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Topic: New to bitcoin & I have these 12 questions (Read 670 times)

legendary
Activity: 3472
Merit: 4801
November 25, 2015, 11:52:52 AM
#8
Can you help me understand how has the price. . . to $320? A pure math with variables would help..

Thanks,
Vipul

The exchange rate is not set with math and variables.  It is agreed to by those that are exchanging, just like haggling over a price for produce or products in a market would happen.  Some people have dollars (or other local currencies) and want bitcoins.  Other people have bitcoins and want local currency.  When they find each other, they either come to an agreement on how much they will exchange, or they fail to come to an agreement and they look for someone else to exchange with.  Here's an example I wrote up previously:

The "price" of a bitcoin is exactly what someone somewhere is willing to pay for it, and someone else is willing to sell it for.

Exchanges provide a place for people who want to buy bitcoins and people who want to sell bitcoins to find each other.

Example:

Albert has 100 BTC.  He needs to pay his electric bill and the electric company doesn't accept bitcoin as payment.  He decides to convert some of his bitcoin to USD.  Albert logs on to an exchange and creates a limit order offering to sell 10 of his bitcoin for $33.45 each.  He is not willing to sell the bitcoin for less than $33.45 because at any price less than that he'd rather just hold on to the bitcoin and pay his electric bill with other funds.

Bobby only has a two bitcoin that he purchased at $32.50 each.  He decides that he doesn't really want bitcoin anymore, but he doesn't want to take loss.  He logs on to the exchange and creates a limit order offering to sell his two bitcoin for $32.55 each.

Carl has just received his paycheck.  After paying his expenses he has $200 left over.  He decides to purchase bitcoin with this money.  He feels like the exchange rate might drop a bit and so to get them as cheap as possible, he transfers his money to the exchange and creates a limit order to purchase 6.25 BTC at $32 each.

David just received an inheritance of $10,000. He decides he'd like to hold the entire balance as bitcoin.  He has seen the exchange rate varying between $31.50 and $33.50 lately, and hopes he can get the entire balance at $31.50.  He creates a limit order at the exchange for 317.460317 BTC at $31.50 each.

Earl is in a hurry.  He just wants to buy something from Overstock.com right now, and he'll take whatever the current exchange rate is.  He needs $60 worth of bitcoin.  He transfers his $60 to the exchange and places a market order for $60 worth of bitcoin.  The exchange sees that the cheapest offer to sell bitcoin at their site at the moment is Bobby's offer of 2 bitcoin at $32.55 each.  The exchange transfers the $60 from Earl to Bobby and at the same time transfers 1.84331797 bitcoin from Bobby to Earl.

At this hypothetical moment the current bitcoin price is therefore $32.55, since that is the most recent exchange that has occurred.
Earl now has 1.84331797 BTC
Bobby now has $60 and 0.15668203 BTC still available to purchase at an exchange rate of $32.55 per bitcoin.

Now Albert suddenly realizes that he doesn't have enough other funds for his bill.  He needs $334.50 right away to pay the bill, and needs to sell the bitcoin quickly to get the necessary money.  Albert cancels his limit order and places a market order to sell $334.50 worth of bitcoin.  The exchange sees that the most expensive offer to buy bitcoin at their site at the moment is Carl's offer of 6.25 bitcoin at $32 each.  The exchange transfers $200 from Carl to Albert, and 6.25 bitcoin from Albert to Carl.  Since Albert still needs another $134.50 worth of bitcoin to fulfill his order, the exchange sees that the next highest offer is David's offer of 317.460317 BTC at $31.50 each.  The exchange transfers 4.26984127 BTC from Albert to David, and $134.50 from David to Albert.

At this hypothetical moment the current bitcoin price is therefore $31.50, since that is the most recent exchange that has occurred.
Albert now has the $334.50 that he needs, and still has 89.4801587 BTC remaining.
Carl has picked up the 6.25 bitcoin that he wanted, spending the $200 that he wanted to spend.
David has purchased 4.26984127 for $134.50, and still has a limit order out there waiting to be filled for another 313.190467 bitcoin at $31.50 each.

You'll notice that there are actually many "prices" for bitcoin.  There is the price that each individual is willing to buy or sell their bitcoin for.  Some of the more often quoted prices are the "current Ask", "current Bid" and "most recent exchange".

Prior to Earl coming along, the "Current Ask" was Bobby's $32.55 that he is asking to sell his bitcoin (the lowest price anyone is willing to sell for at that time).
The "Current Bid" was Carl's $32 bid to purchase bitcoin from anyone willing to sell that cheap (the highest anyone is willing to pay to buy at that time).

legendary
Activity: 4424
Merit: 4794
November 25, 2015, 11:29:38 AM
#7
Hi guys,

I am pretty new to bitcoin and I want to understand the following stuffs

1. What is fullnode?(I understand it as transaction confirmation points) Is it same as Blockchain?
a full node is running the proper bitcoin program that stores the entirety of bitcoins blockchain database ledger on your computer
"blockchain" is the term for the technology, even other coins have their own blockchain(ledger).

2. Is bitcoin as an application decentralized or blockchain?
bitcoins are a currency unit, which is listed on a database ledger called a blockchain using private keys to control who owns the currency held within an address.
the complicated thing is that bitcoins can be stored in large amounts by single people. for instance exchanges may hold 10,000-600,000 coins under the private keys solely held by the exchanges and not the customers.
the blockchain (database ledger) is stored on computers of anyone running the full bitcoin program.

the issues for bitcoin the currency is that some people dont want to store bitcoins on their own private keys, and prefer to store them on central services such as exchanges
the issues for the blockchain ledger. is that people dont want to run the full bitcoin program and prefer to use central services, such as exchanges/online wallets.

which if lets say only 1% of bitcoin users decide to own their own private keys holding their funds, using te full bitcoin program.. but 99% of people store and use a specific online service. then the funds and the bitcoin ledger will become mainly centralised because these online services gain alot of control

3. What happens if there is only one fullnode on Earth?
If... (i highly doubt it will happen) but if.. it did.. then that single user can change the code how they like and control any element or function. which is why its best to distribute the database and code to many people so that no one person can manipulate it.

4. Why is bitcoin always priced based on Dollars?
its not. there are chinese exchanges that only measure in yuan. and european exchanges that only measure in euro's.. the only reason there are more US exchanges is because most liberal minded people that want something that is not government controlled. are americans.

5. Who is bitcoin community? What are they doing to keep bitcoin in the limelight for common people?
anyone, you, me, us, them are the bitcoin community. we can all do a little bit to help. but right now, bitcoin needs to become more user friendly before offering/advertising it to common people. after all until you can buy toilet roll and baked beans with it from your local store, most common people wont want to use it. as its not useful for them

6. Why does supply halving done? will it not be a loss for miners?
the supply halving is to ensure it has limited supply and is long term deflationary. as oppose to the government economy that can print as much as they like. which has caused so much problems.
as for the price.
well when it begins to cost miners more then $400 of equipment/electric to mine a bitcoin. these miners wont sell it at a loss, obviously.. they would instead hold it, making supply dry up and cause a price rise as demand rises, until the price moves upto a value that miners can profit from.

7. How is data in the blockchain not editable?
because lots of people have the blockchain (database ledger) if one person edited their data.. everyone else will see that the editors version is not correct. and wont relay the editors version.

8. What happened in Mt. Gox incident? was all the bitcoins lost?
not lost.. they are still on the blockchain(ledger).. but no one can prove who owns the private key to spend them.

9. How do we know how much bitcoins are lost & how does it affects the economy?
the amount of coins truly lost where there is 100% proof that the private keys are not in existence, cannot be known for sure.
but it is estimated that 1 million coins can be reasonably thought of/assumed to be lost.
this can be estimated because 'satoshi' the bitcoin creator and a few other coders in 2009 regularly messed around and deleted their private keys
also news reports of people accidently throwing their computers into landfill. or people getting viruses/wiping their harddrives in the early days.
we cannot be sure, but as a general estimate, 1million coins can be deemed as unspendable at this current moment.

10. Why do we have so many bitcoin startups coming up? what do companies other than exchange does?
offer services. such as:
casinos
selling products and services
advertising companies
gaming industry
sex industry
black markets
employment services

11. Why do we do pool mining? Isnt it unfair for other miners who dont use pool?
mining farms, which are single entities owning enough hashing power to mine by themselves are unfair.
mining pools, which are services that let lots of independant miners come together to combine their hashing power to compete against farms. which is fairer

12. Is there any other application based on blockchain which is as active as bitcoin is?
in short, no.. there are many applications based on blockchain technology. these are called altcoins.. but none are as active as bitcoins blockchain

Pardon me if you find some questions too much basic.. Smiley

Thank you,
Vipul
hero member
Activity: 672
Merit: 508
LOTEO
November 25, 2015, 11:18:44 AM
#6
Hi guys,

I am pretty new to bitcoin and I want to understand the following stuffs

1. What is fullnode?(I understand it as transaction confirmation points) Is it same as Blockchain?

A full node is a node in the peer to peer network that contains a copy of the blockchain database and participates in the network.

2. Is bitcoin as an application decentralized or blockchain?

Blockchain is simply a very large database file. The blockchain is shared amongst many machines in a global network. Bitcoin does not exist without blockchain because it exists in the blockchain. To be clear, the number of bitcoin (in satoshi) is stored in every transaction. Bitcoins do not exist out of the blockchain database. To make bitcoin transactions you need the decentralized network. Without the network you can only show you have a certain amount but nobody would believe you. Smiley  tl;dr? both.

3. What happens if there is only one fullnode on Earth?
Impossible scenario at this point.

4. Why is bitcoin always priced based on Dollars?
This depends on the site you use and the settings you put in your wallet / exchange.

5. Who is bitcoin community? What are they doing to keep bitcoin in the limelight for common people?
The bitcoin community are simply individuals who support the bitcoin network or use bitcoins.

6. Why does supply halving done? will it not be a loss for miners?
This is the design of Satoshi Nakamoto. The idea is to have a deflationary currency which would increase value over time due to scarcity. There are altcoins which do not have this halving property.

7. How is data in the blockchain not editable?
You can edit the blockchain database, but you do not reach consensus. Your edits would not be accepted by the network.

8. What happened in Mt. Gox incident? was all the bitcoins lost?
Someone run of with the coins. Many people think the owner of the site stole all.

9. How do we know how much bitcoins are lost & how does it affects the economy?

We don't.  It makes bitcoin more scarce. Economically, if something is scarce it has more value than if something is everywhere. One of the properties of money is scarcity.

10. Why do we have so many bitcoin startups coming up? what do companies other than exchange does?
Because people want a piece of the slice (money). There are companies in gambling, services, sales, hotels, food and the list goes on.

12. Is there any other application based on blockchain which is as active as bitcoin is?
As active probably not, but other applications include smart contracts and chat.
newbie
Activity: 8
Merit: 0
November 25, 2015, 11:17:28 AM
#5
4. Why is bitcoin always priced based on Dollars?
It isn't. It is just that the US Dollar is the most prominent reserve currency in the world so Bitcoin just happens to be typically priced in dollars. However go to exchanges and you will find trades for Euros, Yen, Yuan, and many other currencies around the world.



Whoah, that was a quick reply.. Thanks Smiley

Can you help me understand how has the price of a [Suspicious link removed]ived to $320? A pure math with variables would help..

Thanks,
Vipul
staff
Activity: 3500
Merit: 6152
November 25, 2015, 11:01:14 AM
#4
I will try to answer what I can

1. "A full node is a program that fully validates transactions and blocks. Almost all full nodes also help the network by accepting transactions and blocks from other full nodes, validating those transactions and blocks, and then relaying them to further full nodes." and you can run one of those Full nodes simply by running Bitcoin Core wallet in your PC and opening the ports .

2. I'm not sure what that means honestly , but basically the Decentralized part is that we don't really need any third party like banks etc ... and all transactions can be viewed by everyone everywhere on the Blockchain .

3. Basically nodes are needed , if there is no nodes or everyone is using Lightweight nodes Bitcoin could not exist .

4. Euro has it value on dollar as-well , just like anything else . It's just conversion ? (I hope I got your questoin right)
5. Bitcoin community is basically us , everyone try to contribute on the way he can  , some people open services that accepts Bitcoin , others try to speak about Bitcoin and how cool it is to their families or their friends etc ...

6. Supply halving is made so Bitcoin don't use it value with time , and no Miners don't really lose (maybe they do , but they will keep making profit) , I mean if they don't make profit , they will logically stop .
Also the miners owns the most of the bitcoins , so probably after the next halving which should happen next July ... price should rise (It's based on supply and demand , so less supply and same or higher demand should make the price rise)

7.What do you mean how it's editable ?

8. Mtgox claimed that they got hacked , and till now .. no body knows where are the millions of dollars stolen exactly , they are probably little bit everywhere (on different bitcoin addresses) and the suspect number one is their CEO .

9.You can't really know how much Bitcoin is lost ,it's pretty impossible . How it does affect the economy ? On a good way , as Satoshi said few years ago on this forum "Lost coins only make everyone else’s coins worth slightly more. Think of it as a donation to everyone"


10. What companies are we talking about here ?

11. I have zero knowledge on Mining so couldn't really answer this one , sorry .

12. I guess not (AFAIK) , but banks finally understood how Blockchain is good and some of them are even using the technology right now .
sr. member
Activity: 268
Merit: 258
November 25, 2015, 11:00:50 AM
#3
Hi guys,

I am pretty new to bitcoin and I want to understand the following stuffs

1. What is fullnode?(I understand it as transaction confirmation points) Is it same as Blockchain?
No, a full node is not the same as the blockchain and it is not transaction confirmation points. A full node is a peer on the p2p network which will verify and validate every single block and transaction it receives according to the built in consensus rules. If the transaction or block validates, then it will be relayed to all of its peers. The consensus rules are built directly into the code so an upgrade is required to change them. Full nodes also store the entire blockchain locally and provide it to others when requested.

2. Is bitcoin as an application decentralized or blockchain?
The blockchain is decentralized since there is no central authority that governs it. Not sure what you mean by bitcoin as an application being decentralized.

3. What happens if there is only one fullnode on Earth?
Then that full node is the only one that can provide the blockchain to others and it will become the central authority. Since SPV wallets rely on full nodes to supply the right data, that one full node could in theory rewrite history and make things up with the blockchain and no one would know about it.

4. Why is bitcoin always priced based on Dollars?
It isn't. It is just that the US Dollar is the most prominent reserve currency in the world so Bitcoin just happens to be typically priced in dollars. However go to exchanges and you will find trades for Euros, Yen, Yuan, and many other currencies around the world.

5. Who is bitcoin community? What are they doing to keep bitcoin in the limelight for common people?
The Bitcoin community is everyone who is involved in Bitcoin.

6. Why does supply halving done? will it not be a loss for miners?
The block reward halves in order to control the supply of Bitcoin. If the block reward did not continue to halve and eventually go to zero, then Bitcoin would constantly be inflationary and over time the value of Bitcoin would drop. Being deflationary is one of the most important aspects of Bitcoin.

7. How is data in the blockchain not editable?
The blockchain uses cryptography to ensure that the data stored within blocks cannot be edited. Each block is referenced by its hash. The hash is a cryptographic function which converts all of the data in a message (in this case the block) into a long 256 bit number represented in hex. This number will change depending on the data in the block. If anything changes, then the hash will not match and the block is invalid. To prevent data in transactions from being changed, the transaction uses signatures, which also use hashes. If any data that was signed does not match the signature, then the transaction is invalid. Since transactions are stored in blocks, changing a transaction will result in making the block invalid as well.

8. What happened in Mt. Gox incident? was all the bitcoins lost?
It went bankrupt. Supposedly the Bitcoin was stolen, but people aren't sure.

9. How do we know how much bitcoins are lost & how does it affects the economy?
We don't know how many bitcoins were lost.

10. Why do we have so many bitcoin startups coming up? what do companies other than exchange does?
There are many use cases for Bitcoin and the blockchain. Specifically the blockchain can be utilized to store data but this is not recommended. Many of these companies are utilizing the decentralized nature of Bitcoin and the blockchain to do stuff.

11. Why do we do pool mining? Isnt it unfair for other miners who dont use pool?
Pool mining is to pool people's resources together so that more mining can be done. It ensures that the miners in the pool will get paid something, and it also ensures that the network will continue to stay alive. If we didn't have pools, the mining would become more discouraged because your odds of getting any reward is very little. Through pools, people are incentivised to mine since there is always some payout for mining with a pool.
legendary
Activity: 3472
Merit: 4801
November 25, 2015, 10:54:55 AM
#2
1. What is fullnode?(I understand it as transaction confirmation points)

A full node is any peer on the bitcoin network that fully validates that the information received from all peers is valid within the constraints of the consensus rules before accepting or forwarding on the information.  Additionally a full node is capable of supplying to any peer the necessary information that peer to operate as a full node.  Generally this means that it implements all the communication functionality of the reference client known as Bitcoin Core.

Is it same as Blockchain?

No.

There are two completely different things that are commonly called "blockchain".

The first is the proof-of-work chain of all transactions that have been confirmed according to the consensus rules of the bitcoin protocol.  This data is stored by all full node peers as well as by many businesses.

The second is a website, blockchain.info.  blockchain.info is an independent company that listens to all the transactions that occur on the bitcoin network and supply services (including a block explorer and a web based bitcoin wallet) based on the information that they collect.

2. Is bitcoin as an application decentralized or blockchain?

Bitcoin is a word with many meanings.
  • It can be used to describe a piece of peer-to-peer software that is used to receive, store, and send value.
  • It can be used to describe the value that is transferred with that software
  • It can be used to describe the set of protocol rules that are used by the software to reach consensus in a decentralized way
  • It can be used to describe an independent company that provides services to the public based on information they gather from connected peers

3. What happens if there is only one fullnode on Earth?

Then every other peer will rely on that node for the full validation of the blockchain and transactions and for any historical information required.

4. Why is bitcoin always priced based on Dollars?

It isn't.  It is also priced in Yen, Euro, Peso, Televisions, Computers, and anything else that you might want to exchange for bitcoins.  If you have only seen it priced in dollars, its because that's all you've looked for.

Bitcoin is a currency.  Like any other currency it can be used to buy things, or it can be exchanged for other currencies.  Your question is a bit like asking why Euro are always priced in dollars.

5. Who is bitcoin community?

Bitcoin community is anybody that is interested in bitcoin in any way.  Since you are asking questions about bitcoin, you are now part of the bitcoin community.

What are they doing to keep bitcoin in the limelight for common people?

Bitcoin community IS common people.  They are not under the control of any bitcoin authority.  Each individual is welcome to do whatever they like.

6. Why does supply halving done?

The supply is not halving.  The amount of new bitcoins that get created every day is halving.  When bitcoin was created in 2009 the software was designed to create approximately 7200 new bitcoins every day.  The software was also designed to cut the number of new bitcoins created in half approximately every 4 years.  Therefore, back in 2012 the number of new bitcoins created every day dropped from approximately 7200 to approximately 3600.  Next year it will be about 4 years since the last reduction, so the number of new bitcoins created every day will automatically be reduced again from approximately 3600 to approximately 1800.  This will continue approximately every 4 years until somewhere around the year 2140 the number of new bitcoins created every day will be so small that when it is cut in half again it will just be reduced to 0.

This was done as a way to limit the total number of bitcoins that will exist (to avoid supply inflation) and to get bitcoins into circulation for people to use.  It solved many problems with getting the entire system up and running and has been quite successful so far.

will it not be a loss for miners?

It will reduce the gross revenue for miners in terms of bitcoins.  Depending on the exchange rate to their local currency, it might reduce the revenue for miners in terms of their local spending power.  If it does, then they will reduce their costs to compensate so that they can be profitable again.  Some miners will be unable to reduce costs enough, so they will simply stop mining.

7. How is data in the blockchain not editable?

Every full node peer on the network validates every transaction and every block.  If you edit any information, it will be rejected by every peer on the network that has implemented the bitcoin consensus rules.  Getting a peer to accept a block that you have created requires you to perform a proof-of-work (often called "mining").  The deeper down the chain you want to make a change, the more work you'll have to prove in order to get peers to accept your change.  This proof-of-work quickly becomes prohibitively expensive as the block gets deeper in the chain as long as most of the hash power on the network that is performing the proof-of-work is not cooperating to make the change.  Additionally, any block with an invalid transaction is rejected regardless of how much proof-of-work you supply.

8. What happened in Mt. Gox incident?

There are a lot of opinions about that.  There is no definitive proof yet as to exactly what happened.  The basics are:

  • Lots of people gave their bitcoins to MtGox and trusted MtGox to keep those bitcoins secure
  • MtGox failed to keep most of the bitcoins secure (either because of fraud in the company, or incompetence)

was all the bitcoins lost?

No.  But almost all the bitcoins were lost.  There were still some bitcoins left at MtGox when they announced that they lost lots of bitcoins, but not very much.

9. How do we know how much bitcoins are lost

By looking at the blockchain and knowing what the consensus rules are, we can compute a number of bitcoins that are provably unspendable.
By understanding some mathematics and cryptography, we can make some assumptions about additional bitcoins that we can safely assume are unspendable.
Beyond that there are bitcoins that people have publicly stated they've lost.  They may be lying.  They may not.  We generally can't know for certain.

& how does it affects the economy?

Basic understanding of economic principles leads most people to accept that a reduction in supply will lead to an increase in value for a given demand.  

10. Why do we have so many bitcoin startups coming up?

Because there are entrepreneurial individuals that believe that they can supply a product or service that others are willing to pay for.

what do companies other than exchange does?

The same thing that any company ever does.  They find or create products or services that others are willing to pay for, and then they exchange those products or services for a profit.

11. Why do we do pool mining?

Pool mining reduces variance in payouts over reasonable timeframes.

Isnt it unfair for other miners who dont use pool?

If they want to use a pool, they can.  If they don't want to, they don't have to. Each individual has the freedom to choose whether they want to get small payouts on a regular basis, or a chance for a large payout very rarely.

12. Is there any other application based on blockchain which is as active as bitcoin is?

Bitcoin is the first and most popular blockchain based protocol.  There are others that aren't quite as popular, such as litecoin.

Pardon me if you find some questions too much basic.. Smiley

It probably would have been better to post in the "Beginners & Help" section of the forum. (edit: I see that a moderator has moved it for you).

Thank you,

You're welcome.
newbie
Activity: 8
Merit: 0
November 25, 2015, 10:44:09 AM
#1
Hi guys,

I am pretty new to bitcoin and I want to understand the following stuffs

1. What is fullnode?(I understand it as transaction confirmation points) Is it same as Blockchain?
2. Is bitcoin as an application decentralized or blockchain?
3. What happens if there is only one fullnode on Earth?
4. Why is bitcoin always priced based on Dollars?
5. Who is bitcoin community? What are they doing to keep bitcoin in the limelight for common people?
6. Why does supply halving done? will it not be a loss for miners?
7. How is data in the blockchain not editable?
8. What happened in Mt. Gox incident? was all the bitcoins lost?
9. How do we know how much bitcoins are lost & how does it affects the economy?
10. Why do we have so many bitcoin startups coming up? what do companies other than exchange does?
11. Why do we do pool mining? Isnt it unfair for other miners who dont use pool?
12. Is there any other application based on blockchain which is as active as bitcoin is?

Pardon me if you find some questions too much basic.. Smiley

Thank you,
Vipul
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