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Thread: Blockchain Tech and Cryptocurrencies

  1. #21
    With billions(?) of bitcoin transactions, how does the block chain not grow to an unmanageable size. Does it just record the balance of every existing bitcoin wallet?

  2. #22
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    Quote Originally Posted by DistrictDeacon View Post
    With billions(?) of bitcoin transactions, how does the block chain not grow to an unmanageable size. Does it just record the balance of every existing bitcoin wallet?
    All the transactions are recorded. And yes, it's large, but Moore's law is our friend here.

    As well, not every device has to have a copy of the ledger downloaded. A fridge may be connected to the network but does not have to maintain the ledger of every transaction.

  3. #23
    Siacoin

    To the mooooooooon

  4. #24
    Robert O'Kelley
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    Quote Originally Posted by Screamindemon3 View Post
    What's the best exchange to use for someone wanting to throw 1k at some coin?
    Coinbase will get you Bitcoin, Ethereum, and Litecoin from dollars; from there to get the others you have to trade on an exchange like Kraken. All of these steps take time, I think my Litecoin purchase at Coinbase took a week to execute.

  5. #25
    Quote Originally Posted by 2&2 Slider To Leyritz View Post
    I've thought about buying a bunch of Ethereum as it is less than 1/10 the price of bitcoin ... think it is worth it? (with the recognition that all of this shit is extremely speculative).
    No idea, otherwise I'd have bought a ton of one of the other dozen possible "next bitcoins." Bitcoin was meant to mimic gold, so in a sense any viable cryptocurrency that gains traction in the market via some technical benefit could be seen as just another mine. This could lead to the top 3 or 5 or 10 currencies all balancing out at some point. I could also see a government-aided rally around a single crypto currency, but that could actually be a negative to the types of economies crypto's adoption was led by. Whatever leading crypto that wasn't chosen could skyrocket.

    Is Bitcoin Facebook or is it MySpace? How sticky are the institutions that survive on the $40 billion or whatever amount the 21 million bitcoins will someday be worth? The gains have been massive but on a global economic scale it's still fairly insignificant - a meltdown and mass migration to something else is totally feasible. Imagine what a serious code problem would cause, or if a quantum computer was created that could sidestep quantum-resistant SHA encryption.

    Anyway, who knows. I do know that there are few things I can think of being more awesome than coming up with a ledger system based on known encryption technologies, leveraging it to invent a currency initially worth almost nothing, and looking up a decade later to see that every code you kept for yourself has a legitimate dollar value of over 4 grand. Crazy.

  6. #26
    Nonny, get that AMA/ELI5 fired up, I'm ready to learn

  7. #27
    A few months ago, a friend of mine says, "Come here," and shows me the spare bedroom in his house. He opens up the door and it's 100 degrees in there. The vents are all blocked off and he has fans running and his windows cracked open. He has a bunch of graphics cards geared up to mine Ethereum, which is the first time I've heard of such a thing. He says he supplements his income by about $1200/month with this setup after extra power costs are considered. Nothing great, but not bad for just letting something run. I said, "OK, but how much did it cost to set this up?" $7000 was the answer. In another 6 weeks, I guess he will have paid for it, assuming it has remained stable as a currency.

  8. #28
    Quote Originally Posted by AnonymousDeac View Post
    All the transactions are recorded. And yes, it's large, but Moore's law is our friend here.

    As well, not every device has to have a copy of the ledger downloaded. A fridge may be connected to the network but does not have to maintain the ledger of every transaction.
    What gives digital currencies value. I understand the dollar bill is also essentially worthless but it has the backing of the US government and is accepted everywhere. Do digital currencies have backing, if the US said this currency is not valid would the value crumble?

  9. #29
    Robert O'Kelley
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    As long as people perceive it has having value, it does. Look back at currency history, people have used stones and shells as currency. Or cigarettes and fish tins in jails.

  10. #30
    what does it mean to "mine" cryptocurrency?

  11. #31
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    Quote Originally Posted by bernbp5 View Post
    What gives digital currencies value. I understand the dollar bill is also essentially worthless but it has the backing of the US government and is accepted everywhere. Do digital currencies have backing, if the US said this currency is not valid would the value crumble?
    Simply the faith in that digital currency.

    Bitcoin was far from the first digital currency. There were actually many attempts before Bitcoin that failed for one reason or another, DigiCash probably most famous. In my opinion, one major issue with all those pre-blockchain currencies is they relied on a 3rd party to issue, manage, and validate the currency and transactions. Despite many conversations, DigiCash was unable to get the banks to support the digital currency, eliminating any chance of it connecting to traditional financial systems.

    Cryptocurrencies on blockchain use the network and code to issue the coins, track and manage the transactions, and validate if they are legitimate.

  12. #32
    Quote Originally Posted by JuiceCrewAllStar View Post
    what does it mean to "mine" cryptocurrency?
    you are essentially chipping in computing power to facilitate transactions

    I believe ELC's friend was a bit hyperbolic with his $1,200 / month figure; that would take many rigs to get that much going.

  13. #33
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    Quote Originally Posted by JuiceCrewAllStar View Post
    what does it mean to "mine" cryptocurrency?
    First things first, not all blockchains have mining. Most public ones have some form of mining because there is not trust on the network. If you have a private or federated blockchain, you can create an alternative consensus algorithm (e.g., voting among the participants) to validate transactions.

    Now what is mining? Mining is the process of adding transaction records to Bitcoin’s official public ledger of past transactions. The computers on the network need to come together to decide which transactions in the past 10 minutes should be added to the official public ledger. The network can't just choose one random node (i.e., computer) to tell us how it should be because if that node is a malicious actor, it can make up transactions for personal gain. So how does it choose who gets to propose the newest ledger? Through mining.

    Now you have all these computers out there mining. Originally it was predominantly computers and laptops in people's houses. Now, it's server farms 30x the size of Google. And they're all competing through brute force to solve a complex math problem. The formula includes a hash or representation of the previous block, a root of the current transactions to be added, and a nonce (random number) that must equal a number less than .0000000000xx (actual target area was 1/10^20 as of 2014). If they solve the math problem, they are then allowed to propose the next block of transactions and as a reward, it is allowed to issue itself 12.5 bitcoins. This reward incentivizes the winner to only propose legitimate transactions because if they propose faulty ones, everyone else will reject it and they'll wait for someone else to solve the problem and propose an honest ledger.

    Now because of this reward, we have seen significant improvements in chip manufacturing and server farms optimized to solve these math problems. We're also seeing domination of the market by Chinese firms that have allegedly partnered with the government for cheaper electricity to lower costs. Interesting as well to see some of the Nordic and colder countries participating and using the additional heat to warm up houses and large buildings.

  14. #34
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    Quote Originally Posted by Screamindemon3 View Post
    Nonny, get that AMA/ELI5 fired up, I'm ready to learn
    No need to get a new thread started. Happy to answer any here

  15. #35
    Quote Originally Posted by AnonymousDeac View Post
    First things first, not all blockchains have mining. Most public ones have some form of mining because there is not trust on the network. If you have a private or federated blockchain, you can create an alternative consensus algorithm (e.g., voting among the participants) to validate transactions.

    Now what is mining? Mining is the process of adding transaction records to Bitcoin’s official public ledger of past transactions. The computers on the network need to come together to decide which transactions in the past 10 minutes should be added to the official public ledger. The network can't just choose one random node (i.e., computer) to tell us how it should be because if that node is a malicious actor, it can make up transactions for personal gain. So how does it choose who gets to propose the newest ledger? Through mining.

    Now you have all these computers out there mining. Originally it was predominantly computers and laptops in people's houses. Now, it's server farms 30x the size of Google. And they're all competing through brute force to solve a complex math problem. The formula includes a hash or representation of the previous block, a root of the current transactions to be added, and a nonce (random number) that must equal a number less than .0000000000xx (actual target area was 1/10^20 as of 2014). If they solve the math problem, they are then allowed to propose the next block of transactions and as a reward, it is allowed to issue itself 12.5 bitcoins. This reward incentivizes the winner to only propose legitimate transactions because if they propose faulty ones, everyone else will reject it and they'll wait for someone else to solve the problem and propose an honest ledger.

    Now because of this reward, we have seen significant improvements in chip manufacturing and server farms optimized to solve these math problems. We're also seeing domination of the market by Chinese firms that have allegedly partnered with the government for cheaper electricity to lower costs. Interesting as well to see some of the Nordic and colder countries participating and using the additional heat to warm up houses and large buildings.
    So are new coins only added to the population of existing coins from this reward system for maintaining the transaction ledger?

    It seems like the more prevalent this becomes, the more complex and resource intensive the calculations will become to add blocks of transactions. And isn't there a cap of 21 million coins to ever be "minted?" Once this cap is reached, what's the incentive to keep expending resources for mining, as it sounds like maintenance of the ledger is the only thing giving folks confidence in this as a means of currency?

    Sorry if this is unclear, typing fast on a phone

  16. #36
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    Quote Originally Posted by 06deacon View Post
    So are new coins only added to the population of existing coins from this reward system for maintaining the transaction ledger?

    It seems like the more prevalent this becomes, the more complex and resource intensive the calculations will become to add blocks of transactions. And isn't there a cap of 21 million coins to ever be "minted?" Once this cap is reached, what's the incentive to keep expending resources for mining, as it sounds like maintenance of the ledger is the only thing giving folks confidence in this as a means of currency?

    Sorry if this is unclear, typing fast on a phone
    Yes, new coins are only added as a reward for mining. They can never be taken off and can't be added any other way.

    And yes, there is a cap of 21 million. However, every 210,000 blocks (or about every 4 years), the reward for mining bitcoin is halved. Now, if the network continues to be valuable in the future, we expect the price of bitcoin to also increase. But that can't happen forever enough that the cost to mine is greater than the reward for mining. So what we'll likely see (and seeing to small degree right now) is that people can attach a small tax or tip to their transactions to increase the likelihood or speed of it getting processed. In the future, we could see all transactions potentially costing a couple pennies and that tip/tax going to the node that wins the mining.

  17. #37
    Sounds like the continuing viability of maintaining the register on tips/tax alone will depend on computing power continuing to progress such that mining wont be as expensive in the future?

  18. #38
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    Quote Originally Posted by 06deacon View Post
    Sounds like the continuing viability of maintaining the register on tips/tax alone will depend on computing power continuing to progress such that mining wont be as expensive in the future?
    We'll also likely see consolidation of miners going forward. As profitability decreases, competition will likely also decrease. Which then decreases the computing power necessary.

    One thing I didn't mention is that the difficulty of the math problem adjusts every 2016 blocks. Is recalculates to whatever difficulty is necessary (based off the previous 2016 blocks) to make the expected time to solve it 10 minutes.

    So if people decide it's not profitable based off their current computing expenses, as they drop off, the total cost to mine will also decrease.

  19. #39
    Quote Originally Posted by AnonymousDeac View Post
    No need to get a new thread started. Happy to answer any here
    So for a beginner just looking to gain more information on the subject and also looking for a fairly risky investment, how would you get started with 500.00? What's the sites I should join and is any external hardware needed (as with the wallet suggested above). Not looking for what currencies you would specifically purchase (unless you want to share that), but more of how to get started and everything up until the point of purchase.

  20. #40
    Quote Originally Posted by bernbp5 View Post
    What gives digital currencies value. I understand the dollar bill is also essentially worthless but it has the backing of the US government and is accepted everywhere. Do digital currencies have backing, if the US said this currency is not valid would the value crumble?
    What gives any currency value?

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