Topic: New to bitcoin (Read 4876 times)

You just made my day humphrey!  I was gone for a while, too, but people like you keep me coming back

Thanks for the reply. I sort of vanished for awhile. I wish id had stuck with the mining or at least bought some coins back when they was dirt cheap.

And my first bitcoins came from a coin seller and my own mining although it wasn't much.

I highly recommed the body cavity search if you are into that kind of thing, but the cost of loosing all of your cash certainly makes a visit to an S&M brothel the greater value.

oh my, Cryptoman...

you've never tried to enter or return to the U.S. with $5,000.00 in cash?     heavens lad - you just haven't lived...

That's an interesting selling point that I hadn't thought of before.

Although those are some reasons that people might use BitCoins, they're by no means the only ones.  For me, international usage is one of the primary applications that got me excited about BitCoin and I believe it could be the "killer app" for bitcoin eventually.  I also have very little interest in anonymity, and only like decentralization for its technical value.


@alittlegreen BitCoin will start to become practical for you to use when it starts to be accepted and exchanged in the countries where you work--then it will be a much cheaper way of transferring money to many countries than bank transfers or Western Union.  I'm kind of implicitly assuming here that at least some of those 15 countries you spend time in lack convenient financial access such as either all using the same currency or sharing a common banking system--if they're all EU member countries BitCoin probably won't help you that much for a long time.

But if my assumption is right then I would say BitCoin will probably be quite useful to you if it succeeds and becomes a bit more established.  Based on my own experience I suspect you currently travel with either US dollars or Euros and exchange them in local countries--BitCoin would essentially allow you to do the same thing without having to carry any actual currency on you because you would only have to get to an internet access location within each country and then would have access to unlimited BitCoin transactions.  This makes it a lot safer and could avoid strict currency import regulations that certain countries impose.  It would also reduce the costs of operating because the BitCoin network itself will always be very low on fees and will likely command a premium exchange rate similar to dollars and euros.  If it is even moderately successful BitCoin will probably start to replace Western Union, etc. as the primary method by which money is sent internationally because of the high fees of the latter, so many people will be happy to exchange it wherever you go.

For right now, Paypal is going to be simpler for you because most of your donors don't already use BitCoins.  They would have to convert into BitCoins and have you convert back out, which means the low internal fees don't help you.  But spread the word about bitcoins and how easy to use they are, especially in countries where financial services are harder to access!


You're very welcome!

eMansipater: Thank you very much for your explanation!

First things first, Bitcoin is a currency too, but in its infancy stages.  A usable currency, well, that's what we're trying to accomplish.

To be perfectly honest, there is little to be gained from accepting Bitcoins in your circumstance, other than the satisfaction of increasing awareness about the system (which of course we all appreciate).  Since you don't really care about anonymity, one of the main selling points of Bitcoin is gone.  Another major selling point is that Bitcoin is decentralized, meaning that PayPal/Visa/Discover etc can never shut you down if they feel like it (like they did with Wikileaks).  If your donations won't make PayPal shut you down, then that benefit doesn't help you much.

As others have mentioned, at the current stage you'll need a Bitcoin-to-local-currency exchange to make Bitcoin donations useful, unless you happen to want one of the services offered in our Marketplace forum, or if you choose to speculate and hold on to them and hope that the value of Bitcoin is going to be worth more in the future.  Your donators would also probably require a local-currency-to-Bitcoin exchange just to donate to you in the first place, so it's rather roundabout.  

In short, while we would highly appreciate it if you accepted Bitcoin as an option for donations, it's currently not feasible to use it as your only source.  We're still in the stage that increasing awareness is the best thing one can do.

--

On a personal note, I have much respect for missionaries because I believe that they have a positive net effect on the places they travel, religious debates aside.  Maybe I'm just biased because two of the most influential people in my growing life ended up becoming missionaries (you're not Mr. and Mrs. Voss right? hehe), but I just want to thank you for what you do.  

Ok so I have to sell them for dollars first, not euros?

I'm sorry. Alright, since you don't care about anonymity, you would need to go to some place like mtgox.com and deposit your Bitcoins there. After they are deposited, list them for sale at the current bid price so you can sell them instantly. After you sell them, you will have USD in your account and you can withdraw it from there. Once you have USD you can convert them to whatever local currency you need.

Ok your still talking over my head.  So your saying bitcoin is a currency that has to be exchanged?  I am not following you.....sorry  How would my example above work?  there money comes to me in bitcoins?  Do they have to understand it all too just to make a simple donation?

Anonymity is not an issue

It would work the same as changing any currency into any other currency. You need to work with a currency exchange. If you're looking for anonymity there are several cash-by-mail services such as mine, bitcoin2cash.com. If you're looking for convenience there other others that will send you USD or Euros by wire transfer, or other forms of payments. Look at the trade wiki for the different exchanges being operated.

Ok I am blonde and NOT good at math so help me here.  My hubby and I are missionaries living in one country and working in about 14 others.  We travel constantly.  People mostly from America and Europe send us donations from time to time.  If I were to use Bitcoin how would this work?  How would I turn bitcoins to usable national currency like Euros.  and how would I deposit that money in my bank account?

For example: Right now I use Paypal, so a person in Montana sends me 100 dollars (through Paypal) and I accept it, exchange it to the 10 euros its worth (just kidding I know its worth a bit more then that) and withdraw it to my bank account.  How would that transaction work with bitcoin?

Blessings,
ALG

Aww shucks guys.  Thank you .  Some day I will have to publish some statistics on my tips--they are an awesome feedback tool to know that I'm doing something right.  The only wish I have is that I could do a different address per post and increase the resolution of it!  Maybe that will be the killer app for bitcoins.  Any of you coders--hint, hint .

Glad to hear it!

As Reto said, bitcoins will need to become much more popular before they are accepted widely in "meatspace".  Personally I estimate that it will be a couple years before the value of bitcoins stabilises enough that the value proposition for large, established companies will be sweet enough.  But depending on who your landlord is and where you get your groceries, you might be able to convince them sooner.  Since most people aren't earning their living directly in bitcoin yet this isn't a problem, but I can see that some people will need to use another currency as an interface, like you said.  It will be the existence of these people that will provide the incentive for more established companies to start adopting bitcoin.

You're exactly right that exchanges merely facilitate trade between users.  Although I'm sure exchange operators do some trading, the vast majority of volume is travelling between their users.  In fact, a fair bit of trading still occurs through #bitcoin-otc where there is no exchange and users trade with aid of the "web of trust" system.

As far as how transactions actually occur--some exchanges leave the actual transaction up to the users, while some are essentially acting as escrow agent, like you said.  Obviously when you hold both the bitcoins and the dollars/euros/whatever of users directly it increases the confidences of the users drastically, provided the exchange itself is trusted.  That way you know the person is actually capable of completing their order--and in fact it is done immediately.  So having trusted exchanges is the ideal vs having to figure out whether you trust each individual users.  Exchanges like Mt. Gox, for example,  have secured the trust of the community and this is why the Mt. Gox price is often used as the benchmark of bitcoins' exchange value.

My personal advice to people is always that the riskiness of BitCoin itself is much greater than that of using a major exchange like Mt. Gox, or a trusted trader like Bitcoin4Cash or CoinPal.  Bitcoin is groundbreaking technology that has a chance of being wildly successful, but you still shouldn't be putting any money that you can't afford to lose into bitcoins.  Put a small amount in and start using it, and get your friends to do the same.  BitCoin needs to scale up slowly and carefully, prove itself, and then become wildly successful if all the kinks have been worked out.  Most of us here in the BitCoin community are in it for the long haul--we don't need the price to go through the roof tomorrow and have bitcoins accepted at the grocery store on Monday.  Building a successful currency will take time, patience, and a lot of hard work.  But if you can help that process along by participating in the BitCoin economy, the powerful business models it enables, and ideally offering goods or services for BitCoins yourself, the future would be greatly indebted to you.  Even if all BitCoin becomes is the greatest experiment ever, the knowledge gained will be incredibly worthwhile.  Just think of the stress-testing of the cryptography alone!

At the end of the day, buying bitcoins today is a little bit like buying shares in Microsoft at its IPO.  Sure, there is the potential for incredible gains and the investment of capital is critical for its success.  Everybody these days wishes that they had bought shares in Microsoft, or Google, or whatever at just the right time.  But back when the buying of those shares had to happen, the future of that company was a big question mark.  It was simply impossible to tell for sure what would happen--which is the whole reason initial investors made so much.  Make sense?  To invest in bitcoins now is to take on the risk of the bitcoin's future.  We need people to do it, and if BitCoin is successful they will be greatly rewarded, but you shouldn't take a risk that you can't afford to.

Maybe that investment advice was completely superfluous there, but I always try and include it just in case its not.  On a more personal note, I've convinced a number of my friends and family to put small amounts into bitcoin and start playing around with it--it's a fantastic idea and I believe it may well be bigger than any of us realise.  But it's also unproven--be wise.

It will be awhile (years) before Bitcoin is widely accepted enough for you to no longer need traditional currencies.  Most of the early adopters are people who are either technically-inclined or are fed up with the way that government-backed currencies are being manipulated.  It's really just a big experiment at this stage, albeit one that many people are putting a lot of effort and faith into.


This is one aspect of the experimental side of Bitcoin.  It's a social experiment in a lot of ways.  Since Bitcoin transactions are irreversible, the person sending Bitcoins has to place a lot of faith in the other party.  They can't just call up the Bitcoin bank and cancel payment.  There will be a larger use of escrow with Bitcoins than with traditional payment methods.  However, you can choose whether or not to utilize escrow rather than subsidize the cost of fraud protection for everyone, which is how credit cards and checking accounts work today.


In the case of Mt. Gox, all funds have cleared by the time offers are placed on the exchange.  So whether you're buying or selling Bitcoins, you can rest assured that the matching funds are there.  The trust you place is in the exchange operator.  You trust that you will be able to withdraw your funds once the exchange is complete.  There are also a lot of individuals who do exchanges (myself for one).  In fact, a lot of us believe that the best way to facilitate exchange is for everyone who holds Bitcoins to offer to do exchanges.  After all, one of the strengths of Bitcoin is that it is decentralized, so why would we want to rely on a centralized exchange?

Currently, the bitcoin is still a pretty niche idea, but it's spreading quite virally. Even so, it'll be a long time before grocery stores start accepting them. Bitcoin, in its purely electronic nature, is geared towards exchanges for electronic/digital goods and services. Maybe in the future, stores will have a terminal-ish thing for Bitcoin transactions.

I'm also going to add that bitcoin mining by yourself is extremely slow, in terms of probability. You could get lucky and get that 50 BTC prize, but the chances are so slim you're better off participating in pooled mining. Pooled mining is a service where many people cooperatively try to solve blocks, and the block reward is split among the participants. How it's split is up to the pool's host.

I mine with Deepbit, but there are other pools posted around the forum.

-edit-

Also, you won't get anywhere even in a pool with CPU mining. The GPU is much more adept at mining, reasons at this page. You'll have to use a GPU miner to take advantage of your GPU. I use m0mchil's GPU miner.

Great response, that really helped me a lot.

I do have one question though, and it's more a request for clarification than an actual question:

As I've been reading and reading and reading about Bitcoin, the nagging thought in the back of my head has been: how can I (if possible) use this system to pay for those core things that I need to live, such as groceries and rent. The answer to that, in my mind, has been that I will, at the end of the day, need to convert BTC to USD in order for the BTC to basically "interface" (for lack of a better term) with other, more widely circulated currencies; basically the currencies that we use day to day. That is, I imagine, where an exchange comes in.

My biggest concern has been the trustworthiness of the exchange, but I think I've been considering it all wrong: I've been thinking of exchanges as, essentially, banks that have a quantity of money and I pay them, then they pay me in Bitcoins. There is, of course, the concern for fraud, which is one of the things that BTC is trying to create a system against.

But am I thinking about it wrong? Do these exchanges purely facilitate the trade of Bitcoins-to-USD/CAD/EUR/whatever between the users? So that I go to, for instance, Mt. Gox, put a proposed exchange, and then I'm contacted by the user with the appropriate currency to then do the exchange, and everything is done directly so that there is no intermediary that acts as a bank to hold money for me (or anyone else) to withdraw from? Or is it these services that act as escrow, essentially?

I apologize if these questions seem pretty rudimentary, but I'm intrigued by the prospect of BTC as a thing, and I'm always and forever interested in crypto-anything, so why not get involved in cryptocurrency?

BitCoin.exe will only use your CPU, but more advanced mining programs like poclbm, which is available with a graphic interface, use the parallel processing power of GPU's to far outperform them.  Because mining is essentially a competition, this is why it has become so difficult to earn bitcoins this way.

Based on other people's numbers it looks like your total generating capacity would be only 1-2 "MHash", which equates to earning one 50 BTC reward every 11 years.  These days the most powerful mining is done with leading edge AMD graphics cards where the owner of an AMD Radeon HD 6990 will get a 50 BTC reward about every 6 days if mining continuously.  But competition is always reducing the rate people earn, like Ricochet explained.

Thanks humphrey--we like to track down misinformation whenever we can.  It sounds like those numbers were either very out of date or a misunderstanding.

Thank you.  Tips always make my day .  By the way, I'm always curious to ask where people got their first bitcoins, since it used to be quite difficult but is getting easier and easier all the time.  Was it from CoinPal, or a friend, or something else (if you don't mind my asking)?

Yes, exactly--see above.

That's correct.  It's the limited amount that gives bitcoins their value--if there were an unlimited number there wouldn't be any competition to own them and it would be foolish to treat them as money.  Wampum, for example, started being mass-produced by dutch settlers and was ruined as money.

The initial 21 million are going to be very gradually distributed, mostly over the next few decades, instead of running out.  But you will always be able to get bitcoins by trading goods, services, or other money for them with other people, just like you would get any other kind of cash.  Similarly, the total amount of gold in the world doesn't tend to change very much but instead the existing gold is just traded around and re-used.  Unlike paper currencies, bitcoins don't wear out so this isn't a problem.

Trying to buy up the majority of bitcoins would be like trying to buy up the majority of gold in the world--it would soon get very expensive, and all the remaining bitcoins would increase greatly in value.  So in short--they would make everybody else rich.  As far as technically, having less bitcoins isn't a problem because unlike normal banknotes they can be divided into as small of pieces as you need.  The entire bitcoin economy could run on a single bitcoin if it needed to, because you could just transfer .0000001 btc at a time, for example.  For the time being we only use amounts as small as .01, but we can change that as bitcoin becomes more valuable.

Yes, it is very impressive!  And it's also a great sign for BitCoin's future.

Right--the underlying mathematics of how mining works is ingenious, but intricate!  I would be happy to explain it if you're interested.

As transactions are processed and verified on the BitCoin network, they are put into blocks and an SHA256 checksum is computed of the whole block.  This is so that those transactions cannot be changed later.  However, the p2p network of bitcoin clients won't accept just any checksum, or hash, for a block.  Only hashes starting with a certain amount of zeroes are accepted (the number of zeroes depends on how fast blocks are appearing on the network), so if the first hash calculated doesn't work the block has to be changed slightly by adjusting a number called a nonce, and the hash calculated again.  This process gets repeated many, many times until the miner randomly finds a hash that starts with enough zeroes.  Because this block will now be accepted by the network, we call this "finding a block".  So the work a miner is doing is to first doublecheck all the transactions it has seen recently to make sure they are valid, then put them all in a block and try using different nonces many many times until they find a block with enough zeroes in its hash to be accepted by the network.  The difficulty in finding a hash guarantees that no one can just make up their own blocks to try and change the official record of transactions.  And, because each block also includes the hash of the previous block, these blocks together form an unbreakable series called the blockchain.  As long as a client connected to the BitCoin network uses the most computationally difficult blockchain, they will know they that the list of transactions in it is the "official" one and can be trusted.

Confused?  It's a little complicated, but once you understand it this is the underlying reason that BitCoin doesn't have to trust anyone, and why it would be very expensive for a fraudster to try and "write two cheques on the same bank account" in a double-spend attack.  Feel free to ask for more clarification.  The BitCoin wiki, which I keep linking to, is also a great source of detailed information.

The reward for generating a block (which is included as a transaction to themselves by the miner who finds the block, and accepted as valid by the rest of the network as long as they follow the rules) follows a set schedule and is currently 50 bitcoins.  Miners also earn any transaction fees paid by transactions they process (you can pay a fee to to jump to the head of the line, which is important if the bitcoin network ever starts to fill up with more transactions than can be processed for free).  The set schedule will reduce the reward over time to gradually approach that magical 21 million bitcoin total, and as the reward decreases it will be replaced by transaction fees to ensure people keep mining for ever without any new bitcoins having to be created.  By this time, if it is successful, the bitcoin network will probably have so many transactions on it that the fee will be very low but still create an incentive for miners to keep joining.

The more people start using bitcoin, the more bitcoins become worth (due to the limited number), and thus the more valuable block rewards become.  More miners join in the competition to find blocks, the network adjusts the number of zeroes needed for a block to count, and bitcoin becomes more secure.  So what this means is, the more people use bitcoin, the more secure it becomes.  Isn't that ingenious?!!  BitCoin is incredible.

Well, if you have a $700 graphics card you will find one, on average, every 5-6 days of continuous mining--though it's random when it actually occurs.  If you have a $100 graphics card you will find one every 24 days of continuous mining on average (For mining AMD cards tend to outperform NVIDIA cards due to their differences).  Because of the randomness and the long waits, some people choose to join a mining pool where they mine together with a large group of people and split the proceeds.  Most mining pools charge a small fee for the server, so in the end the $100 graphics card tends to make a more consistent 2 BTC per day or so.  Of course, as new miners are always entering, this will go down over time with the increased competition.

By the time you pay for the electricity, the graphics card, and the time spent on it, nobody's really making a whole ton of bitcoins this way.  The best and simplest way to get bitcoins is simply to buy them, which is what most people do.  For smaller amounts CoinPal works well off a verified PayPal account.  For larger amounts most people do a bank transfer to a BitCoin exchange like Mt. Gox.  In both cases there will be a slight fee for exchange because of either the expense involved or the risk of fraud (people will do crazy things for bitcoins because they're so secure and they're basically digital cash).

You can also sell something or work for bitcoins, just like any other kind of cash!



When you use the normal bitcoin client, this happens behind the scenes.  What's going on is that a person's public address, like the one in my signature, is where coins are sent to.  But only the person who holds the private encryption key to that address can spend them.  These keys are normally stored in a file on your computer called your "bitcoin wallet" and then used by bitcoin.exe every time you send coins.  If someone gets these keys they can steal your bitcoins, so be careful to protect them!  You should also make a backup of them in case your computer crashes.  Right now making a secure backup is a little intricate, but it will probably be much easier in a future edition of the bitcoin client.

Yes, if the private keys in your wallet are lost and you don't have a backup, no one will ever be able to spend those bitcoins and they will be essentially lost.  The simplest way to move bitcoins from one address to another is simply to send them like a normal transaction--then you will only need the new private keys in the new wallet file to spend them, no matter what happens to the old computer.

I hope that answers some of your questions

I wouldn't bother with it either, but that's from a 'steady income' point of view.

My point is that if you do want to use a cpu for generating coins, you should probably be thinking of it more like buying lottery tickets.