCoin Master Thread
« Reply #1027 on: May 02, 2018, 12:47:22 PM »
He did not call it a scam. I put him in the scam column. His point is it has no intrinsic value. The same point that has been made in this thread.

Most currencies don't have an intrinsic value, but then again "investing" in currency is not for most people.
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Offline sguitarist18

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Re: BitCoin Master Thread
« Reply #1028 on: May 02, 2018, 01:27:13 PM »
Most currencies are at least tied to a country's overall economic performance.   

Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #1029 on: May 02, 2018, 01:37:54 PM »
Bitcoin is a currency?
I guess that would make Monopoly money a currency to.  :)
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Offline Emkay

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Re: BitCoin Master Thread
« Reply #1030 on: May 02, 2018, 04:39:30 PM »
Bitcoin is a currency?
I guess that would make Monopoly money a currency to.  :)
It's as much a currency as CNN is a news agency.

Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #1031 on: May 02, 2018, 04:51:10 PM »
It's as much a currency as CNN is a news agency.
We finally agree.  :)
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Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #1032 on: May 05, 2018, 10:50:35 AM »
Five years ago BC was rat poison. Now Buffett calls it rat poison squared. Don't shoot the messenger.  :)
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Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #1033 on: May 06, 2018, 07:33:50 PM »
Five years ago BC was rat poison. Now Buffett calls it rat poison squared. Don't shoot the messenger.  :)
http://www.msn.com/en-us/money/markets/warren-buffett-says-bitcoin-is-probably-rat-poison-squared/ar-AAwP9dd?ocid=ientp
"In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending," the chairman and CEO of Berkshire Hathaway said then. "If I could buy a five-year put on every one of the cryptocurrencies, I'd be glad to do it but I would never short a dime's worth."
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Offline Yitzshpitz

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Re: BitCoin Master Thread
« Reply #1034 on: May 07, 2018, 10:32:53 AM »
http://www.msn.com/en-us/money/markets/warren-buffett-says-bitcoin-is-probably-rat-poison-squared/ar-AAwP9dd?ocid=ientp
"In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending," the chairman and CEO of Berkshire Hathaway said then. "If I could buy a five-year put on every one of the cryptocurrencies, I'd be glad to do it but I would never short a dime's worth."

Like he's never been wrong lol. Just ask Jeff Bezos. Google is doing all right. Wallmart is holding their own.

Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #1035 on: May 07, 2018, 11:53:40 AM »
Like he's never been wrong lol. Just ask Jeff Bezos. Google is doing all right. Wallmart is holding their own.
Of course he has been wrong. You want put your track record against his?  :)
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Offline aygart

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Re: BitCoin Master Thread
« Reply #1036 on: May 07, 2018, 11:57:54 AM »
Like he's never been wrong lol. Just ask Jeff Bezos. Google is doing all right. Wallmart is holding their own.
When did he say that those businesses would come to a bad ending or that he would buy puts?
Feelings don't care about your facts

Offline Emkay

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Re: BitCoin Master Thread
« Reply #1037 on: May 07, 2018, 12:36:12 PM »
http://www.msn.com/en-us/money/markets/warren-buffett-says-bitcoin-is-probably-rat-poison-squared/ar-AAwP9dd?ocid=ientp
"In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending," the chairman and CEO of Berkshire Hathaway said then. "If I could buy a five-year put on every one of the cryptocurrencies, I'd be glad to do it but I would never short a dime's worth."
One of the things I like about him is that he usually admits when he makes a big mistake, so we will probably see him here again about this. (Obviously not posted by you)

Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #1038 on: May 07, 2018, 12:37:35 PM »
One of the things I like about him is that he usually admits when he makes a big mistake, so we will probably see him here again about this. (Obviously not posted by you)
If I see it I will post it. That's why they call me Mr Goalpost.  :)
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Offline Emkay

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Re: BitCoin Master Thread
« Reply #1039 on: May 07, 2018, 12:38:30 PM »


That's why they call me Mr Goalpost.  :)
Yup, because it moves with you.