Lets talk bitcoins

At a high level mining is the validation of a transaction in the Bitcoin 'network', this validation can be done fairly easily, but the network asks you to solve a complicated puzzle before it accepts your validation of the transaction. This puzzle that you have to solve for each transaction validation keeps getting harder, the difficulty is in part based on the amount of computing resources that the network has (aka the computing power of all the miners).

Why do you have to solve a big puzzle? Because the network is protecting itself from being cheated/spammed with fake transactions. At a high level, this is how the concurrency works:

You join the network and either buy or mine a coin, we'll call it WeraCoin with ID A. Coin A has a history of all the people that it ever came in contact with, a blockchain, which says Coin A belongs to Flyboy. So we have

Coin: A
Blockchain: Network-> Flyboy

Everybody in the Wera world wants your coin, and you decide that you're going to trade your coin for a YamaHonda CBR8, which Tophyr is selling. So you open up your digital wallet and send your coin to Tphyr, so now the state of the coin looks like this:

Coin: A
Blockchain: Network-> Flyboy -> Tophyr

When this transaction takes place, the network asks other computers to validate their blockhain/history of Coin A. This must take place before Tophyr sees the WeraCoin deposited in his wallet. The validation is in place to make sure you don't rip of Tophyr by double-spending the coin. How could you rip him off? Well if you were sending the coin directly to him and didn't ask the network to validate the transaction, you could send him Coin A and then also send me Coin A (for a CBR8 exhaust) at the same time, and if we had a slow Internet connection I'd never know you double spent the coin until it was too late.

So say you really really want to rip both of us off, and you have access to quite a bit of computing power, so you set up A LOT of fake miners that tell the WeraCoin network that both of those transactions are actually good. Well the network requires you to solve a puzzle before you validate the transaction, a sort of proof-of-work. That proof of work is what mining is all about, you validate a transaction in the network and then provide proof-of-work to the network. The more computational power the network has, the harder that proof-of-work will be, so it stops (well, makes it REALLY hard) for any one person from cheating everyone.

So why validate transactions and solve puzzles, aka mine? Because every now and then the network 'gifts' machines that solve puzzles with a WeraCoin. For all that hard work your PC is doing you get a WeraCoin, and this is one of the reasons so many people 'mine' coins.

tl;dr you're validating a transaction and doing a proof-of-works puzzle to submit to the Bitcoin network, in the hopes of scoring some coin

If you have some time, this is the best explanation of crypto-currencies that I found: http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-actually-works/

 

I'm just waiting for this to be hacked. It will be and then the facet will fall down and all of those resources will be wasted.

Also on a global scale I disagree with the amount of wasted resources for this sort of thing. As Tophyr says....we can't we use that computing power for something good like folding proteins, processing radio signals, etc.

 

facade.

 

façade

 

i did wonder what crystal structure had to do with anything though

 

I thought about using the bent c (I even know the alt key by heart having just this past fall hosted a Catalan grad student named Llorenç), but the word has been adopted by the English, so apparently its copacetic. I'm hoping Sunshine comes back and corrects us.

 

This is what you get for ignoring my helpful posts. You keep making the same mistakes.

 

I guess y'all saw that the CEO of Bitcoin was just arrested today at JFK Airport and charged with money laundering?

http://www.businessinsider.com/repo...l&utm_source=facebook.com&utm_campaign=buffer

 

Hahaha, awesome. But, to make a critical distinction - He's not the "CEO of Bitcoin", he's the CEO of one of the exchanges. Anybody can start up an exchange, they're similar to banks or brokers.

 

Ah, makes more sense. Will be interesting to see the backlash on the value for the short term.

 

Eat me Frenchie. It's an omission, not a mistake

 

Well, that's the same "omission" twice in about one week, made in the process of criticizing other people's grammar. You have to admit the irony is delicious.

 

The arrest of that CEO, having been the result of laundering, will most likely be the trigger that causes Washington to start their crackdown on the whole enchilada. Who knows, maybe money laundering was why bitcoin was started. Whatever the reason I'll bet it's soon to be gone.

 

People that think it will be gone are missing the point entirely. They are here to stay in one form or another (cryptocurrencies).

As for wasted resources? Please name a currency that does not have associated resource waste.

 

But not exactly. They aren't regulated like a bank or a broker. Nor are they insured like FDIC.

 

As for the arrest. Zero fucks were given by the market.

 

alexm-
Thx for the explanation. Is there any chance the "puzzle" being solved could be nefarious? Like crunching numbers for the NSA or some other organization? Or would that have been recognizable?

Btw I'm a computer dummy....in case you can't tell lol

 

Not sure how I missed this gem...


This is the right response, correct?

 

China started accepting bit coin again. Buy buy buy! Also Dodge coin mining is the most profitable now.