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Bitcoin's properties cannot be illegitimately changed as long as most of bitcoin's economy uses full node wallets. Bitcoin requires certain properties to be enforced for it to be a good form of money, for example:. These rules define bitcoin. A full node is software that verifies the rules of bitcoin.
Any transaction which breaks these rules is not a valid bitcoin transaction and would be rejected in the same way that a careful bitcoin wiki weaknesses list rejects fool's gold. Full node wallets bitcoin wiki weaknesses list be bitcoin wiki weaknesses list by any intermediate bitcoin user bitcoin wiki weaknesses list above and especially bitcoin businesses. Therefore anybody attempting to create bitcoins with invalid properties will find themselves being rejected by any trading partners.
Note that lightweight wallets and web wallets do not have the low-trust benefits of full node wallets. Web wallets blindly trust the web server which could display anything at all. Miners are required to choose between multiple valid transaction histories. Miners burn a lot of electrical power in the mining process so they must constantly be trading their bitcoin income in order to pay bills. This makes miners utterly bitcoin wiki weaknesses list on the bitcoin economy at large and therefore gives them a strong incentive to mine valid bitcoin blocks that full nodes will accept as payment.
Influential figures in the community such as developers, politicians or investors may try to use their influence to convince people to download and run modified full node software which changes bitcoin's properties in illegitimate ways. This is unlikely to succeed as long as counterarguments can freely spread through the media, internet forums and chatrooms.
Many bitcoin users do not follow the bitcoin forums on a regular basis or even speak English. All appeals to run alternative software should be looked at critically for whether the individual agrees with the changes being proposed. Full node software should always be open source so any programmer can examine the changes for themselves.
Because of the co-ordination problem, there bitcoin wiki weaknesses list usually a strong incentive to stick with the status quo.
It is not correct to say that Bitcoin is "backed by" processing power. A currency being "backed" means that bitcoin wiki weaknesses list is pegged to something else via a central party at a certain exchange rate yet you cannot exchange bitcoins for the computing power that was used to create them.
Bitcoin is in this sense not backed by anything. It is a currency in its own right. Just as gold is not backed by anything, the same applies to Bitcoin.
The Bitcoin currency is created via processing power, and the integrity of the block chain is protected by the existence of a network of powerful computing nodes from certain attacks. One could bitcoin wiki weaknesses list that gold isn't backed by anything either. Bitcoins have properties resulting from the system's design that allows them to be subjectively valued by individuals. This valuation is demonstrated when individuals freely bitcoin wiki weaknesses list for or with bitcoins.
Please refer to the Subjective Theory of Value. This statement is an attempt to apply to Bitcoin the labor theory of valuewhich is generally accepted as false.
Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users. In fact the causality is the reverse of that this applies to the labor theory of value in general. The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine because mining is profitablethus difficulty will go up, thus the cost of mining will go up.
The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces [1]. This is simply not true. Each bitcoin gives the holder the ability to embed a large number of short in-transaction messages in a globally distributed and timestamped permanent data store, namely the bitcoin blockchain.
There is no other similar datastore which is so widely distributed. There is a tradeoff between the exact number of messages and how quickly they can be embedded. But as of Decemberit's fair to say that one bitcoin allows around such messages to be embedded, each within about 10 bitcoin wiki weaknesses list of being sent, bitcoin wiki weaknesses list a fee of 0.
This message embedding certainly has intrinsic value since it can be used to prove ownership of a document at a certain time, by including a one-way hash of that document in a transaction. While some other tangible commodities do have intrinsic value, that value is generally much less than its trading price.
Consider for example that gold, if it were not used as an inflation-proof store of value, but rather only for its industrial uses, would certainly not be worth what it is today, since the industrial requirements for gold are far smaller than the available supply thereof.
In any event, while historically intrinsic value, as well as other attributes like divisibility, fungibility, scarcity, durability, helped establish certain commodities as mediums of exchange, it is certainly not a prerequisite. While bitcoins are accused of lacking 'intrinsic value' in this sense, bitcoin wiki weaknesses list make up for it in spades by possessing the other qualities necessary to make it a good medium of exchange, equal to or better than commodity money.
Another way to think about this is to consider bitcoin wiki weaknesses list value of bitcoin the global network, rather than each bitcoin in isolation. The value of an individual telephone is derived from the network it is connected to. If there was no phone network, a telephone would be useless. Similarly the value of an individual bitcoin derives from the global network of bitcoin-enabled merchants, exchanges, wallets, etc Just bitcoin wiki weaknesses list a phone is necessary to transmit vocal information through the network, a bitcoin is necessary bitcoin wiki weaknesses list transmit economic information through the network.
In Marchthe U. Financial Crimes Enforcement Network issues a new set of bitcoin wiki weaknesses list on "de-centralized virtual currency", clearly targeting Bitcoin.
In general, there are a number of currencies in existence that are not official government-backed currencies. A currency is, after all, nothing more than a convenient unit of account. While national laws may bitcoin wiki weaknesses list from country to country, and bitcoin wiki weaknesses list should certainly check the laws of your jurisdiction, in general trading in any commodity, including digital currency like Bitcoin, BerkSharesgame currencies like WoW gold, or Linden dollars, is not illegal.
According to the definition of terrorism in the United Statesyou need to do violent activities to be considered a terrorist for legal purposes. Recent off-the-cuff remarks by politicians have no basis in law or fact. Also, Bitcoin isn't domestic to the US or any other country. It's a worldwide community, bitcoin wiki weaknesses list can be bitcoin wiki weaknesses list in this map of Bitcoin nodes. Cash transactions offer an increased level of anonymityyet are still taxed successfully.
It is up to you to follow the applicable tax laws in your home country, or face the consequences. While it may be easy to transfer bitcoins pseudonymously, spending them on tangibles is just as hard as spending any other kind of money anonymously. Tax evaders are often caught because their lifestyle and assets are inconsistent with their reported income, and not necessarily because government is able to follow their money.
Finally, the Bitcoin blockchain is a permanent record of all transactions, meaning it can be mined for info at any time in the future making investigation, tracing of funds, etc much easier than with other forms of payment.
Instead, Blocks are computed by miners and for their efforts they are awarded a specific amount of bitcoins and transaction fees paid by others. See Mining for more information on how this process works. If you believe that these algorithms are untrustworthy then you should not trust Bitcoin, credit card transactions or any type of electronic bank transfer.
Bitcoin has a sound basis in well understood cryptography. Early adopters bitcoin wiki weaknesses list rewarded for taking the higher risk with their time and money. The capital invested in bitcoin at each stage of its life invigorated the community and helped the currency to reach subsequent milestones. Arguing that early adopters do not deserve to profit from this is akin to saying that early investors in a company, or people who buy stock at a company IPO Initial Public Offeringare unfairly rewarded.
This argument also depends on bitcoin early adopters using bitcoins to store rather than transfer value. The daily trade on the exchanges as of Jan indicates that smaller transactions are becoming the norm, indicating trade rather than investment. In more pragmatic terms, "fairness" is an arbitrary concept that is improbable to be agreed upon by a large population. Establishing "fairness" is no goal of Bitcoin, as this would be impossible. Looking forwards, considering the amount of publicity bitcoin received as of Aprilthere can be no reasonable grounds for complaint for people who did not invest at that time, and then see the value possibly rising drastically higher.
One Bitcoin is divisible down to eight decimal places. There are really 2,,, just over 2 quadrillion maximum possible atomic units in the bitcoin system. The value of "1 BTC" represents , of these.
In bitcoin wiki weaknesses list words, each bitcoin wiki weaknesses list is divisible by up to 10 8. No, your wallet contains your secret keys, giving you the rights to spend your bitcoins. Think of it like having bank details stored in a file. If you give your bank details or bitcoin wallet to someone else, that doesn't double bitcoin wiki weaknesses list amount of money in your account. Bitcoin wiki weaknesses list can spend your money or they can spend your money, but not both.
Bitcoins are divisible to 0. If you lose your coins, indirectly all other coins are worth more due to the reduced supply. Consider it a donation to all other bitcoin users. A related question is: Why don't we have a mechanism to replace lost coins? The answer is that it is impossible to distinguish between a 'lost' coin and one that is simply sitting unused in someone's wallet. And for amounts that are provably destroyed or lost, there is no census that this is a bad thing and something that should be re-circulated.
Bitcoin does not make such a guarantee. There is no central entity, just bitcoin wiki weaknesses list building an economy. A Ponzi scheme is a zero sum game.
In a ponzi scheme, early adopters can only profit at the expense of late adopters, and the late adopters always lose. Bitcoin can have a win-win outcome. Earlier adopters profit from the rise in value as Bitcoin becomes better understood and in turn demanded by the public at large. All adopters benefit from the usefulness of a reliable and widely-accepted decentralized peer-to-peer currency.
