@Deozzan - Check your wallet. I just sent you about $10 in bitcoins. By the time you see this message, it will be in your wallet.
-Renegade
Wow, thanks!
-Deozaan
You're welcome! Now, go forth, and do transactions~!
If you privately send me some bitcoins, and then I turn around and send some of it back to one of your public addresses, won't that link your public address to the private addresses, just by following the chain back a bit?
-Deozaan
With your empty wallet, yes, but not necessarily if you already have a well-used wallet. Again, wallets can have many addresses, and unless you specifically pick an address to send from, it's more or less random which address (envelope) gets used.
I guess there's a link there, but there's no proof that a payment to that public address came from me unless I publicize the address I'm paying from. And there's no proof who the owners of the other addresses belong to. Right?
-Deozaan
Right.
I'm not quite sure that's entirely the case, as there's a fixed number of BTC to mine. So (yes many years in the future), after all the coin has been mined there would be no point in continuing to mine ... So the currency would become worthless because no one would be processing the transactions. Unless there is something else going on in the way of verification ... Got a map of this one Renegade??
-Stoic Joker
Yep!
Every 4 years (about) the reward for miners halves. So, while it is 25 BTC per block now, in a bit it will be 12.5 BTC.
There is a soft limit on the number of miners out there. This is going to be a bit difficult for some people to grasp, but it really is very, very simple. Here goes...
Miners mine for rewards. This is critically important.
Miners mine for rewards. It bears repeating.
The reward for finding a block has a value.
The cost to find a block has a value.
As the cost to find a block approaches the value of the reward, more miners will begin to stop mining. As it goes above, there will be a sharp cut-off of miners who stop, i.e. Only professional miners that have planned for this scenario will continue, along with amateur miners who are simply in it for fun on a small scale.
So, that is the "soft limit" on how much mining is done.
But that only explains the block reward partially.
In addition to the block reward, miners also receive transaction fees for finding a block.
As Bitcoin becomes more popular, there will be more transactions, and more fees. So you can imagine the declining reward as a \ line on a graph, and the increasing transaction fees as a / on a graph. Exactly how those plot doesn't particularly matter. (See below.)
What will happen is that even when the block reward reaches zero, the transaction fees will have long ago surpassed the block reward in terms of value.
So the intersection of those two lines on the graph represents the point in time when the transaction fees become larger than the block reward.
Hence, a block reward of zero reaches zero importance in terms of value to miners.
I'm confused about transaction fees. I've read that they're completely optional, but I can't figure out how to make a transaction without including transaction fees. Maybe that's because the client I'm using (Bitcoin Core) doesn't allow that? It has an option I've checked to "send as zero-fee transaction if possible" but when I click send the confirmation screen shows the fee added in there automatically anyway.
The fees are fairly minimal. But when I'm only sending a few cents (in USD) anyway to get a feel for how it works, it kinda sucks losing even a penny of it in fees. Feels kind of like handing a dollar bill to a friend, then having him hand it back and it only being worth 98 cents.
-Deozaan
That's because Bitcoin is transparent, where dollars, euro, and other fiat currencies are opaque.
Don't think in terms of $$$ or BTC. That's always the wrong way to think about things. The value XYZ is an arbitrary number that could mean anything.
Instead, think of $$$ or BTC in terms of
**PURCHASING POWER**. That is the real measure that we should think of.
So, if I give you $1 today, in 1 year you have $0.92~$0.97 (about) in terms of actual
purchasing power thanks to inflation.
(The central banks aim at 2% inflation per year, but they are failing miserably.)
But, it's worse than that.
If you take your (let's say) $0.95 and go to purchase anything using your credit or debit card or Paypal, etc., there are transaction fees. Those can be as low as 2.5% (sometimes lower, but it depends - they can also be much higher). So, assuming 2.5%, the $1 I gave you gets you $0.92625 of
purchasing power.
And that assumes that you don't carry a balance on your credit card, which can easily have an interest rate of 30% or more.
And that doesn't even get into Quantitative Easing... The inflation rate is currently being artificially surpressed because all the central banks are engaged in QE. That is, all the major fiat currencies are being devalued (debased) at the same time, giving it the appearance that inflation isn't as bad as it actually is. If/when the bubble goes pop, it's going to be devastating.
The example to look at is the Swiss Franc. A while back the Swiss decoupled the Swiss Franc from the euro. Previously, it had been pegged to the euro. The unpegging sent the franc soaring by 30% against the euro (and other currencies).
That was a major event in terms of what it showed, although it was rather small in scale as Switzerland is a small country. If that happened to the Chinese RMB, the Japanese JPY, or the USD, it would be a global bloodbath.
Anyways...
the small transaction fee in bitcoin transactions is extremely tiny. The only difference is that you can see it and that nothing is hidden from you. If you could readily see the cost of using fiat currencies, you would be horrified.
