I keep seeing all these articles about Bitcoin mining and how it takes massive amounts of computational power and electricity.

Can someone break all this down for me how this all works? I’m still not following, how does something that doesn’t actually exist outside of being ones and zeroes be worth anything and how does this “mining” of it work?

It honestly sounds like a bunch of smoke and mirrors to me.

It kind of is smoke and mirrors. Yet so is physical currency to a certain degree.

You will hear a bunch about blockchain and it’s value because it is basically an unbreakable algorithm. What you won’t hear is how that makes it valuable or even useful. There is money to be made in crypto but the golden days are nearing their end. Governments are tracking your crypto use and trying to get their fair share. Eventually a nation state could make their own crypto currency and it could severely weaken the value of the current crypto’s.

Currency trading isn’t for the weak of heart, uninitiated, or those who can’t stomach a loss.

Good luck. You are going to get a bunch of explanations and yet you still won’t feel like you really “get” it. Join the club. And be wary of those who think they have it wired. Those already in crypto need people to keep pouring into the game.

quote:

Originally posted by pedropcola:

And be wary of those who think they have it wired. Those already in crypto need people to keep pouring into the game.

So it’s a high-tech Ponzi scheme…

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Originally posted by PASig:

So it’s a high-tech Ponzi scheme…

That’s my take on it..if I can’t hold it in my hand..I’m not into it

Well think of this. Elon makes a simple tweet or says that Tesla won’t accept Bitcoin and the price fluctuates massively. Massively. A drunk tweet sends it plummeting. That isn’t exactly stable.

Ask the experts what the practical end use of an unbreakable unhackable blockchain is. You will hear how that ensures it’s value because of its security. Yet nothing is backing it whatsoever. People will say US dollars aren’t backed either. True if you are willing to discount the backing of the most powerful nation in the world as worthless. It’s not, it may not be as valuable as it once was but having everything that the US can bring to bear backing your currency isn’t a small matter either.

I have a basic tenet I follow involving investing. If I can’t understand it I stay away. I stay away from trading on margins, commodities, and others financial devices. I understand them but I don’t like the medium. Crypto is easy to understand the basic ideas but nearly impossible to understand the how’s, why’s, and the possible end games. You will find plenty of people who can teach you how the system works, how to mine, how to safely store, how to redeem, etc. Why it has lasting value or why it’s a good long term investment you will get some sketchy answers.

And yes, every single mf’er who owns Bitcoin, etherium, doge, etc needs people to continue buying in. Does that make it ponzi? Probably not but if you figure it out come back and explain it to me. I’m looking forward to the responses.

New York Hydro Power Plant Mines Bitcoin Because More Profitable Than Selling Electricity To Grid

https://www.zerohedge.com/cryp...ing-electricity-grid

This year, some of the hottest trends in the crypto industry have been bitcoin adoption and environmental, social, and governance factors into crypto mining.

Tesla CEO Elon Musk pushed bitcoin's environmental concerns into the forefront, calling for "renewable energy" to be used for mining instead of fossil fuels. It's no secret that bitcoin mining takes a massive amount of electricity. It's estimated that energy consumption exceeds the power consumption of countries like the Netherlands and the UAE.

With the push towards ESG-Friendly bitcoin mining operations, there's one historic hydroelectric plant near Albany, New York, using power generated from its massive water turbines to mine crypto.

"We think this is the oldest renewable energy facility in the world that's still running," Albany Engineering Corp. CEO Jim Besha told the Times Union.

He said the plant "could actually make more money with bitcoin than selling the electricity to National Grid.

Albany Engineering Corp. receives around 3 cents per kilowatt-hour when it sells energy to National Grid. Mining bitcoin makes about three times the amount of money, Besha said.

"It's the best (type of bitcoin mining) because we're using renewable energy," Besha said. "We're just doing it on the side, experimenting with it. We're buying used servers."

Each week Besha converts thousandths of a bitcoin into fiat rather than 'HODL' because he's worried about crypto volatility.

The hydroplant was constructed in 1897 and is getting new life amid China's crackdown on miners, resulting in the hash rate —the computational power available to mine the cryptocurrency, reflecting the efficiency of the bitcoin blockchain network, plunging since mid-May.

quote:

Originally posted by PASig:

So it’s a high-tech Ponzi scheme…

That is definitely an element of it, amplified by the massive appreciation of the currency for those who got in early. Part of the appreciation is that it costs more to mine as there is more of it. The term "mining" is a misnomer, what the calculations are for is to validate transactions, prove that the tokens regarded as a bitcoin are actually legitimate. This has to be done for both sides of a bitcoin transaction, and costs a lot (in terms of CPU cycles and the electricity powering the device), the calculation is rewarded by paying sort of a commission thereby adding value to the trading marketplace. Do enough calculations, validate enough trades, and you "earn" a new bitcoin. The downside is that now that bitcoins have become so widely used, the cost of "mining" has grown to the point where it cannot be profitable unless your electric cost is zero or thereabouts. Not to mention that the computing horsepower needed is so great that it requires a significant capital expenditure to assemble the necessary infrastructure.

Why is it worth anything at all? Because some people will pay "real money" for it. The same could be said for an hour of labor, any physical object, or something less tangible, e.g. an athletic, musical, or theatrical performance.

But I fear this doesn't answer the OP's question. I'll confess that I don't really "get it" either, no investment in bitcoin, and no intention or desire to do so. The market seems to me to be driven by the twin forces of greed and wishful thinking, neither of which are something I'd like to hang my fortune on.

I don't understand any of the "tech" of bitcoin. Mining, blockchain, etc. I do know part of the appeal is that the way the mining process works you eventually produce the maximum amount of "coins" possible, 21 million from what I understand. So unlike the government which can always just print more money the supply of bitcoin is ultimately limited. Now of course since there is no "backing" as previously mentioned the value of bitcoin is determined solely by what the market demand says it is. I don't know how anyone can take seriously a currency (to be generous with that word) that just in the last 3 months has lost almost 50% of its peak value.

Mining is mining. People expended effort to mine gold because other people find value in gold. Same for silver, coal, diamonds, etc.

People mine cryptocurrency by expending computing effort to "solve" calculations and help track cryptocurrency transactions because other people find value in the particular cryptocurrency.

But cryptocurrency shares an attribute with countries' money that differentiates them from gold, silver, diamonds, etc. The value of a cryptocurrency and government money is based on the belief that other people will continue to see value in the currency. The value for government money is determined by supply and demand on the foreign exchange markets.

Bitcoin isn't the first cryptocurrency; it's only the first cryptocurrency that got established. There were two cryptocurrency companies that went belly up with the dot com bust.

The draw of cryptocurrencies unlike government money is that the algorithm for mining cryptocurrencies is supposedly fixed and it takes more and more effort to mine additional cryptocurrencies thereby setting a practical limit on the supply of the cryptocurrency. This makes them preferable over money that is printed at will by the issuing government.

But in the end, cryptocurrencies depend on people continuing to find value in it enough to use it as a medium of exchange of value.

And for full disclosure, I kick myself every so often for not following through and dumping $1,000 in bitcoin when it was $30 each. I also kick myself to not following through and buying Apple at $3 when Microsoft even bought shares in Apple to keep it from going bankrupt and leaving Microsoft vulnerable to an anti-trust suit and subsequent break up.

Imagine if keeping your car idling 24/7 produced solved Sudokus you could trade for heroin…

If you can not afford to loose it in the blink of a gnats eye then run away faster than a speeding bullet. A form of legalized gambling. ..................................... drill sgt.

This message has been edited. Last edited by: drill sgt,

I am far from an expert but I have been able to digest the below from the articles I've read.

The 'mining' is using your computer to help the cryptocurrency do the math required behind the scenes to make the currency secure. It is like the Federal Reserve outsourcing some of the work making currency hard to counterfeit.

'Mining' is very computationally intensive, so the software involved both ties up your PC and soaks up kilowatt-hours. There are some add-ons that make the work faster (i.e. certain graphics cards) but while they speed things up they also soak up more power. (Since you can't get powerful graphics cards these days, that's largely irrelevant.)

What you get paid for 'mining' is a small probability of being compensated with one unit of the currency, and a much larger probability of getting compensated with nothing. You are out the cost of the power and of much of the use of the PC while it is 'mining' so there are real costs to factor in.

Invest in bacon bits. At the least you get something you can eat. Cryptobits..noval.

I’d search for couple of movies suggested here in a previous thread as it really can’t be explained in a couple of paragraphs. My take away was the whole thing requires exponential amounts of electricity, someone will flip the switch at some point and it will be gone.

The transaction processing is clunky as all get out and gets worse with each transaction processed. When people stop processing the transactions, it’s over.

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Originally posted by joel9507:
There are some add-ons that make the work faster (i.e. certain graphics cards) but while they speed things up they also soak up more power. (Since you can't get powerful graphics cards these days, that's largely irrelevant.)

This is one of the major reasons you CAN'T get a powerful Graphics Card these days!

I don't know... I've got a new PC I put together a couple months ago. I'm thinking about setting it to "go mine". I've got a buddy that's into it.

Based on the calculators I've seen I'd net $80 a month or more after electricity cost. Maybe buy my self a sig with this imaginary money if it works out.

quote:

Originally posted by myrottiety:
I don't know... I've got a new PC I put together a couple months ago. I'm thinking about setting it to "go mine". I've got a buddy that's into it.

Based on the calculators I've seen I'd net $80 a month or more after electricity cost. Maybe buy my self a sig with this imaginary money if it works out.

If that is the case I'd consider re-investing your $80/month in crypto. Digital DRIP.

Interesting:

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Originally posted by nhracecraft:

quote:

Originally posted by joel9507:
There are some add-ons that make the work faster (i.e. certain graphics cards) but while they speed things up they also soak up more power. (Since you can't get powerful graphics cards these days, that's largely irrelevant.)

This is one of the major reasons you CAN'T get a powerful Graphics Card these days!

I thought the price of graphics cards is (is going to?) fall faster than the price of lumber now that the ChiComs have banned bitcoin mining in the PRC.

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Originally posted by MikeinNC:

quote:

Originally posted by PASig:

So it’s a high-tech Ponzi scheme…

That’s my take on it..if I can’t hold it in my hand..I’m not into it

Like paper currency? I view the main difference between crypto and government issued fiat money is mainly that a government issued one. It is still made up money. I don't have a problem with made-up money, either.

And yes, currency trading of any kind, whether in traditional government fiat currency or cryptocurrency, is incredibly risky and hard to predict. More than most other kinds of trading.