Quote:
Originally Posted by Jinto
I see... and yet I fail to see, how spreading virtual money for solving cryptographic problems makes any sense, when the solved problems are never sold and thus are virtually of no value. Open algorithms doesn't mean that you cannot have customers that pay you for solving cryptographic problems. I suppose the whole bitcoin generating concept is meant to resemble the generation of virtual goods in online games. In that sense it would make sense sort of... it could be an instrument of regulation. Under the assumption that users have an idea of what it costs (power bill, wear of hardware) to solve the cryptographic problems, an equilibrium should be reached where the bitcoin money creation in value is almost equivalent to the costs that come with solving the cryptographic problems. Now I could imagine, that the aforementioned assumption is not really true... which could be compromising in the long run.
|
Like you suspected, the solving of the cryptographic problems is purely meant to control the rate of growth for bit coins when people are generating bit coins themselves. It's crucial to solve the fundamental problem of creating a currency system that isn't backed by any third party.
You can't just say okay, let's use this new currency, and everyone has 100 bitcoins. Cryptography is needed because these problems are known to be solvable in a certain amount of time, and no amount of computer hardware could 'break' the system and generate more bitcoins than designed. Using this system, everyone can generate bitcoins at a rate that everyone knows.
So yeah, it's essentially tying bitcoins to some tangible, real world commodity so that getting a bitcoin requires some time and money. Without speculation, each bitcoin would be worth exactly how much electricity it costs to generate them (+ the initial hardware frees). However, the rate of bitcoin generation also slows down as more and more are generated. This then essentially controls the 'supply' of bitcoins, while demand goes up when more people join in on this.