quote:

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

Just the opposite.
Bitcoin Mining is the process of verification of banking transactions.
The bank is decentralized ~ in computers across the world vs transactions of banks/governments that are centrally controlled.
It is confusing, and a hard concept to grasp.
Understandable for reluctance vs the "gold in hand".
FWIW, I have no part of it but that is just my understanding of it.

On a very basic level, here's the deal with Bitcoin mining.

The goal with Bitcoin was for everything to be distributed - there is no central authority that records or manages transactions.

So you want a bunch of random people all over the world to run software that collectively records/manages transactions.

To make it hard to cheat the system, the software uses something like encryption that everyone can read but is very, very, very difficult to edit. Doing this encryption uses a lot of computer power.

People aren't going to do that for no reason. There has to be some incentive or it won't happen. It requires paying for electricity to run the machine and you can't use that computer power for something else.

So the way Bitcoin was set up, if you run the software that makes you a part of the distributed network that records/manages transactions, you have a chance of being awarded Bitcoin for doing so. It's basically a way for the system itself to pay people for operating it.

This is "mining." Running the software that makes up the financial network and hoping to be awarded new Bitcoin for doing so.

Of course, the total number of Bitcoin is limited. Eventually, there will be no "unmined" Bitcoin left.

The assumption under which Bitcoin was set up is that by the time "mining" Bitcoin is no longer incentivizing (because there aren't many Bitcoin left to "mine"), Bitcoin will be a popular enough currency that small transaction fees built into the system will be enough to incentivize the people running the software that makes up the network.

Regardless of how one feels about it as a currency or its actual value, it's a really clever, elegant idea.

A big difference is that a government can create as much fiat money as it wants. But at some point doing too much of that will create inflation (we're getting to that point now.)

With cryptocurrency, the calculations that have to be completed to create new currency are both well understood (by people who understand the math and hard core computer science), and act to limit the amount of the currency that can be released. It's set up that the more currency gets into circulation, the harder/more computationally intensive the calculations that need to be completed to make new currency get. IIRC, at some point they calculations get impossible to complete, and the amount of currency is essentially capped.

So from an inflation protection standpoint Cryptocurrencies are superior to government fiat currencies.

quote:

Originally posted by jhe888:

quote:

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.

Ponzi is probably over used in this case. However, the value if there is value, resides in people continually doing the mathematics on their computers (or server farms) to verify 5he transactions. All in the hope of earning (mining) an actual bitcoin. If people stop doing this relentless chase of the BT then the mathematics grind to a halt and the value plummets. It does require more and more people to actually do the mining. People stop mining there is no value.

Your pile of 100 dollar bills doesn’t require this level of entry level users to still buy stuff. Over simplifying? Yes, but crypto isn’t the magic bullet currency that many would like you to believe it is. It’s swings alone should scare the shit out of you.

Plus I come to the basic question. What makes it valuable? If it didn’t have the wild upward skyrocketing ride and just kind of plateaued relatively stable like most trusted currency nobody would give a shit. People only care because you can spend 100 dollars in electricity and maybe get 180 dollars back out. If the currency stabilized in price though that delta is going to shrink. And fast.

quote:

Originally posted by BBMW:
A big difference is that a government can create as much fiat money as it wants. But at some point doing too much of that will create inflation (we're getting to that point now.)

With cryptocurrency, the calculations that have to be completed to create new currency are both well understood (by people who understand the math and hard core computer science), and act to limit the amount of the currency that can be released. It's set up that the more currency gets into circulation, the harder/more computationally intensive the calculations that need to be completed to make new currency get. IIRC, at some point they calculations get impossible to complete, and the amount of currency is essentially capped.

So from an inflation protection standpoint Cryptocurrencies are superior to government fiat currencies.

quote:

Originally posted by jhe888:

quote:

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.

I understand, and my point is that many of the "flaws" in cryptocurrency are also flaws in government-issued fiat money. Each has some other advantages and disadvantages, but they are not as different as some believe them to be.

In one sense you can accurately and casually say:

"Bitcoin Mining is using computers to solve online math problems in exchange for prizes."

And the more computers and gpus, the more problems you can solve (transactions you can verify) and the more prizes you can earn (fractional Bitcoins themselves).

One can also say, then, that Bitcoin Mining is the tech-sweat-equity/tech-barter way of acquiring actual Bitcoins as opposed to simply buying them with fiat currency like the USD.

It's no different than loaning out one's Tracktor to a Farmer in exchange for a small portion of the Harvest, then as you see the trend you buy lots of Tracktors and loan those out too. Same idea, old as dirt.

Look at this video of a Mining setup to see what the serious sorts are doing:

https://www.youtube.com/watch?...esktop&v=f0HC1Udk6-E