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Cryto currency and mining

  • 18-08-2017 8:54am
    #1
    Closed Accounts Posts: 2,888 ✭✭✭


    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.


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Comments

  • Registered Users, Registered Users 2 Posts: 68,190 ✭✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 7,157 ✭✭✭srsly78


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


  • Closed Accounts Posts: 39,022 ✭✭✭✭Permabear


    This post has been deleted.


  • Posts: 0 [Deleted User]


    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.


  • Registered Users, Registered Users 2 Posts: 2,166 ✭✭✭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.


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  • Registered Users, Registered Users 2 Posts: 1,572 ✭✭✭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/


  • Closed Accounts Posts: 39,022 ✭✭✭✭Permabear


    This post has been deleted.


  • Registered Users, Registered Users 2 Posts: 20,730 ✭✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 204 ✭✭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!


  • Registered Users, Registered Users 2 Posts: 30,813 ✭✭✭✭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!


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  • Registered Users, Registered Users 2 Posts: 5,022 ✭✭✭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


  • Registered Users, Registered Users 2 Posts: 18,860 ✭✭✭✭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


  • Registered Users, Registered Users 2 Posts: 18,860 ✭✭✭✭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"


  • Registered Users, Registered Users 2 Posts: 30,813 ✭✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 163 ✭✭bananabread12


    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...


  • Closed Accounts Posts: 2,888 ✭✭✭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.


  • Closed Accounts Posts: 2,888 ✭✭✭Atoms for Peace


    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...

    :p


  • Registered Users, Registered Users 2 Posts: 2,166 ✭✭✭Are Am Eye


    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?


  • Registered Users, Registered Users 2 Posts: 5,982 ✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 163 ✭✭bananabread12


    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.


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  • Registered Users, Registered Users 2 Posts: 5,982 ✭✭✭Caliden



    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.


  • Registered Users, Registered Users 2 Posts: 18,860 ✭✭✭✭Dohnjoe


    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


  • Closed Accounts Posts: 2,888 ✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 30,813 ✭✭✭✭Wanderer78


    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'!


  • Registered Users, Registered Users 2 Posts: 3,739 ✭✭✭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.


  • Closed Accounts Posts: 2,888 ✭✭✭Atoms for Peace


    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.


  • Registered Users, Registered Users 2 Posts: 18,860 ✭✭✭✭Dohnjoe




    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


  • Closed Accounts Posts: 39,022 ✭✭✭✭Permabear


    This post has been deleted.


  • Registered Users, Registered Users 2 Posts: 163 ✭✭bananabread12


    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.


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  • Posts: 0 [Deleted User]


    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.


  • Closed Accounts Posts: 2,888 ✭✭✭Atoms for Peace


    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.

    All right you got me I'm not an economist, i was using the term loosely.


  • Registered Users, Registered Users 2 Posts: 163 ✭✭bananabread12


    A currency nobody will pay you in

    What a strange comment considering more people are using Bitcoin than ever before.....
    the government won't accept when collecting tax

    Oh no! :(

    lovejoy3.jpg


  • Registered Users, Registered Users 2 Posts: 3,739 ✭✭✭scamalert


    cryptos are pretty much get rich quick plan, since see if those bad banks where to offer same people to put cash into investment portfolio that puts cash into real companies and returns could be 30-40% but also include massive losses and needing to put up front 10k minimum most these so called crypto traders would wet their pants seeing actual money either working or losing them profits.As opposed to putting in some 20e smth and few weeks later magically taking out few hundred profit,without much logic besides hype, makes them more sense since at the end of the day its free cash.


  • Posts: 0 [Deleted User]


    What a strange comment considering more people are using Bitcoin than ever before.....



    Oh no! :(

    lovejoy3.jpg

    Fantastic rebuttal.

    Look, Bitcoin might be many things but right now it isn't in any meaningful sense a currency and people should stop pretending it is.


  • Registered Users, Registered Users 2 Posts: 9,597 ✭✭✭gctest50


    Dohnjoe wrote: »

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

    ......

    Yer coffee shop won't be open if there's a powercut


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  • Registered Users, Registered Users 2 Posts: 1,259 ✭✭✭alb


    Seasmus post was a pretty good overview of the idea, but there are a couple of technical things that were innacurrate:
    seamus wrote: »
    ... 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.

    Bitcoin miners add transactions to bitcoin in blocks, one block is added on average every 10 minutes. They get a reward of newly generated btc for doing this. It started at 50 btc per block and reduces by half every 4 years. It has halved twice already so it's currently at 12.5. This is what causes the absolute limit of 21 million coins, the last of which will be mined over 100 years from now.

    The difficulty to mine a block and get that reward depends on the total global power being spent on mining. If blocks are being mined faster than 10 minutes, the mining gets more difficult to slow it down again, but if it's taking longer than 10 minutes it will actually get easier again. So the difficult (or cost) of mining trends towards the value of the reward. Bitcoin has in general been going up in value over its lifetime, so mining has gradually been getting more difficult as people have been dedicating more power to it.
    seamus wrote: »
    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.

    The mining difficulty has no direct relationship to transaction fees. Fees are affected by how many transactions people are making, and how many bitcoin can support. Currently bitcoin can only support 1 megabyte of transactions per block (i.e. per 10 minutes). The transactions offering the highest fees get prioritised, so if there's a backlog of transactions and you're in a hurry to get you transaction confirmed you'll need to pay a higher fee than others to jump the queue, or you can pay a lower fee and wait.

    The fee has no relation to the amount of btc you're sending. Fees may go down in future if off-chain scaling can be achieved - essentially making many transactions that do not get included in blocks but that eventually settle by using a single transaction that does. This is a work in progress and will vastly increase the usefulness of bitcoin if it works sufficiently.


  • Closed Accounts Posts: 39,022 ✭✭✭✭Permabear


    This post has been deleted.


  • Registered Users, Registered Users 2 Posts: 11,230 ✭✭✭✭B.A._Baracus


    Problem with BitCoin today is that's it is too popular for your average joe to get into on a personal scale and make decent money. It's like most things in life when late to the party.

    Take a look at this:


    It's a Chinese factory running so many computers hooked together and their monthly electricity bill is insane to boot. I know that's big scale. But that's also what you are up against / the reality of what it takes to make great money.


  • Registered Users, Registered Users 2 Posts: 163 ✭✭bananabread12


    Fantastic rebuttal.

    Look, Bitcoin might be many things but right now it isn't in any meaningful sense a currency and people should stop pretending it is.

    Rebuttal? You mean to say your previous comments were serious? I thought your statements that flew in the face of thousands of legitimate and highly reputable academic studies was in jest. In any event, it seems the extent of your analysis and "argument" against cryptocurrencies are that you simply don't understand them and therefore you dislike them.


  • Posts: 0 [Deleted User]


    Rebuttal? You mean to say your previous comments were serious? I thought your statements that flew in the face of thousands of legitimate and highly reputable academic studies was in jest. In any event, it seems the extent of your analysis and "argument" against cryptocurrencies are that you simply don't understand them and therefore you dislike them.

    I don't like or dislike them.

    My point is that it isn't a currency in a meaningful sense. People who argue that it is don't understand what a currency is I'm afraid.

    I am not aware how that opinion is contradicted by 'thousands of legitimate and highly reputable academic studies', maybe their authors should have started by looking up currency in the dictionary?


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  • Posts: 17,378 ✭✭✭✭ [Deleted User]


    It's barely a currency and in reality, it's used like a shopkeeper in the south accepting the pound but he only ever gets the euro because people are hoping their pounds keep appreciating.


  • Registered Users, Registered Users 2 Posts: 3,522 ✭✭✭paleoperson


    I don't care what anyone says, they're a pyramid scheme. No lengthy explanations will change that. You're creating nothing of any value and nothing of worth. I know there's this gimmick about how your CPU is "validating" other transactions. If that were the case then just pay people for validating transactions normally, not "mining". The whole thing is just a scheme that is a waste of humanity's time. You can't make something from nothing unless you're stealing it.


  • Moderators, Recreation & Hobbies Moderators, Science, Health & Environment Moderators, Technology & Internet Moderators Posts: 94,296 Mod ✭✭✭✭Capt'n Midnight


    Pretty much every scam with real currency , shares and bubbles has been replicated, repeatedly.
    http://www.bbc.com/news/technology-41011658
    Cyber-thieves are believed to have stolen about $500,000 (£390,000) in the Ethereum crypto-currency, with an investment scam.

    The thieves hijacked the website of finance security start-up Enigma and posted messages saying it was about to launch its own currency.


  • Registered Users, Registered Users 2 Posts: 18,860 ✭✭✭✭Dohnjoe


    I don't care what anyone says, they're a pyramid scheme. No lengthy explanations will change that. You're creating nothing of any value and nothing of worth. I know there's this gimmick about how your CPU is "validating" other transactions. If that were the case then just pay people for validating transactions normally, not "mining". The whole thing is just a scheme that is a waste of humanity's time. You can't make something from nothing unless you're stealing it.

    Well time + electricity are involved, so I wouldn't say they come from nothing

    Also, it's not all negatives, it's a mixed bag..

    The blockchain and distributed ledger technology behind are a pretty big deal - just about every large financial institution and industry player are investing heavily into it right now

    As for the coins, yes they have limited use, but they are as tangible as just anything digital we use today. Think of them like digital assets/commodities/stocks

    The fact that Joe public can buy and sell these digital commodities on a risky unregulated market is very attractive to certain people. People who give that process value, therefore the coins behind gain value

    It's also a strong hedge against recessions and economic downturns - if the economy goes into a slide, these things will just go up in value

    As an investment vehicle, Bitcoin has obliterated just about any other financial asset out there.. by a long shot - so much so that more and more investment and financial firms are offering BTC and crypto funds. Whether or not you believe in it - the fiat you get selling it is very real

    As for the Tulip mania comparisons, perhaps.. but every time the market crashes it seems to bounce back stronger, and that's going on 7 years now


  • Registered Users, Registered Users 2 Posts: 2,763 ✭✭✭Sheeps


    Tezzos are the future. That's all you need to know.


  • Registered Users, Registered Users 2 Posts: 7,157 ✭✭✭srsly78


    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.

    Kinda like dollars in Ireland then?


  • Closed Accounts Posts: 4,719 ✭✭✭JaMarcusHustle


    I studied Economics. I work in finance. I consider myself to be fairly tech-savvy.

    But I still feel like an idiot because I just can't my head around the whole idea of mining and how it works or creates currency :o

    Edit: Emphasis on the "creates currency" part. I've seen mining explained in simple terms, and while I don't get the intricacies, I get the broad summary of it. But I just don't understand how that's rewarded with currency. Surely that mean's there's some program out there that generates currency to give to people who are mining? And someone owns that program or created it? And surely that means there's an infinite supply?


  • Registered Users, Registered Users 2 Posts: 40,798 ✭✭✭✭ohnonotgmail


    srsly78 wrote: »
    Kinda like dollars in Ireland then?

    i can exchange dollars for euro in 5 minutes. can i do that with a bitcoin?


  • Registered Users, Registered Users 2 Posts: 2,763 ✭✭✭Sheeps


    I studied Economics. I work in finance. I consider myself to be fairly tech-savvy.

    But I still feel like an idiot because I just can't my head around the whole idea of mining and how it works or creates currency :o

    Edit: Emphasis on the "creates currency" part. I've seen mining explained in simple terms, and while I don't get the intricacies, I get the broad summary of it. But I just don't understand how that's rewarded with currency. Surely that mean's there's some program out there that generates currency to give to people who are mining? And someone owns that program or created it? And surely that means there's an infinite supply?


    When people mine they are basically solving a problem that is really hard to complete but really easy to verify that it has been solved. It's called proof of work. The proof of work involves hashing, which is basically creating a digest of a payload of data with a known hashing algorithm.

    The proof of work problem in bitcoin is 17 leading zeros in a double hashed digest, which is incredibly hard to find, but on average it is solved approximately once every 10 minutes or so.

    Once they have solved the problem the miners communicate to the network that they've solved the problem and if they're the first person to solve the problem (i.e they've got the highest block on the chain), they are rewarded with coins in their wallet for doing so (started at 50 coins per block, now its at 25) once other nodes in the network verify their work.

    Since it's their version of the ledger they're basically committing to the distributed network, the coins they give themselves becomes part of the reward for mining.

    The thing that stops people from just altering the block chain and committing it to the network, is the fact that all the hashes generated for previous transactions in the ledger are essentially parents of future transaction and make up part of the message digest used for hashing, so in essence for someone to recompute the block chain and have their version (with false or double spent transactions in it) they would need more computing power than the sum of the computing power of the entire network. It's not impossible, just incredibly impractical. What's more is that they'd have resolve the entire block chain in less time than it takes for someone else to solve a single block on the chain (which is usually about 10 minutes).

    On top of the sum of money miners give to themselves for hashing the next block, they also collect the transaction fees for all of the transactions commit to the network in that block.


  • Registered Users, Registered Users 2 Posts: 7,157 ✭✭✭srsly78


    i can exchange dollars for euro in 5 minutes. can i do that with a bitcoin?

    Yes works the same way. Gotta shop around to get best exchange rates. If you want instant exchange there are bitcoin atm machines but that won't give a good rate - similar to the ****ty fx places in airport.


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