Unfortunately nobody clicks the link for all answers:
Where Do Bitcoins Come from?
Bitcoins are created by a complex algorithm. Only 21M can be made by the year 2140. Your desktop bitcoin software can make bitcoins, but at this point
the electricity and time it would take to produce a bitcoin is larger than the actual value of a bitcoin (your laptop might take five years to make
one, and they currently trade at $6.70 per bitcoin [ see mtgox.com...
for the latest exchange rate ].
Bitcoin miners use super cheap GPUs (not CPUs) to create the coins, but as more people come online to make them, the algorithm adjusts so that one
block can only be made every 10 minutes.
Who Invented Bitcoins?
An individual with the name -- or perhaps handle -- of Satoshi Nakamoto first wrote about bitcoins in a paper called Bitcoin: A Peer-to-Peer
Electronic Cash System. This person has stepped back from the project and trusted Gavin Andresen to take charge as the project’s technical lead.
How Does One Buy and Sell Bitcoin?
Currently Paypal and credit card companies are making it illegal to sell bitcoins. Why? Simple: PayPal’s terms of service prohibit "currency
CoinPal had its account frozen, details here.
Given that you can’t whip out your Paypal account and buy them, and that it will become harder and harder to get them, bitcoins will be bartered for
services in the real world.
For example, a Hacker News community member named Nicholas Carlson just boasted that he is being paid for a programming project in bitcoins.
Bitcoins in Real Life
In the next year you’ll hear about people in casinos in Vegas buying and sell bitcoins for cash and casino chips.
Imagine a bachelor party comes to Vegas and STNY (someone that’s not you) gives $550 to a guy at a bar and he takes out his laptop or tablet and
ships 100 bitcoins to STNY’s phone. STNY then goes to Craigslist and ships some bitcoins to an escort and a drug dealer, who then show up in person
to provide goods and services.
The Drug Underground and Bitcoin
Last month folks were buzzing about an online drug marketplace called SilkRoadMarket, which was reportedly trading in, well, all kinds of drugs:
marijuana, mushrooms, '___', ecstasy and '___'.
Of course, since bitcoin transactions are untraceable, you would have zero recourse if you sent a dozen bitcoins to someone for a couple of tabs of
'___'. Just like you might lose your $10 if you gave it to a kid in the school yard for a dime bag and he never came back.
Let’s Make Some Predictions
We are 100% certain that governments will start banning bitcoins in the next 12 to 18 months. Additionally, we’re certain bitcoins will soar in
value and a crush of folks will flood the system and start using them.
Currently there are 6M coins at $6.70 each for a total economy of about $40M. Bitcoin speculation and hoarding will also cause a massive spike in
bitcoin value. For example, if 10M people find out about bitcoins in the next year and want to buy $100 worth, $1B will be infused into the bitcoin
Finally, there will be massive breakage in bitcoins. If your laptop crashes and you didn’t back up your bitcoins, well, you’re SOL. If someone
steals you laptop that has 10,000 bitcoins on it you won on Bitcoin Poker, you’re SOL. Lost your USB drive with 500 bitcoins on it after a night out
on the town? You’re SOL.
Sites like 99designs, eLance and oDesk will start accepting bitcoins for payment. If they don’t, they will face competition from folks who do.
Bottom line: The world is going to be turned over by bitcoins unless governments step in and ban them by prosecuting individuals.