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Hopefully You're aware of what BitCoin is (supposed to be)...


Seeding Initial Wealth

When the federal reserve "prints money", it doesn't just mail million-dollar checks to random Americans. It does one of two things. It either (a) purchases some other asset [generally us treasury bonds] on the free market, thereby injecting more cash into the system than there had been before, or (b), loans money to a bank, who will then loan it to other people who will then spend it.

Importantly, the people on the other end of those transactions did not just get free money. They either sold an asset for cash, or they borrowed cash that they will eventually repay (with interest).

Bitcoin does not have a central bank capable of printing and lending Bitcoin; it has an "algorithm" which through some convoluted mechanism allows Bitcoins to be "mined". Essentially it randomly allocates Bitcoin to early adopters. This is a very good system for early adopters (free money!) It is a nonsensical system for a real currency, not to mention being obviously unscalable (what happens when everyone tries to mine Bitcoin all day long?). To solve this second problem, the supply of Bitcoin is algorithmically limited, which is again good for early adopters.

So, is it a scam? Just a clever plan to enrich it's creators? (value of BitCoins is now (as of May 19th 2011) about 500 times higher than it was initially and is still growing as expected from the start mainly due to the built in deflation)

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closed as off topic by ChrisF, Kyle, Sathya May 19 '11 at 15:02

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You might consider reposting this on skeptics.stackexchange.com. I think it's appropriate there. –  Shinrai May 19 '11 at 15:08

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