Bitcoins

I find the subject very interesting and have some questions, however I didn't think it was worth another thread so I'll ask here...

1) Who is setting the complex equations that require "mining"?

2) Other than the miner or pool receiving Bitcoins as wages, what value does the person who set the equations get?
Otherwise it seems that basically you are paying a wage to somebody for their time however getting nothing in return, except the energy companies through increased electricity consumption

3) There are complex computers that are required for mining as it gets tougher and tougher, ASICs machines, these are single use and so what happens to them once either all the coins are mined or the requirement for mining gets harder still, they must just become obsolete and I would think very quickly.

4) The coins have a dollar value in exchange rates, surely that is what they are trying to avoid however say a dealer on Silk Road sells 10,000 bit coins of weed in a year, I am pretty convinced that they will want to cash that in to tangible cash (except a float obviously) so as to be able to use in freely in the real world, not tied to certain e-vendors however large the list is getting.


The main one I can't get my head round is the initial value, I buy an ASICs, start mining as part of a pool and start to receive Bitcoins, what value am I placing in the system to warrant me receiving monetary tokens?

andy.m wrote: »

I find the subject very interesting and have some questions, however I didn't think it was worth another thread so I'll ask here...

1) Who is setting the complex equations that require "mining"?

The equations are set as part of the BitCoin protocol. It cannot be changed because no one else using BitCoin will agree that your calculations are correct otherwise, so don't think you can somehow simplify the formula to make it quicker for you to mine.

2) Other than the miner or pool receiving Bitcoins as wages, what value does the person who set the equations get?
Otherwise it seems that basically you are paying a wage to somebody for their time however getting nothing in return, except the energy companies through increased electricity consumption

The person who set the 'equation' (not really correct terminology, read about the HashCash algorithm for detail) didn't do so for their own profit. The idea is it costs processor time to calculate/create a BitCoin. It's this TIME and the expense which is required for that time i.e. resources in terms of electricity and capital in terms of the PC doing the mining, which GIVES VALUE to the BitCoin.

3) There are complex computers that are required for mining as it gets tougher and tougher, ASICs machines, these are single use and so what happens to them once either all the coins are mined or the requirement for mining gets harder still, they must just become obsolete and I would think very quickly.

Due to the general computing nature of a PC, any machines built specifically for mining can just be re-purposed. Aside from the obvious where all PCs gradually become obsolete this doesn't really have anything to do with BitCoin.

4) The coins have a dollar value in exchange rates, surely that is what they are trying to avoid however say a dealer on Silk Road sells 10,000 bit coins of weed in a year, I am pretty convinced that they will want to cash that in to tangible cash (except a float obviously) so as to be able to use in freely in the real world, not tied to certain e-vendors however large the list is getting.

They are not trying to avoid that at all. Sure they would prefer that everyone just accepted BitCoin preventing the need to lose a conversion fee, but like ANY currency, they accept the need for currency conversion.

The main one I can't get my head round is the initial value, I buy an ASICs, start mining as part of a pool and start to receive Bitcoins, what value am I placing in the system to warrant me receiving monetary tokens?

In order to solve the equations which are necessary to create a new BitCoin, a lot of (computer) work needs to be performed. Just like you sit at your desk at work and write a report, that WORK has value, just like this computer work has value. You aren't being rewarded per se as in paid for the work though, rather you're doing the work to CREATE the money, like you would be doing work to mine gold, you essentially are creating value because you're discovering new gold. The global level of gold increases but because you own the increase in gold, you alone have benefited from the work of doing the mining.

deed02392 wrote: »

They are not trying to avoid that at all. Sure they would prefer that everyone just accepted BitCoin preventing the need to lose a conversion fee, but like ANY currency, they accept the need for currency conversion.

I thought, obviously incorrectly, that the idea was to have a currency unit that was not centralised or government controlled so that its intrinsic value was dictated by true market factors opposed to government interference or control.
If the bitcoin exchange is linked to the dollar, pound and euro then surely it's value can be influenced and therefore it can be artificially controlled?

People struggle with the whole concept of what money is and what value we bestow on it.

The idea that nothing can have any intrinsic value is intriguing. It's all about belief and trust, fantasy even.

It's not a guaranteed investment full stop, it is a very, very high investment risk.

I'm fully behind the concept of decentralised digital currency but no way would I refer to it as an investment for any amount of wealth you're not prepared to lose completely. I do hope you're not trying to ramp it.