4 Jun 2011 10:40 UTCSat 4 Jun 2011 - 10:40 am UTC
What do ucluers think about Bitcoin? I am not so interested in its potential as a solid currency, but as a way of getting rich.
4 Jun 2011 18:37 UTCSat 4 Jun 2011 - 6:37 pm UTC
What I am really after is the judgment of ucluers - I realise Quezi another ucluer website, but that answer is factual only. I am as familiar with the facts as one can be with this weird and obscure service.
5 Jun 2011 00:24 UTCSun 5 Jun 2011 - 12:24 am UTC
As Uclue does not provide investment advice, this answer is in the form of overview and opinion, which I think is what you are seeking anyway.
The potential to get rich with Bitcoin is inexorably linked to Bitcoin's potential as a solid currency; or rather to Bitcoin's potential for wide adoption and extensive use, which is not exactly the same thing but is closely related.
Bitcoins are being traded now for more than a hundred times what they were changing hands for a year ago. In that regard, it seems that investing in Bitcoin a year ago would have been a spectacularly good decision. But that's with hindsight, and at the time the picture was not at all clear. No-one really knew whether anyone would start using bitcoins for real transactions. There was the guy who bought two pizzas for 10,000 bitcoins, but that was more a "proof of concept" than a regular transaction. So people who invested by buying bitcoins a year ago were taking an enormous chance against overwhelming odds, and they were lucky that it paid off.
Fast-forward to today, and the picture is much the same: only the scale is different. The risks are now slightly lower (but are still enormous), and the price has risen so the upside is not quite so high (but is still enormous). So the decision to be made is just as difficult.
The market price of a bitcoin is already "pricing in" the risks perceived by the market participants. If the risk of failure is lower than that priced into the market, then it could be a good investment. If the risk of failure is higher than that already priced into the market, then it is certainly a poor investment.
There are several reasons why Bitcoin might not become widely adopted, and any of these could lead to a total failure of the investment. If enough governments around the world tried to prohibit Bitcoin, it would prevent Bitcoin from achieving critical mass. If a corporation like Google or Facebook came up with a peer-to-peer currency that was significantly easier to use than Bitcoin, that could trigger the failure of bitcoin.
The early adopters of Bitcoin are acutely aware that it's not as easy as it might be to keep your coins secure. To avoid losing your coins, you need to have robust backups of the file that holds your private keys (the cryptographic keys that your software uses to enable you to spend your coins). To avoid others spending your coins, you must not let anyone else get access to that file. There's no doubt that virus writers are working on ways to "steal" people's bitcoin wallet files. A major loss of coins to a bitcoin-stealing virus or trojan could dent people's confidence in Bitcoin to the extent that it might not recover.
Naturally the software developers are working on ways to make Bitcoin more robust. But the Bitcoin software is a volunteer-driven open-source project. There's no organization "responsible" for Bitcoin (no central bank, no government, no corporation), which of course is one of the reasons some people want Bitcoin to succeed. This means that each user is responsible for securing their own system.
Services that exchange bitcoins for national currencies and vice-versa are springing up, and by far the most developed of these at the moment is MtGox
None of the exchanges has been able to make it really easy to get your cash in so that you can buy bitcoins (because convenient payment mechanisms such as credit cards and PayPal are fraud magnets when used to purchase non-cancelable items such as bitcoins). For most people outside the US, a bank wire is the most practical way to get money to the exchange, but the "friction" of doing this probably takes a little pressure off the exchange rates.
The number of bitcoins is limited algorithmically to 21 million (but they are subdivisible, so there's no economic problem here). Many people have published optimistic estimates of the evantual value of each bitcoin, based on wild assumptions such as that all uses of national currency will be replaced by bitcoins. Of course this leads to stratospheric but unrealistic projections.
More likely in my opinion is that the bitcoin community will grow, but will remain a minority. I would draw a parallel with other "niche interests" such as Esperanto speakers where there are a million or so adherents. If a million people were to actively use Bitcoin, the average person's holdings would be 21 bitcoins.
This leads to an interesting investment possibility. If you were to buy, say, 210 bitcoins, and if Bitcoin becomes successful and is adopted by a million people, you would have ten times the Bitcoin "wealth" of the average user. The worth of those 210 coins might end up being zero, or it might end up being a lot. But whatever the value is, the investor who holds 210 coins will be ten times as "rich" as average. Bitcoins are trading around £11 each today, so a holding of 210 coins would cost £2310.
There is a meme circulating in the Bitcoin community that 2100 coins could be enough for a retirement fund, being one ten-thousandth of all the coins that will eventually be "discovered"/"created".
Are these these the angles that you were hoping to explore with this question? Let me know if you need a different slant on this.
19 Nov 2013 08:10 UTCTue 19 Nov 2013 - 8:10 am UTC
I have not mined Bitcoins for a few years. The electricity prices in the UK are so high that it's usually cheaper to buy Bitcoins from someone who mined them in a country with cheaper electricity. Of course, had I known a few years ago that the price would rise this high then the electricity price would have been irrelevant!
The difficulty level is now so high that a regular PC is totally unusable. A high-end GPU card can still (just) be used, but only if you have free electricity.
Current-day Bitcoin mining uses ASICs (applications-specific integrated circuits) which are the most efficient arrangement. These are available as a USB miner (low-speed) or as boxes containing many such chips (much more expensive but much higher speed).
The performance of ASIC-based miners depends greatly on the silicon technology that they use. In particular, those that use silicon with narrower track widths will run much faster and substantially cooler.
As I haven't been keeping track of what's currently on the market, I have no suggestions as to which of the current dedicated mining platforms are likely to be cost-effective.
However, I can say that mining brings with it a lot of hassles: software re-starts, hardware failures, and noise from the cooling fans. It's much easier (and almost as cheap) to just buy any Bitcoins that you need.
The current rapid price rise is obviously unsustainable, but I don't know whether it will stop later today or in a few weeks, and I have no idea where the price will settle. So far, each spike has been higher than the previous spike, and each low has been higher than the previous drop.