Bitcoins - a currency for the internet?

[Jubal]

http://www.bbc.co.uk/news/technology-21964881

Saw this on the BBC. I hadn't even heard of bitcoins before, but apparently;

Bitcoin (sign: BTC) is a decentralized digital currency based on an open-source, peer-to-peer internet protocol. It was introduced by a pseudonymous developer named Satoshi Nakamoto in 2009.

Internationally, bitcoins can be exchanged by personal computer directly through a wallet file or a website without an intermediate financial institution. In trade, one bitcoin is subdivided into 100 million smaller units called satoshis, defined by eight decimal places.

Bitcoin does not operate like typical currencies: it has no central bank and it solely relies on an internet-based peer-to-peer network. The money supply is automated, limited, divided and scheduled, and given to servers or "bitcoin miners" that verify bitcoin transactions and add them to a decentralized and archived transaction log every 10 minutes. The log is authenticated by ECDSA digital signatures and verified by the intense process of bruteforcing SHA256 hash functions of varying difficulty by competing "bitcoin miners." Transaction fees may apply to new transactions depending on the strain put on the network's resources. Each 10-minute portion or "block" of the transaction log has an assigned money supply. The amount per block depends on how long the network has been running. Currently, 25 bitcoins are generated with every 10-minute block. This will be halved to 12.5 BTC during the year 2017 and halved continuously every 4 years after until a hard limit of 21 million bitcoins is reached during the year 2140.

Bitcoin is the most widely used alternative currency. As of March 2013, the monetary base of bitcoin is valued at over $800 million USD. The large fluctuation in the dollar value of a bitcoin has evoked criticism of bitcoin's economic suitability as a currency.

Thoughts? Will it catch on?

[Scarlet]

My friend spent an entire day telling me about them a couple of years ago.

From what I can remember, the main problem is that there seems to be is that as more of them are mined, the codes get more complex and so it become harder to gain Bitcoins. Mining essentially seems to involve letting your computer run with it and seeing how far you get. Though there seemed to be some irregualirty with regards to how long it took to mine a Bitcoin There was some debate about whether mining in groups (so you get less Bitcoin but faster) or just doing it one your own was better, those with large amount of computing power at their disposal get richer quicker. When it first was introduced it was relatively easy to get Bitcoins but now it is much harder. There was also a problem with the fact that each time the Bitcoins (or small subsections of Bitcoins) were transferred, this added to the list of transfers (the Bitcoin is recorded as a series of transfers so it is unique) and so the more they are exchanged the more labour-intensive it is to find it again. This could obviously be problem. The changing/ increasing number of Bitcoins in the world would be interesting and I would be intrigued to see how that worked.

One advantage seemed to be that the "money" is far more difficult to track as it is a code transferred between computers (which may explain why the only place I really know of them currently being used are in the somewhat darker (less friendly) areas of the interwebz). I remain unconvinced that the banking services would be overly happy with any developments which take their power away.

This information could, of course, be hokum (laced with the cloud of two years of not thinking about them at all) but I am inclined to trust this friend's knowledge. A friend who, come to think of it, I should probably send in the direction of this website at some point.

[Jubal]

Apparently their value as a currency fluctuates very significantly.

(Clearly they should be pegging it to the value of the Exilian Bezant )

[joek]

Currently, their value is shooting up, mainly (I think, I'm not entirely certain) due to the fact that well off/tech savvy Cypriots and Spaniards are investing on the grounds that the currency is safer than things stored in Spanish/Cypriot banks. It seems to have escaped their notice that they are causing a massive bubble. Up until a few months ago, though, the currency was relatively stable, if steadily getting stronger.
I like the idea of bitcoins, personally, but I can't imagine them catching on, though they are used in shady areas of the internet, e.g. in drug/botnet dealing, but also frequently by anonymous bloggers and various open source projects.

[Scarlet]

I hear rumours of up by 10 000% in the last month.

[Jubal]

I guess it's partly a question of who accepts them as tender, too, since not many places do quite frankly.