Bitcoin mining and crypto currencies

[Afro_Samurai]

What in the name of god is it all about? Why do you earn bitcoins to solve maths problems?

http://www.bitcoinmining.com/

 

[Bin Hex 12]

What in the name of god is it all about? Why do you earn bitcoins to solve maths problems?

http://www.bitcoinmining.com/

Because there is difficulty metric built into bitcoin making their mining more complicated as more blocks are mined.

The difficulty is the measure of how difficult it is to find a new block compared to the easiest it can ever be. It is recalculated every 2016 blocks to a value such that the previous 2016 blocks would have been generated in exactly two weeks had everyone been mining at this difficulty. This will yield, on average, one block every ten minutes. As more miners join, the rate of block creation will go up. As the rate of block generation goes up, the difficulty rises to compensate which will push the rate of block creation back down. Any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by everyone on the network and thus will be worthless.

 

[Afro_Samurai]

I have no idea what you just said or why solving complicated maths equations generates value. Who is benefiting from the solved equations?

 

[The Curious Lozenge]

there are some somewhat shady "exchanges" where you can trade them for real currency.

they are also a god send for criminals, as it's a completely untraceable method of paying for things.

 

[macuísle]

Afro I now officially love you for being the first honest feen to ask the question.

How is nothing a valid currency. Regardless of how intelligent you aren't it makes no economical sense that solving math equations has monetary worth.

 

[Bin Hex 12]

I have no idea what you just said or why solving complicated maths equations generates value. Who is benefiting from the solved equations?

There are are finite number of Bitcoins. They are hidden in encrypted blocks - anyone can buy an unencryption machine and start mining blocks. They get a certain number of Bitcoins for every block they uncover, unlocking the extra Bitcoins.

The reward they get reduces eventually as the more they uncover the more the value of individual Bitcoins decreases.

Eventfully all bitcoin will be mined and no more will ever be created and they value my then rise, and rise.

 

[Afro_Samurai]

there are some somewhat shady "exchanges" where you can trade them for real currency.

they are also a god send for criminals, as it's a completely untraceable method of paying for things.

I can understand the bitcoin itself, I think, but I am baffled by the mining stuff. What is the purpose of the computations?

 

[Afro_Samurai]

There are are finite number of Bitcoins. They are hidden in encrypted blocks - anyone can buy an unencryption machine and start mining blocks. They get a certain number of Bitcoins for every block they uncover, unlocking the extra Bitcoins.

The reward they get reduces eventually as the more they uncover the more the value of individual Bitcoins decreases.

I'm sorry, but I don't understand any of this. Why do they get a reward? For doing what for whom?

 

[Bin Hex 12]

I'm sorry, but I don't understand any of this. Why do they get a reward? For doing what for whom?

It is like mining. They are doing the donkey work, digging for gold, unencrypting blocks of data. They get a portion of the value if bitcoin they 'find'.

 

[Afro_Samurai]

Okay, okay, okay. Wait. The bitcoin company sells you these 'blocks' of data that have bitcoins (digital codes) hidden in them. But there will only ever be a finite amount of bitcoins (they'll all be discovered eventually).

So, the faster computer/banks of computers you have, the more bitcoins you'll have. Buying the opportunity to mine them now, for whatever they cost, gives you a bigger share of the overall number of bitcoins...

They're propagating the currency. Tbh, it sounds well dodgy. How much is a block?