Does it have any *real* value?   From what I've read, it sounds like it is tied to computer processing assets and that's it.  Basically crunching numbers for bitcoin credits.Is that an accurate assessment?  Are the computations tied to anything critical and specific like space exploration, curing cancer or women's undergarments?


  • I understood it to be an electronic currency that shows all transactions for which it has been used.  In effect, it can't be laundered as long as you know how to read the code.
  • edited November 2017
    My understanding is that the software that "mines" bitcoins is typically paired with the "wallet" software that keeps redundant records of whose wallets hold how many bitcoins, with an account that is not inherently connected to your real world identity.

    To answer your second question, no, its not tied to a useful calculation; its a computation designed to limit the number of bitcoins issued, specifically to avoid the economic consequences of a government managed fiat currency, and the tendency of governments to debase their own currencies as a remedy for undisciplined spending.  There is a diminishing return for newly mined bitcoins, according to how much electricity is consumed solving for the next coin.  They will have to increase substantially in value, for distant future bitcoin mining to be worth the electricity/computational power consumed. (Or the number of bitcoin miners will have to drop; I read somewhere that its a system designed to issue one bitcoin every ten minutes, globally, but I'm much less confident that I've remember this parenthetical correctly)

    The anonymity of bitcoins is lost when you use your account to actually spend bitcoins with one of those rare merchants who accept them, to deliver goods or services to your home (such as or Newegg).  To the extent that doesn't happen, or only happens with under the table transactions (a seller sending a package via UPS), they can serve as a means of moving wealth around without any of the burdens or protections that go with U.S. currency.  I'm not sure if bitcoins were the primary means of criminals paying for things through the "Silk Road" ebay of illegal goods and services.

    I've heard/read that people have lost their bitcoin wallets due to forgetting passwords, losing hard drives, and being hacked.
  • How is it that its existence is tolerated by the federal government?  How is it that people are willing to invest in it?  Seems extremely risky.
  • I think the perception of risk in bitcoins is mitigated by the risks inherent in fiat currency, and the speculative rewards if bitcoins really take off.

    Maybe you'll waste some money turning electricity into bitcoins, or buying bitcoins mined by others.  Maybe those bitcoins will multiply in value by a factor of 100 or 1000, if something really bad happens to the fiat currency economies. (I'm not sure how that happens without undermining the internet connectivity that seems to be a requirement for the widespread transparency of bitcoin wallet transactions.)

    The more modest speculative gains come from things like that Crimean (or was it Crete) banking bitcoin rush that happened ?... a few years ago?

    I thought about opening an exchange, but worried precisely about the possibility of having to defend against an IRS prosecution or something about failing to comply with banking regulations.  I'm not sure I could earn a bunch of bitcoins, and then realize a gain in U.S. dollars, report that income on my tax returns, and not wind up suffering the worst possible IRS audit I can imagine.

    If one avoided U.S. taxation entirely, (by only spending gains abroad) I'd imagine you'd just be substituting even less predictable risks (robbery/kidnapping/corruption).  Those are sufficient barriers to entry to keep me investing in the U.S. stock market.
  • What makes money "MONEY" is the willingness of the general population to accept it as a store of value.
  • Bitcoin is only useful in the context of a "connected" civilization. In a TEOTWAWKI scenario, it loses all value, as you will not be able to communicate with the network that clears the transactions against the central register.

    There are also technical challenges currently causing problems for BTC - the scalability of the network is in question, were BTC to take off and become more mainstream.

    The counterpoint here is that BTC *can* be spent in some stores (both online and brick & mortar) today, whereas if you try spending bullion, you're gonna have a bad time. 

    The "value" of bitcoin is in the belief in its computationally-driven scarcity, coupled with the belief in its relative anonymity as a means of exchange and value storage.

    I guarantee you there are lots of lost BTC out there, which can never be recovered, due to the aforementioned lost passwords and lost hard drives. In that sense, as a digital store of value, I see it as fairly risky. Corrupted hard drives happen.

    The existence of BTC and other cryptocurrencies is also driving cybercrime. Because the cost of running the computational algorithm is "lots of electricity", there is a tendency for unethical miners to rent the services of botnets (large groups of compromised computers with a software backdoor installed) to distribute that cost to unknowing participants.

  • Something I don't understand- bitcoins are farmed by high end graphics cards, the graphics card companies are starting to produce cards specifically for bitcoin farming... wouldn't it be a great revenue stream for the graphics card companies to set up a bunch of farms?
  • No - because the economics of running all that server gear are awful. There's no money in it, unless you're the "lucky one" who mines the next coin.
  • They are only mined in whole bitcoins?  Yeesh.  Sounds like a lottery.
  • My understanding of the mining end of it, is that its gotten so competitive already that if you don't live next to a cheap source of electricity, the coins you can mine with good hardware are worth less than your electric bill for running the mining rig.

    I thought about joining a mining group (distributes the computation and shares any coins mined) and running the mining software on a work computer (which would otherwise sit idle 2/3rds of the day).  That carries the risk of an employer finding out that you've been converting a portion of their electric bill into pocket change for yourself, and reacting... badly.

    I read about some early bitminers renting apartments with "free" electricity for a couple hundred bucks a month, and being evicted after their landlords got bills for thousands of dollars from their electric companies.  A portion of the bills were for window fans to keep the apartments from overheating from all the miners they had running.

    Its a funny subject.  I just never saw a way to get personally involved without the costs and risks outweighing the likely benefits.
  • ZedZed
    edited November 2017
    Yeah, I saw an article not so old article talking about the hardware required to get into the game and they had several links to kits that were sold on Amazon and had hard documented the prices in the article. By the time I read the article, the price of the hardware had almost tripled if it hadn't been made obsolete by next generation mining hardware.  And I'm talking a couple thousand dollars for something that would mine thousandth of a bitcoin over a day.  (with the difficulty rate as of summer 2016)

    Like this unit:
  • We have fired people for mining at work.
  • How long were they able to mine before getting caught?  Do you know what gave them away?  From what I'm reading, those mining units are very loud (fans), and hot.
  • Someone on the security team was scanning a host in our server farm and detected the outrageous cpu usage.
  • If I were going to build a computer for mining I would build in in a chest freezer and do away with the fans altogether, replacing them with the largest heat sinks I could buy off the shelf.

    I would also take a good look at buying up obsoleted blade servers.

    Of course, I wouldn't be mining for crypto-currency anyway...  The time to do that was right at the beginning when the "mine" was still rich.
  • dgm said:

    Someone on the security team was scanning a host in our server farm and detected the outrageous cpu usage.

    How feasible would it be to trick people into turning them into distributed mining resources via online gaming?
  • Showtime's website had a cryptocurrency mining program that would use people's browsers without their knowledge or consent.

    Tricking people is easy.
  • I wonder if the big cloud guys could use idle compute power.
  • Sure, but it doesn't change the economics. The energy used to produce 1 BTC costs more than 1 BTC is worth.
  • ZedZed
    edited November 2017
    So the trick is *just* to get someone else to do the lifting for you without them noticing.
  • Wait a minute... Why is my CPU pegged when I visit NPB!?!

  • That's right Zed. If you want to mine BTC, you need to steal energy from someone, or produce it yourself at a cost lower than the value of the BTC you mine.

    Stealing it turns out to be much easier.

  • Seems to be gamble on human nature.    The natural inclination is toward the path of least resistance, versus a desire to find a desire to find a new way to do something.   Except it seems to me that BTC can only be generated by computers, so until there is some exponential increase in efficiency it is a losing proposition to get involved in it.
  • Solar?

    So BTC could be the reason for the Matrix?
  • nbody said:


    So BTC could be the reason for the Matrix?

    Solar power is problematic. There isn't as much of it as most people think.
  • So a few days ago, 1 BTC was about 6500USD

    Now it's 7260USD
  • ZedZed
    edited November 2017
    If you look at the value chart for the past few years... seems like that trend wouldn't be sustainable.

    And a "recent" article about them
  • Maybe the value of a bitcoin has finally reached a level where it's economically viable to extract.
  • According to this:

    I can make $4k/year mining at home, taking into account the $0.104/kwh cost of energy, at $12k/BTC

    The cost of the equipment is about $2000.

    Given the heat that one of these mining computers kicks off, I could use one to heat our home office in the winter.
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