Do all the virtual currencies also have currency mining? and what does it mean?

[edutech4schools]

Just been browsing around some different virtual currency sites but it all really confuses me. Probably the most confusing thing is the mining. Why do they have mining? what's it all about?

[Sdrawkcab]

It's how they generate new cryptocoins, as well as verify transactions. My understanding of how it works for Bitcoins is as follows:

 

The mining computers all try and generate a hash value for "blocks" of transaction data where the hash value has to fill certain criteria. In the case of bitcoins, the protocol asks you to generate a hash value with a certain number of leading 0's. The number of 0's required is modified on-the-fly by the protocol depending on the total computing power of the network - more miners = a more complex hash/more leading 0's required. This is done to keep the "block time" (that is, the amount of time that passes between each block of processed transactions) around 30 minutes or so. When the protocol announces the number of leading 0's required, all the mining computers essentially race to try and "find" the block by producing the required hash. Whichever miner finds the hash first gets the block rewards from the block, plus any transaction fees sent with the transactions in the block.

 

It's basically making your computer do useless busywork in order to generate libertarian play money.

[Heebeejeebee]

... but what work are they doing and who 'pays' for it?

 

I haven't looked deeply into it but I'm a bit confused about how it can generate a monetary value unless someone somewhere is stumping up some 'real' cash.

 

HBJB

[Sdrawkcab]

... but what work are they doing and who 'pays' for it?

 

I haven't looked deeply into it but I'm a bit confused about how it can generate a monetary value unless someone somewhere is stumping up some 'real' cash.

 

HBJB

 

WELCOME TO BITCOINS!!!!! The person paying for it is whoever pays the electricity bill for the mining machines.

 

They have a value right now because people are willing to buy them for actual real money. This is different to real actual money, which has value because people are willing to exchange it for goods and services.

 

The new bitcoins generated as block rewards are only set to happen until there have been 21 million bitcoins created (this will be the total number of bitcoins created EVER), and the amount of bitcoins given out as a reward for finding each block will gradually decrease until they've all been mined. At that point, the only reward you'll get from mining is from collecting the transaction fees sent along with the transactions in any blocks you mine.

 

This means bitcoins are deflationary due to scarcity, which is an absolutely stupid quality to have in a currency and is exactly why we dropped the gold/silver standard. Some bitcoin "true believer" is probably going to come in and say BUT BITCOINS ARE INFINITELY DIVISIBLE, which only demonstrates that they have absolutely no grasp of economics whatsoever.

 

tl;dr: cryptocurrencies are dumb as hell do not buy them

Edited February 28, 2014 by Sdrawkcab

[Heebeejeebee]

So nothing actually constructive then (like folding, SETI etc)? Just churning to get some chance of getting a portion of a virtual currency. Mostly at the expense of their employer I suspect as there are a lot of people doing this at work it seems.

 

HBJB

[featured_spectre]

One guy I know, used his university machines to do it, had like 5000 devices mining. He got caught and a final warning. What happened was the machines were mining when not in use, so they were "passively" mining. They were kept on 24/7 and he was found out simply through the higher than normal electricity usage for his department.

[Sdrawkcab]

So nothing actually constructive then (like folding, SETI etc)? Just churning to get some chance of getting a portion of a virtual currency. Mostly at the expense of their employer I suspect as there are a lot of people doing this at work it seems.

 

HBJB

 

Nope, and the best bit is that because Bitcoin uses some stupid hashing system, you can't adapt any of the specialized mining hardware to actually produce useful hashes!

@nephilim is it really suprising to hear that people are doing it at work? someone else foots the bill that way, totally fits in with the classic libertarian FYGM attitude.

[featured_spectre]

FYGM? Dont know that acronym.

[Sdrawkcab]

FYGM? Dont know that acronym.

 

F*ck you got mine

[edutech4schools]

This means bitcoins are deflationary due to scarcity, which is an absolutely stupid quality to have in a currency and is exactly why we dropped the gold/silver standard.

 

Does this make something like dogecoin better as it is not deflationary. On the site they call it dogeflation, lol.

[flyinghaggis]

Probably the most confusing thing is the mining. Why do they have mining? what's it all about?

 

Because mining new coins is easy to begin with and gets progressively more difficult it's what allows the early adopters and founders [con-artists] who started the crypto-currency [pyramid scheme] to own most of of the newly created 'currency'. That way they can cash out with the lions share of the stolen money before Ponzi scheme collapses and everyone else gets robbed blind wondering why they paid real money for a digital currency that isn't actually worth anything at all

Edited February 28, 2014 by flyinghaggis