[Closed] Can someone explain 'crypto mining'.....

"It’s all virtual right? How can it be worth bucket loads of ‘proper’ money?"

It's a long time since economics depended on actual physical money or resources, so it's really just an extension of that- and the mining process itself keeps a level of scarcity similar to natural resources. So sure, it doesn't really make much sense but it's far from the only thing in late stage capitalism that doesn't make much sense.

I think I'd rather people be trading made up money than taking bundles of bad debt, getting their mates in the credit agencies to rate them AAA+, then selling them. Or shorting shares in a real company and causing investor panics that cost real jobs. Maybe in time we can get all of the parasitic stuff to move entirely into virtual assets.

Just got my spare PC running again and I don't pay the electric bill so maybe I'll get mining eQualtoons.

I remember the web in its infancy and friends laughing about it and not really getting it.

Crypto is at that stage now.

Mining is generally solving equations using algorithms at rapid speed in exchange for payment, at a very simple level.

We have 10x1080ti cards doing this when they're not crunching graphics.

There are of course different types and methods of mining. We use nicehash which is not the same as mining bitcoin.

I have read a little bit about this and interested but also a technophobe.

Mining is generally solving equations using algorithms at rapid speed in exchange for payment, at a very simple level.

I'm curious if this "work" actually has a purpose? Does the solving of problems help some part of the web to function or is it just some token effort, because this quote seems to indicate it has no real value.

Think of it like one of those competitions where you have to guess the weight of the cake - only you get unlimited guesses, and the first one to submit a correct answer wins. Whoever can make guesses at the fastest rate has a higher chance of winning.

http://www.itpro.co.uk/digital-currency/30249/what-is-cryptocurrency-mining

I’m curious if this “work” actually has a purpose?

There might be some little known variant which does but generally speaking there is no wider purpose to it.

How can it be worth bucket loads of ‘proper’ money?

Because people are willing to pay bucket loads of proper money for it. Like most other forms of speculation the value assigned to it has no relationship to the actual cost of the manufacture.

Crypto is at that stage now.

Its been around for over 10 years now. By that stage the WWW was widely accepted.

It is another way of wasting the earth's limited resources for no benefit other than speculative personal gain.

Yep, it's stupendously wasteful.  0.1% of the world's electricity currently, and expected to be 0.5% by the end of the year.  There's some good commentary (and explanation of it) here:  https://davidgerard.co.uk/blockchain/2018/05/22/bitcoins-stupendous-power-waste-is-green-apparently-bad-excuses-for-proof-of-work/

I’m curious if this “work” actually has a purpose?

22 years in my current job and I wonder the same everyday.

Simplistic (and I don't fully understand it myself so may be wrong)…

It's an electronic currency with no central bank. There's a public digital ledger shared around which contains all the transactions in blockchains. The encryption keeps this secure, but to maintain and validate the blockchain a large amount of computer power is required, which is distributed and anyone can run a node to do this. This is the mining part and you get a reward for doing it.

The encryption is in the form of private/public keys for the coins themselves to prove ownership, and hashes on the blockchain to prove the ledger hasn't been hacked. As I understand it, it's designed to take far too long to crack with current technology, even distributed and will also adapt as the speed of computer power and networks increase, by making the algorithms more complex. This makes the mining more difficult and I think reduces the reward, or you have to spend a lot more money in the mining equipment to make it worth doing.

As said, the environmental impact is high. There are big data centre type places churning out this stuff.

That's pretty much it, except that the large amount of power needed is purely the mechanism to make it both secure and decentralised.  You do a completely pointless calculation to prove that you've done the work.  If you find a winning number before anybody else, you get to write the next block and get a "mining fee" as a reward.  Everybody else's efforts are completely wasted.

The purpose of this is that if you wanted to rewrite the ledger with different transactions, you'd need to control more than 50% of the world's mining efforts.  This ensures that it stays decentralised.  Or at least it would, if it weren't for the fact that the majority of mining is now done by just three mining pools.

I'd highly recommend David Gerard's blog (see link above) for more information on this stuff.

We have 10x1080ti cards doing this when they’re not crunching graphics.

Which is why it's almost impossible to pick up a high end Nvidia card for anything like the RRP.

Harrumph.

I think proof of stake (rather than proof of work) is the long term goal, like Ethereum is doing with Casper.

There's a brief explanation here

https://blockgeeks.com/guides/ethereum-casper/

Crypto mining is a great way to make a lot of money very quickly.  Here's how you do it.

Step 1: go back in time ten years.

I’d highly recommend David Gerard’s blog (see link above) for more information on this stuff.

Cheers, interesting read 👍

Hadn't realised it was so wasteful!

We have 10x1080ti cards doing this when they’re not crunching graphics.

Which is why it’s almost impossible to pick up a high end Nvidia card for anything like the RRP.

Harrumph.

You had exactly the same opportunity as me to purchase them. I purchased them over a short period at reasonable rates.

Crypto mining is a great way to make a lot of money very quickly.  Here’s how you do it.

Step 1: go back in time ten years.

Or go forward in time ten years?

Yep, it’s stupendously wasteful.  0.1% of the world’s electricity currently, and expected to be 0.5% by the end of the year.

It's not wasteful if like any other mechanism to the individual who is doing it.

A few things people don't understand.

1) Our small farm is also used for CGI work.

2) We had no heating on during the winter.

3) The cards of throttled to 60% of their power, meaning the total power pull is 2KW when being used for mining.

I bet my business as whole is much lest wasteful than many households.

Crypto mining is a great way to make a lot of money very quickly.  Here’s how you do it.

Step 1: go back in time ten years.

Can't argue with that. We've been asked by a finance co. to value 'Crypto rigs' basically banks of hi-end GPUs with cooling etc, they want to fund them over 5 years to make them viable, but they'll never last that long, and even if they did they're not going to be efficient in 2 years.

IMHO mining margins are now so low that unless you're getting free electricity or are prepared to risk a lot of capital for a tight margin it's not worth it and the currency itself is dangerously over-valued - there are £84bn worth of Bitcoins in existence at the moment but it's completely intangible and only worth what someone will pay for it - yes, that's the same as anything else - but the other usual commodities have a tangible real world value - Oil, Gold, Food - all have values related to real world uses.

If it was a Bank, or a Sovereign Nation it wouldn't pass any sort of stress test, it's just such a classic bubble I can't see it lasting forever.

Its been around for over 10 years now. By that stage the WWW was widely accepted.

I still think Crypto is in its infancy even if the timings differ.

It is another way of wasting the earth’s limited resources for no benefit other than speculative personal gain.

Assuming you work for a living - what task do you perform that doesn't need any of the earth's resources that benefits you for personal gain?

If it was a Bank, or a Sovereign Nation it wouldn’t pass any sort of stress test, it’s just such a classic bubble I can’t see it lasting forever.

Are you so sure that fiat isn't heading for rough end - particularly the dollar.

You had exactly the same opportunity as me to purchase them. I purchased them over a short period at reasonable rates.

I assume that you're doing some exotic graphics workstation stuff most of the time.

Tell me, how does Fallout 4 on a 4K display run with that lot powering it?

Tell me, how does Fallout 4 on a 4K display run with that lot powering it?

I could find out for you?

All I'm saying is I waited out buying the cards and didn't pay too much over the odds.

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If it was a Bank, or a Sovereign Nation it wouldn’t pass any sort of stress test, it’s just such a classic bubble I can’t see it lasting forever.

Are you so sure that fiat isn’t heading for rough end – particularly the dollar.

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I don't think any national currency has made it through the last few hundreds years without one crisis or other, but they're supported by central banks which even today hold large, physical, tangible assets and of course the collective work of their citizens, not to mention they're managed by the people who make the rules - if there was a national crisis and US industry started paying their workers in Crypto instead of dollars to try to fight hyperinflation risking their currency, they could, in extremis, ban their trade and collapse their value. Given it's use in criminality it wouldn't even be hard to do. Wars have been fought for less.

I'm probably wrong on Bitcoin, lord knows I'm skint enough to know I'm no economic genius - but I firmly believe Bitcoin has ceased to be a viable currency given it's vast growth in cost and without an intrinsic value it's pure speculation and nothing more. It's the South Sea Company of the 21st Century, not a new era of global currency.

Assuming you work for a living – what task do you perform that doesn’t need any of the earth’s resources that benefits you for personal gain?

Whatever it is, it's unlikely to be a task that wouldn't benefit from using less of the earth's resources.  I run an internet hosting company, and have racks full of computers turning electricity into websites and heat.  We have a very strong incentive to buy more efficient computers as it reduces our costs, and so do all of our competitors.  Over time, hosting becomes more efficient (although one of the side effects of this is that people can use easier but much less processor-efficient ways of building websites - I'm looking at you, WordPress - but that's still a benefit in some respects)

The same is not true for Bitcoin. As computing efficiency increases, the rate at which blocks are discovered increases,  so the difficulty of the calculation is increased to get the rate back down again.  So you're burning more and more electricity to process exactly the same number of blocks.  The more Bitcoin gets used, the less efficient it becomes.  Given that it's currently using the same amount of electricity as the whole of Ireland to process just 2-4 transactions/second, that's pretty damned scary.

Mining: computers shouting random numbers at each other until one of them guesses today's secret number. That's numberwang!

If it was a Bank, or a Sovereign Nation it wouldn’t pass any sort of stress test, it’s just such a classic bubble I can’t see it lasting forever.

I'm completely out of my depth with all this, but I've been wondering the above. It reminds me of the dot com bubble (rather than the internet itself); people got very excited about e-business and its new 'get rich quick' opportunities provided by this new technology and pumped vast amounts of money into the companies without actually looking to see if they could make money. Dot com businesses became hugely over valued; to be fair some behemoths emerged but most were vapour ware, with little or no assets, product or viable business model and when people realised this the bubble burst.

I could be completely wrong with crypto-currency (and again I can't really get my head around it) but there doesn't appear to be anything of value underpinning it - isn't it just rare (unique) numbers?

All I’m saying is I waited out buying the cards and didn’t pay too much over the odds.

GPU prices for 10xx series GPUs seem to be falling in line with speculation that the next gen of Nvidia cards will be announced shortly.  I assume that your company has recently done a bulk deal for the 1080TIs?

And yes, being a colossal nerd, I would love to see how Fallout 4 with a 4K display and a shedload of high end GPUs looks!

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If it was a Bank, or a Sovereign Nation it wouldn’t pass any sort of stress test, it’s just such a classic bubble I can’t see it lasting forever.

I’m completely out of my depth with all this, but I’ve been wondering the above. It reminds me of the dot com bubble (rather than the internet itself); people got very excited about e-business and its new ‘get rich quick’ opportunities provided by this new technology and pumped vast amounts of money into the companies without actually looking to see if they could make money. Dot com businesses became hugely over valued; to be fair some behemoths emerged but most were vapour ware, with little or no assets, product or viable business model and when people realised this the bubble burst.

I could be completely wrong with crypto-currency (and again I can’t really get my head around it) but there doesn’t appear to be anything of value underpinning it – isn’t it just rare (unique) numbers?

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That's pretty much it - there only seems to be two types of people with an interest in Crypto - people who mine and invest in it who think it's secure (in both senses of the word) and people who have reservations (Warren Buffet doesn't believe in it).

It's really unparalleled because as a commodity it's useless to Man and Beast - people talked about a Gold Bubble, it's doubled in value in the past 10 years, partly because of the economic crisis. 3 years ago it dived, the economy was really recovering from the 'great recession' and markets were rising offering quicker returns for investors, it's value has returned thanks mostly to new economic risks, but also because of greater and greater use in industry - it's intrinsic value means it can never be worthless.

I'm not economist, but the realities of currency are that it is worth whatever the recipient is willing to part with in exchange for it. A bit of reading around situations where the system breaks down (or functions perfectly - depending on whether you are looking at it from an academic or social perspective) such as hyper-inflation provide examples that are easier to understand than day to day FX rates etc.

The actual concept behind crypto currencies is actually quite interesting, though. A new 'coin' is created by someone finding a problem and a solution that is very difficult for someone else to reverse engineer and thus 'forge' the currency. My maths is a bit woolly these days, but I believe that gigantic numbers that are the product of multiplying two gigantic primes together are an example of a 'one-way' function that can be used for crypto purposes.

The basic idea is that a gigantic number that is the product of two massive primes is found. The original 'finder' knows the two primes that make it up and that authenticates them as the 'owner' of the number. Anyone trying to reverse engineer it would take too long and too much computing power as factoring the products of a massive number is not easy to do (it is essentially a brute force attack that takes too long). Linking networks of computers together to find these 'coins' increases the likelihood of you finding them, but increases the number of people you have to split the worth with.

Contrary to some beliefs, there are real-world (in the most basic sense) consequences. The carbon footprint of all that computing power is real and has an environmental impact that is, of course, only being started to be considered years down the line (plus ca change).

Thanks all - I still have no f***** idea what it is though or how there is value in it.

Do you get paid to give over your servers etc. to carry out the mining/numberwang etc.?

Have a friend of a friend who thinks it'll make him a load of money and is trying to get people on board.

As with a lot of these things, as soon as the likes of you or me get to find out about it, it is too late - the clever clogs have got there first.

Unless someone invents a quantum computer - then all bets are off. Or maybe they already have (I wouldn't tell anyone if I had).

It's out of date now (inevitably) but read 'The Code Book' by Simon Singh. It is very interesting and does end up talking about stuff like one-way functions - accessible and although it might seem a bit nerdy, it is actually very interesting.

One big global war that takes out power and the Internet, and the currency is dead.

Technically all currencies would be, but at least in anticipation you could withdraw cash which might still be tradeable by hand. Or maybe you could demand the gold that our currency promises to pay the bearer in... if Brown hadn't sold it all!

Probably better to start growing potatoes or something as currency.

people who mine and invest in it who think it’s secure

I would separate those into at least three different camps.

There are the true believers. Who think it will replace the normal currencies as actual useful currencies.

Then there are the speculators. Who may or may not believe in the security etc and may just be planning to get out before the bubble blows (if it does).

Then there are the straight out fraudsters,

but I believe that gigantic numbers that are the product of multiplying two gigantic primes together are an example of a ‘one-way’ function that can be used for crypto purposes.

Thats used for Public key encryption. Very, very useful unlike most crypto currencies (I know some people are annoyed at the "crypto" being used in this way). The miners use various algorithms but not related to this as far as I know.

Do you get paid to give over your servers etc. to carry out the mining/numberwang etc

Very roughly speaking. The purpose of mining is to calculate the next "block" based off the previous blocks in the chain using an algorithm. If you solve it first then you earn a coin. You can then sell this coin to someone else for actual cash.

In addition when someone wants to carry out a transaction they will pay a fee for it. So if you carry it out then you earn some more coin (or a bit of a coin).

Thats used for Public key encryption. Very, very useful unlike most crypto currencies (I know some people are annoyed at the “crypto” being used in this way). The miners use various algorithms but not related to this as far as I know.

No, sorry, but that's not strictly true - bitcoin for example uses SHA-256 as its hash algorithm.

However any difficult to solve algorithm could be used.

No, bitcoin for example use SHA-256

I meant for the actual mining part of things. Whereas thats used for hashing the previous block.

I meant for the actual mining part of things. Whereas thats used for hashing the previous block.

No SHA *IS* the mining part of things (for bitcoin, other coins use other algos).

This gives a primer

http://www.righto.com/2014/09/mining-bitcoin-with-pencil-and-paper.html

I agree though that crypto is probably not the best term, especially with proof-of-stake coins ( as i mentioned earlier,  that is a completely different process )

Mining in its current form will eventually become outdated.

As mentioned earlier in this thread, mining has no future with nation states or banks requiring SLAs or mitigating risk. This century miner's strike anyone? It could happen with large Chinese pools.

There are cryptocurrencies, such as IOTA that are feeless to transact and will become truly decentralised forms of transacting both data and value. FWIW, VW is looking to implement Tangle (IOTA backbone) in its vehicles from 2019.

Next-gen cryptocurrency has a bright future. It doesn't mean huge resources either. IOTA nodes can run on a Raspberry Pi.

Did I mention that I like IOTA? 😉

2) We had no heating on during the winter.

Are you all working in underpants now?

It is another way of wasting the earth’s limited resources for no benefit other than speculative personal gain.

Assuming you work for a living – what task do you perform that doesn’t need any of the earth’s resources that benefits you for personal gain?

I work as the environmental officer for a charity dedicated to providing sustainable schooling for 3rd world orphans.