the coins are physically stored on your computer, and network stays alive because people leave their computers on to pass transactions around. the only way in the world that bitcoins are created is through a mining process, where you leave your computer running, and it does an intensely complicated SHA-256 encryption hash to try and solve the next block of transactions, if you solve one, you get 50 BTC (currently ~$500), but there are so many people involved with it that you would never find a block anymore, it would take 5 years to find a block on 1 computer. so people mine in teams, or "pools" where you get a % of each block depending on how many shares you put into it.
download the wallet program, it needs to download the blockchain, takes a few hours
you could alternatively get a blockchain.info wallet, but the traditional "satoshi" client from bitcoin.org is highly recommended, you wont get scammed that way. people steal bitcoins.. i've seen hundreds of thousands of dollars worth stolen so many times.
all the transactions that are in the world get placed in the next "block". when you download the blockchain (its automatic as soon as you open bitcoin), it downloads all transactions from day 1 (genesis block!) up to today. the earlier blocks had very little transactions in them, so they download super fast, once you start getting into the 2012 blocks they take a little while to download.
if you leave your computer offline for a week, years, etc, and then turn it on and open bitcoin, the transactions that have been sent to you while you were away will not have shown up in your wallet yet.. as it starts to download the blockchain, you'll see them all start to flow in.
you can take your wallet.dat file, burn it to a CD, then you have a copy of your wallet backed up permenantly. but dont put it somewhere where someone will steal the CD, because they can import the wallet into their wallet and take your coins lmao
if your computer dies and you didnt back up your wallet, too bad so sad, those coins are gone.
those bitcoins are lost "FOREVER". there is NO way to recover lost coins, so the number of coins worldwide is decreased whenever someone loses their coins..
and theres a lotta dumb fucks out there who lose coins lo
starting from day one, there is 50 BTC (BTC = bitcoin) for each tx block discovered. if you had a computer (with just a CPU, dual core) mining bitcoins at day one, you would have probably gotten 1000 BTC per day. a dual core gives you about 1 MH/s (megahash/s)
in 2010, someone figured out how to get video cards mining. GPU's are very powerful. a radeon 5870 can do 440 MH/s, but since EVERYONE has a video card, the global hashrate went up drastically, and there is a block found every 10 minutes or so (the network adjusts itself to make block discovery harder automatically depending on how high the hashrate is, this is called difficulty).. so after GPU mining came out, a radeon 5870 doing 440 MH/s would do like 20-30 BTC per day or something. oh yeah 'pooled mining' also came out late 2010. in 2011 mining became POPULAR for the first time, media picked it up and it exploded in popularity. global difficulty went up, the bitcoin demand rose like FUCK. the price of 1 BTC went from $0.02 to $31.90... if you had been mining since day one, and had hundreds of thousands of bitcoins, well you'd be a millionaire many times over at this point.
in 2011 a 5870 would earn you about 0.5 BTC per day at the end of the year.
In july 2011 just as the price of a BTC skyrocketted, Mt. Gox (the main bitcoin exchange) got hacked (because it was a totally unsecure system, totally new to the game) and someone stole like tons of BTC. Some big player also dumped like 250,000 BTC on the exchange and actually sold the price right down to $0.00 (depleted all 'buys' on the site)
fun fact: Mt. Gox stands for Magic The Gathering Onling Exchange. They started off in the magic card game. then they started trading currencies for virtual games like second life, and when bitcoin became popular people starting using it to trade. today 90% of all bitcoin transactions happen here (~100,000 BTC/day = $1,000,000/day)
after the hack/dump, bitcoin was toast. trading didnt start for weeks.
trading opened again, was at like $1.90 or something, but the network difficulty never really went down... people still mined the coins, regardless of trading price.
anywhere in the US or Canada has higher electricty rates than us. we are cheap in Wpg. so the cost of electricity was higher than the value of the mined coins, so it squeezed a lot of people out of the game.. but those people didnt realize that if you mine at a loss today, and hold onto the coins, they will be worth much more later.
month by month, price started climbing... i remember when the price hit $5 again, it was like zOMG!! lets buy more hardware again!!!! just fucking nutters. price was $5 for 6 months straight, basically the first half of 2012 was all $5.
then all of a sudden.. BOOM. price is $9. massive buy's shot it up.
bitcoin is becoming increasing popular globally, the chinese, russian, indian, korean, mexcian, european, and the list goes on.. all these economies have TONS of cash. they are all starting to find bitcoin
bitcoin is perfect because there are extremely small transaction fees. like a hundred thousandth of a cent. fucking small. you can send a million dollars worth of bitcoin to anywhere in the world, no fees, anonymously.
so places like china like it for import/export, but more interestingly is the gambling market because apparently they are only allowed to carry like $5000 (in their currency) at any time... bitcoin you can carry infinite.
there is also a huge underground market.
right now "Silk Road" is the black market.
you need to download the Tor browser to access it, which masks your IP so you can view it without ANY chance that someone will find your IP, and you can download ANY drug. ANNNYY drug, to anywhere, at any time. also guns, like AK47, AR15, u name it, you can buy it there with bitcoin. theres about 2 million dollars per week being sold on Silk Road, people that need drugs keep buying more bitcoins...
the US goverment is not too pleased that there is an eBay for drugs on the internet, but they cant stop it.
what else.....
oh yea
think about the number of dollars in the world...
every country in the world has a minimum GDP of $1,000,000,000.... and some countries spend a billion without batting an eye. think about the BILLIONAIRES out there... some people have 50-bil.
right now the total market cap of bitcoin (# of coins times the $/coin) is about $90 million I think.
so if someone buys a billion dollars worth of coins, you could imagine what the price of a bitcoin would be worth at that point
if all the worlds wealth was in bitcoin, each bitcoin would be worth $80,000,000... for 1 BTC.
the number of coins that is mined each 10 minutes is 50. it has been like that since day one, but every 210,000 blocks, this number halves. so approximately every 3 years, we get half as many coins per day... sucks, but the supply/demand thing makes the coins worth more, so you get the same amount or more in dollars.
in mid-December this year (3 months..) the reward goes from 50 BTC to 25 BTC.. this is a HUGE drop.
so in 3 more years, 12.5 BTC/block, and so on.
the reward keeps dropping every 3 years, and 1 BTC is actually 1,000,000 "satoshi".. so you can send someone a transaction of 0.0000001 BTC if you want, its actually common.
so you could imagine how long the reward can keep halving.
about 50 years.
and after that time, miners will mine the tx fees
when the clients put the tx's in the block, they append a 'fee' of (currently) 0.0005 BTC to make sure they get included in the block (you can send with 0.000 BTC fee but you wait longer) and the miner/pool that discovers that block gets all those fees. they arn't like, lost to a company or something, its entirely decentralized.
so in 50 years, miners will only be recieving those fees, but in 50 years, a bitcoin could be worth a million dollars.
want to retire early? buy 10000 BTC and put it under your bed. the price of a bitcoin is destined to skyrocket, eventually, it's called hyper-deflationary currency.
I wish I bought at $0.02... or $1.90... or $5.00 ...
I sold off 200 BTC for $5.05 each.. im kicking myself, because they hit $10.00 again.
ill be kicking myself for not buying coins at $10 when the coins are $20 again
in early 2012, a company called Bitcoinica started allowing people to do margin trades/calls/hedging, and other things where they would essentially "bet" on the price going up or down. millions got traded on bitcoinica, so if the price went up, people were "hedging" on the price going up, so it would bring the price down. when the price went down, people were hedging on the fact that it went down, and the price went up. it was like tug-of-war, and essentially the price couldn't move.
then bitcoinica got hacked.
http://www.bitcointrading.com/forum/index.php?topic=409.0
they lost 43,000 BTC.
had to put up a claims page for people to get their coins out.. took forever, but they opened their doors.
they got hacked again, for 18,000 BTC.
it happened during a "transitional" period when the owner, Zhou Tong, a 17-year old from singapore sold the site to Intersango, some company.
site has been down ever since.
the source code was posted for some reason, if anyone wants to start a bitcoinica, they can.
then.. BOOM. 3 months after their doors were closed, Bitcoinica's Mt. Gox account got hacked and 40,000 BTC (the limit) and $40,000 (the limit) were stolne.
stolen*
the reason: the API key used on the site for something was used as the Mt.Gox password, and since it was public now, someone broke in and stole the monies.
http://www.bitcointrading.com/forum/index.php?topic=869.0
the news today?
http://www.bitcointrading.com/forum/index.php?topic=917.0
"At this time, it appears that there is an overwhelming amount of evidence linking Zhou Tong personally to the Bitcoinica account hack at MtGox. Our legal department has advised us to freeze the funds for the exchange order mentioned above until further investigation by the authorities and/or legal proceedings are concluded."
thats like -24 hour breaking news.
also, on the 2nd hack, the hacker logged into Linode's datacenter to the VM and deleted all the VM's (virtual servers) that stored the whole website, dev units, database, everything. backups too. deleted them all and the backups. took pictures, posted them online, and then went on IRC freenode #bitcoin and started handing out coins to random people to prove he was teh hacker
i bet it was Zhou Tong who hacked in all 3 times.
So the people who were trading on bitcoinica before teh hack... no one knows how much money each user deposited.. theres no more database, its all gone. people who could prove without a shadow of a doubt that they had a certain amount in there were refunded a percentage of funds.. it was like, they gave as much to each user as they could... my boss lost 400 BTC, but Zhou gave him 30 BTC in his "olive branch" where he offered a 5000 BTC contribution to affected users of Bitcoinica of his "own personal money" which was obviously just money stolen from the users.
https://bitcointalk.org/index.php?topic=93100.0
So that's THAT drama....
Bitcoinica = gone.
now the price can climb again...
so the price started climbing ever since they left.. $5.50.. $6.00... $6.50... and then shot up to like $7-8-9 in rapid succession, we thought we were going to have another bubble like last years thing. but a bubble is not good for business sometimes. if a bitcoin shoots up to $100/BTC, and then someone sells a car for 20 BTC ($2000), and then BTC goes to $10 again, that dude lost like 90% on his investment. it would leave a bad taste in your mouth if that happened to you, but the opposite effect happens when you trade for BTC and then the price skyrockets.
so.. this dude called pirate@40 CRUSHED us at $7.00
it was FUCKED, i saw it happen in realtime.
he put like $100,000 on the exchange, and crushed the price waaaay down. everyone panic'd.
http://www.bitcointrading.com/forum/index.php?topic=866.0
^ that page has a vimeo link that is someone recording the screen when he did it
(skip to 8 minutes in, watch later)
we had no idea what happened, but apparently he was talking to the people in the freenode #bitcoin chatroom when he did it
http://www.bitcointrading.com/forum/index.php?topic=878.0
[2012-07-17 04:02:56] <EmanuelDeOrtego> PIRATE
[2012-07-17 04:02:58] <sabari> lol
[2012-07-17 04:02:59] <EmanuelDeOrtego> WHY
[2012-07-17 04:03:01] <EmanuelDeOrtego> WHY
[2012-07-17 04:03:05] <EmanuelDeOrtego> WOULD YOU DO THIS
[2012-07-17 04:03:06] <sabari> did anyone see it go back to 8.75 just now
he was like "dude i can take you to $1.50 if I wanted to"
he apparently makes a fortune by crushing the price down like that, he runs bitcoin savings and loan, and offers 7% weekly returns (2000 BTC minimum deposit, but less percent for less BTC available) to run his regime against us.
but people can trade "against" pirate like I do.
he "CRUSHED" the price like 50 times now. when the price gets too high, he squishes us. he's keeping us in line.
but he claims he makes $20,000 every time he does it.
I remember one night.. it was awesome... people were trying to combat him on 'Gox... what they were doing, was placing 50,000 BTC walls in the exchange
so someone places a bid of 50,000 @ 8.05... then another 50,000 @ 8.10.. and they kept building these 50,000 BTC walls one after another so that if pirate wanted to lower the price by $0.25 it would cost him about $750,000... except he actually makes more money doing it than anything, he wouldnt lose either way. its a fucked up mentality, how could he offer to pay 7% on money and then go out and lose it all? well, there is one of 2 things going on:
1.) ponzi
2.) money laundering
some people think that he is totally running a ponzi, making it appear profitable to do what he's doing, but essentially he's just taking users' deposits and cashing them out, and he says he made a ton, so people deposit tens of thousands with him... so he could just vanish tomorrow, i wouldn't be suprised
but actually, I can tell you with like 90% certainty that pirate is actuallly smuggling black market money into bitcoin at an alarming rate.
think mafia, like real life mafia, underground markets with like, rooms full of cash? what would a columbian drug lord do with a room stacked to the ceiling with US dollars do to buy a car? its very hard to spend underground money. so, pirate@40 is taking their duffle bags full of cash and buying bitcoins and putting them on the exchange. so he's laundering tens of millions of dollars into bitcoin, in a short period of time, and i think he makes $20,000 on each dump simply by getting PAID by the black market to do that, and gets $20k per dump.
this is like, real life. people are trading millions of dollars around in seconds. its fucked. you should get involved, thats why i gave you bitcoin's life story just now!
i just sold 4 BTC on eBay for $90...
I get 5 BTC per day...
my boss pays me in bitcoin sometimes lol
BitInstant made it so you can go to any of 700,000 banks in the united states and buy bitcoins with cash.
there are hundreds and hundreds of website accepting bitcoin. new car manufacturer Wikispeed is the first ever bitcoin accepting automaker: get a brand new car for bitcoin!
bitcoin was featured on season 3 , episode 13 of The Good Wife (with that dude from American Pie) called "Bitcoin For Dummies", it was a 1 hour episode dedicated to finding the inventor of bitcoin. it was FUCKING AWESOME. broadcast to 18 million plus viewers worldwide. i've watched it like 3-4 times, its great, you can sit someone down with that episode and they will consider bitcoin a practical thing because they saw it on TV for the first time.
you can buy "physical bitcoins" by casascius: https://www.casascius.com/
the way it works is just like a bitcoin wallet. if someone takes your wallet.dat file, they can import it into theirs and steal your coins. they are really only after your private key (but you can encrypt/password protect it too)...
so the way a physical bitcoin works is casascius sends 1 BTC to an address, takes the private key, puts the key on the coin, then covers up the key with a holographic tamper evident sticker.
so on the outside of the coin, you can see the public key. you can look up the public key and see the balance without damaging the coin.
we're ordering 120 BTC worth of these coins this week.. that's like $1200 in one order.. ill probably make like $4000 doing that because on eBay im the only one selling them, and i can get $25 for a $10 coin for some reason. on eBay people bid INSANELY high for coins because on eBay, you can reverse your paypal transaction and suffer a feedback point, but you can NEVER EVER reverse a bitcoin transaction, so people lose out big on eBay. i've made like 5 grand on ebay and ive only ever lost $100. i have a secret for this, but its too much typing to explain right now. they cannot reverse a transaction if you have a tracking number, because you can prove you sent the item, which is why im mailing them physical bitcoins now.
want to see the current price of a bitcoin go to bitcoin.clarkmoody.com or http://mtgoxlive.com/orders?dark
ASICS!!!!!!!!!!!!!!
kk, so, in december, the reward halves.
so GPU mining profitability goes way down.
kk, so they figured out you can mine bitcoins on an FGPA (field gate programmable array), a generic programmable dev board.
the FGPA's are primarily used in cryptography (i.e. cracking codes/passwords/legit reasons) and someone made it work for bitcoin
instead of mining 400 MH/s per video card, you can mine 400 MH/s on an FGPA. instead of 200 watts, it's only 30 watts. way less power, so you can mine them virtually forever without a massive power bill. they are very popular, and the cost is high. about $700 to get one where a $150 video card would be just as quick.
doesnt seem very exciting.
the company, Butterfly Labs, has been the most popular choice.
they have been shipping units for like 7-8 months or so, it's a 60-day wait to get one because the lineup is so long.
they go for $1000 "on the street" because people want to skip the wait in line
well they announced that they are/have developed an ASIC.
application-specific-integrated-circuit
so instead of a video card, or a dev board, it's a unit designed in a multimillion dollar fabrication plant JUST FOR BITCOIN. can you imagine how fast it will hash?
these new ASIC's? they do 3500 MH/s.. way faster. the price? $150. waaaaay less. energy? like 10 watts.
DUDE GET IN LINE!!!!!!!!!
I have 8 on order....
i want to get 200 on order...
I have like 7 different orders placed, my first order will be #2050. the orders start at #1700, because people who ordered FPGA's in the months prior are the first 1700 orders, and all orders after teh annoucement are split between FPGA and ASIC. so the current order number is like #4200. so if you order today, i'll get mine 2000 orders head of you.
but some orders are of a dozen, or dozens of units.
they also offer two higher models, a 25,000 MH/s unit for $1299, and a 1,000,000 MH/s unit for $24,999
whenever you got $150, dude order an ASIC. once these things hit the street, they could be worth $1000 each, and if you use it to mine, the thing will make $150 every few days.
i order them whenever possible
they are like gold.
but the difficulty will keep rising as units are produced. no one knows how many units BFL is capable of delivering. with the massive 1 TH/s (terahash) units being sold.. and people are ordering lots of them (because the early adopters of bitcoin are all millionaires, they have millions to blow on 1 TH/s BFL's).. so the difficulty number right now is around 2,000,000 (random number, hard to explain), the difficulty in a few months could climb to 500,000,000.... which means we would get 25 BTC per block so -50% reward, but with a difficulty 20-30 times higher, video card mining will completely DIE. it will make you like a penny. so its a bad time to get into GPU mining.
if they can ship enough 1 TH/s units, it might even be hardly profitable to mine with ASIC's. it all depends on how many units they can deliver. but ASIC's killed GPU mining overnight. user vladimir has millions of dollars too and he developed his own custom ASIC chip and is not selling it, just mining for himself on the hardware in a big facility. he already sold off his GPUs. so we need these new ASICs to combat him.
ASIC KILLED THE GPU STAR.
so heres the thing.
global hashrate going up 1000%? reward halving soon? what does that mean.. higher demand.. lower supply.. dude, if you bought 100 BTC and sat on them, the BTC price could go up to $50-100 by the end of the year, and you would make 1000% on yoru investment.
this is the all-time ultimate best strategy right now, because bitcoins are going to become waaaaaay hard to find in 3 months.
at least buy like $200-300 in the next few months. i went up to some people and told them to buy at $3, and they laughed, and now they could have tripled- or quadrupled their money in that time period, and if they hung onto it for 10 years, they could easily retire on a $10,000 investment (had you bought at $3)
