Where does bitcoin derive its value from?

A few weeks ago, at Campus Party, I attended a lecture on Bitcoin.

This virtual currency, which is ruled by math instead of politics (paraphrasing the lecturer),
is already quite an acceptable way of paying for things online.
Of course this doesn’t mean you’ll be able to pay your rent with bitcoins anytime soon
(unless your landlord is a geek), but there are plans of issuing a Bitcoin credit card (sounds awesome!).
One thing that still wasn’t clear to me was how the value of the currency is being set?

The current Bitcoin value stands at approx. 10$ for 1 Bitcoin, however, how can one know
what tomorrow will bring? the demand is high right now, but I for one am not really sure what it all depends on.

To get Bitcoins in the first place, one can either trade them in the various market places, or
do some Bitcoin mining (that’s not a joke).

There are some clever methods that prevent Inflation and people trying to cheat the system,
but I still need to do more reading to voice a real opinion on this topic, definitely turned my curiosity on.

I’m keeping an open mind about this (especially due to the type of people developing, true free software fans),
though it’ll still be a while until I start working for Bitcoins.

Then again, who knows, stranger things have happened before.

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  • jim

    > “One thing that still wasn’t clear to me was how the value of the currency is being set?”

    Simple market demand. mtgox.com is the largest bitcoin exchange.

    • admin

      Yeah but there are a lot of markets… I kind of understand the principle of demand here, as always, but usually there are regulations to stabilize the value of the currency.

      • jim

        > “usually there are regulations to stabilize the value of the currency.”

        Fiat currency is always subject to various controls and regulations. Since bitcoin isn’t fiat and not issued by a government or a government-connected agency, there are no regulations as of yet. I’m not really sure how it could be regulated or if regulation is such a good thing.

        Heck, they can’t even regulate bit torrent. : )

        • admin

          True but not many people can share bittorrent for food… :)

          • jim

            The first person to figure how to make a downloadable pizza will be the greatest human in history. : )