Bitcoins

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Bitcoins

Postposted on Fri Apr 05, 2013 5:10 am

Hi gerbils. I've been hearing quite a bit about Bitcoins lately and how their value has gone up from a few cents a few years ago to something like $20+ today. I'm not sure Bitcoins have a solid future and if it's a good idea to buy them today as its value may go up even further. It's also possible that Bitcoins will crash in value. What are your thoughts? Perhaps Scott can make this next Friday Night's topic.
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Re: Bitcoins

Postposted on Fri Apr 05, 2013 8:43 am

I'd like to piggy-back this thread. I recently read about bitcoins and bitcoin mining on wiki. Can someone explain this to me? Why do we need so much computing effort to generate bitcoins? It seems to me like generating bitcoins entitles you to the bitcoins you generate. Making money for your computing efforts?
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Re: Bitcoins

Postposted on Fri Apr 05, 2013 12:27 pm

Ugh.. hearing about bitcoins everywhere...

The basic version is that some guy is trying to create a trading medium based on a scare resource (computing resources/mining), rather than an "arbitrary" government backed value based currency. My understanding is that the computers "mine" bitcoins by contributing computing power to calculate primes. As more computing resources come online, the calculations become more complex to maintain the "rarity" of the bit coins.

The problem that comes up is that bitcoins are untraceable (worse than cash, since cash has traceable serial numbers), so they are a safe haven for money-laundering. Secondly, the bit-coins are in a bubble now, because they are being traded like a commodity. This means that right since everyone is talking about it (some idiot has invested all his money in bitcoins as a retirement strategy), it is probably already too late to get into (buying stocks near their peak).
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Re: Bitcoins

Postposted on Fri Apr 05, 2013 12:29 pm

Let me just say that this thread is just bursting with R&P potential. Let's see if we can avoid that.

Thanks for listening.
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Re: Bitcoins

Postposted on Fri Apr 05, 2013 12:31 pm

DPete27 wrote:I'd like to piggy-back this thread. I recently read about bitcoins and bitcoin mining on wiki. Can someone explain this to me? Why do we need so much computing effort to generate bitcoins? It seems to me like generating bitcoins entitles you to the bitcoins you generate. Making money for your computing efforts?


Basically yes... My friends and I did some quick calculations (assuming you are paying for power), you'll pay more in power costs than you can make mining coins, unless you can figure out how to get low power ARM cores to do the mining..

Tangentially, this is going to lead (if bitcoins are determined to be valuable) will lead to data farms for bit coin mining, and I can easily see bot farms being used for "free mining" instead of spammers, so not sure if that's a good or bad thing..
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Re: Bitcoins

Postposted on Fri Apr 05, 2013 12:42 pm

Bitcoins are great if you think that the problem with the gold standard is that there is too much gold in the world.

As far as they go as an investment, the price will continue to rise as long as the interest in using them as a currency and/or hoarding them is increasing. Mining alone won't create a significant downward pressure on their value in the near-long term, since the number that can be created through mining is exponentially decreasing, going to zero in a hundred years or so, and about half have already been mined.
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Re: Bitcoins

Postposted on Fri Apr 05, 2013 1:14 pm

Here's the deal on bitcoins: 1) They are almost never worth the electricity based on bitcoin prices at the time. It's all about future bitcoin prices. 2) Given #1, the best way to really make money in bitcoins is trading them. They are extremely volatile though, and are prone to big swings based on irrational sentiment and news - the recent huge rise is attributed to the financial turmoil out of Cyprus. There have been hacks of exchanges, loss of bitcoins in accounts, and other shenanigans that add lots of risk...that's part of the price premium though. Recently, there was a 20% price drop overnight when the biggest bitcoin exchange was DDOS'd. 3) I feel quite certain that they will eventually come under some form of regulation, or (and I don't mean this to be R&P) if governments get really draconian they could be outlawed altogether.

Summary: if you want to gamble, go to a casino and play some games like blackjack that are at least a little skill-based and which you can beat over time using a system. If you really don't want to do that, trade bitcoins.
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Re: Bitcoins

Postposted on Fri Apr 05, 2013 1:35 pm

DPete27 wrote:I'd like to piggy-back this thread. I recently read about bitcoins and bitcoin mining on wiki. Can someone explain this to me? Why do we need so much computing effort to generate bitcoins? It seems to me like generating bitcoins entitles you to the bitcoins you generate. Making money for your computing efforts?


To keep it simple, it relies on public-private cryptography, a peer-to-peer network, and "proof-of-work".

The validity of a currency relies partly on not being able to double-expend. of course you can't double-expend a dollar bill since it is a physical entity unless you counterfeit (a whole different animal than "double-expending".

your bitcoin is essentially a private key that is hashed into a blockchain which is public, and they form a node. the longest chain is considered the correct one. when you "spend" your bitcoin essentially someone else uses the private key you gave them and hashes it and adds it to the blockchain. now there are many branches but only the longest one is considered the correct this takes care of a person giving the private key again and "double-expending". and it doesn't rely on a central authority to verify it but on a peer network with public and private cryptography and proof of work.

There is more to it and i am quite sure i didn't do such a good job of explaining it, but basically when you "mine" the coins you are basically a client calculating the next node of the blockchain and integrating it into the blockchain, but you are not alone, there are other computers that do the same, and it is practically impossible to counterfeit the currency since the longest chain is considered the correct one. The computing power needed to counterfeit would be astronomically high and would cost more the resources used on them than what you would counterfeit.
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Re: Bitcoins

Postposted on Tue Apr 09, 2013 2:50 am

At their current value, you're actually making money by mining -- even considering power consumption. IF you're running an AMD graphics card, that is.
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Re: Bitcoins

Postposted on Tue Apr 09, 2013 4:04 am

Whenever stuff like this happens, I always strive to try to see the true value(TM) of something. Does mining of bitcoins add any value to the future of humankind? Sure, it's rare, but wouldn't it be more useful to have all those computers calculating something more useful? Like predicting earthquakes?

(No - this is not R&P unless you insist it is) This is no different from all the "goldbugs" predicting that the "value" of gold is going to skyrocket. Well, gold is not really that useful for human species. It's valued way higher than its 'intrinsic worth' because it has become a tool for speculation. But you can't eat gold (ok, you can, but it won't keep you nourished). You can't grow vegetables with it. You can't really build anything useful out of it. Monster Cables? Yeah...

Gold has "value" only because it's somewhat rare, and because everyone agrees it has value. But, what if everyone suddenly agrees it doesn't? You know, because there is some disaster that nukes 90% of arable land and nobody has food? Suddenly, anything that improves the food output of that land becomes way more important........ like oil?

Fossil fuel is a true rare consumable, and one that can actually be translated into something (fertilizers) that bring value (food) to human kind. When there is an absolute, global food shortage, the value of gold will crash compared to oil. Gold has become a speculative tool that everyone is using in the hopes of getting ahead of the herd, hoping that they can cash out (to what?) before it's too late.

NeelyCam prediction: By 2050, gold has become useless, and all the currencies will be pegged to a combination of 1) arable land, and 2) fossil fuels. Much like there have been wars for oil land for decades, arable land has suddenly become important as well (partly because of what we call "global warming"). The food-production-boosting mechanisms based on renewable systems are highly "preferable" by governments, but the profit incentives still push companies to maximize food production by extracting as much fossil fuel from the land as possible, any way possible. The techniques of extraction have become cheap enough to handle very difficult extractions, as that's where the R&D focus has been, extending the 'viability' of 'fossil-assisted productivity for a few more years.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 9:04 am

You are misconstruing the gold bug position. The value of gold doesn't necessarily rise, the value of currencies relative to gold falls.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 9:42 am

I would stress having a look here : https://en.bitcoin.it/wiki/Mining_hardware_comparison

it will break down the hash/sec value of most modern cards (gpu) and cpu's. currently the coin value return is like 12.5 for xxxx hashes processed or something like that (when i looked a few months ago). essentially making "getting into the game" pretty difficult unless you already own a team of gpu's. most people are buying the custom aisc systems for 800$+ to get a decent return rate... but there are NO guarantees on return and recouping costs will not be immediate (like months).

this comes from me who did *light* research a few months ago since i have 3 mid range dx-11 class cards. **so your mileage may vary**
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 9:44 am

Cybert said: Capitlization and periods are hard for you, aren't they? I've given over $100 to techforums. I should have you banned for my money.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 9:50 am

Hawkwing74 wrote:You are misconstruing the gold bug position. The value of gold doesn't necessarily rise, the value of currencies relative to gold falls.

This is a common assumption but I don't think it stands up to scrutiny.

Think about it, if your economy has collapsed and people having trouble buying food, would you care about some gold or would the sack of potatoes be more important?
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 10:00 am

NeelyCam wrote:W
Gold has "value" only because it's somewhat rare, and because everyone agrees it has value. But, what if everyone suddenly agrees it doesn't? You know, because there is some disaster that nukes 90% of arable land and nobody has food? Suddenly, anything that improves the food output of that land becomes way more important........ like oil?

Fossil fuel is a true rare consumable, and one that can actually be translated into something (fertilizers) that bring value (food) to human kind. When there is an absolute, global food shortage, the value of gold will crash compared to oil. Gold has become a speculative tool that everyone is using in the hopes of getting ahead of the herd, hoping that they can cash out (to what?) before it's too late.


I didn't think oil was used so much to make fertilizer. Mostly methane (natural gas). Yes, the two resources are related. But you can source methane elsewhere. And, I'm no organic chemist, but I'm guessing one of the reasons methane is used as the carbon source in fertilizer is because it is relatively cheap and there is already a supply infrastructure. If natural gas ceased to become available, there'd probably be other ways to get the carbon.

Anyway, given a disaster that "that nukes 90% of arable land", I'd think potable water would be the natural resource to skyrocket in value, easily surpassing oil. (Remember the water-seller with radioactive water in Mad Max: Thunderdome?)

The one thing that bitcoins has brought everyone (even those with no interest in them) are a new batch of trojans that try to hijack your GPU for remote mining when you'r not using it. I had one of these recently and only noticed when it started interfering with a certain graphics benchmark.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 10:25 am

ChronoReverse wrote:
Hawkwing74 wrote:You are misconstruing the gold bug position. The value of gold doesn't necessarily rise, the value of currencies relative to gold falls.

This is a common assumption but I don't think it stands up to scrutiny.

Think about it, if your economy has collapsed and people having trouble buying food, would you care about some gold or would the sack of potatoes be more important?


Actually, his assumption is correct; it's not that gold is getting more valuable it's that the value of currencies fall relative to gold. You can buy less gold for $100 now than you could a year ago, and much less than you could ten years ago, etc.

As such, gold is a great safety net against runaway inflation, because it retains it's value. We can set aside the argument over it being real intrinsic value or agreed upon value; the point is if you've got a hunk of gold, you've got something that has value in our society, and that will keep that value even as the spending power of the dollar (or whatever your local currency is) decreases.

Of course, all of this assumes a working economy, and a working society. In the case of total collapse, gold may retain some of it's perceived value (because people will assume the economy, in some form, will recover) but things like food, water, and fuel will become much more valuable commodities. In that kind of situation, you will indeed see people taking a sack of potatoes over a sack of gold, for example. In fact, if we're assuming a total catastrophic collapse - that is, basic social order is disrupted, supplies of food, water, and fuels are cut, and so forth - what you're going to see is folks resorting to bartering or outright fighting over necessary goods. At that point, while it may be worthwhile to keep a stash of gold for when things settle down, most folks will be too busy trying to gather necessary goods - or trying to keep the goods that they have - to bother with gold.

Back to the original topic... a bitcoin is similar to gold in that it has perceived value. Right now that value is rising relative to currency because people perceive that bitcoins are "rare" based on how they come to be. Of course, if someone figures out a way to flood the market, their value would collapse very quickly. And of course their value is completely dependent on them being accessible - if the internet goes down, so does your bitcoin portfolio.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 10:33 am

cphite wrote:Actually, his assumption is correct; it's not that gold is getting more valuable it's that the value of currencies fall relative to gold. You can buy less gold for $100 now than you could a year ago, and much less than you could ten years ago, etc.

As such, gold is a great safety net against runaway inflation, because it retains it's value. We can set aside the argument over it being real intrinsic value or agreed upon value; the point is if you've got a hunk of gold, you've got something that has value in our society, and that will keep that value even as the spending power of the dollar (or whatever your local currency is) decreases.


Again, this doesn't stand up to scrutiny. An ounce of gold can buy a lot more groceries than it could 10 years ago. Is this because food has somehow become less valuable as well? If gold has a steady value, why control the mining of it? If it really holds it value magically outside of the laws of economics, why not pull as much out as possible to increase overall wealth? Why is gold particularly special compared to other precious metals that are also fairly inert, shiny and rare? Shouldn't they have the same value properties as gold then? In that case why does the value of gold against these other metals change?

No, gold is seen as more valuable now that currency seems unsteady, therefore its value rises. Again, if everything went to hell, would gold continue to retain its value? Of course not, you'll find buyers probably but not at the same rate. Therefore, gold has a higher value now than in 2000 for the same reason the Canadian Dollar has a higher value now.



The idea that gold somehow doesn't fluctuate in value is a scam perpetuated by those who have an interest in gold and/or getting you to buy into gold.

What's not wrong is that gold has increased in value over the USD since there's more confidence in it. But it's certainly not true that gold has a fixed value.
Last edited by ChronoReverse on Wed Apr 10, 2013 10:36 am, edited 3 times in total.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 10:34 am

cphite wrote:As such, gold is a great safety net against runaway inflation, because it retains it's value. We can set aside the argument over it being real intrinsic value or agreed upon value; the point is if you've got a hunk of gold, you've got something that has value in our society, and that will keep that value even as the spending power of the dollar (or whatever your local currency is) decreases.

Actually, it doesn't prevent currency collapses. While the limited availability should theoretically act as a safety brake, the real world laboratory says otherwise -- the US economy and currency were not more stable during the gold standard, and likewise, the history of the 1800s was littered with commodity metal panics, including gold and silver.

OTOH, never underestimate the human capacity for greed -- the man who has stockpiled potatoes will almost certainly trade some of them for an opportunity to acquire and hoard shiny things, even to his own long-term detriment, so there's a good chance that you'll still be able to buy food during an apocalyptic event.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 11:57 am

ludi wrote:
cphite wrote:As such, gold is a great safety net against runaway inflation, because it retains it's value. We can set aside the argument over it being real intrinsic value or agreed upon value; the point is if you've got a hunk of gold, you've got something that has value in our society, and that will keep that value even as the spending power of the dollar (or whatever your local currency is) decreases.


Actually, it doesn't prevent currency collapses. While the limited availability should theoretically act as a safety brake, the real world laboratory says otherwise -- the US economy and currency were not more stable during the gold standard, and likewise, the history of the 1800s was littered with commodity metal panics, including gold and silver.


Who said anything about preventing currency collapses? I said it was a safety net against runaway inflation. That is, for the person holding the gold, not for the currency in general.

OTOH, never underestimate the human capacity for greed -- the man who has stockpiled potatoes will almost certainly trade some of them for an opportunity to acquire and hoard shiny things, even to his own long-term detriment, so there's a good chance that you'll still be able to buy food during an apocalyptic event.


Sure, there would be people who will hoard gold, jewelry, or even cash; either because they feel certain that the economy will recover, or because they simply desire those things. I don't believe that will be the norm.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 12:10 pm

I would have loved to have jumped on the bandwagon in the first months of bitcoin. You could mine them relatively quickly, instead of the days? it takes now just for a unit. Or even just bought up a bunch of them when they were worth $0.10 a piece.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 12:17 pm

ChronoReverse wrote:
cphite wrote:Actually, his assumption is correct; it's not that gold is getting more valuable it's that the value of currencies fall relative to gold. You can buy less gold for $100 now than you could a year ago, and much less than you could ten years ago, etc.

As such, gold is a great safety net against runaway inflation, because it retains it's value. We can set aside the argument over it being real intrinsic value or agreed upon value; the point is if you've got a hunk of gold, you've got something that has value in our society, and that will keep that value even as the spending power of the dollar (or whatever your local currency is) decreases.


Again, this doesn't stand up to scrutiny. An ounce of gold can buy a lot more groceries than it could 10 years ago. Is this because food has somehow become less valuable as well?


No; it's because gold has become much more valuable relative to the dollar. If you were to take your ounce of gold to a grocery store (assuming you found one that accepted gold) the first thing they would do is determine the dollar value of your gold before allowing you to use it to buy anything. Since you are getting more dollars for that ounce of gold ($1,560) than you would ten years ago ($365) you can buy more with it.

If gold has a steady value, why control the mining of it? If it really holds it value magically outside of the laws of economics, why not pull as much out as possible to increase overall wealth?


Nobody said anything about a steady value. Obviously the intrinsic value fluctuates like any other commodity. However, the main source of the increase in buying power comes from the relative value to currency.

Why is gold particularly special compared to other precious metals that are also fairly inert, shiny and rare?


Because gold has historically been used as money around the world to a far greater degree than other precious metals.

Shouldn't they have the same value properties as gold then? In that case why does the value of gold against these other metals change?


You seem stuck on the idea that someone is suggesting that these commodities never fluctuate. As far as I know, nobody has.

No, gold is seen as more valuable now that currency seems unsteady, therefore its value rises.


Yes; because the value of currency is unsteady and has been trending downward. As that happens, the value of gold relative to currency goes upward. It's not that gold is has suddenly become intrinsically more valuable in the past few years; it's just that the thing it's compared against has become less valuable.

Again, if everything went to hell, would gold continue to retain its value? Of course not, you'll find buyers probably but not at the same rate. Therefore, gold has a higher value now than in 2000 for the same reason the Canadian Dollar has a higher value now.


Which is remarkably similar to what I said in the first place; which is that as long as the economy is working and society is stable, gold is a good safety net against inflation.

The idea that gold somehow doesn't fluctuate in value is a scam perpetuated by those who have an interest in gold and/or getting you to buy into gold.


Again, I don't believe anyone here has stated that gold doesn't fluctuate. The point was, the real driving force of gold' value right now is currency falling.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 12:42 pm

No you're somewhat agreeing with my position but not understanding the origin my comment:

You are misconstruing the gold bug position. The value of gold doesn't necessarily rise, the value of currencies relative to gold falls.


The value of currencies are indeed falling, but we can measure this; it's simply inflation.

Gold's value has risen faster than this though. The reason is simple economics. You can call it consumer confidence or what-not but it just boils down to there's more demand for it.

In the end, all I wanted acknowledged is that gold's value is in no way fixed and since you've pretty much settled yourself in that position as well, I'm out of this discussion (just like I recently cashed out my bitcoins).
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 1:33 pm

A currency is a medium used for the mass exchange of goods and services. Back in the day, gold was used as a currency; It is no longer used as one now. Bitcoins bills itself as a currency that is inflation-proof, counterfeit-proof, double-spend-proof, and as untraceable as cash money.

Yet it is plain to see that it is not used as a currency. It is used as a commodity (a useless one) and at best as a meta-currency. Bitcoins are NOT worth what they are worth today. All of those buying into bitcoins and what not, they are not buying it to buy things with it, they are not receiving money in bitcoins for exchange of their goods and services. They are playing a speculative bubble, plain and simple. It WILL burst, it is matter of time.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 2:03 pm

And apparently it's bursting right now.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 3:14 pm

ChronoReverse wrote:
Think about it, if your economy has collapsed and people having trouble buying food, would you care about some gold or would the sack of potatoes be more important?

I just read a book on Weimar Germany. What you said is a false dilemma as both are important.
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Re: Bitcoins

Postposted on Wed Apr 10, 2013 4:39 pm

Hawkwing74 wrote:
ChronoReverse wrote:
Think about it, if your economy has collapsed and people having trouble buying food, would you care about some gold or would the sack of potatoes be more important?

I just read a book on Weimar Germany. What you said is a false dilemma as both are important.


Perhaps but the value of gold in such a situation relative to food would still decrease. Gold wouldn't be inflating as much as the worthless currency but you'll always need a certain amount of food just to survive.

It's not a false dilemma because I'm not saying you had to choose one or the other but rather, gold doesn't keep as much value.

Again, the point is only that gold's value, like everything else, is still determined by demand (and supply but that's just adjusting demand).
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Re: Bitcoins

Postposted on Thu Apr 11, 2013 10:16 am

The situation you are imagining has not happened in any part of recorded history, if you are describing a total world currency collapse. If it's that bad, most of us are dead anyway.

Gold certainly didn't decline relative to food in Weimar. It held value against the hyperinflation. Gold was worth steadly more marks, but not steadily more or less pounds or dollars. People would trade their marks for absolutely anything, whether gold, silver, francs, pounds, dollars, furniture, clothing. Anything but marks.
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Re: Bitcoins

Postposted on Fri Apr 12, 2013 6:24 am

Do bitcoins remind anyone else of Cryptonomicon?
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Re: Bitcoins

Postposted on Fri Apr 12, 2013 7:59 am

kumori wrote:Do bitcoins remind anyone else of Cryptonomicon?

I picked up that book at the book sale last year and haven't read it yet. Looks very interesting.
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Re: Bitcoins

Postposted on Sat Apr 13, 2013 10:58 am

http://spectrum.ieee.org/tech-talk/comp ... e-plummets

Hmm, a decentralized currency loses massive value because the central exchange has tech issues. That's real irony, not Alanis Morissette irony.
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