Can someone explain bitcoin?

Please note this sub-forum does not provide professional finance advice. You should seek advice from a licensed financial advisor.

To post in this sub-forum you must have made 100 posts or have Trust status or have completed our ID Verification.

If investing please consider our affiliate link for new accounts: Sharesies.

Forums › Finance and wealth management › Can someone explain bitcoin?

richms

26419 posts

Uber Geek

Trusted

Subscriber

#87249 23-Jul-2011 15:10

So you run stuff, it cracks stuff, but who is paying for the stuff to be cracked and why are they paying for it?

For all I know it could be helping alquada or something to break codes for money. At least the other power wasting things like seti and folding had a purpose, but bitcoin seems to have none to me.

Richard rich.ms

1 | 2

BDFL - Memuneh
76410 posts

Uber Geek

Administrator

ID Verified

Trusted

Geekzone

Lifetime subscriber

#497112 23-Jul-2011 15:15

No one is paying, and it's no a workload to solve some problem.

The workloads are just distributed in a way that people need to provide evidence the problem was cracked, and each evidence is rewarded with some "bitcoin".

The actual value of these bitcoins come from the fact that

a) some are willing to provide goods and services in exchange of bitcoins you have
b) some are willing to pay actual cash for the bitcoins you have

There's a limited number of bitcoins that will be generated, and every few days/weeks it's harder to generate more, so value changes with time, as well as availability.

Transactions are said to be P2P because other participants in the currency chain must acknowledge your evidence of work.

It's not like Folding@home project or anything else.

If you want to get paid for CPU work then you have to look for other projects, such as CPU cycle sharing programs.

Please support Geekzone by subscribing, or using one of our referral links: Dosh referral: 00001283 | Sharesies | Goodsync | Mighty Ape | Backblaze

freitasm on Keybase | My technology disclosure

NordVPN

Protect your online activity with NordVPN (affiliate link).

freitasm

BDFL - Memuneh
76410 posts

Uber Geek

Administrator

ID Verified

Trusted

Geekzone

Lifetime subscriber

#497114 23-Jul-2011 15:17

Obviously to solve those workloads in a timely manner you need a fast CPU or a GPU which will yield a lot faster results.

You can do it yourself with miners, or you can particpate in a pool. When in a pool your contributions are paid off in a proportional manner, in relation to the total number of contributions.

Please support Geekzone by subscribing, or using one of our referral links: Dosh referral: 00001283 | Sharesies | Goodsync | Mighty Ape | Backblaze

freitasm on Keybase | My technology disclosure

freitasm

BDFL - Memuneh
76410 posts

Uber Geek

Administrator

ID Verified

Trusted

Geekzone

Lifetime subscriber

#497116 23-Jul-2011 15:20

Also you should read this discussion http://www.geekzone.co.nz/forums.asp?forumid=48&topicid=82546

Please support Geekzone by subscribing, or using one of our referral links: Dosh referral: 00001283 | Sharesies | Goodsync | Mighty Ape | Backblaze

freitasm on Keybase | My technology disclosure

richms

26419 posts

Uber Geek

Trusted

Subscriber

#497129 23-Jul-2011 16:37

So its just pissing away electricity in an e-peen competition to show who can solve the most pointless problems then?

Richard rich.ms

freitasm

BDFL - Memuneh
76410 posts

Uber Geek

Administrator

ID Verified

Trusted

Geekzone

Lifetime subscriber

#497132 23-Jul-2011 16:57

Basically. As it stands the number of bitcoins one make doesn't really cover the amount of power used.

Please support Geekzone by subscribing, or using one of our referral links: Dosh referral: 00001283 | Sharesies | Goodsync | Mighty Ape | Backblaze

freitasm on Keybase | My technology disclosure

richms

26419 posts

Uber Geek

Trusted

Subscriber

#497144 23-Jul-2011 17:15

You know, if it was doing something useful like breaking passwords etc and you could see who was paying you for it, I might give it a shot even if it was just a break even activity. @vfxnzguy seems to have had some positive return on it, but I dont see how that can last if its not doing anything useful.

Richard rich.ms

conky

4 posts

Wannabe Geek

#500454 1-Aug-2011 17:00

Actually it is a pretty widespread misconception that 'mining' calculations are just pointless number crunching wasting electricity.

I'm not fully able to explain how the process works in detail but the gist of it is that all bitcoin transactions need to be verified and recorded by the entire bitcoin network. This prevents people from being able to reverse transactions etc.

The number crunching done by the miners is the solving of cryptographic hashes called 'blocks' which get added to the list of verified transactions which is known by the entire network.

In extremely basic terms, the computing power provided by the miners is used to 'run' the bitcoin network.

crackrdbycracku

1168 posts

Uber Geek

#500455 1-Aug-2011 17:05

Ahh, I may have just misunderstood you but does that mean the 'goal' is to provide a verified network for exchange?

Didn't anybody tell you I was a hacker?

richms

26419 posts

Uber Geek

Trusted

Subscriber

#500460 1-Aug-2011 17:12

Yeah, still not seeing the point here.....

Richard rich.ms

crackrdbycracku

1168 posts

Uber Geek

#500463 1-Aug-2011 17:14

I can see 'the point' of a verified network for exchange...

... if it could actually be verified, which it can't, or credit cards and paypal didn't give us a way to exchange the important stuff; money.

"I'm not fully able to explain how the process works"

No kidding.

Didn't anybody tell you I was a hacker?

conky

4 posts

Wannabe Geek

#500479 1-Aug-2011 17:38

crackrdbycracku: I can see 'the point' of a verified network for exchange...

... if it could actually be verified, which it can't, or credit cards and paypal didn't give us a way to exchange the important stuff; money.

Not sure what you are saying here. The transactions are verified because the whole network has a record of every single transaction.

crackrdbycracku: "I'm not fully able to explain how the process works"

No kidding.

Well its pretty technical but here is the relevant portion of the FAQ from the wiki

==Mining==
===What is mining?===
Mining is the process of spending computation power to find valid blocks and thus create new Bitcoins.

Technically speaking, mining is the calculation of a [[hash]] of the a block header, which includes among other things a reference to the previous block, a hash of a set of transactions and a [[nonce]]. If the hash value is found to be less than the current [[target]] (which is inversely proportional to the [[difficulty]]), a new block is formed and the miner gets 50 newly generated Bitcoins. If the hash is not less than the current target, a new nonce is tried, and a new hash is calculated. This is done millions of times per second by each miner.

===Is mining used for some useful computation?===
The computations done when mining are internal to Bitcoin and not related to any other distributed computing projects. They serve the purpose of securing the Bitcoin network, which is useful.

===Is it not a waste of energy?===
Spending energy on creating a free monetary system is hardly a waste. Also, services necessary for the operation of currently widespread monetary systems, such as banks and credit card companies, also spend energy, arguably more than Bitcoin would.

===Why don't we use calculations that are also useful for some other purpose?===
To provide security for the Bitcoin network, the calculations involved need to have some very specific features. These features are incompatible with leveraging the computation for other purposes.

===How does the proof-of-work system help secure Bitcoin?===
To give a general idea of the mining process, imagine this setup:

payload =
nonce = 1
hash = [http://en.wikipedia.org/wiki/SHA2 SHA2]( [http://en.wikipedia.org/wiki/SHA2 SHA2]( payload + nonce ) )

The work performed by a miner consists of repeatedly increasing "nonce" until
the hash function yields a value, that has the rare property of being below a certain
target threshold. (In other words: The hash "starts with a certain number of zeroes",
if you display it in the fixed-length representation, that is typically used.)

As can be seen, the mining process doesn't compute anything special. It merely
tries to find a number (also referred to as nonce) which - in combination with the payload -
results in a hash with special properties.

The advantage of using such a mechanism consists of the fact, that it is very easy to check a result: Given
the payload and a specific nonce, only a single call of the hashing function
is needed to verify that the hash has the required properties. Since there is no
known way to find these hashes other than brute force, this can be used as a "proof of work"
that someone invested a lot of computing power to find the correct nonce for this payload.

This feature is then used in the Bitcoin network to secure various aspects. An attacker
that wants to introduce malicious payload data into the network, will need to do the
required proof of work before it will be accepted. And as long as honest miners have more
computing power, they can always outpace an attacker.

Also see [http://en.wikipedia.org/wiki/SHA2 SHA2] and [http://en.wikipedia.org/wiki/Proof-of-work_system Proof-of-work system] on Wikipedia.

conky

4 posts

Wannabe Geek

#500481 1-Aug-2011 17:45

Here is nicer explanation:

http://bitcointalk.org/?topic=4132.0;wap2

Also I'm not trying to convince anyone of the merits of bitcoin, just trying to clear up the misconception that mining is wasted computing power, electricity, pointless etc.

richms

26419 posts

Uber Geek

Trusted

Subscriber

#500483 1-Aug-2011 17:47

I dont care how you sugarcoat it, just churning away hashing stuff to see if it matches some outcome just to prove that you have hashed a lot of stuff to get that outcome is a waste. The "payment" network is a total croc.

Richard rich.ms

conky

4 posts

Wannabe Geek

#500485 1-Aug-2011 17:54

righto

Oubadah

676 posts

Ultimate Geek

#500541 1-Aug-2011 19:54

Yep the 'mining' system is the biggest load of tripe I've heard in a long time.

.

1 | 2