bhaw wrote:So how is this different than credits or something you would get at an online site?
credits are only able to be redeemed at certain sites. They are not universal. They are not tracked the way these bitcoins are. It's kind of opposite of a bank.
Bitcoins contain the current owner's public key (address). When user A transfers some to user B, A relinquishes ownership on them by adding B’s public key (address) to those coins and signing them with his own private key. He then broadcasts these bitcoins in an appropriate message, the transaction, on the peer-to-peer network. The rest of the network nodes validate the cryptographic signatures and the amounts of the transaction before accepting it.
Because transactions are broadcast to the entire network, they are inherently public. Unlike regular banking, which preserves customer privacy by keeping transaction records private, transactional anonymity is accomplished in Bitcoin by keeping the ownership of addresses private, while at the same time publishing all transactions. As an example, if Alice sends 123.45 BTC to Bob, a public record is created that allows anyone to see that 123.45 was sent from one address to another. However, unless Alice or Bob make their ownership of these addresses publicly known in some way, it is difficult for anyone else to connect the transaction with them.
As more people buy into bitcoins, wouldn't it follow the laws of inflation? As more bitcoins are generated, the current bitcoins become less valuable? In addition, if you can create a "block" (whatever that is), you are generating currency similar to the Fed just printing more money. That seems like it would cause inflation as well...
It said that it has predictable inflation and that in something like 20 years there will be no more bitcoins created at a limit of 21 million. You cannot just print at will. It is nothing like the Fed.
Lastly, it seems like it is going to be attached to a real dollar value in the end. For example, if you are selling a computer online that would go for $400 real dollars, it seems logical that you would only accept $400 worth of bitcoins.
In the end the idea is to replace the dollar. It will only happen if people start using (and if we are allowed to use) this as currency (which I highly doubt).
At the end of the day, this just seems like a way to quantify online barter, which is already done all over the place. The problems arise when you have to pay your rent or a bill in real money. Most banks, utilities, credit cards, etc don't accept bitcoins, so you would eventually have to cash into real money.
Well acceptability is the last hurdle to be good money. It's divisible, portable, durable, and scarce. The last item needed to be good money is acceptibility. It will never be accepted in the US though because the government would lose ALL monetary control. Fat chance on that.