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 66460 times)

Online aygart

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Re: BitCoin Master Thread
« Reply #315 on: November 29, 2017, 07:32:31 AM »
One of the world's great falsehoods.
The existence of exceptions doesn't make something a falsehood.
You have the right to remain silent. Anything you say can and will be used to start a religious discussion.

Offline Emkay

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Re: BitCoin Master Thread
« Reply #316 on: November 29, 2017, 07:36:35 AM »
The existence of exceptions doesn't make something a falsehood.
Scientifically proven rebuttal does.

Offline SuperFlyer

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Re: BitCoin Master Thread
« Reply #317 on: November 29, 2017, 07:45:03 AM »
The rubbish is starting to pile up...

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Re: BitCoin Master Thread
« Reply #318 on: November 29, 2017, 07:59:05 AM »
Scientifically proven rebuttal does.
How about you show one? Mean reversion has been shown to happen over and over again.
You have the right to remain silent. Anything you say can and will be used to start a religious discussion.

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Re: BitCoin Master Thread
« Reply #319 on: November 29, 2017, 08:00:33 AM »
Not sure if there are any guides, I am not an expert at Bitcoin, but remember trees do not grow to the sky and what goes up must come down eventually, this is a bubble about to burst .
When I have customers in random businesses telling me how their energy usage will double or more because they are installing servers to mine bitcoins that is a very bearish indicator.
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Offline aro123

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Re: BitCoin Master Thread
« Reply #320 on: November 29, 2017, 08:58:34 AM »
Can someone who understands bitcoin answers these 2 questions for me:
1. why should bitcoin be more valuable than any other crypto currency  (I know it was first and therefore more widespread) but why should I rely on that long term?

2. why should bitcoin have value do to the blockchain being valuable?  everyone has and will keep copying and perfecting the blockchain so why should that give value to bitcoin or any crypto currency?

Offline hachover

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Re: BitCoin Master Thread
« Reply #321 on: November 29, 2017, 10:06:15 AM »
Can someone who understands bitcoin answers these 2 questions for me:
1. why should bitcoin be more valuable than any other crypto currency  (I know it was first and therefore more widespread) but why should I rely on that long term?

2. why should bitcoin have value do to the blockchain being valuable?  everyone has and will keep copying and perfecting the blockchain so why should that give value to bitcoin or any crypto currency?

The success of any given network is dependent on having enough participants on the network. If you came up with good enough code you could start a rival network, and if you are also successful in convincing thousands of nodes to join then you could compete with the other blockchain networks. Point is, bitcoin has built this up and the next great crypto hasn't (yet).

There are two major blockchains at this point, the bitcoin network and the ethereum network. The real value that legitimate businesses see in the crypto world is in the blockchain, not the digital currencies. But to operate on a blockchain you have to use the native currency.
I'm an optimist; but only because life isn't going to give me any other good choices.

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Re: BitCoin Master Thread
« Reply #322 on: November 29, 2017, 10:08:43 AM »
BTC is moments away from trading at $10,000. I think that milestone will very quickly tell us how close to over the rally is. Crossing that milestone could either trigger a sell off or heighten interest. Will be interesting either way.

Not at all surprised that crossing the 10,000 mark added fuel to the rocket (it's well over $11,000 now). I think we'll see $20,000 in the near future
I'm an optimist; but only because life isn't going to give me any other good choices.

Offline ludmila

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Re: BitCoin Master Thread
« Reply #323 on: November 29, 2017, 12:22:51 PM »
One of the world's great falsehoods.
Depends on the time frame we look at.
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Offline aro123

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Re: BitCoin Master Thread
« Reply #324 on: November 29, 2017, 04:00:59 PM »
The success of any given network is dependent on having enough participants on the network. If you came up with good enough code you could start a rival network, and if you are also successful in convincing thousands of nodes to join then you could compete with the other blockchain networks. Point is, bitcoin has built this up and the next great crypto hasn't (yet).

There are two major blockchains at this point, the bitcoin network and the ethereum network. The real value that legitimate businesses see in the crypto world is in the blockchain, not the digital currencies. But to operate on a blockchain you have to use the native currency.
but what happens when the visa or MasterCard start their own blockchain or eventually the U.S. government then everyone besides the black market will run to a more secure and accepted blockchain.

Offline hachover

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Re: BitCoin Master Thread
« Reply #325 on: November 29, 2017, 04:06:54 PM »
but what happens when the visa or MasterCard start their own blockchain or eventually the U.S. government then everyone besides the black market will run to a more secure and accepted blockchain.

Fair question. Similarly, what do you think of investing in Comcast? Their natural monopoly can also be upset by someone building up a competing network of cables that reach every home in the US (ex. FiOS)
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Re: BitCoin Master Thread
« Reply #326 on: November 29, 2017, 04:28:23 PM »
why is it all about the blockchain?

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Offline ExGingi

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Re: BitCoin Master Thread
« Reply #328 on: November 29, 2017, 04:51:18 PM »
The rise and likely fall of bitcoin will likely be studied in Wharton etc. for years to come.
Isn't Wharton a business school? I would think it would more likely be studied in psychology courses.
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Re: BitCoin Master Thread
« Reply #329 on: November 29, 2017, 05:02:26 PM »
Isn't Wharton a business school? I would think it would more likely be studied in psychology courses.

Definitely belongs in behavioral economics courses, but probably also marketing case studies and operations management (think about all the scaling problems they are/have had with the network itself, and separately - the exchanges)
I'm an optimist; but only because life isn't going to give me any other good choices.