Bitcoins

I'm surprised that no one has posted on this topic yet.

Bitcoins were worth about 20 USD/BTC in February and are now worth over 90 USD/BTC

It has been slow in getting acceptability, and difficult to spend otherthan a few places online. The question is that if I own it, there are limited options to spend.

BTW the electricity consumed in mining bitcoins overall maybe more than its value!

Its a currency that you can literally mine from your computer for free - other than the electricity and processor usage. Check it out on the net, its gaining a lot of publicity, but has limited uses as of now.

To get started, I bought some bitcoins using the website localbitcoins.

As for forex regulation, I'm not sure how legal it is. It is a grey area. Bitcoins can be bought from Indians who have mined bitcoins. The day that a site such as Amazon or Facebook uses bitcoins, is the day that the currency becomes mainstream.

I was interested in buying a bitcoin mining add on from Butterfly but they do not have a shipping product. Doing further research, I found a company called ASIC Miner that allows a person to buy shares in it and pays out dividends based on how much bitcoins it mines (they use specialised hardware which is faster than normal computer parts and is more efficient with electricity.) You can google "ASICMiner-PT" and you'll get to a faux stock exchange called BTC Trading Corp that was setup because the original stock exchange the shares were sold on had collapsed.

At this point, I wouldn't invest more than half a lakh in bitcoins (government only really takes notices of transactions worth more than 50,000 INR) but it'd be interesting to see how things mature over the next 3 years.

To answer your first question how can one mint something from thin air.? The US Fed is doing it by the trillions!! The US left the gold standard and the Dollar is backed up by nothing that the promise of Uncle Sam to pay - without assets to back it up.

The very reason for Bit coin to appreciate is that many people have lost the faith in the Government printed money and banking system. The happening in Cyprus where there is a talk of 60% hair cut for investors holding over 100,000 Euros (irrespective it happens or not) and the US Govt. loose monetary and fiscal policy, lets people seek alternatives, and the alternative is looking good, as there is greater demand for a currency which is going to be limited in supply. This makes it acceptable to people.

bitcoin is a fascinating development...

some people say it violates "Mises regression theorem"

Regression theorem says something like this:
For a thing to function as currency (medium of exchange) it should have intrinsic value to start with...

does bitcoin have intrinsic worth except its a number inside computer?

Bitcoin mania could be next Tulip mania...
or it might become a strong currency screwing up governments once for all !
(note: bitcoin transactions are anonymous and govt cant tax on them!)
...

so its exciting and confusing simultaneously!

The same way US goverment or the Indian goverment prints dollars or rupees. The dollar and rupee are not backed by any assets.

There is no fundamental on which bitcoin is valued, its price is set by the market.

You can only create a bitcoin if your computer validates a transaction between two third parties. There is some high level math involved. Check out some bitcoin videos on youtube.

I'm willing to stash 1/10th of disposable income as bitcoins.

Bitcoin is a mathematical based currency and there are a finite number of bitcoins that can be mined (by 2040, bitcoin mining may stop.) It has something to with mining as a means of discovering usable 256 bit encrypted hashes. It's best to read up on it as the explanation is something even the core developers need time to explain clearly.

13 trillion dollars were printed and given away to wall street based corporations with no strings attached last year. I don't know if the Indian government is doing things to warrant me placing more trust in mathematical based currencies but European governments don't seem to be in the best positions.

There is a risk of an entity using more than 50% of the total hashing power of the bitcoin network to upset the network. I'm not sure what the plans are in 2040 to secure the network when no more bitcoins can be mined (who'd contribute computing power when no more currency can be mined?)

The first famous bitcoin transaction saw the exchange of 10,000 BTC for 2 pizzas. Today that would be worth 900,000+ USD. Bitcoin value seems to be based on pure demand unless there's someone out there hoarding publicly released bitcoins (not all mined bitcoins have been exchanged for fiat) only to dump them later.

I am somewhat biased towards bitcoins success.

Think bitcoin as virtual silver.

Virtual silver can always have physical representation eg: printed bitcoin cards.

All paper printed money can't be seen as virtual silver becoz they don't have upper printing limit!

So bitcoin is a win in my opinion....

but still I feel something is missing, even Tulips can't be grown infinitely that doesn't stop the collapse of Tulip mania (but unlike Tulip, bitcoins are eternal!)

will you accept your salary in bitcoins?
I bet no one will ... so its still in speculation phase.