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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.

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Atoms for Peace

bananabread12 wrote: »

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.

bananabread12

Deleted User wrote: »

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!

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.

[Deleted User]

bananabread12 wrote: »

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

Oh no!

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.

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

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.

Permabear

This post has been deleted.

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.

bananabread12

Deleted User wrote: »

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.

[Deleted User]

bananabread12 wrote: »

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?

[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.

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.

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.

Dohnjoe

paleoperson wrote: »

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

Sheeps

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

srsly78

Deleted User wrote: »

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?

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

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?

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?

Sheeps

JaMarcusHustle wrote: »

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

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.

srsly78

ohnonotgmail wrote: »

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.

Sheeps

ohnonotgmail wrote: »

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

With Ripple, you can do it in 6 seconds.

ohnonotgmail

srsly78 wrote: »

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.

but i couldnt do that in ireland. those bitcoin atms dont exist here. or anywhere in europe apart from kosovo. and i did a quick check of the fees. they make the ****tiest airport fx place seem reasonable.

ohnonotgmail

Sheeps wrote: »

With Ripple, you can do it in 6 seconds.

exchange bitcoins for cash?

Sheeps

ohnonotgmail wrote: »

exchange bitcoins for cash?

In essence yes. For example if you want to exchange or transfer JPY for VND you can use ripple as an intermediary almost instantly. It's in-fact it's main use-case, which is why it's being used as a vehicle for instantaneous (almost free) international payments (replacing SWIFT based systems).

alb

JaMarcusHustle wrote: »

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

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?

While sheeps has gone quite technical and perhaps lost you with some of the terminology, lets try a simpler analogy. You could say that it doesn't matter how many goals a team scores in a match, because the score keeper could just add on false goals to the score. So why are we not worried about? well there are witnesses at the match, and there is a video recording that could be used as evidence to verify the score was correct.

In Bitcoin the blockchain, meaning the whole history of every transaction, is public, so anyone can verify it. The transactions allow miners to award themselves new coins are part of this so they can also be verified as fair and within the rules of bitcoin. There is no owner or anyone in control. The system is open and the software is free, anyone can run it and become part of the network or become a miner.

blockchain.info are one website participating in the network, they have a website allowing you to browse their copy of the blockchain.
Here is block 481736 And from that block, here is the transaction where the miner awarded themselves the block reward + fees from the transactions in the block (totaling 15.04btc)

Here's the same block and the same transaction from the copy of the blockchain that a different webside blockexplorer.com has.

You could run the bitcoin software yourself and verify that you get the same block and same transaction too.

What bitcoin does is provide a way for everyone running the software to reach consensus on what the transaction history of bitcoin is without anyone being in charge or in control of it.
It also makes it basically impossible to change old blocks, re-write history or undo transactions.

Austria!

paleoperson wrote: »

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

So what you think of VISA taking a cut of transactions? Or of banks changing you for having accounts and useing financial instruments? If blockchains can do that more efficiently and cheaper then there's the value.

What about keeping track of information in a decentralised trustless and more efficient manner? What about FACTOM for instance?

Why do you think so many multinational companies have signed up to the EEA? Are they all falling for a pyramid scheme too?

alb

I'll add that if you think using a digital ledger as money is crazy then also realise that that is all your bank account is.

When you opened the account you started at 0, there was a transaction recorded with your first deposit and that gave you a positive balance etc.. the history of transactions is all that is required to arrive at your current balance, and it's just a number in a computer.

There is no segregated pile of euros in a safe representing the money in your account. Your account balance is effectively an IOU from the bank for that amount, with the government saying that if the bank goes bust you have an IOU from the government for up to 100k of your balance.

Think about the question, what is more valuable, a euro coin in your pocket or a euro in your digital bank account? why?

Dohnjoe

JaMarcusHustle wrote: »

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

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?

Yeah I'm not too good with the tech part, and I'll probably butcher this horribly, but..

Think of it like a mini lottery programmed to make a few coins available every few minutes to those that enter. In order to enter the lottery you have to start your PC solving the problem (mining). So your PC becomes like having a lottery ticket. The more PC's you have (mining power) the more tickets you have, the higher chance of "winning" every few minutes

Your reward will be a few coins

All this is recorded on a public ledger and the coins go to your address on that public ledger. Everyone can see it, but only you can access it with a private key (password)

All of this is "group-validated" by other machines to avoid cheating or duplication

The smart programme that you were solving for the coins will have a raft of features built in, e.g. a limited number of coins that will ever be produced, difficulty of mining increasing over time, etc

You can e.g. transfer the coins from your address to another address (of a shop) to pay for something

All of which is recorded and validated on the central ledger

CruelCoin

Wanderer78 wrote: »

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.

A key one being anyone living under such a system not being able to afford anything better than a Lada.

The current form of currency and economic structure we have puts into the hands of the average industrial worker: foreign trips, 2 cars, tvs in every room, fag and booze money aplenty.

There is no other system, conceived or attempted that can achieve that level of prosperity.

Are there issues? Absolutely, but at the end of the day, unlike lefty nations, people don't starve to death in capitalistic countries.

Wanderer78

JaMarcusHustle wrote:

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?

I believe it is common that money and it's creation is rarely explained in economics courses, is this true?