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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 347324 times)

Offline Lurker

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Re: BitCoin Master Thread
« Reply #1540 on: February 24, 2021, 08:33:37 AM »
I don't think this bull run is over. And I don't think we see these prices again before the very end of this cycle. My prediction, before the next major correction, we see BTC at 75k and ETH at 2.5k.

FTR, I am nobody and I know nothing. I just like documenting my stupidity on the internet.
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Offline yos9694

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Re: BitCoin Master Thread
« Reply #1541 on: February 24, 2021, 08:56:49 AM »
I don't think this bull run is over. And I don't think we see these prices again before the very end of this cycle. My prediction, before the next major correction, we see BTC at 75k and ETH at 2.5k.

FTR, I am nobody and I know nothing. I just like documenting my stupidity on the internet.

If you drop a cat it will bounce. No way of knowing if its alive or dead until afterwards

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Re: BitCoin Master Thread
« Reply #1542 on: February 24, 2021, 09:22:43 AM »
If you drop a cat it will bounce. No way of knowing if its alive or dead until afterwards

This cat ain't dead. I saw buy orders lined up like I haven't seen in months.
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Re: BitCoin Master Thread
« Reply #1543 on: February 24, 2021, 12:44:28 PM »
Do I have to declare the 5 dollars worth of Bitcoin that I got (and cashed in) from Coinbase when I signed up? The problem is that if I do, I can't file for free with TurboTax

Offline yos9694

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Re: BitCoin Master Thread
« Reply #1544 on: February 24, 2021, 01:20:37 PM »
Do I have to declare the 5 dollars worth of Bitcoin that I got (and cashed in) from Coinbase when I signed up? The problem is that if I do, I can't file for free with TurboTax

I have to imagine you'd get away with not reporting it. If you were ever asked about it you could claim it was like getting a gift card for doing a survey. Now I'll hide from the backlash that will come from people who know what they're talking about

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Re: BitCoin Master Thread
« Reply #1545 on: February 24, 2021, 01:29:41 PM »
I have to imagine you'd get away with not reporting it. If you were ever asked about it you could claim it was like getting a gift card for doing a survey. Now I'll hide from the backlash that will come from people who know what they're talking about

And if I bought $5 worth of Bitcoin and then sold it (or used it) after it went up?

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Re: BitCoin Master Thread
« Reply #1546 on: February 24, 2021, 02:49:10 PM »
or the $0.05 cashBTC back from cashapp

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Re: BitCoin Master Thread
« Reply #1547 on: February 24, 2021, 03:13:52 PM »
And if I bought $5 worth of Bitcoin and then sold it (or used it) after it went up?

You could probably still get away with it but if you actually had BTC as an investment then you should fill out a cap gains worksheet. In your first example I think it could be justifiable to skip it because you'd have to pay extra for the form and you hadn't acquired the coins as an investment.

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Re: BitCoin Master Thread
« Reply #1548 on: February 24, 2021, 03:20:07 PM »
And if I bought $5 worth of Bitcoin and then sold it (or used it) after it went up?

How long ago did you buy? If it was long enough I might want to "be your friend" :D
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Re: BitCoin Master Thread
« Reply #1549 on: February 24, 2021, 04:13:54 PM »
I try not to contradict and get into disputes but there's a lot of inaccurate information in your post and I hope you don't mind if I point that out. If we're all good after that I'd love to get on with talking more about "stability" and "security", where we clearly still have differences of opinion.

1) Many or even most alt coins are NOT centralized. You might be referring to tokens native to exchanges like BNB (a centralized but good asset, with competitors like KCS and OneCoin) and XRP (centralized and a bad bad baby). But Cardano is most definitely not centralized. Neither is Tezos, EOS, Stellar, Nano, and many  more. Then you have in between ones like VET.

2) Barrier to entry for bitcoin doesn't mean the current price to buy on the market. It means the type of equipment that is required to produce it (i.e. mine blocks) and the amount of energy consumed collectively by all the working nodes. Originally you could mine bitcoin in the background on your regular home PC, but now it takes dedicated gear that is quite expensive, and the aggregate electricity cost is enormous. This prevents new miners from getting started and encourages enlargement of pools, which increases centralization.

3) I never said that Bitcoin will become worthless (but we can get into that separately)

4) Many many many other coins have a finite supply. Very few have unlimited supply. Dogecoin is not the template for all altcoins. You can read the whitepaper of any altcoin at random and find the cap.

5) Bitcoin's so-called limited supply is a bit of a misnomer. Every bitcoin is comprised of 100,000,000 satoshis (in fact, if you look at blockchain transactions they are always recorded in satoshis). 5 years ago no one bothered to count more than 1-2 decimal places. Now the 4th decimal place is worth ~$4.20. As its supply becomes more "limited" we automatically apply a 10x multiplier to the "currency" in order to create meaningful units. Meanwhile, new bitcoins are created every 10 minutes and will continue to be until the year 2140. So between now and then we have a predetermined inflation factor because of the increasing supply. After that I don't care.

First of all, we are all good. I like sharing ideas and discussing points to understand things better. No offense taken and no offense intended.

1) The discussion about decentralization first requires a definition for what is considered "decentralized". From a technical perspective these coins might be considered decentralized (because of their nodes but I dont view them as purely decentralized because all those cryptocurrencies that you mentioned were founded or are primarily developed by certain people who can exert significant influence to the direction of the project and how it functions. IMO, if known individuals are actively involved with a currency's development it is not decentralized.  Therefore, I'd argue that projects which rely on Ethereum are not truly decentralized because Ethereum has a leader (Vitalic) who also develops their platform and makes decisions that directly affect their platform. (unlike Bitcoin)

2) Mining has definitely become expensive and inefficient but it is not the only way to acquire bitcoin. I dont believe that is the  reason for people not owning bitcoin.

3) True but you indicated it would diminish in value. Remember that even if Bitcoin loses market share within crypto, it can still grow by sucking value away from gold/silver.

4) Finite and decentralized must go together. The main purpose of having a finite currency is so that undo influence cannot affect the value of the coin which often occurs through printing more.

5) This is an interesting point but I'm not sure how it is more an issue with Bitcoin than any currency that uses numbers since it can always be divided. Also, a predetermined inflation factor is not perfect but at least it wont result in a hyperinflation. I know there are coins that attempt to fix this and adjust the supply based on the value but it is difficult to do with volatile assets.

In summary, bitcoin is not perfect and I'm not a maximalist. However, I do think it is still the safest crypto asset and will continue to increase in value over the next several years (doesnt mean there wont be major dips) especially considering where the US dollar is heading.

Btw, I learned a lot from your posts and look forward to continuing the conversation.

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Re: BitCoin Master Thread
« Reply #1550 on: February 24, 2021, 08:44:42 PM »
https://www.cnbc.com/2021/02/24/microstrategy-buys-more-than-1-billion-worth-of-bitcoin-adding-to-massive-holdings.html

Companies like this will kill the idea of decentralized currency in the long run, but will inflate it's value in the short term.
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Re: BitCoin Master Thread
« Reply #1551 on: February 24, 2021, 09:15:35 PM »
https://www.cnbc.com/2021/02/24/microstrategy-buys-more-than-1-billion-worth-of-bitcoin-adding-to-massive-holdings.html

Companies like this will kill the idea of decentralized currency in the long run, but will inflate it's value in the short term.

Why does a software company have a billion of extra cash, and why dont they invest it in their business.

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Re: BitCoin Master Thread
« Reply #1552 on: February 24, 2021, 09:16:52 PM »
Their market cap is under 7b. They’re more than one seventh bitcoin

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Re: BitCoin Master Thread
« Reply #1553 on: February 24, 2021, 09:22:08 PM »
Their market cap is under 7b. They’re more than one seventh bitcoin

How do shareholders put up with this and how is it legal? If bitcoin tanks they can easily erase x% of company value (I don’t know enough about company valuation to name x, but it’s certainly significant, could probably bankrupt the company).

ETA: This volatility is beyond insane, look at their YTD stock chart, in less than three months:


« Last Edit: February 24, 2021, 09:26:35 PM by AsherO »
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Re: BitCoin Master Thread
« Reply #1554 on: February 24, 2021, 09:39:45 PM »
How long ago did you buy? If it was long enough I might want to "be your friend" :D

Lol. It was worth $15 earlier today

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Re: BitCoin Master Thread
« Reply #1555 on: February 24, 2021, 09:44:37 PM »
Why does a software company have a billion of extra cash, and why dont they invest it in their business.

If I understood the article correctly, they borrowed the billion dollars...

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Re: BitCoin Master Thread
« Reply #1556 on: February 24, 2021, 09:46:40 PM »
If I understood the article correctly, they borrowed the billion dollars...

With interest rates next to zero... wonder how their creditors/lenders put up with this...
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Re: BitCoin Master Thread
« Reply #1557 on: February 24, 2021, 10:14:32 PM »
Their market cap is under 7b. They’re more than one seventh bitcoin

Quote
It has spent $2.171 billion on bitcoin. Based on the price of bitcoin Wednesday morning, the firm’s holdings were worth nearly $4.5 billion.

They're more than half BTC.

How do shareholders put up with this

They've more than doubled their investment already. Their shareholders aren't ignorant to the company's strategy or their opinion on BTC. Their CEO has been super vocal about it.

With interest rates next to zero... wonder how their creditors/lenders put up with this...

They borrowed just to buy BTC, so their lenders knew exactly what they were giving money for.
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Re: BitCoin Master Thread
« Reply #1558 on: February 25, 2021, 12:28:19 AM »
Do I have to declare the 5 dollars worth of Bitcoin that I got (and cashed in) from Coinbase when I signed up? The problem is that if I do, I can't file for free with TurboTax
You can file for free on Credit Karma.
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Re: BitCoin Master Thread
« Reply #1559 on: February 25, 2021, 12:29:51 AM »
I have some coins on Binance I left there since a couple years ago. I heard about all sorts of changes to Binance but haven't been following. If I want to sell do I need to transfer my coins off of Binance or go through some special verification?
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