Topic: Some help needed. (Read 572 times)

Thanks a lot for the time.
That clarifies many things.

I suppose that depends on what you mean by "from scratch", but yes bitcoins come into existence without being backed by anything physical or tied to anything else of value.


The value of each bitcoin is controlled by market forces (supply/demand).  At any given moment it is worth exactly what one person is willing to accept to sell it and another person is willing spend to buy it.  Blocks are not "decoded" they are "encoded".  The amount of bitcoin awarded started at 50 BTC per block for the first 210,000 blocks, and is cut in half after each 210,000 blocks.  This is the controlled method that new bitcoin are released into the market as well as the initial method of rewarding the "miners" (transaction confirmers) for the work they do.  As the reward slowly drops over time it is expected that the value of the transaction fees will increase until eventually the "miners" will earn most of their revenue from transaction fees rather than from the block reward.


The protocol rewards those who do the work of confirming transactions in blocks.  In addition, anyone with bitcoin can use their bitcoin to pay anyone else for any sort work if they both agree.


It would probably be more accurate to say that they are given when a block is "encoded" and thus confirming that many transactions have actually happened.


It represents the value that the market assigns to its usefulness.


Initially as the currency is released into the market inflation of supply has to exist.  There is no way to increase the supply without inflating the supply.  However, as long as the adoption of the currency outpaces the supply inflation the market will experience price deflation.  This is let to the market to handle freely and is not controlled beyond controlling the rate at which new currency is released.  


http://en.wikipedia.org/wiki/SHA-256

The algorithm relating to bitcoin minning is a some kind of Encryption/decryption process, which is called SHA-256 hasing algorithm. That's why the mining and hashing are sometimes both used interchangable.

SHA-256 hashing is a quite hard process, which means it could be only sovled by brutal force, e.g. using computer calculation to search every possible answers to find a real solution. But don't think you can solve one definite problem using your own computer, which nowadays is not possible. Becausing during your hashing process, there are other T hasing/s computers calculating the same problem and once the problem is solved, the problem itself will be updated accordingly. This kind of design determines that the most amount of hashing power you have, the quickest solver you will be, and you can mine most bitcoins.

However, the difficulty of the problem itself, is dynamically adjusted by the network, which is adjusted according to the total hashing power on the network, so that every 10 minutes on average, a block can be generated. The return of a block, nowadays, is 25 bitcoins. After some years(4 maybe), the return will be further reduced by half. Finally, there will be no returns of generating a new block, but only transaction fees. So the total amount of bitcoins will be 21 milion and will be changed forever. All this kind of rules have been coded to the bitcoin software so no single party can change it by itself, which means bitcoin network has no central bank, or some kind of currency issuing department.

From what I understand the amount of bitcoins that are generated are specifically created in order to keep the market fluid, but how is inflation avoided altogether? (or is it?)
Also, can somebody explain what is hashing, because I can't seem to figure it out

"Are bitcoins generated from scratch?" Yes, but at a controlled rate. Right now they are generated at the rate of about 25 BTC every 10 minutes.

"Is the value of each bitcoin changing over time..." The value of bitcoins change with supply and demand. The more people want bitcoins compared to the number in circulation, the more valuable they will be.

"...and if it's not, then this is why the number of bitcoins awarded each time a block (if I'm saying it right) is decoded changing every 4 years?" The rate bitcoins are produced is limited to control supply. If too many bitcoins are produced their value would fall.

Hello.
I'm totally new to all this and really very much interested.
I've browsed the web to understand what this whole network is and have found many things but nothing that seems simple enough for me to understand the fundamental structure in which the network is based. So, as a newbie, I'm asking the following questions:

• Are bitcoins generated from scratch?
• Is the value of each bitcoin changing over time and if it's not, then this is why the number of bitcoins awarded each time a block (if I'm saying it right) is decoded changing every 4 years?
• Why are bitcoins given to individuals, for what kind of work?

From the little things I've understood, bitcoins are given when a block is decoded and thus verified that a bitcoin transaction has actually happened, but then the actual value of a bitcoin would just be fictional and not representing any actuall value.
These are not the only question I have just the ones that are coming right now to my mind, and I will post more after I clarify the ones above.
Thanks a lot in advance.