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Comment by pero | Hacker News Reader

While the video does look great, I'm afraid I still do not know how real-world value is attached to BTCs--it seems as if a 'step' is messing in the 'how it works' explanation.

I'm assuming that was the major desired end-result of this video; if it wasn't, it was the question I was hoping most to get answered.

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Supply and demand. On the supply side, it's limited to 21 million bitcoin forever.

Demand is supported by people who accepts bitcoin. Currently, the price is around 0.80 USD per bitcoin. It used to be only 5 cents per bitcoin.

And the ones who own the initial supply are the ones cranking out the solutions to the problems?

Yes. Those who solved a problem get to send 50 BTC + transaction fees to himself.

Yes. Note that solving the problems is useful to the whole network: it records transactions and secures the network.

What's being solved are not just abstract mathematical problems, but equations that have implications on the whole system?

The "equation" is a simple cryptographic hash performed on a block of data, as described earlier in this thread: http://news.ycombinator.com/item?id=2358396

The equation itself is trivial -- it can be calculated hundreds of thousands of times a second by even a really slow CPU.

An artificially set difficulty is implemented and the result is that only one of those attempts across the entire network will succeed in about ten minutes, which is the targeted time for processing a batch of transactions (a block).

And it was well over 1 USD at one point (the first time the subject really blew up on HN).

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