*Important* Convince Video Producers to Accept Bitcoin as Payment

[metalgod]

Note: This post was originally removed by Myriads as it was thought to contain spam. After messaging him and explaining some things, he was gracious enough to allow me to re-post. The original message was lost, so this is not a verbatim recreation.

Have you heard of Bitcoin?
Bitcoin is a digital, online, peer-to-peer currency (see www.bitcoin.org for more information, a theoretical abstract, and a brief 1-minute video generally explaining it). Peer-to-peer means it is decentralized -- there are no banks, no holds on your account, no transaction fees, and no chargebacks. This means that I can send money (Bitcoins) from one person to another, even if they are on the other side of the world, instantly. Bitcoins can be exchanged for goods and services. There are an increasing number of businesses/merchants popping up that accept only Bitcoins as payment, and even a large number of existing merchants are agreeing to accept Bitcoins as payment. Additionally, Bitcoins can be exchanged for USD.

How does it work?
After downloading the Bitcoin program, your computer is linked to other computers in the Bitcoin peer-to-peer network. The program tells each computer in the network to solve a very very difficult mathematical problem. Each time a computer is lucky enough to solve this program, 50 Bitcoins are generated into the system. In other words, the computer is doing 'work' to create something of value. After a problem is solved, the difficulty of the problem increases such that after a given time, the problem will become so difficult that no computer can solve it and no more Bitcoins can be generated. This puts a cap on the number of Bitcoins in circulation and also places a cap on inflation.

What are the advantages to using Bitcoin?
1.) All transactions are anonymous. When you download the Bitcoin program, you are given a digital 'wallet' that can be encrypted, as well as a Bitcoin wallet address (much like a bank account number, except that the chances of guessing this number correctly are about 1 in 2^160. Additionally, a new address is created with every transaction so it is virtually impossible to link the address to a single person).
2.) There is no central authority. This means there are no bank/credit card fees, no transaction fees, no holds on your account, no chargebacks. Essentially, there is no middleman.
3.) Fraud is virtually impossible. Every single transaction must be confirmed by other computers in the network. Thus, it is impossible for someone to "fake" a Bitcoin, for example, because this Bitcoin must be recognized as valid and having been derived from solving the mathematical problem.
4.) The program is completely open source. This means that nobody would be able to tamper with the program and inject it with a virus because there are literally thousands and thousands of eyes watching it. The current Bitcoin community is full of very intelligent computer experts (naturally, as it caters to their interests in digital technology) who constantly stay informed on the current state of Bitcoin and fully understand how the program operates.
5.) It is also virtually impossible to find the inverse of the Bitcoin algorithm such that a single person could overtake the entire network. An analogy would be similar to finding a function that can effectively factor the product of two extremely large prime numbers. In fact, it would be far easier to hack into an online bank account than it would be to hack the Bitcoin network.

Why would I want Bitcoins?
Bitcoins can be exchanged for products and services as well as fiat currency such as USD. There is an ever-expanding number of merchants accepting Bitcoins as payment. Furthermore, Bitcoins are based on a deflationary model. Because the program is such that only 21 million total Bitcoins can be created (divisible to 8 decimal places), imagine how much a single Bitcoin would be worth if they were adopted by the global population. In a single year, the price has increased from over about 1 penny (last year) to a current price of $14. If logarithmic model trends continue, the Bitcoin could be worth as much as $100 by the end of this year.

How do I get Bitcoins?
1.) Bitcoins can be 'mined' using your computer graphics card and a downloadable program called a GUIminer. This program utilizes the processing power of your graphics card to solve the mathematical equation. When a computer in your network solves the mathematical problem, you receive a proportion of the payout. Currently, my computer is earning me a profit of .25 Bitcoins per day.
2.) Bitcoins can be purchased at an online exchange that functions much like the stock market (see www.mtgox.com or www.tradehill.com -- currently the two largest exchanges). You can buy Bitcoins with USD (other currencies accepted as well) and either exchange them for goods/services, or you can wait until the price of Bitcoin goes up and resell for a profit in USD.
3.) You can find other members of the Bitcoin community who are willing to exchange products/services/money for Bitcoins. You can see this by viewing the 'marketplace' subsection of the bitcoin forum (http://forum.bitcoin.org).

What's in it for Video Producers?
1.) When the video producer downloads the Bitcoin program and are given a digital wallet and address, all they need to do is link that address to their site as a form of payment. For someone to steal these funds, they would literally need to have access to the producers computer, find the digital wallet file, somehow transfer it to their own computer, and then find a way to un-encrypt it.
2.) Short term, video producers can make additional profit by say charging a 10% extra fee on Bitcoin purchases to account for daily market volatility. Then, at the end of the day, they simply cash out their Bitcoins at an online exchange for USD.
3.) Long term, video producers can hold onto a portion of their Bitcoins. Given Bitcoin's deflationary model, the value of these Bitcoins could grow exponentially over time (as it has in the last year by growing from a penny to over $14). Because of deflation, there is the potential for video producers or ANYONE with Bitcoins to accrue a ridiculous amount of wealth. Bitcoin has already produced many millionaires -- imagine how much money those people made who were lucky enough to purchase at 1 penny and sell at $14.

What's in it for me, the original poster?
Quite honestly, not nearly as much as what's in it for anybody reading this. I have 2 general things to gain. 1.) I am seeking to increase interest in Bitcoin. Greater demand results in greater Bitcoin value which helps increase the value of my stock. 2.) Online exchanges have referral programs. All I ask is that anyone here who enters into Bitcoin trading use my referral codes. These codes give you 10% off exchange commission fees for life, and I earn 10% of your paid commissions. It's a win-win situation.

As a final note...
I know this is a lot of information. I know it also appears either 'too good to be true,' appears like a 'pyramid scheme,' etc. I thought the same things when I first heard about it too. However, I have been involved with Bitcoin for only a month and have already made 100% profit from my original investment of $100 (so I now have $200). I will be happy to answer any questions regarding Bitcoin to the best of my knowledge. Please consider that due to Bitcoin's technical and mathematical complexity, it is very difficult to describe it without overwhelming you with a ridiculous amount of information. Ultimately, convincing video producers to accept Bitcoin could result in greater profit for them, cheaper prices for you, and a greater client base. I, for one, do not want to buy a tickling video with a credit card, but I would be MORE than happy to pay with an anonymous currency such as Bitcoin.

 

[Myriads]

While this post looks like Spam, after some discussion with the poster I feel it's not. But a possible topic of discussion.

For now it can stand.

Myriads

 

[Jagermeistered]

I'm rooting for Bitcoin!

I just hope they don't turn into another fiasco like 'e-gold'. The federal government took that company down for money laundering, and not following money-service business regulations.
As long as the supply of Bitcoins is an open source program, and the value and supply of the currency is not regulated by a board of directors and executive committee, but by demand of electronic credits(money). Their is no way they are money-service business, and the peer-to-peer consumers/sellers/producers have to report to the IRS; that is if they convert their Bitcoins to central bank issued currency.

 

[socktickler86]

Bitcoin is a horrible idea. I can't believe people are serious about it.

 

[metalgod]

I'm rooting for Bitcoin!

I just hope they don't turn into another fiasco like 'e-gold'. The federal government took that company down for money laundering, and not following money-service business regulations.
As long as the supply of Bitcoins is an open source program, and the value and supply of the currency is not regulated by a board of directors and executive committee, but by demand of electronic credits(money). Their is no way they are money-service business, and the peer-to-peer consumers/sellers/producers have to report to the IRS; that is if they convert their Bitcoins to central bank issued currency.

Right. I have a record of all my profits that I will report to my tax agent next April. Bitcoins are technically considered an internet "commodity" but are uplifted to the status of "currency" by those who want to see it succeed. While I have negotiated deals with others in the Bitcoin community (for example, I have advertised selling an Edelbrock Carburetor and some old Nintendo 64 games) that constitute bartering and do not require taxation, the USD profits I earn from converting Bitcoins to Cash at the online exchanges (which are registered, licensed businesses) are recorded so I can relay them to the proper authorities. In short, do the right thing and it's legal, just like anything else.

 

[Jagermeistered]

How is it a bad idea?

In my opinion, it's better than carrying an overly inflated currency(politically, commercial/investment bank-backed) driven, or gold/silver hard-metals dude(et)s.

As long as the 'complicated' computer program drives the supply, and demand builds amongst consumers and producers

 

[metalgod]

Bitcoin is a horrible idea. I can't believe people are serious about it.

I can't believe people are serious about fiat currency, a currency that equals debt and is inherently a pyramid scheme. Fiat currency is the reason the top 1% of the economic class system have a net worth greater than the bottom 99% combined.

 

[Jagermeistered]

Right. I have a record of all my profits that I will report to my tax agent next April. Bitcoins are technically considered an internet "commodity" but are uplifted to the status of "currency" by those who want to see it succeed. While I have negotiated deals with others in the Bitcoin community (for example, I have advertised selling an Edelbrock Carburetor and some old Nintendo 64 games) that constitute bartering and do not require taxation, the USD profits I earn from converting Bitcoins to Cash at the online exchanges (which are registered, licensed businesses) are recorded so I can relay them to the proper authorities. In short, do the right thing and it's legal, just like anything else.

It would be far cheaper to keep your own records, and report to the IRS yourself. Just get a cheap or free/cheap accounting program.

 

[Jagermeistered]

I can't believe people are serious about fiat currency, a currency that equals debt and is inherently a pyramid scheme. Fiat currency is the reason the top 1% of the economic class system have a net worth greater than the bottom 99% combined.

Actually, Bitcoin, may or may not be considered a scam or ponzi scheme. But, they are the closest thing to a free-market we have. They are not a complete scam, because the entrepreneurs(computer programmers), are hoping for a future profit. Whereas, central banks can inflate the currency supply(by choice, driving up prices), and the government can screw with the rest. Destroying the consumers/savers, and producers walking in circles(and, trying no to go bankrupt).

 

[metalgod]

Actually, Bitcoin, may or may not be considered a scam or ponzi scheme. But, they are the closest thing to a free-market we have. They are not a complete scam, because the entrepreneurs(computer programmers), are hoping for a future profit. Whereas, central banks can inflate the currency supply(by choice, driving up prices), and the government can screw with the rest. Destroying the consumers/savers, and producers walking in circles(and, trying no to go bankrupt).

This is quite true. The argument for Bitcoin being a ponzi scheme mostly lies with the argument that the people who were earliest to adopt Bitcoin (as well as its creator) were able to profit significantly due to the limited number of people 'mining' for bitcoins coupled with the extremely low difficulty of the mathematical equation. However, this is countered by 2 things. First, these 'early adopters' (as they are known within the Bitcoin community) had to take risks to begin building the Bitcoin infrastructure -- that is, creating businesses, services, exchanges, etc. without knowing what direction Bitcoin would initially take. Second, while these 'early adopters' benefited from Bitcoin's rapid growth in value over the last year, people who join now (and even more so, later) benefit from increasing stability in the currency. I'm sure that if Bitcoin becomes a huge success and a globally accepted alternative form of currency, even those that join now and even several years from now will also be considered 'early adopters' as they too will profit significantly. And yes, it is hard to purposefully inflate the money supply when the Bitcoin program limits Bitcoin production to a predictable rate. Ah, the beauty of mathematics.

 

[phant0m]

1.) Bitcoins can be 'mined' using your computer graphics card and a downloadable program called a GUIminer. This program utilizes the processing power of your graphics card to solve the mathematical equation. When a computer in your network solves the mathematical problem, you receive a proportion of the payout. Currently, my computer is earning me a profit of .25 Bitcoins per day.

I'd like to know what gpu you're using. As I understand it, bitcoins are several hundred-thousand times more difficult to mine for than when they were first introduced. I was under the impression that only high end graphics cards were worth using to mine, and that over time only networks and botnets would be able to mine at a reasonable rate.

Considering how young bitcoins are and how quickly the equations have become so complex, is it realistic to believe that a person can mine his own bitcoins five years from now?

Also, how can a currency like this survive in a real economy when it's so closely associated with black market sites such as the silk road? According to that article, when the popularity of that site rose the price of bitcoins jumped as well. What would happen to the bitcoin infrastructure if all these sites were to be shut down over the course of a few weeks?

 

[metalgod]

I'd like to know what gpu you're using. As I understand it, bitcoins are several hundred-thousand times more difficult to mine for than when they were first introduced. I was under the impression that only high end graphics cards were worth using to mine, and that over time only networks and botnets would be able to mine at a reasonable rate.

Considering how young bitcoins are and how quickly the equations have become so complex, is it realistic to believe that a person can mine his own bitcoins five years from now?

Also, how can a currency like this survive in a real economy when it's so closely associated with black market sites such as the silk road? According to that article, when the popularity of that site rose the price of bitcoins jumped as well. What would happen to the bitcoin infrastructure if all these sites were to be shut down over the course of a few weeks?

First, addressing the GPU issue. I use an ATI Radeon 6970 HD graphics card. While this is a $400 graphics card, it is also a gaming graphics card. There are much cheaper ATI cards (Nvidia cards, for whatever reason, are about 3-4 times slower than ATI cards for a reason I don't completely understand) that mine almost as efficiently at half the cost. These card are not as good at gaming. My card is by no means the most cost efficient card for mining. There are spreadsheets available that list virtually all available makes/models of graphics cards, their respective mining power, and the cost:mining power ratio. It should also be understood that 1.) As the difficulty increases, as it has been, more and more miners will find that the costs of electricity will slowly become more than the price of mining bitcoins. When this happens, miners will drop out, particularly those with very poor graphics cards who did not purchase their card specifically for mining purposes. As this happens, the difficulty will actually DECREASE again, making mining more profitable once more. We have already seen evidence of this. A month ago, I was generating close to .5 Bitcoins per day. Then, there was almost a doubling of the difficulty. Since that doubling, there have been two more difficulty increases, and I am still earning about .24-.25 Bitcoins per day. After the next difficulty increase, I expect to make about .23 Bitcoins per day. 2.) The program incorporates an additional feature designed to raise the value of bitcoin. Sometime next year, the payout for solving a mathematical equation will drop from 50 Bitcoins to 25 Bitcoins. Then, sometime after that, the payout will drop again, and again, and again. This correlates with the deflationary model. Assuming Bitcoin is still up and running by this point (which, by this time, would likely mean that it has gained general acceptance since demand would need to keep steady with the amount of Bitcoins in circulation), this drop in bitcoin production will correlate with a dramatic increase in Bitcoin value. At this point, it may not seem like much to acquire say, .0001 Bitcoins per day, but, if Bitcoins are worth several hundred (if not thousands) of dollars each, .0001 Bitcoins will be worth a nice amount. 3.) One must also take into account technology upgrades in graphics cards. Every couple of years, people buy new computers, and the graphics cards in those computers will always be far better than the ones they bought a few years prior.

Second, you are right. A news article was posted that received a lot of publicity. This article described the anonymous online drug-trading market, the SilkRoadMarket. After this article came out, interest in Bitcoin rose, and the price of Bitcoins rose with it. However, it is not necessarily true to assume that the rise in interest and price meant that these new Bitcoin users were using the SilkRoadMarket. An article like this simply grabs attention. When people read something like this, they want to find out more about it. So, they do a little research, and some decide that Bitcoin sounds like an interesting idea. While some of these new users may want to buy drugs anonymously with their Bitcoins, it is more likely that the majority of users first became aware of Bitcoin through the article, then found out about the larger, legitimate side of bitcoin (i.e. the Bitcoin forum, online exchanges, etc.). Imagine, for example, if you came across that article, then did a little digging yourself. Then you stumbled upon additional information that stated that the value of Bitcoin had risen by several thousand percent in a single year. Is it possible that at this point you may begin to get curious as to whether or not Bitcoin is a wortht investment opportunity? In fact, this is exactly what happened me to me, after a friend who works at Tiger Direct/Comp USA told me about bitcoin. Before I had mined any coins, I did some research and came upon the SilkRoadMarket website. The idea of an 'anonymous' currency sparked my interest further, so I did more research. The more I learned, the more I realized that the SilkRoadMarket is simply one very small facet of something much larger. So, I dove in. And, I'm glad I did. I am only 25 and would like to invest in the stock market someday. So, to learn about the stock market, I took $100, invested it in an online exchange, sold some of my mined bitcoins for additional profit, and now participate in online Bitcoin day trading. I have only enough money invested that I am willing to lose, and I have made 100% profit on my original investment so far. It's extremely fun, and I'm learning a lot. In this way, media attention on the negative aspects of bitcoin (i.e. the underground black market) has helped the positive side of bitcoin. Sometimes, any publicity is good publicity. If they shut down the SilkRoadMarket, Bitcoin will still be there. There are literally hundreds of programmers working on Bitcoin games, I-phone/I-pad apps, easier-to-use digital wallets, stores, businesses, services, etc. These services are what will drive the price of Bitcoin up as it will help increase demand for Bitcoin. As it stands, there are a lot of people with a lot of money invested in Bitcoin who wish to see it succeed, and they are continually working to build new infrastructure all the time.

 

[Ishaanshah]

I don't know much about Bitcoin. However it's services are pretty good.

 

[Rusty Shackleford]

This is fascinating

 

[metalgod]

This is fascinating

What about it do you find fascinating? Do you think this is something positive or negative?

 

[metalgod]

Evidence of Bitcoin's emerging presence in the real-world marketplace...

http://www. youtube.com/watch?v=N6UaotoT1i8

 

[Bothersome]

A four hundred dollar graphics card...

Mine's like 20 bucks.

Q.Q

 

[metalgod]

A four hundred dollar graphics card...

Mine's like 20 bucks.

Q.Q

Yep. The idea behind a good graphics card is that it will eventually pay for itself. This essentially means a free graphics card plus some profit if the difficulty doesn't get too radical too fast, and also assuming the Bitcoin value doesn't radically decrease. When the difficultly increases, people with poor graphics cards stop mining altogether to make it more profitable once again. It should also be noted that there is a difference between 'pooled' mining and 'solo' mining.

In pooled mining, your computer receives a proportion of Bitcoins equal to its contribution in solving the problem among other computers in the pool. So, for example, if your computer is providing 1% of the total pool's computational power, then you will receive 1% of the 50 Bitcoin payout with each solved problem (so, .5 Bitcoins per solution). However, you can also choose to do solo mining. In this instance, your computer is working by itself, hoping to be the first to solve the problem. If your computer solves it, you get all 50 Bitcoins. The interesting thing about this is that while in the long run your average payout should be equal to of pooled mining (i.e. if you expect to earn about 50 Bitcoins per year in pooled mining, then it should take your computer on average 1 year to solve a problem by itself), you also have the possibility of solving 1 or more blocks very quickly. This is because that while probabilities are probabilities, past events do not dictate present ones. So, it is possible that your $20 graphics card could get lucky and solve 2 problems in a week, and thus you would earn 100 Bitcoins (over $1000). When people stop mining because of difficulty increases, solo mining becomes easier because there are not as many computers working to solve the problem.

But, in either case, money can still be made by simply purchasing Bitcoins with USD and trading them on an exchange. For example, if you day trade, then it doesn't really matter how much Bitcoins are worth as long as you are continuously buying lower and selling higher. And then again, there are very practical reasons to use Bitcoins. For example, at www.Bitmunchies.com, you can purchase ordinary household items and perishables with Bitcoins and have them delivered right to your doorstep. This includes things like toothpaste. deodorant, toilet paper, beverages, snacks etc. There's certainly a convenience factor related to purchasing the things you would normally spend time and gas running an errand to get when you could simply shop with Bitcoins online to buy them instead -- without inputting credit card or other sensitive information.

On a side note, I have a $400 graphics card because I do extensive music processing/editing and play resource-intensive PC games from time to time. You should see the guys that spend 5-10 grand on a 'mining farm' which is essentially a whole fleet of active graphics cards. Some people link up several dozen of these things knowing that they can pay off the entire thing in a few months and then profit afterwards. Plus, since the time it usually takes for a good setup to pay itself off falls into the 3-4 month range, the hardware itself will still have considerable resale value. For example, I have a $400 ATI Radeon 6970 HD. Let's imagine I bought this card specifically to mine for Bitcoins. To this date, it has earned me about 9.5 Bitcoins (at a conversion rate of $13-14 on the exchange). It has done this in 5 weeks. Even if the entire Bitcoin economy collapsed TODAY, I could resell the card for at least $300 and I would have already made a small profit. In 3-4 months, the card will have paid for itself entirely. Now, if I choose to sell the card, the entire resale value would all be profit. There are spreadsheets available listing what graphics cards give you the highest payout for the lowest price, and this can be an option for those looking to take a slight monetary risk (in the immediate future - e.g. I buy $5000 setup and can only get back $4000 if I resale) to earn a profit after several months, and then keep profiting thereafter. Mining is also a good option for gamers who just want to pay off their new shiny card. Like me.

 

[kopfhorer]

Not sure I completely understand Bitcoin, but I do think we need at least some kind of way of anonymously buying stuff online so that when say, a prospective employer checks out your credit card transaction records (right now, that's illegal but since when has that mattered to spookish people?) he doesn't see several dozen purchases of tickling videos ("This guy hasn't bought a single forced-orgasm video. Let's hire someone else!").

 

[metalgod]

I thought I'd bump this. Some more time has passed and I still believe this is a good idea.

 

[Bothersome]

I think the idea for bitcoins is fascinating.
I don't know if I'll try it or not, but I don't know what it could hurt.

About the graphics card bit... try playing ANY PC games with the card I have. It's awful. People who get like 60 FPS on high graphics just make me sad.

4 gigs of RAM, and a 1680x1050 res monitor hunkered down by a cheap, shitty little graphics card. (I know my system isn't grand or anything, but compared to the card it is...)

 

[metalgod]

Actually, deflation long-term is countered by inflation short-term because of a reason you suggested....it is currently speculative and the economy, although growing, is not big enough to support it.

That being said, there is a production cost associated with Bitcoin, namely the cost of electricity and time utilized to produce them. Theoretically, this should keep the value of Bitcoin at around $2-$3 or higher in the short-term. I think it may be possible for it to temporarily drop below that price, but having witnessed the community for several months now, I would anticipate people buying like crazy at that price.

As an investment, Bitcoin has done brilliantly for me. When I first wrote this post, I think I said I profited something like 200%. Now I've profited about 520%. I love this stuff!

Edit: By the way, I actually hope it crashes to pennies. The lower the value of BTC, the more relative profit I make during market swings. After all, if a Bitcoin is valued at $4 and it swings to $5, that's a 25% increase. If its $10 and it swings to $11, that's only a 10% increase. I've made the majority of my profit while Bitcoin has been under $7. Mining for Bitcoins isn't nearly as profitable as it once was, but now trading is more profitable.

 

[metalgod]

Haha you should have seen one of the webpages after the first exchange-hack. Around June 19th, the biggest exchange, Mt.Gox (used to stand for magic-the-gathering-online-exchange but was converted into a Bitcoin exchange) had a hack. Well, it wasn't a true hack...a 3rd-party auditor's computer got hacked and someone gained access to the site. Someone then made a webpage out of frustration, mtcox.com, which had a graph of the average value of dick 🙂

I personally use tradehill.com. I love the login feature that calls my cell-phone for authentication after I input my username and password. Even if someone hacks my password and tries to login, they would still need my cell to access my account.

 

[ZenTickling]

Dwight: Don't you want to earn Schrute bucks?
Stanley: No. In fact, I'll give you a billion Stanley nickels if you never talk to me again.
Dwight: What's the ratio of Stanley nickels to Schrute bucks?
Stanley: The same as the ratio of unicorns to leprechauns.

 

[metalgod]

Dwight: Don't you want to earn Schrute bucks?
Stanley: No. In fact, I'll give you a billion Stanley nickels if you never talk to me again.
Dwight: What's the ratio of Stanley nickels to Schrute bucks?
Stanley: The same as the ratio of unicorns to leprechauns.

The question is whether you want to make your product available to more people.
BTC is currently pegged to fiat currency. And, of course, there are lovely services available to directly convert the Bitcoins you receive into cash immediately.

One example is bit-pay. With bit-pay, consumers purchase your product with Bitcoins, and then your Bitcoins are automatically converted to cash at the current exchange rate and the money is deposited directly into your bank account.

Here's a nifty flow chart.

I have BTC and want to buy a video --> I send BTC and download my video --> Bit-pay automatically converts BTC into cash --> Cash goes into your bank account.

Or you could hold your BTC and wait for the value to increase.

Let's say you sold a video last year for $10 when Bitcoins were valued at 1 cent. So, you received 1,000 Bitcoins. You decided to hold your Bitcoins as an investment. Then, a year later, you saw Bitcoins were valued at $10.

Congratulations! Selling that 1 video earned you a profit of $10,000.