Online-Only Currency BitCoin Reaches Dollar Parity

IamTheRealMike writes "The BitCoin peer to peer currency briefly reached exchange parity with the US dollar today after a spike in demand for the coins pushed prices slightly above 1 USD:1 BTC. BitCoin was launched in early 2009, so in only two years this open source currency has gone from having no value at all to one with not only an open market of competing exchanges, but the ability to buy real goods and services like web hosting, gadgets, organic beauty products and even alpaca socks."

Comments

Re:There are several problems here

[MozeeToby]

The smallest transferable unit is not a single BitCoin. It is in fact .00000001 BitCoin, making for plenty of transferable units.

It works this way :

[unity100]

you join the network with your computer. the network is a cloud that lives on its own, without noone being able to control it. so, it doesnt have any central point of failure. it also awards you some amount of bitcoins for running the client, because you are contributing to the running of the system. but this is inversely proportional to the amount of computational power the cloud has at that moment - back when bitcoin was small, much more coins were awarded for joining clients. now, the network is nearing seti etc in computational power. it is impossible to generate even a single bitcoin over months with an ordinary computer now. and so on.

system assumes two things :

cost of electricity

computational power.

it is based on the computational power of the network. if the computational power increases, the system arranges bitcoins accordingly. so, even if you join with a huge server farm, you just up the computational power of the network, and the amount of coins you can earn from your participation decreases. hence, you cannot beat the network.

also, the cost of electricity is a factor. if you do the above, you will get hit by a huge cost in electricity.

only way to beat the system, is to be able to have zero cost for the electricity you spend, and then join it with mega server farms.

but, the system says that, at a point where zero cost for electricity is a practical reality anywhere on the planet, there will be no need for money, since cost of producing anything will approximate zero. (and that's right).

..........

the system is also anonymous. noone but you and the person you exchange with, know who sent them what. but, this knowledge is only in the form of awareness of a complex encrypted key existing on the other side - nothing else. it may have been done from china over a netbook, or a mobile device flying somewhere on atlantic ocean.

that is both good, and also a drawback - if you lose the encrypted keys you store on your hard drive, you lose the 'wallet' that contains your cash.

but thats no different in the real world either.

Re:In other words

[EllisDees]

> Currency is IOU notes that devalue over time.

No, currency is whatever we decide it is. You are speaking only of one small subset of currency known as fiat currency. There is nothing intrinsic about currency that says it has to devalue over time.