Bitcoin mining

[RidleyRockets]

Any members here into bitcoin mining? I've read about it and it seems too good to be true.

If you know how it works please try and explain it to me. I am not a clever man, so pretend you are explaining it to a Labrador.

 

[hool10]

I don't know what it is or how to mine for Bitcoins. Anybody care to elaborate? I have heard of them though.

 

[lord_raken]

Something about using the excess processing power on your computer to generate hash-tags, which has something to do with pasword protection. Apparently having a massive library of has-tags is like owning a ring of master keys. With enough of them you can hack almost any account. The implications are nefarious.

At least that is how I understand what I have been told. I'm pretty sure there are people here who know more than I do.

 

[AtomicSpark]

^lol

Not even close. Oh look, a video!

 

[lord_raken]

^^ I wasn't talking about what bit coins are used for. I know they are a digital currency. I was referring to what your computer does to "earn" bit coins.

It implication is that you are creating tools for hacking... and getting paid for it.

 

[kineaesth]

Welcome to the internet's premium store for hacking tools! Today we have a discount on flashing error messages, porn pop-ups, and hashtags!

Again, watch the video - by mining, you're adding computer power to the process of encrypting and authorising transactions, essentially what makes the whole system work.

 

[Raziaar]

Something about using the excess processing power on your computer to generate hash-tags, which has something to do with pasword protection. Apparently having a massive library of has-tags is like owning a ring of master keys. With enough of them you can hack almost any account. The implications are nefarious.

At least that is how I understand what I have been told. I'm pretty sure there are people here who know more than I do.

That seems like an obtuse and ineffective way to crack passwords. You're pretty much not going to crack a 256bit password in your lifetime or the lifetime of planet earth or even the universe itself really if you bruteforce it.

And that's what you're describing basically... bruteforcing. There is only ONE possible combination that works out of all the 2^256 permutations, and you're not going to find it collecting random hash tags.

 

[ríomhaire]

I do not understand how this economy works at all.

 

[Dan]

I do not understand how this economy works at all.

It's basically just a protocal for secure decentralized transactions. So there is no central authority like your bank or Paypal that has to monitor and verify each transaction. It's basically a way to handle digital currency reliably so that nobody can steal or make up money. The money enters the system through "mining" which is basically just lending your CPU to the process that lets the transactions occur. Eventually this source of money will die off and the remaining currency will just float around and pass between people like any other commodity. Computers handling the processing of transactions will be able to take a very small fee from that transaction as an incentive to continue lending your gpu to crunching data. The only problem is that it has no intrinsic value, so bitcoins are only as valuable as people value them.

 

[Raziaar]

And real people don't value them, only mole people do.

 

[ríomhaire]

Ok I've been reading up on this and it seems interesting. People seem to be using it not as a proper currency for buying goods but more as an internet favour-trading system. Simple things like "I will make you a banner for your website", "I will answer any questions you have about Spanish", "I will photoshop a moustache onto any picture you send me" and "I will give you a righteous bison in Team Fortress 2" for X amount of BTC (all those examples are ones I actually saw people advertising). Functioning that way it could be a handy little thing but I would not trust the stability of this currency to ever consider using it for proper financial investment/general purchasing.

The way the currency is generated seems like a bit of a pyramid scheme though. It is designed to be harder to mine as time goes on and is set up so that in a few years half the current bitcoins that can ever be mined already will be. This causes the currency to go up and up with time, which means that early adaptors can mine loads easily at the start, then as it becomes harder to mine and more valuable cash in on their assets exchange them for more stable currencies/actual goods and leave the whole thing to crash.

 

[Dan]

This causes the currency to go up and up with time, which means that early adaptors can mine loads easily at the start, then as it becomes harder to mine and more valuable cash in on their assets exchange them for more stable currencies/actual goods and leave the whole thing to crash.

You could basically say the same thing about gold. All of the easily mined gold was discovered thousands of years ago. It's still mined and used as a commodity today.

 

[ríomhaire]

I find this story sort of amusing (from June of this year): http://www.theregister.co.uk/2011/06/16/bitcoin_theft_claims/

Rumors of the heist have been swirling since Monday, when a Bitcoin user named Allinvain claimed 25,000 Bitcoins, technically valued at close to $500,000, had mysteriously been transferred to an unknown user's account. Allinvain speculated the thieves made off with the windfall after using malware to compromise his Windows-based computer.

"I just woke up to see a very large chunk of my bitcoin balance gone," the user wrote. "I feel like killing myself now."

More than 300 posts later, it's still not clear if the claims are part of an elaborate hoax. Because Bitcoin is built on a peer-to-peer foundation that completely bypasses any sort of centralized database, it's impossible for even the architects of the digital currency to verify if a theft took place.

 

[Raziaar]

Good for him! Maybe he should think harder about his choice of currency next time.

I thought this bitcoin shit was only used in the secret hidden away subterranean bunker internet... and who gives a **** about what those people do.

I really only ever heard of bitcoin when I heard about the dark internet... never before then. Really, real people actually use this shit? Just like people valuing game currency as real money in my opinion... buying and selling the stuff for real cash.

I still haven't looked at that video. Maybe I should.

 

[Dan]

The difference between Bitcoins and WOW money is that bitcoins are inherently secure (assuming you don't get hacked) and won't suddenly disappear. Blizzard could flood the market with WOW gold or delete all the gold in existence if they felt like it. They could also return stolen gold to someone, something that isn't possible with bitcoins because it is more like real money.

 

[ríomhaire]

For that matter the US dollar isn't any more real than WoW gold. All currency is just an idea based on the understanding of mutual exchange of value. The only difference between bitcoins, gold in WoW, the USD and metal in TF2 is that some have more methods of exchange and backing than others (and that certain parties have direct control over the gold and metal, a party has the control of making the USD and no one has control over bitcoins).

 

[Raziaar]

Well then... by all means get involved.

No, I don't know how this relates.

 

[hool10]

I don't know I'm still confused. ;(

1. So I am lending the CPU power to whom?
2. I get BitCoins and can trade them in but why can I trade them for real stuff? It's not real money!
3. It's not supported by any bank institution making fraud insanely possible.
4. BitCoins can be traded for guns and other illegal stuff?

What is the point of them????

 

[ríomhaire]

So I am lending the CPU power to whom?
As far as I can tell it's something like this: You're trying to brute force some algorithm to solve it. If you solve it you get a bitcoin. The complexity of the algorithm (and thus how long it takes to solve it) gets more difficult as more people solve them, meaning the supply dwindles over time. You're not lending CPU power to anyone, you're just using your CPU (actually they use GPUs because CPUs suck) to try and crack open and find a coin. You're also taking part in the network the monitors all transactions. I don't really understand it all so what I said there could actually be really really wrong. But that's what I think it is.

I get BitCoins and can trade them in but why can I trade them for real stuff? It's not real money!
Define "real money". You can trade them for real stuff because people accept them for real stuff. Money is just a system where people agree to use something as an exchange token. In this case bitcoins.

It's not supported by any bank institution making fraud insanely possible.
I'm not sure what you mean by this. Of course you an scam people. You can scam people with paper money too.

BitCoins can be traded for guns and other illegal stuff?
Yes it can be traded for anything you like as long as someone is willing to accept them for that thing. Same way you can buy guns with paper money.

What is the point of them????
It's a decentralised currency that no one can control directly.

Answers in quote. I'm not saying it's great or that you should be investing all your cash in them (or any for that matter) but your protest of "it's not real currency!" is silly. Currency is just an idea. If you put money from your online bank account into paypal, then transfer the money from paypal for a copy of Minecraft, where was the "real" money in that exchange? You didn't hand over a wad of dollars to paypal and they didn't fly over to Notch to give him some either.

 

[Dan]

I don't know I'm still confused. ;(

1. So I am lending the CPU power to whom?
2. I get BitCoins and can trade them in but why can I trade them for real stuff? It's not real money!
3. It's not supported by any bank institution making fraud insanely possible.
4. BitCoins can be traded for guns and other illegal stuff?

What is the point of them????

1) The CPU power is used to crunch hashes that verify transactions on the network. Basically your computer adds to other computers doing CPU work that makes it very CPU intensive for someone else to defraud the network.

2) This question doesn't make sense. As best as I can tell you are asking if you can use them for anything? Right now they exchange for about $10 per bitcoin, so you could use them for cash I suppose. A lot of tech related places will accept them as donations. You can buy some products with them. You can use them just as a transaction medium, like Paypal without fees, but you have to have a reliable way to convert dollars to bitcoins and bitcoins back to dollars at the other end.

3) From the way it's set up, no. All transactions are verified by the peer network using brute force processor tasks. You would need more computing power than everyone else mining bitcoins to be able to verify your own fraudulent transactions. It is however really susceptable to hacking individual accounts. The money is only as secure as private key it is stored under, and most personal computers are not super secure. Already a lot of people have had their "wallet" stolen.

4) Probably

 

[Escaep]

It seems like today it is rather frivolous to try and "generate" Bitcoins since from the forum I've read it takes like 50 days to generate one block (however much that is.) It sounds like it would've been better to get on the mining bus several years ago when you could have generated them easily.

Also, the leaderboards: http://bitcoinreport.blogspot.com/2011/03/bitcoin-top-100-rich-list-20th-march_20.html . If it is legit, the top guy has 250,000 Bitcoins which if they're going for $10/coin he is sitting on a good amount of money. But someone said it would be impossible to suddenly dump all of them since the network wouldn't allow for it, and in doing so it would seriously tank their value.

 

[Ennui]

Don't believe the hype.

I researched all this. It is possible to make money off it, but it's got a lot of overhead (you need to have a bunch of high end GPUs) and there is significant financial risk involved because of that coupled with the fact that the bitcoin economy is very unstable and there is no guarantee that the price will stay the same. Also sometime next year the value of discovering/generating a new "block" of bitcoins is halved (from 50 to 25 bitcoins per block IIRC).

If you just have one or two GPUs don't bother with this, it will take you forever to get a bitcoin and you'll end up spending much of that meager profit on electricity running your GPU. It's only really plausible to make any significant money from this if you spend $5000-$10000 on overhead (a rack of 10-20 high end Radeon GPUs). You'll make your money back within a couple of months, and then after that it's all profit (minus the huge energy cost of running 10-20 GPUs at full load 24/7), but even then you won't be making THAT much (a couple grand per month max) and all this hinges on the rather unsafe assumption that bitcoins will keep their value (currently about $11) which isn't remotely guaranteed or reliable thing to assume.

 

[hool10]

I don't understand it as money as it's not recognized by any bank institution. It's only recognized by certain companies that I have never seen before that accept them. It also harms a bit the world economy as your giving fictional money for real things. As for the donating CPU, I would think a worthier cause would be to find a cure for Cancer or something: http://www.makeuseof.com/tag/10-ways-to-donate-your-cpu-time-to-science/ TBH I would steer clear of the coins and Ennui does have points. Thanks for clarifying it guys!

 

[lame-o]

The best way to make money generating bitcoins is to do it secretly. If you are a systems admin at a university or high school you can make use of all those computers for free as long as no-one knows about it, and 99% of the time they wouldn't - even if they found the client running. And if they did find out? They just tell you to stop. It's not exactly unethical, and if it were it would probably be lost on most.

I think most of those guys with 10000+ bitcoins just farm the places they work at as admins.

Also, hi there.

 

[Dan]

Does anybody here actually have bitcoins?

 

[Raziaar]

I have a lot of super mario brothers coins. 8-bit coins.

 

[Escaep]

I don't understand it as money as it's not recognized by any bank institution. It's only recognized by certain companies that I have never seen before that accept them. It also harms a bit the world economy as your giving fictional money for real things. As for the donating CPU, I would think a worthier cause would be to find a cure for Cancer or something: http://www.makeuseof.com/tag/10-ways-to-donate-your-cpu-time-to-science/ TBH I would steer clear of the coins and Ennui does have points. Thanks for clarifying it guys!

You can convert them to almost any currency.

 

[RidleyRockets]

After going away and reading some more it seems i've missed the boat on mining. They also seem a bit of a pain to cash out on.

 

[BabyHeadCrab]

...then you can go and trade your hard-mined bitcoins on crack on the underboob

Thanks, internette!

 

[Robbo]

I don't understand it as money as it's not recognized by any bank institution.

Think of it as bartering, not everyone is going to value your superman comic collection but some people will and that is what gives them value. There is no super hero comic institution that decides the value of the comics they are given value by how much and how many people want them.
Normal money is no different really, the more people want a countries money the higher it's exchange rate.

 

[BabyHeadCrab]

imagine your electric bill going up further than the money you accumulate. it's worthwhile if you don't live on your own or can use your business' or school computer, otherwise the real money w/bitcoins is made actually using the currency to sell things - and there's a sizeable chance of fraud or asshattery at that point. Economically speaking it's interesting; and yeah, there's ways to make physical money doing it - but it's not something to casually invest a lot in. It's a much more volatile market than that video suggests.

 

[Escaep]

Bump.

Paul Krugman just wrote an article for the NYTimes all about BitCoins: http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/ Doesn't really go in depth that much.

 

[Dan]

So a while after reading this thread, I picked up $60 of bitcoins to play around with. I can't say for sure why or what use they have. I don't know of anything useful I can spend them on except maybe for donations to organizations cut off from Paypal like Feed the Protest of Wikileaks. I might just try second guessing the price swings and switch them in and out of real dollars to try to make some profit. Anyways, if anybody wants to get a hold of some, I can sell some at whatever the exchange rate is.

 

[morgs]

"August 5, 2011, MyBitcoin issued a statement that they had been compromised and lost 49% of their user's funds."

lol.