[grania]

I've tried to understand the concept. I just don't understand how money can be made just from running an algorithm. Intuitively, it seems that money can be made by selling or renting something, investing, or providing a service.

What do bitcoins come from that created value? There aren't even tulips at the end of the rainbow.

[rktman]

On second thought, what sort of rock formations would one mine if looking for bitcoins?

[Utilizer]

It's an accepted and established value. Think of it as a baker offering to trade you x- amounts of baked product per month for something you have to offer, such as a certain number of eggs from your hens per month, or an actual chicken, or even a hog or lamb per year. Attach an agreed label to it such as a "Johnthebaker" Local Reserve Note (LRN) and use it as a standard so others can reference to it and trade them so that you can trade your neighbor for an LRN or two in exchange for a butchered turkey so you do not have to go to the bakery, and you have an established standard.

Extrapolate that to the Internet, with more people trading things and LRNs and that is essentially what Bitcoins are.

Rather like trading stocks, or if you work for a bank, trading mortgages.

[expat1000]

“. I just don’t understand how money can be made just from running an algorithm”

My understanding is it can’t. The algorithms are required to support the storage and trading of the bitcoins. In other words, it’s overhead for the bitcoin operation for which you are paid minuscule amounts in bitcoin currency. I could be wrong, but that’s the way I read it.

If it sounds a bit like printing money with nothing behind it, well, it does to me too.