Quoted from TRAMD:
I don't understand the mining and some other aspects of Bitcoin and don't know the answers to the questions I posted. I do understand some things about investing, that Bitcoin has no intrinsic value and that if this type of digital currency can be created once, it can be done again, and again, and again. My "diatribe" related to those topics. I can tell if someone is a good teacher of something without being an expert myself because I learn easily from them. I can tell if they are a bad teacher because they can't explain it on a more basic level that I can understand. I consider myself to be intelligent (though doesn't everyone?) but I am no genius when it comes to computer programming.
Maybe what I am most skeptical about is the defense/lauding of Bitcoin by people invested in it. If it is so great, be quiet, keep buying more, and let us fools that don't understand lose out on that fantastic investment.
Thank you for what you did post. I would be interested in the longer response if you happened to save it. I will check out that link too.
The problem is people talking past each other. Using similar words, but focusing on different contexts.
Bitcoin itself has no intrinsic value - Correct, like most forms of currency, it's only value is as a token of an agreed upon trade value with another party.
The "value" in it is only as a form of exchange between two parties. The existence of Monetary exchanges where people are willing to buy and sell bitcoin with other forms of currency is establish a market value in a metric comparable to Government issued money we are used to. The "value" is set by what you can get by exchanging the bitcoin with someone else. Just like Gold has no value to me as an individual consumer, but someone is willing to trade me government backed paper money in exchange for it. Government backed paper I can then use to trade with other people.
What value do the equations actually solve in mining? The math is self-serving to Bitcoin. The math being computed is math related to Bitcoin's transaction system. Unlike a SETI or other distributed compute systems... it is not a system that has people 'mine' to solve problems for the rest of the world. The compute isn't being applied to some other problem solution, it's being applied to the block system behind Bitcoin's integrity. The "value" of the compute work is that it's actually a decentralized way to validate and strengthen the Bitcoin eco-system. People are rewarded to contribute to the compute power needed to validate the transactions themselves.
Bitcoin has integrity that is validated and strengthened by math and peer sharing rather than regulated record keeping by governments and "tamper proof" physical tokens.
Like all token currencies, it's only value is because of an assumed worth in exchange. A government currency is backed by an entity willing to trade a value for that token. A digital currency like bitcoin is not backed by anyone - it's monetary value is established by what the peers set it to be through their willingness to trade for it.
In that sense, the idea that pumping Bitcoin is a self-serving process, because driving demand for it, drives up the value of the token you may already be holding (Diamonds anyone???). And yes, another system could spring up and compete with it... the same way bitcoin just 'appeared' without any value backing it. But it's the attributes that make Bitcoin secure and independent... that make it desirable to use as a form of exchange. It's not completely arbitrary - it's just not backed by an exchange that one might considered 'guaranteed' to exist.. like a strong government entity.