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Oompa Loompa

Bitcoin - someone explain it to me

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Check out the price graph - No matter what price you bought at there is not a single quarter in the last 2 years that you would not have made a profit on. The trend since the beginning has always been up.  The unpoppable bubble?

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FYI bitcoin now at AUD $15,900 - rocketing away from its start of the year price of around $1,000. Time to mortgage your house for bitcoin as it rises towards $1 million in 2020 as predicted by eclectic personality John McAfee or simply sit back and wait for the bubble to burst......

(I bought my first bitcoin for around $300 - i wish I still had it!! :))

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Story today about the twins who claimed FB was stolen from them. They got a 65mill payout and invested 14mill in Bitcoin. Apparently now the first Bitcoin billionaires.

Edited by goughy

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1 hour ago, goughy said:

Sorry today about the twins who claimed FB was stolen from them. They got a 65mill payout and invested 14mill in Bitcoin. Apparently now the first Bitcoin billionaires.

Smart folk.

I'm not in that league but a decent amount of my spare GBP is going into BC at the moment. With the way the UK is going I'm pretty sure I know which currency is going to do better over the next couple of years!

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18 hours ago, goughy said:

Story today about the twins who claimed FB was stolen from them. They got a 65mill payout and invested 14mill in Bitcoin. Apparently now the first Bitcoin billionaires.

I can assure you they aren't.  The guy that created it is worth about 20 billion.  And there are heaps more.

I really wish I started mining them when I wanted to about 8 years ago. oh well.  Missed that boat.

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On 05/09/2017 at 9:02 AM, XCOM! said:

To put it (probably badly) another way, there are 2 basic components to the price (vs. value) of bitcoin.

- The underlying intrinsic value created by the Bitcoin network-protocol and mining.
- The speculative market value based on traditional trading - i.e. greed.

Bitcoin's blockchain technology uses distributed processing, for which people need to invest in computers, power, network, time, etc etc, and are paid for doing that work in... bitcoin.

When processing bitcoin transactions was the only application for the Bitcoin network, then the value of bitcoin was obviously highly speculative and volatile. But as the technology is becoming more widely accepted and more applications are being implemented for it, the intrinsic value of bitcoin is increasing and becoming more stable. If the technology becomes more established and harder to replace, then the intrinsic value of bitcoin will become harder to dismiss, but the market value will likely not be what it is now.

It's probably not unlike any new discovery-technology where speculative investors stampede into the market to make a killing, and then many lose their shirts as the reality sets in on what it is and how it can be used.

That sounds like a Ponzi. Except the commodity is an autologous waste of electricity in order to create nothing. 

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I can explain it here .... https://en.wikipedia.org/wiki/Tulip_mania

I can't see this lasting for a number of reasons. For a currency to have universal application it must have some core elements, namely Scarcity, Backing, Reference, Portability, Tradability and Stability. This is year 9 economics.

1. Scarcity - Bitcoins can be replicated as long as you have access to the code that defines the "value". If you can replicate the code to create additional Bitcoins (which you can), then the currency reduces in value. The code that creates the currency is available to a select few who have replaced the regulators and can act as a QE intermediary.

2. Backing - currency has to have some inherent backing of a central authority to ensure its value. For example, a $20 note is a promissory exchange note which is underpinned by the Reserve Bank of Australia, the £20 by the Bank of England.... etc etc. If things go a bit wrong with the economy and the currency crashes, theoretically, the underpinning authority should give you $20 or £20 worth of equivalent value for that promissory note. Bitcoin doesn't have this - it relies on trust of those that have them to exchange them for things of equal (or greater) value. But, what happens if there is a crash in Bitcoin value and all that is left are some hard drives with 101010000111001010101010001010.... on it? Simply, there is nothing underpinning the currency.

3. Reference - the currency has to be referable against a point of value, most usually gold in most Western economies. This is to ensure that the currency has referable value. Theoretically, you could take the same $20 or £20 and exchange this with the central bank for an amount of gold to the value of $20 or £20. Bitcoin has no backing.

4. Portability - the currency must be portable. It doesn't need to be in cash, but can be in the form of a cheque, or an exchange of virtual cash through cash machines / POS devices. I don't know much about the portability of Bitcoins - and I would say that this is the most easily overcome limitation - but there are not too many people readily accepting Bitcoin at the moment.

5. Tradability - refer to comments about portability above. A few coffee shops and the occasional trader doesn't make a universal currency. However, traders have set up a mechanism for trade, but I believe that is praying on the inherent vulnerability of the bitcoin as a currency. Refer below for more...

6. Stability - Anything with this sort of lack of stability is a concern. Traders are getting in on this as they see the value rise and will milk it for all its worth, then dump it when the preceding 5 points become apparent. That is what they are doing now - calculating when to dump it and run without being burned.

I'd like to say there was an alternative, global, safe and secure currency system and get all tree-hugger hippy about it, but regulation exists for a reason; to ensure the stability of the society and the way in which it is funded. Bitcoin is a nice idea, but the lack of control, opportunity for speculation and openness to abuse is scary.

I wouldn't invest in Bitcoin if I was investing at the moment.

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As I said earlier, so long as the BlockChain technology is superior, demand for processing those transactions continues to increase (e.g. ASX is moving to BlockChain) and payment for processing of the transactions (mining) continues to be token-based made in Bitcoin, and the number of Bitcoins in 'circulation' is fixed, then the intrinsic value of Bitcoin will increase.

The problem is the vast disparity between the intrinsic work-payment value of Bitcoin and it's speculative market value. 'Investing' in Bitcoin based on its speculative value, is gambling - there will be winners and losers.

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I remember when the US dollar was backed by gold. 

Then he Usa just kept printing money with nothing backing it. 

Now they are in debt well. Such an amount they will never get near paying it off. 

Anway bitcoin mining work. 

So my understanding is you get a 

server

install bitcoin core

get a wallet 

then what? 

 

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5 hours ago, Peter said:

 

Anway bitcoin mining work. 

So my understanding is you get a 

server

install bitcoin core

get a wallet 

then what? 

 

It's cost prohibitive in Australia due to high electricity costs. 
You need: high end computer, cheap electricity, time, and a hope that what you mine will go up in value. 

Better just to buy bitcoin if that's what you want at the end.

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42 minutes ago, Aidan said:

It's cost prohibitive in Australia due to high electricity costs. 
You need: high end computer, cheap electricity, time, and a hope that what you mine will go up in value. 

Better just to buy bitcoin if that's what you want at the end.

Servers. Power. Not an issue. 

I just don't know what to do beyond my previous post. 

How does it link and begin work and attribute it to my servers and wallet

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2 hours ago, XCOM! said:

As a one-out miner with a regular server, it's likely less profitable than placing adsense on a webpage.

I have 100 servers doing noting in a Comms room. 

 

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26 minutes ago, Peter said:

I have 100 servers doing noting in a Comms room. 

You need to do your research and find out the level of computing power required to compete against the cloud-pools.

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21 hours ago, XCOM! said:

As I said earlier, so long as the BlockChain technology is superior, demand for processing those transactions continues to increase (e.g. ASX is moving to BlockChain) and payment for processing of the transactions (mining) continues to be token-based made in Bitcoin, and the number of Bitcoins in 'circulation' is fixed, then the intrinsic value of Bitcoin will increase.

The problem is the vast disparity between the intrinsic work-payment value of Bitcoin and it's speculative market value. 'Investing' in Bitcoin based on its speculative value, is gambling - there will be winners and losers.

That's not quite right... you can set up your own Blockchain independently of the Bitcoin network. Bitcoin is just one Blockchain, the ASX will have their own version which is more likely to be based on Ethereum which works in the way that you describe where the cost of executing smart contracts is paid for through tokens or their might set up their own chain completely which is processed internally.

Also, the number of Bitcoin in circulation isn't fixed... what is fixed is the reward for mining new bitcoins the difficulty of which is dynamically adjusted every 2016 blocks (approx every 14 days) depending on the total amount of mining capacity on the network. So the increase in supply is fixed hence whilst demand is rising the price will increase.

The reward halves every 210,000 blocks and so when we reach 21million blocks the reward will be 0. So the limit is effectively 21m but we're a long way from that. 

Peter, for mining my advice would be to leave Bitcoin alone, 100 servers won't touch the sides. if you have that capacity then I suggest getting in on either Ether or Litecoin.

There are guides all over Google. See here for example: https://rumorscity.com/2013/12/02/how-to-mine-litecoin-cpu-mining/

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8 hours ago, XCOM! said:

You need to do your research and find out the level of computing power required to compete against the cloud-pools.

 

This article from Mother Jones might give some idea of the magnitude of power (electrical and computing) required to mine bitcoin these days - so much it's become an environmental worry....

"...No one may be using Bitcoin, but we’re all paying for them. Bitcoin analyst Alex de Vries, otherwise known as the Digiconomist, reports that the coin’s surge caused its estimated annual energy consumption to increase from 25 terawatt hours in early November to 30 TWh last week—a figure, wrote Vox’s Umair Irfan, “on par with the energy use of the entire country of Morocco, more than 19 European countries, and roughly 0.7 percent of total energy demand in the United States, equal to 2.8 million U.S. households.” (As of Monday, the figure had reached nearly 32 KWh.) Just one transaction can use as much energy as an entire household does in a week, and there are about 300,000 transactions every day. That energy demand is more often than not met through fossil fuel energy sources, which, along with polluting air and water, emit greenhouse gases that cause climate change.

In other words, Bitcoins are contributing to the warming of the atmosphere without providing a significant public benefit in return. Some Bitcoin enthusiasts claim that it will eventually become a mainstream currency, and that the cryptogovernance system upon which it’s built could actually help the environment. But the Bitcoin market is volatile, its future murky. We only have 32 years left for carbon emissions to peak and then rapidly decrease, if our planet is to remain livable. We don’t have time or resources to waste on Bitcoin."

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On 09/12/2017 at 10:25 PM, Peter said:

I have 100 servers doing noting in a Comms room. 

 

You need GPUs not CPUs, so if they're loaded with GPU (Graphics Processing Unit), then you could be in luck.

I'll add my description  of what mining is, for context.

A bitcoin ledger consists of transactions. When a ledger is closed, the transactions are hashed to produce a checksum (a mathematical algorithm applied to the entire content, that produces a signature - known as the checksum - unique to that content and the order of that content - the content can never be recreated from the checksum). The checksum is generated and added to the next ledger. I.e. a ledger is hashed along with the checksum of the last ledger, which again produces a further unique checksum. And so the chain continues, creating a sequence of ledgers each linked, meaning if an entry in any ledger is changed the entire chain collapses as the checksum calculations do not match.

So, where does the "mining" part come in?

Bitcoin demands that the calculated checksum must be of a certain 'pattern', currently I think (and a quick search will confirm this) the pattern is that the checksum must start with a sequence of zeros. To achieve this, a nonce (a random sequence of characters) is added to the ledger-and-previous-checksum combination, and the hashing process (the mathematical algorithm) repeated. Mining is simply finding the nonce that produces a checksum that meets the pattern requirements.

The GPU is good at repetitive tasks, and mining bitcoin is a repetitive task, some pseudo code to explain:

does hashOf(last_checksum + ledger + aaaa) = checksum_starting_with_zeros?

--negative: does hashOf(last_checksum + ledger + aaab) = checksum_starting_with_zeros?

----negative: does hashOf(last_checksum + ledger + aaac) = checksum_starting_with_zeros?

------negative: ....

------positive: nonce = aaab

--positive: nonce = aaaa

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Yeah you are right.  it's a bust.

I wonder if bitcoin will go the same as dotcom fad.

Going to be interesting to see.

I know if I had even 4 bitcoins I'd sell them now and buy a new car.  Or go on an amazing holiday first class.

Mind you I would have sold out when they hit 5K. So who am i kidding

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On 12/9/2017 at 6:31 AM, Rimmer said:

I can explain it here .... https://en.wikipedia.org/wiki/Tulip_mania

......

I wouldn't invest in Bitcoin if I was investing at the moment.

See, therein lies the problem. One isn't investing in a currency per se, it is more like a commodity, more akin to gold than USDs.  And trying to define it by the old rules is not going to work either. If we ignore the "underlying value" and think that price is attributed to something based on how much people want (or need) to own it.   Then look at how much people want to own bitcoin and why - and the kinds of transactions that will ONLY accept bitcoin - ransomware payments, for example. Come on, what IT risk management plan wouldn't consider a handy 10k or so in bitcoin within easy reach?  

And as for not investing in Bitcoin on the 9th of December?  The average bitcoin price on that day was 20,500 (admittedly it had just fallen from 25,000 odd) and is now back to 24,500 at time of writing.  If someone HADN"T taken your advice and invested in bitcoin on that day they would have realised a 20% return on their investment in just 7 days which I think in round figures is annual rate of return of about 1,000%. Note that while there are some bumps here and there in the short to medium term (especially in the last few years) bitcoin has NEVER reduced in value.  My sadly missed $350 bitcoin in 2015, should I have hung on to it :(, would have now realised about 7,000 % return.

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