Cryto currency and mining

Atoms for Peace

So it seems all the cool kids are investing in bitcoins and mining for etherium these days.
Maybe I'm just getting old and not with it any more but I don't really understand how they work, to me they appear to be pyramid schemes infused with some modern day tulip mania.

seamus

It's not a pyramid scheme, though tulip mania might be relevant.

It's a bit more like digital gold. Each "coin" is a distinct piece of data that can only be discovered (i.e. "mined") by a computer performing a tonne of calculations. The whole currency hinges on the existence of what is basically a public audit trail of transactions and discovered coins. People can't just fake their own transactions and generate loads of coins for themselves because the audit trail will show them up to be wrong and reject the transactions. The audit trail both ensures that real transactions take place and that the coins used are valid.

This audit trail is maintained by a public network that any can (and does) join so there's no one central authority that can manipulate it. A decentralised currency was its goal and is part of why people like it.

It's more complicated than that, but that's how it works. In the early days there are loads of coins. As time goes on it takes more effort to mine coins. This puts a practical upper limit on the number of coins that can exist. Hence why the value of coins in circulation goes up.

At the root of it though you have data to which you've assigned a value. Data doesn't really exist in any physical form. Unlike gold.

And there is nothing stopping someone from setting up a new currency on the same software. That currency and bitcoin wouldn't be directly interchangeable, but all it takes is a critical mass of people using any currency, to make it relevant.

Bitcoin is kind of heading towards a peak. Hence why you're seeing new cryptocurrencies trying to wrestle into the space.

Bitcoin is heading towards a peak because of the public audit trail I mentioned before. It's big. Insanely big. The bigger it gets, the more computing power that's required to validate a transaction and mine new coins. And thus the more your transaction costs in real-world terms and the longer it takes to process. As a method for transferring large sums of cash, perhaps people might be happy to wait a week for the transaction to be processed and pay a 10% processing fee. Or more likely they'll cash out and move to another cryptocurrency with a shorter blockchain and a processing time in minutes rather than days.

Just like any other bubble, be that tulips or houses, the people who got in early and made the cheapest investments can make off now like bandits. And as with any other bubble, if it seems like you need to invest an insane amount of money just to get started, then you're at the tail end of it and you're going to be one of the big losers.

Look at the up-and-coming cryptocurrencies; hedge your bets and spread €1000 across them, or set up your own mining hardware. Worse case scenario you're out €1000.

srsly78

OP think of it as a currency rather than as an investment.

Permabear

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mariaalice

This happened about 3/4 years ago.I know of a couple who's relationship was rocky and going now they lived together and one of the final nail in the coffin was when she came home one day found that he had 3 computers hooked up together take over half the sitting room and told her he was going to spend his time mining for bit coins.

Are Am Eye

Your puny earth money will someday be replaced by cryptocurrency issued by banks off their own private blockchain.
No doubt a microchip in your hand will be involved.

DominoDub

Wow I had just finished reading this... when I spotted this thread

https://qz.com/1054805/what-its-like-working-at-a-sprawling-bitcoin-mine-in-inner-mongolia/

Permabear

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cnocbui

Here's the thing with mining. It creates a lot of heat. Unfortunately noise too. Does your boiler generate money while it's working? Mine neither, but an Etherium miner might.

Drumorig

Forget mining, buy cheap coins and hold, I'm currently in adex and neo, 100 quid now worth 3k. I have pillar too but that only doubled since I bought it!

Wanderer78

Permabear wrote:

This post had been deleted.

You are aware that the majority of money created is in fact created by privately owned banks in the form of debt? I do believe it is this fact that actually causes the bulk of our instabilities in our economic and financial systems, but the guberment!

jamesbere

Are Am Eye wrote: »

Your puny earth money will someday be replaced by cryptocurrency issued by banks off their own private blockchain.
No doubt a microchip in your hand will be involved.

I think in the form of a suppository would be best

Dohnjoe

Wanderer78 wrote: »

You are aware that the majority of money created is in fact created by privately owned banks in the form of debt? I do believe it is this fact that actually causes the bulk of our instabilities in our economic and financial systems, but the guberment!

It's been around various forms for hundreds of years and functions

As of yet no one has an alternative that works better

It will likely be around as long as the public, companies and governments demand loans - which doesn't seem like it's going to change any time soon

Dohnjoe

Drumorig wrote: »

Forget mining, buy cheap coins and hold, I'm currently in adex and neo, 100 quid now worth 3k. I have pillar too but that only doubled since I bought it!

Worth mentioning there are thousands of coins, some spike, some hold value, many fade or die

Even with the best knowledge of the market and coins - the experts can't predict what will happen next to which coin - only hope that others piling in with boost the value of X or Y coin

The usual applies to anyone getting into this - "only put in what you can afford to lose"

Wanderer78

Dohnjoe wrote: »

It's been around various forms for hundreds of years and functions

As of yet no one has an alternative that works better

It will likely be around as long as the public, companies and governments demand loans - which doesn't seem like it's going to change any time soon

there are actually alternative ideas and systems out there that might just be a little more stable but im sure these alternatives do and would have their own faults and problems.

id have to agree with those that advocate for things such as public banking systems, they seem to be far more stable systems but also noting they to are problematic.

id also agree with somebody like steve keen, that governments, just like banks, have the ability to create money in the form of bonds, but id agree with somebody like jim rickards, theres an invisible limit in which money can be created before confidence is lost in that money or currency. i do feel our political approach of 'balancing the books' is fundamentally flawed as explained by steve keen, i.e. governments can actually create more money than they collect in taxes.

unfortunately, id have to agree with those that say, most of our politicians and policy makers don't truly understand these systems and even basic ideas such as, money and its creation.

i do think we ve handed our money creation systems over to potentially very dangerous institutions that actually dont truly understand the complexity of our financial and economic systems, and have based their thinking on very simplistic ideas and theories that have been proven to fail repeatedly. i think this is one of the reasons of why we are now seeing the rise of alternatives such as crypto currencies, i.e. confidence is slowing being lost in these institutions and the ideas and theories in which they're based on.

bananabread12

Atoms for Peace wrote: »

So it seems all the cool kids are investing in bitcoins and mining for etherium these days.
Maybe I'm just getting old and not with it any more but I don't really understand how they work, to me they appear to be pyramid schemes infused with some modern day tulip mania.

TIL digital currency such as Bitcoin that is considered relevant and reputable through it's practicality, subject to literally hundreds upon thousands of academic studies and advocated by many economists, is a "pyramid scheme" by a boards.ie poster.....

How you manage to put on your trousers in the morning I'll never know...

Atoms for Peace

Permabear wrote: »

This post had been deleted.

I have no faith in the banks or government with everything that's come on in recent times thanks to the laissez-faire economic policies that why I'm cynical that a completely feral currency based on lines of code will be to the benefit of the average Joe.

Atoms for Peace

bananabread12 wrote: »

TIL digital currency such as Bitcoin that is considered relevant and reputable through it's practicality, subject to literally hundreds upon thousands of academic studies and advocated by many economists, is a "pyramid scheme" by a boards.ie poster.....

How you manage to put on your trousers in the morning I'll never know...

https://www.youtube.com/watch?v=MF5pbroiSoA

Are Am Eye

Atoms for Peace wrote: »

I have no faith in the banks or government with everything that's come on in recent times thanks to the laissez-faire economic policies that why I'm cynical that a completely feral currency based on lines of code will be to the benefit of the average Joe.

Do you accept or decline the salary that's transfered into your bank account every month?

Caliden

srsly78 wrote: »

OP think of it as a currency rather than as an investment.

Except that very few places accept it and it takes a long time for the transaction to go through.

bananabread12

Atoms for Peace wrote: »

I have no faith in the banks or government with everything that's come on in recent times thanks to the laissez-faire economic policies

What laissez-faire economics? The financial system is, as it has always been, one of the most highly regulated areas of the economy. Can you elaborate on what exactly these "laissez-faire economics" are that you're referring to? I'm just curious.

I'm cynical that a completely feral currency based on lines of code will be to the benefit of the average Joe.

And do you believe that this assumption is reason enough to refrain in even giving market participants at least the opportunity to use it? Must it be stamped out entirely based on some peoples negativity towards it's practicalities as a means of exchange? Surely any free society would at the very minimum permit us to make the choice.....

In reality, cryptocurrencies like Bitcoin and Monero ect have many benefits for the average Joe over fiat paper like the Dollar or the Euro. Of what benefit is fiat paper to the average Joe is the real question here? What benefit does the average Joe receive when he finds his wealth evaporating through inflation? At the end of the day if you do work for me - whose business is it if I pay you in Skittles if we both agree to it? It's nobodies business.

Caliden

bananabread12 wrote: »

In reality, cryptocurrencies like Bitcoin and Monero ect have many benefits for the average Joe over fiat paper like the Dollar or the Euro. Of what benefit is fiat paper to the average Joe is the real question here? What benefit does the average Joe receive when he finds his wealth evaporating through inflation? At the end of the day if you do work for me - whose business is it if I pay you in Skittles if we both agree to it? It's nobodies business.

Best of luck to the average Joe trying to buy BTC and then best of luck trying to keep it.

For something to take off with the general public it has to be easy to use which isn't the case with BTC.

Dohnjoe

bananabread12 wrote: »

TIL digital currency such as Bitcoin that is considered relevant and reputable through it's practicality, subject to literally hundreds upon thousands of academic studies and advocated by many economists, is a "pyramid scheme" by a boards.ie poster.....

How you manage to put on your trousers in the morning I'll never know...

Apart from the fancy dencentralised tech behind and black market there's not much practical use for it yet

Everyone is hoarding it bc it's rising in value, and the only reason it rises in value is because some other joe soap pays more than you did for it

The same economists and experts also consider it volatile, unstable, risky, technically complex, pyramidy and currently unsuitable as a national currency

The main public interest is in the fact that their speculative digital "gold" is now worth 4 times more that what it was in January.

And industry is excited about the blockchain and DL tech behind so they can trim the fat on old linear processes

Atoms for Peace

I wasn't trying to disparage anyone's use of crypto currency or start a argument, rather start a light hearted discussion on its merits.

Wanderer78

bananabread12 wrote: »

What laissez-faire economics? The financial system is, as it has always been, one of the most highly regulated areas of the economy. Can you elaborate on what exactly these "laissez-faire economics" are that you're referring to? I'm just curious.

the abolishment of the glass steagall act comes to mind and of course, 'light touch regulation'!

scamalert

the only problem with cypto currency is that no one uses it as currency.but if your a bit into gambling and have few euro to spare why not speculate on something that created of thin air, doesnt drive any economical growth ,nor create economy but is solely used to hold and wait until it goes into hyperinflation and for barely nothing make enough to cash out into real cash/fiat which you can actually do something with.

Atoms for Peace

bananabread12 wrote: »

What laissez-faire economics? The financial system is, as it has always been, one of the most highly regulated areas of the economy. Can you elaborate on what exactly these "laissez-faire economics" are that you're referring to? I'm just curious.

There's been a big change in the culture that began in the days of thatcher and Reagan where maintaining growth is now the main priority. The idea that the financial sector, here anyway during the bertie period, was highly regulated is farcical.

Dohnjoe

bananabread12 wrote: »

In reality, cryptocurrencies like Bitcoin and Monero ect have many benefits for the average Joe over fiat paper like the Dollar or the Euro. Of what benefit is fiat paper to the average Joe is the real question here? What benefit does the average Joe receive when he finds his wealth evaporating through inflation? At the end of the day if you do work for me - whose business is it if I pay you in Skittles if we both agree to it? It's nobodies business.

Just to elaborate here a bit

For a start BTC is hyper-inflating, which means people aren't going to spend it. It's volatile and unstable (that's a given) It's also based on a market with zero regulations that can be freely manipulated by cartels, insider trading, hackers, rogue nations, big players, you name it

There is technical risk to the coin, forks, bugs, scaling issues, etc. There is personal risk - hacks, malware, exchange risk, hardware risk, no insurance and no recourse (you screw up, forget one password, your life savings could be gone)

On top of that the people we elect would have no monetary or fiscal controls over it - great for volatilty, terrible for stability. And if there's an economic crash? no mitigating factors. It can drop 20% or more in 48 hours, that would be enough to devastate a country if it were a national currency. Those drops aren't disappearing with size either, was 120bn market cap and we had a 25% dive

Don't have electricity? can't use it. Don't have internet? can't use it

But don't get me wrong, it can be used as a form of "money", absolutely. However widespread use as a currency? don't know about that

would have to be a fair few changes

Permabear

This post has been deleted.

bananabread12

Atoms for Peace wrote: »

There's been a big change in the culture that began in the days of thatcher and Reagan where maintaining growth is now the main priority. The idea that the financial sector, here anyway during the bertie period, was highly regulated is farcical.

What, may I ask, was so "laissez-faire" about Reagan and Thatcher? Both of which were largely corporatist/crony-capitalist. State capitalism is a very different concept to a genuine freed market economy. That's like lumping a mutualist in with a Stalinist/Maoist.

srsly78

srsly78 wrote: »

OP think of it as a currency rather than as an investment.

A currency nobody will pay you in, the government won't accept when collecting tax, and not accepted at 99% of retail outlets.

Yeah, think of it like that.