Bitcoin mining

ivormonee

HansOndabush said:

It's just a techie version of past bubbles, Bitcoin will pop.

It may well do that but a few people have, and are, becoming extremely wealthy in the meantime.

HansOndabush

Well I wouldn't buy one for $10 so I'm certainly not buying at 40,000. Greed and fomo will cause pain for the people getting in now. 

k12479

What's going to happen the transaction fee level over time, and why?

It looks like it's currently $29.73, up 3x from the start of the year.

masonic

k12479 said:

What's going to happen the transaction fee level over time, and why?
It looks like it's currently $29.73, up 3x from the start of the year.

Ultimately the bitcoin reward for mining is going to disappear, and at that point the energy costs for mining will have to be paid for with transaction fees. So transactions will likely become more expensive in the future, assuming its popularity remains. Transaction fees do fluctuate quite wildly though, as they depend on how many people are competing to get their transactions on the next few blocks. If there are fewer miners competing in the future then difficulty will decrease and hence the energy costs will do likewise, so a balance will likely be struck.

HansOndabush

Bitcoin consumes an obscene amount of energy; the sooner it is banned, the better. It's nothing but a speculation for rich kids.

dunstonh

HansOndabush said:

Bitcoin consumes an obscene amount of energy; the sooner it is banned, the better. It's nothing but a speculation for rich kids.

Dont forget the criminals using it for laundering.

nottsphil

ivormonee said:

HansOndabush said:

It's just a techie version of past bubbles, Bitcoin will pop.

It may well do that but a few people have, and are, becoming extremely wealthy in the meantime.

 But that's likely to happen with any successful Ponzi scheme.
Are cryptocurrencies anything more than a load of ones and zeroes, whose only value is that other people think they are valuable? 

pbartlett

well are gold or diamonds the same? or indeed paper money? yes there is some industrial use for gold and diamonds, but even so...

maxsteam

I get that a bitcoin is the reward, but   is all the number crunching   the network of  computers  do ,  an   algorithm  that  decides  whether or not a new bitcoin is needed  at a given time , and if so, who  designs the algorithm to be given to the computers?  If  the number crunching isn't  about deciding whether to produce a new bitcoin,  what is it purpose? 

 How is Bitcoin attractive to normal people 

If you imagine the computer processing that is done by your bank when you pay online with pounds, that processing is done by the miners' computers with bitcoin. The miners' computers record every transaction and verify the records between themselves. As time goes by, the size of bitcoin transaction records increases. The miners get a bitcoin reward for doing this which decreases as time goes by (the maximum number of bitcoins may never be reached). The earning from mining are a few pounds per week if you design the computer specially (a "mining rig") and leave it running 24/7. Some claim that Ethereum is economical to mine. Some claim that the cost of a "mining rig" can be recouped in a year or so. You can try to "outsource" mining to somewhere where electricity is cheaper but you might get scammed.
As to how Bitcoin is useful, there are lots of rules about money laundering but these do not apply to Bitcoin. If you are a criminal wanting to deposit, store and spend ill-gotten gains, Bitcoin is extremely useful.

A_Lert

As far as how the mining works. Each block contains:

A number that's calculated based on the previous block. The calculation used is known as a *hash*, a way to make a small number that depends on a much bigger chunk of data, in such a way that changing the data even slightly changes the hash a lot. This creates the "chain" part of blockchain.

A list of transactions.

A variable number.

A hash based on the current block.

The mining problem is to make the hash of the current block lower than a certain value. This is done by changing the variable number. There's no shortcuts, the only way is to try numbers at random until one works. This takes computing power (and thus electricity), and this gives what's called proof of work.

Once the new block is created, future blocks can be added to the chain. This makes it virtually impossible for anyone to change previous blocks, because later blocks depend on them.

That computing power costs money. To pay for it, the successful miner gets a Bitcoin reward, implemented as a transaction from nowhere to that miner's wallet, added to the list of transactions in that very block.