Where does the money go when i buy bitcoin

The internet made information global and easy to access. Gox, once the largest exchange, shut down in after losing hundreds of millions of dollars worth of bitcoin after a hack. So is there anything truly valuable about bitcoin? Yet a key reason the price of bitcoin keeps going up is, well, because it keeps going up. Asked 7 years, 4 months ago.

How To Get Rich Off Bitcoin Or Lose It All While Trying

By using our site, you acknowledge that you have read and understand our Cookie PolicyPrivacy Policyand our Terms of Service. This question seems to me to be such an obvious question, that it must be answered. As I understand it is necessary to buy bitcoins using dollars or some other currency. Where do those dollars. The money goes to the party that sold it to you — that party owned the bottle before you owned it. You might be able to trace ownership of that bottle all the way back through the supply chain, to the point at which it was manufactured. It probably had several prior owners before you got it.

Some people kill time at the airport by browsing duty-free shops. I decided to shop for bitcoin.

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What is happening?

By using our site, you acknowledge that you have read and understand our Cookie PolicyPrivacy Policyand ddoes Terms of Service. This question seems to me to be such an obvious question, that it must be answered. As I understand it is necessary to buy bitcoins using dollars or some other currency. Where do those dollars. The money goes to the party that sold it to you — that party owned the bottle before you owned it.

You might be able to trace ownership of that bottle all the way back through the supply chain, to the point at which it was manufactured. It probably had several prior owners before you got it. If you purchase from a market exchange like Mt. Goxhere’s how that works. Gox, like most market exchanges, operates using deposit accounts. To sell 10 bitcoins you must have deposited 10 BTC to your account with the exchange.

Then when you withdraw your BTCs, the exchange will send that amount of bitcoins from the exchange’s wallet to yours. When the seller withdraws the USDs or whatever currency the coins were sold forthe exchange will send those funds.

This generally occurs through the banking system, with the funds eventually arriving in the seller’s bank account. There are other types of bitcoin sellers — direct sellers, who have an inventory of bitcoins that they purchased previously, or will make a trade behind the scenes to be able to deliver your order. So the dollars from your purchase goes to them in exchange for the bitcoins they owned. Then there are other types of trades which involve risk.

These include financial derivatives where you may speculate on bitcoins using cash but until you actually withdraw those bitcoins to your own wallet, you only own a claim against those bitcoins or against a financial position on bitcoins. But that is an example where there is not a simple buying and selling of bitcions at a certain price. Now every bitcoin in existence originated from mining.

Mined coins arrive 50 at a time about once every where does the money go when i buy bitcoin minutes. They are earned by a mining operator or mining pool and distributed to the mining operators who were mining. To mine, one must buy expensive hardware, expend the effort to build and operate the equipment, and purchase tbe electricity expended during mining. The mining operators can then deposit their bitcoin wbere to an exchange to huy them and receive cash in exchange.

It’s like when you buy doess. When you trade your dollars for somebody else’s eggs, you get the other person’s eggs, and they get your dollars. You can then sell the eggs to somebody else if you like — then you get their dollars, and they get your eggs. If you are able to sell your eggs for more than you paid for them, you make a profit. Instead of buying eggs, it is possible to mine them using a device commonly known as a ‘hen’. Hens make eggs out of thin air, and are effectively a license to print money since the eggs they make can be traded for dollars.

They do require fuel to run, which costs money. Miners need to determine whether their earnings from mining eggs is enough to offset the wjen costs. Unlike eggs, however, there is a fixed limit of 21 million bitcoins that will ever be created, which makes them relatively scarce, and helps give them value.

Home Questions Tags Users Unanswered. Where do the dollars go? Ask Question. Asked 7 years, 4 months ago. Active 2 years, 6 months ago. Viewed 40k times. When you buy a bottle of soda at the convenience store, where does ho money go? Bitcoins are like a commodity that works the same way. Stephen Gornick Stephen Gornick So in the case of an exchange like Coinbase, do they hold a «pool» of Bitcoin that they hold and sell to people?

Chris Moore Chris Moore 14k 5 5 gold badges 56 56 silver badges 81 81 bronze badges. Heh, this is a great way of explaining it! Chris How does this work in the case of exchanges like Coinbase?

Directly to people who are currently selling if you don’t count the minor exchange fees. Featured on Meta. Update: an agreement with Monica Cellio. Linked 0. Related 4. Hot Network Questions. Question feed. Bitcoin Stack Exchange works best with JavaScript enabled.

Here’s What Happened When I Bought Bitcoin In Person

The mining operators can then deposit their bitcoin proceeds to an exchange to sell them and receive cash in exchange. Investing in bitcoin may seem scary, but know that it takes time and effort to understand how Bitcoin works. Find a Bitcoin Exchange How wheer Secure Bitcoins As with anything valuable, hackers, thieves, and scammers will all be after your bitcoins, so securing your bitcoins is necessary. They are earned by bitcoinn mining operator or mining moneey and distributed to the mining operators who were mining. Buy Bitcoins. One hundred dollars, or 0. Some investors have likened the bitcoin hype to the dot-com bubble. This generally occurs through the banking system, with the funds eventually arriving in the seller’s bank account. It’s like when you buy anything. The Bitcoin mining industry has grown biycoin a rapid pace. So the dollars from your purchase goes to them in exchange for the bitcoins they owned. And when the value of your bitcoin doubles in a week, as it did for me, it’s easy to think you’re a genius.