Bitcoin Op -

[Sammy]

With Jace proposing to start up a Bitcoin Operation, I wanted to have a conversation about that, knowing little about bitcoins myself. I already asked about it some in the Christmas Deagle Nation Fundraiser thread, but I figured I'd move the conversation to another thread going into bitcoins in detail would be pretty off topic:

I'm sorry I'm not the hip young interweb surfer I was in halcyon days of my youth, and I think I've asked this before on the forums, but apparently the description didn't stick and I need a reminder -

What the fuck is a bitcoin, and what exactly is involved in bitcoin mining? I've gathered that it involves keeping your computer on and your computer does.... something. The more powerful the computer, the better, hence the over clocking (and the heat issues Smutley's post mention), and of course, the more computers you have the more you can put to the task of bitcoin mining, but what I've typed is literally the end of my understanding. I don't know what the bitcoin is, how its used (other than some form of maybe tradable currency?), or what kind of processing your actual cash-expensive new supercomputer cluster is doing in order to earn or 'mine' these tender fuckers.

I think when I asked this question before, the explanation that was given to me made me conclude that bitcoin mining was the stupidest thing I'd ever heard of, but as Jace is voicing his intent to give it a try (rather than get a job alongside Eli), it seems relevant to ask again, if nothing else to have a better understanding of what The Commander is up to.

My question to the masses of gamers, which Smutley promptly responded to, being the rad dude he is.

I'll keep this short so it doesn't get too off topic, but basically...

Bitcoins are generated by having a computer work at a special math problem. Multiple people all work on the same problem and communicate it with a central server every other person that mines or uses bitcoins in something called the blockchain. Depending on how much you have generated towards the problems solution is the amount of bitcoins you get. The more people who are trying to solve the problem, the harder the problem and the smaller the payout.

Certain hardware - such as specific ATI graphics cards, and ASCI mining computers that literally can do nothing but crunch bitcoin math problems - are better at this, and they can do it faster than commercial computers. But as you add more power to the problem, then the math problem gets harder, and you generate less coins. Bitcoin mining is also rife with scammers, so people sell snake oil and pyramid schemes and cheat get rich quick schemes.

It's gotten to the point where now, it costs the average consumer with a Dell or a single Gaming PC more money in power per day than they generate in coins - say, 50 cents of power vs. 30 cents in coins. Since this is all speculation (and not an investment since the currency isn't real, there is no product, and it depends on what people want to pay for funny money), people are hoping their initial cost is offset by Bitcoin prices GOING GANGBUSTERS!

What it's really proven is that only cheats and the lucky make a profit, and everyone else is left holding a bag of unstable monopoly money that almost no business accepts as a payment and can tank to 50% it's original value in less than an hour. Also every transaction costs you a percentage and there's no guarantee that the companies you store your bitcoins in won't just steal them, go bankrupt, or both. There's also the problem of the blockchain which is a massive file that stores records of every single bitcoin transaction that has ever been made since it's inception. This file is constantly growing, and the more people and more trades the quicker and larger it will grow.

Now back to your regularly scheduled broadcasting.

I have further questions from this response though. So companies/individuals are storing this file rather than a central server? who governs these bitcoins? Someone? No one? How is this "Blockchain" file kept genuine? Is that how the amount of bitcoins earned/owned are tracked, or can someone just say they have x or y bitcoins? What is this math number crunching achieving? And why is someone willing to offer compensation for your computer's resources and time? How do third party companies store your bitcoins if its one big file stored by everybody? I figure some of these questions don't have answers (such as how is the file kept genuine, it probably isn't?).

It sounds an awful lot like SETI@Home, but dumb?

 

[XYZpdq]

As far as I understand bitcoins are good for buying illegal things or overpriced shit from trendy places.

 

[Le Bateleur]

Bitcoin makes me sad. I almost bought a few when they were worth pennies, just for the curiosity. The value then went through the roof, and I could've been a bitcoin millionaire who was too busy playing helicopter golf to post on here.

What might've been

 

[WWWWolf]

I have further questions from this response though. So companies/individuals are storing this file rather than a central server?

Yep. Essentially, the blockchain is distributed to all Bitcoin users at the same time. Kind of like Bittorrent, only slower.

who governs these bitcoins? Someone? No one?

No one. The monetary value is essentially whatever the hell people are imagining it to be, but that is just the basic property of money in general. So the only difference between Bitcoin and real-world currencies is that the real-world currencies are actually widely accepted for payments and hence people tend to think they're worth something.

How is this "Blockchain" file kept genuine? Is that how the amount of bitcoins earned/owned are tracked, or can someone just say they have x or y bitcoins?

Strong cryptography.

What is this math number crunching achieving? And why is someone willing to offer compensation for your computer's resources and time?

Essentially, the number crunching is done to ensure that the deposits/withdrawals are genuine, so that ensures that the transactions are actually valid. As a reward of that number crunching, the computers that solve the problem are given free money. So everyone who participates in fulfilling this important part of the network's function are compensated by a chance of winning free money out of nowhere.

How do third party companies store your bitcoins if its one big file stored by everybody?

Essentially, the blockchain itself is terabytes (?) in size and downloading it is a bloody time-consuming process. Currently, there's np official way to alleviate this problem, so nobody wants to do it. So companies essentially offer a front-end that lets them have the blockchain on their servers, while everything else happens over the web. Essentially you're letting someone else take care of the money in your wallet. This can be a good thing or a bad thing. (Spoiler: the people who implement these services generally have no fucking clue how to implement these and get hit by hackers. Or they're just outright scams and run with it.)

It sounds an awful lot like SETI@Home, but dumb?

Pretty much. I personally believe Bitcoin is a very interesting experiment from technical point of view, but the user community has been infested with people who either have no idea what they're doing, or have a very good idea on how to scam people out of their filthy fiat-currency money. Purely from a technical point of view it's a very cool proof of concept, but people who think it's a total replacement for world currencies are totally deluded. Perhaps one day this sort of system will lead to a more workable cryptocurrency. Who knows.

 

[Smutley]

WWWWolf has a great breakdown above. If you were interested in more stuff, he made a thread that kind of fell in to disuse that chronicles both Bitcoins as a cryptocurrency and the eccentric and bad behavior that surrounds it.

http://cwckiforums.com/threads/bitcoin-the-funny-money-of-this-decade.3048/

 

[KatsuKitty]

Bitcoins are not exactly free money. "Free money" implicitly means the currency in question has no value because the value of currency depends on people not having it.

Imagine a giant wall of safes. Millions of safes. Inside each safe is one dollar. Bitcoin mining is like trying each safe for the combo to get it open and retrieve the dollar. Assuming massive manpower, more and more of the safes are cracked, and the dollars inside are taken. After a while, there's not as many safes left to crack, and it gets harder to find a dollar in the wall of safes. If you want a dollar, it's not as easy as cracking a safe anymore. You'll have to find some other way to get the dollar, like working.

Bitcoin is much the same. Eventually, the amount of Bitcoins to be mined will be exhausted. It gets harder and harder to find one as more cryptographic hashes are found, requiring more computer time to find one, and thus more electricity. Jace missed the original Bitcoin boom where you could turn a small profit from the hardware and electricity required. He's not going to turn a profit this time.

 

[StallChaser]

Bitcoins are not exactly free money. "Free money" implicitly means the currency in question has no value because the value of currency depends on people not having it.

Imagine a giant wall of safes. Millions of safes. Inside each safe is one dollar. Bitcoin mining is like trying each safe for the combo to get it open and retrieve the dollar. Assuming massive manpower, more and more of the safes are cracked, and the dollars inside are taken. After a while, there's not as many safes left to crack, and it gets harder to find a dollar in the wall of safes. If you want a dollar, it's not as easy as cracking a safe anymore. You'll have to find some other way to get the dollar, like working.

Bitcoin is much the same. Eventually, the amount of Bitcoins to be mined will be exhausted. It gets harder and harder to find one as more cryptographic hashes are found, requiring more computer time to find one, and thus more electricity. Jace missed the original Bitcoin boom where you could turn a small profit from the hardware and electricity required. He's not going to turn a profit this time.

The difficulty of the crypto automatically adjusts to how much computing power is thrown at it, so it's solved every x amount of time (I forget the interval). It created a sort of arms race in bitcoin mining. First with CPU, then with GPUs, then with FPGAs and dedicated hardware. The time of doing any worthwhile mining with a general purpose PC is long gone, because the cost of the electricity to run the PC far exceeds what you're likely to mine. Mining now consists of people buying into shares of expensive rigs at a datacenter somewhere that have the express purpose of mining.

It works as long as nobody gains control of half or more of mining, which would make it possible for them to force a fake block chain on everyone(presumably to give themselves more bitcoins), because it relies completely on computational power to add the next set of transactions to the chain.

 

[Dutchbash]

Nice try DEA.

you wont catch me

 

[Positron]

Is Bitcoin still a thing? I thought the economy collapsed as the largest exchange (Mt. Gox) lost most of their deposits and basically vanished.

What is this math number crunching achieving?

In the simplest words: NOTHING; Bitcoin is not folding@home or some altruistic resource-sharing project. The calculations are basically just to ensure that your computer is doing something. Something that does not contribute to the world's knowledge in any way.

Sometimes your mining computer is being used to verify transactions, but the number of transactions is so small compared with the number of mining computers that most of the calculation are just waste of electricity.

 

[Godjesus]

Is Bitcoin still a thing? I thought the economy collapsed as the largest exchange (Mt. Gox) lost most of their deposits and basically vanished.



In the simplest words: NOTHING; Bitcoin is not folding@home or some altruistic resource-sharing project. The calculations are basically just to ensure that your computer is doing something. Something that does not contribute to the world's knowledge in any way.

Sometimes your mining computer is being used to verify transactions, but the number of transactions is so small compared with the number of mining computers that most of the calculation are just waste of electricity.

Bitcoin is definitely still a thing. Each is over $330.