A bitcoin breakdown

If you’re interested in technological, financial or social innovation, you’ve probably heard of Bitcoin. It’s a virtual currency used by people around the world to make purchases online, or in person using a mobile app. As more merchants accept the currency — and more companies pitch Bitcoin investments — more people are curious about how it works.

Unlike dollars, pesos or yen, bitcoins are not backed by a government or distributed by a central bank. Instead, bitcoins are created on the peer-to-peer bitcoin network through a process called “mining.”

As more people join the Bitcoin network, the challenge of mining bitcoins gets tougher. Miners need faster and more advanced computer equipment to turn a profit because older versions become obsolete quickly. To make money, you have to stay ahead of the pack — and that could mean shelling out money to a company like Butterfly Labs.

According to a recent FTC complaint, Butterfly Labs touted the profitability and cutting-edge technology of its Bitcoin mining machines — which sold from $150 to nearly $30,000 — but repeatedly broke its promises to customers. 

The company said that its BitForce machine would be ready for delivery by October 2012, but the complaint says that as of September 2013, Butterfly Labs had failed to ship machines to more than 20,000 paid-in-full customers. In August 2013, the company touted its Monarch machine as the “fastest and most power efficient Bitcoin miner yet.” But the FTC says a year passed and not a single Monarch machine had been shipped.

The complaint alleges that even when machines eventually arrived, they often were defective or obsolete, mining far fewer bitcoins than they would have generated had they been shipped when Butterfly Labs promised.

In December 2013, the company began to offer services that would start generating bitcoins in the “March 2014 time frame.”  According to the complaint, by August 2014, the company had yet to generate any bitcoins for people who had spent thousands of dollars for the service.

If you’re considering investing in bitcoins, understand the risks. Before you do business with any company, do research. Enter the name of the company with words like “scam” or “complaint” in an online search engine. Read reviews from customers and experts.

If a company doesn’t make good on its promises, ask for a refund, but don’t shell out any more money. The company shouldn’t ask you to pay for its mistake. Also, file a complaint with the FTC.

Tagged with: mobile, payment, technology

Comments

From the above, it appears that Bitcoins are tokens earned on an online game. This labor in the game produces no useful goods or services. This is not good. Bitcoins are in effect, credit that mounts and mounts. Monetizing Bitcoins makes no sense.

Part of the bitcoin mining process results in new coins coming into circulation. Note that this is a mathematically enforced algorithmic process which prevents any more than 21 million bitcoins (which are divisible to 8 decimal places) from ever existing.

Bitcoin is a useful system; I can send value to anyone with a bitcoin wallet, instantaneously, at near-zero cost, anywhere in the world. And I know that the supply of coins is fixed. Those features are where the utility and hence, the value, of bitcoin comes from.

At the end of the day, all money is an accounting system whose value depends on how easy it is to use the system. We used to hand chunks of metal to each other to serve as this accounting. Now we use digital balances in our bank accounts and rely on banks to make electronic accounting updates on our behalf. Bitcoin does all that natively in our online era, without requiring any 3rd party. It's just a technological advance on how to send value electronically, securely, cheaply, and globally.

As discussed with programmers, everyone has to be on the same page. If this succeeds then those without the technology will be without access to monetary gain. THis is a test of the electronic currency. If the systems fail then you have this stuff floating in cybercurrency unaccessible. That's the risk

According to this story, the only people who lost were the ones who gave DOLLARS to the shell company Butterfly Labs. I know someone who mines bitcoins, but he built his own machine, because he did his own research and has the knowledge to build his own computers. He has indeed made a small pile of coins/cash that he uses to purchase items from sellers who accept bitcoins, and occasionally he will cash out a few. His investment returns between 20-30%, even after accounting for all expenses. Bottom line - do your homework, don't trust fly-by-night scammers.

I have done literally hundreds of hours on the Bitcoin gimmick and came to the conclusion that it's no more than a pyramid scheme at best and the added fact that a Bitcoin is an intangible abstract, scams are abundant. I ask you to do your own research and determine this for yourself. For the past 3+ years, proponents have been stating that Bitcoins are taking over in the new cyberage making tangible monies worthless. I wouldn't burn your cash just yet. I suggest that you approach with due diligence.

Seems like a industry just ripe for corruption. Like the internet isn't already a freeforall. Im not for more regulation but for more personal responsibility. If the internet is going to be free and open for generations then we need to put our greed natural instincts to power aside for the betterment of mankind.

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