Bitcoin mining made easy

[cheapsheep]

Weird discussion guys.

I think it is pretty simple:

There is a fixed total possible amount of bitcoins (21 million). Since you can make smaller portions of a bitcoin like milibitcoin etc (and there is no technological limit to this?) you potentially have an unlimited amount of 'coins'. The fact that the total amount of bitcoins doesn't change only makes this system more fucked up. This just means that all the ´value´ that the world is going to subscribe to bitcoin in the future will go straight into the pockets of the bitcoin owners.
...

So your point is, by converting euros to cents, you are increasing the money supply by 100. You are confused, and you are also in the camp of people who believe that the Bitcoin system is based on tokens.

Having no understanding of the system do not make your criticism pertinent. But it seems that this thread is not really about pertinence, its rather about circlejerking...

BTW, there is a limit in divisibility, 10^-8. I'm sure you'll find something "very interesting" and relevant to say about that...

[very_bad_soldier]

I have a problem to understand what the value of bitcoin is based on. How does it matter if it will be 21 or 50 or 100 million bitcoins in the end if there is no real value behind it?
Btw people entering this thread at page 20 and throwing something like "you are stupid and dont understand it anyway" in every post probably does not contribute to the quality of this discussion.

[LordMuffe]

So your point is, by converting euros to cents, you are increasing the money supply by 100. You are confused, and you are also in the camp of people who believe that the Bitcoin system is based on tokens.

isn't every unit of a currency basically a token?

BTW, there is a limit in divisibility, 10^-8. I'm sure you'll find something "very interesting" and relevant to say about that...

Is that limit somehow hardwired in the Bitcoin system? just curious.

if so, would´t that limit the possible exchange usage if the price for Bitcoins rises even further while people start to use it as an actual currency? I mean, 10^-8 is quite a small piece, so it will probably not come to that point...

ok with rough data from wiki..

there are roughly 592*10^11 euro-cents in trade-able coin cash.
So with a course of about 500€ per Bitcoin that would lead to 42*10^11 Bitcoin-pieces if they would "swap" to trade all the stuff there is to trade. Which leads to a smaller "resolution" of the currency... and that would still just be fraction of all the money world wide. Of course it seems unlikely that Bitcoin would ever get to the point where it needs to be able to have that much units to enable trading, but what if?

Why is it limited at 10^8? Again, I´m just curious why that specific number.

There might be some errors in my calculations... drunk and all...

[cheapsheep]

I have a problem to understand what the value of bitcoin is based on. How does it matter if it will be 21 or 50 or 100 million bitcoins in the end if there is no real value behind it?

It is "the market". If people are ok to buy/sell a bitcoin for 100euro, then its worth 100 euro. If people are ok to buy/sell a bitcoin for 900dollars, then thats what its currently worth.
There is nothing more to it. Is like any other commodity/good traded on a public exchange. Look at the order book of any exchange to see exactly how many bitcoins can be sold/bought for a given price. There is no better indication of what it is currently worth.
Example:
https://www.bitstamp.net/market/order_book/

Some (such are Merrill Lynch) have made models to evaluate what a bitcoin should be worth. This is speculative analysis and open to debate.

So, the current price is not open to debate. Whether this is under/over-priced is open to debate.

Btw people entering this thread at page 20 and throwing something like "you are stupid and dont understand it anyway" in every post probably does not contribute to the quality of this discussion.

I know you are talking about me, be more frontal, I can take it :)
I'm sorry if you have had 20 pages to reinforce completely wrong ideas among yourself, with only one person (just guessing) advocating for Bitcoin. I don't think he should be using economical arguments (such as "it is inflation-proof"), especially not when people do not even understand how the system works and make wild guesses leading to wrong conclusions.

I didn't say "you are stupid" to anyone. But I try to debunk many ideas that are so wrong (and deeply engrained) that explaining how wrong they are (and how evident it is) may lead you to believe that I said so.

I believe this is a forum where mostly technical people gather... and not some food or religion forum. Am I wrong in expecting that people are actually able to understand unit prefixes (there is nothing more in mBTC or uBTC) and simple algorithms?

Bitcoin is so simple, I can not understand how some of you can get it so wrong.

You can debate all you want regarding what a bitcoin should be worth, I don't intend to interfere. There are more appropriate places to discuss this anyway.

But making statements such as "you can mine more than 21 million bitcoins" deserve to be debunked... so you are not left in the dark. Since this is about facts/algorithm, it is quite easy to debunk... but it requires that the person hearing the argument is not actually hostage of his belief-system.

[cheapsheep]

So your point is, by converting euros to cents, you are increasing the money supply by 100. You are confused, and you are also in the camp of people who believe that the Bitcoin system is based on tokens.

isn't every unit of a currency basically a token?

Every physical banknote/coin is a token.
A bitcoin does not exist in the form of some kind of indivisible token, unlike a coin. Technically, you never "send a bitcoin". Instead, you spend the output of a previous transaction (everything is linked!). If the output of the previous transaction you are spending is too large (you previously received more than what you want to "send"), you (your client) add another output to the txn which sends the change to an address you own.
So, if you received 5 bitcoins and want to send 1, you create a transaction which send 1 bitcoin to recipient, and 4 to yourself.
Likewise, if you received 1 bitcoin and want to send 0.5, your transaction will have 2 outputs with 0.5. You are never splitting a "bitcoin token", you are subdividing the outputs of previous transactions. Whether it is "round" (1 bitcoin) or not is irrelevant, this is why I insist that there is no token. Just transactions, with inputs and outputs. There is no bitcoin entity in the data model. The "balance" denominated in bitcoins you see in your client is just the result of additions/subtraction.

BTW, there is a limit in divisibility, 10^-8. I'm sure you'll find something "very interesting" and relevant to say about that...

Is that limit somehow hardwired in the Bitcoin system? just curious.
...
Why is it limited at 10^8? Again, I´m just curious why that specific number.

Amounts are stored as integer values, not floats, and the base unit is not bitcoin, it is satoshis. 1 bitcoin == 100'000'000 "satoshis". So the smallest amount you can designate is 10^-8 bitcoins, because the smallest non-zero value you can designate with an integer is 1, and the unit is satoshi.

As to the philosophical "why"... I don't know :)

[very_bad_soldier]

I have a problem to understand what the value of bitcoin is based on. How does it matter if it will be 21 or 50 or 100 million bitcoins in the end if there is no real value behind it?

It is "the market". If people are ok to buy/sell a bitcoin for 100euro, then its worth 100 euro. If people are ok to buy/sell a bitcoin for 900dollars, then thats what its currently worth.
There is nothing more to it.

Well thats not what I meant. I know how the price is created.
But for example when I buy stocks from Apple I basically own a little portion of Apple. Apple as a Corporation has a real value consisting of technology, knowledge, machines, buildings etc. etc. and they earn real money. So when I buy Apple stocks I buy something of real non-abstract value. So what exactly do I buy when investing in bitcoins? What is the value behind it?

[smoth]

It is clear that detractors of Bitcoin appear no smarter than the fiercest btc evangelists. I'm not impressed to see what 20 pages of this thread has been able to produce
..
..
But maybe you are too happy congratulating yourselves about finding out about buttcoins and Tulip Mania 2.0. This thread seems like the opposite of r/Bitcoin circlejerk. Same amount of brain power, but applied to criticism of Bitcoin...

I didn't say "you are stupid" to anyone.

people are smart enough to read what you were implying here. That the detractors(anyone who questions bitcoin) are somehow stupid.

Bitcoin is so simple, I can not understand how some of you can get it so wrong.

see above. If it is so simple then give us a simple summary.

This sort of thing is what people are talking about. I have stopped posting in the thread because EVERY time I ask a question and try to understand I am given no answers or hostility. Bitcoin people need to work on being less defensive and more helpful.

linking to random articles is a bad thing to do, if you understand it so well summarize and use an article as a citable reference. English 101 shit bro, it isn't that hard.

I do take issue with you guys and to be honest I think you are nicer than varion has been in this thread but chill dude, most of the people here are not attacking bitcoin. It isn't important to many of us, we are just wanting answers and many times we are talked down to or treated badly for asking. Yet you wonder how the hostility starts. We talk about bitcoin, bitcoin fan sees it as insulting to bitcoin and attacks a PERSON over it.

this is fucking stupid, I want nothing to do with anyone like that. Matter of a fact varion landed on my foe list so I don't even read his posts after the way he acted in here. Seriously, go read where he asks if I was trolling when I was trying to understand how bitcoins worked. It isn't that far back.

I have been reading still and I am sure I am not the only one. We get inconsistent explanations, some say bitcoins are an id of some sort. Others say they are somehow a generated transaction id based on a chain of events. I am not really sure and I am waaaaay too busy to go read the code behind bitcoin and study it like you lot do. Which is why this THREAD COULD HAVE BEEN GOOD. Supposed bitcoin fans sharing knowledge. Instead I found a thread filled with voodoo levels of mysticism!

By all means call us simpletons for not spending days reading up on something and then not knowing as much about something that you have spent months being into. You are being a class A elitist.

[cheapsheep]

I have a problem to understand what the value of bitcoin is based on. How does it matter if it will be 21 or 50 or 100 million bitcoins in the end if there is no real value behind it?

It is "the market". If people are ok to buy/sell a bitcoin for 100euro, then its worth 100 euro. If people are ok to buy/sell a bitcoin for 900dollars, then thats what its currently worth.
There is nothing more to it.

Well thats not what I meant. I know how the price is created.
But for example when I buy stocks from Apple I basically own a little portion of Apple. Apple as a Corporation has a real value consisting of technology, knowledge, machines, buildings etc. etc. and they earn real money. So when I buy Apple stocks I buy something of real non-abstract value. So what exactly do I buy when investing in bitcoins? What is the value behind it?

ok!
I'd say a bitcoin has value because it is a scarce, non-counterfeitable entity that is easy (cheap, secure) to transfer. How much value is anyone's guess.

Merrill Lynch's price estimate is based on these properties, they assess what is the size of the market that bitcoins could take, how much money that market is worth (for example western union transfers), then do some voodoo economics ("science!") by adding arbitrary ratios and they come with "a bitcoin is worth $1300".

Crazy bitcoiners say "it will replace gold, so a bitcoin is worth $100k (or $1m)".

Crazy antibitcoiners say "it is worth nothing".

And me, I don't know... I consider that the price is fixed more by psychology and adoption rate than by anything consistent. And this is not very different for many stocks (not all), if you consider PE ratio.

Example: twitter
http://www.nasdaq.com/symbol/twtr/pe-ratio

People do not buy some twitter stock because of the dividends, they buy it because it is perceived as being worth more than "fundamentals".

[smoth]

so how is a bitcoin a currency? I don't get it.

what I (think) know:
Bitcoins can be converted for money, just like say a baseball card.
Bitcoins are somehow a virtual thing that can be split indefinitely.
Bitcoins are a sort of virtual thing that people have assigned value, because they wanted to, it has no real backing in gold or anything like that.

what I want to know:
What IS a bitcoin.
What exactly do you "mine" for

[cheapsheep]

so how is a bitcoin a currency? I don't get it.

what I (think) know:
Bitcoins can be converted for money, just like say a baseball card.

Yes.

Bitcoins are somehow a virtual thing that can be split indefinitely.

You can exchange bitcoins with a resolution of 1 satoshi == 10^-8 bitcoin.

Bitcoins are a sort of virtual thing that people have assigned value, because they wanted to, it has no real backing in gold or anything like that.

Yes.

what I want to know:
What IS a bitcoin.

"a bitcoin" is just a unit.
If your wallet balance shows "1 bitcoin", it does not mean you have 1 file which contains a special token. It means that your wallet has processed all the bitcoin transactions in existence, and found out that all the transactions where you were beneficiary minus all the transactions where you are debtor result in a balance of 1 bitcoin.

What exactly do you "mine" for

Every transaction is archived in a block.
All the blocks are called the blockchain, which act as a ledger of all transactions.
There is a new block every 10 minutes (more or less).
To ensure that the ledger is unfalsifiable (prevent counterfeit coins, double spend), a large amount of work is required to "finalize" (mine) a block (ie, to make other nodes accept your finalized block).
When you mine, you are just searching for a number that, when hashed with the list of new transactions, will satisfy an equation. That equation has a difficulty requirement that is dynamically adjusted to ensure that a solution will be found by someone every 10 minutes.
Add more power (competing miners) to the network, and the difficulty of the problem will increase.
This is not a "useful" equation to solve (protein folding or whatever), but the simple fact that the difficulty is adjusted proportionally with the amount of computation power that is dedicated (collectively) to the problem ensure that the difficulty to cheat the system is proportional to the total computation power in the network. More power collectively dedicated == more resilient system (more expensive to attack).
If you are lucky and find the solution to this problem, you are rewarded for your mining effort (currently 25 btc). More probably, as a miner, you have joined a mining pool and you do not receive the full 25 btc, but you receive a share proportional to your contribution to the pool.

Important details have been left out.

[smoth]

so the blocks that you get have no relation to a bitcoin at all(beyond the reward they pay you for the effort)?

These blocks essentially store a transaction list, after all the transactions that the block can contain are exhausted, they move to a new block?

if the blocks get increasingly difficult to resolve, what is the curve we are looking at? will the the computing power to resolve a block eventually reach ~infinity?

[cheapsheep]

so the blocks that you get have no relation to a bitcoin at all(beyond the reward they pay you for the effort)?

These blocks essentially store a transaction list, after all the transactions that the block can contain are exhausted, they move to a new block?

Not sure if I understand what you ask.
The blockchain is public. Everyone downloads the same blockchain, which contain the same blocks, which contain the same data.

All the transactions, most of them say "take these inputs, move amount A1 to output O1, move amount A2 to output O2" are stored in the blocks. This allows everyone to compute balance for everyone. Everything is public.

Before you start mining, you actually include a special transaction in the transaction list you are trying to "archive". This special transaction ("coinbase" transaction) is a transaction without input, but with an output amount of (currently) 25 btc, and an output address (obviously yours, though you could be altruistic).

Basically, you do not receive 25 individual bitcoins. You receive control over the output of the (coinbase) transaction which has an amount of 2'500'000'000. First time you spend it, you make a new transaction using that previous output as input, then 1 or many outputs.

After a block has been mined, miners attempt to solve the next block. All the transactions included in previous block are not included in the new block. However, the new block contains a reference to the previous block (when you mine, you also include a hash of the previous block).

if the blocks get increasingly difficult to resolve, what is the curve we are looking at? will the the computing power to resolve a block eventually reach ~infinity?

Some kind of exponential curve.
http://bitcoin.sipa.be/

Difficulty is dynamically adjusted, but every 2016 blocks only, which explains the "quantization":
https://blockchain.info/charts/difficulty
https://blockchain.info/charts/hash-rate

[zwzsg]

if the blocks get increasingly difficult to resolve, what is the curve we are looking at? will the the computing power to resolve a block eventually reach ~infinity?

Yes, I know that this is not accurate, sue me. I'm just trying to get the point across to him.

[smoth]

so the blocks that you get have no relation to a bitcoin at all(beyond the reward they pay you for the effort)?

These blocks essentially store a transaction list, after all the transactions that the block can contain are exhausted, they move to a new block?

Not sure if I understand what you ask.

I'll try to clairfy. I mine block 2.

so, block [1] -> [2]

is this correct?

this block is now available in the chain to be used.

Each blocks store transactions? if so, when do they need block 2 instead of block 1?

Before you start mining, you actually include a special transaction in the transaction list you are trying to "archive". This special transaction ("coinbase" transaction) is a transaction without input, but with an output amount of (currently) 25 btc, and an output address (obviously yours, though you could be altruistic).

and if the block succeeds, that block is yours? first come first serve?

Basically, you do not receive 25 individual bitcoins. You receive control over the output of the (coinbase) transaction which has an amount of 2'500'000'000. First time you spend it, you make a new transaction using that previous output as input, then 1 or many outputs.

so I control that portion of the block chain. If I don't spend them, they are not in the system? and my block is sitting idle?

[zwzsg]

It's a first come first serve, but nobody has any clue to which direction to look for the solution, so it's more a : who gets the most computing power get the highest chance to win. Should two machines find a solution at the exact same moment, there'll be a moment of chaos when half the network follows one, the other half the other, that will quickly resolve in the favor of whoever get his solution to reach the most nodes first.

It's not that you own the block, but that everybody else on the network see you got the right solution to the problem, and accept it as the new basis. And since you made sure that solution include a 25 bitcoins transaction from nothing to you, you get 25 bitcoins for you. Even if you don't spend those bitcoins, they are in the system, marked as belonging to you.

[cheapsheep]

so the blocks that you get have no relation to a bitcoin at all(beyond the reward they pay you for the effort)?

These blocks essentially store a transaction list, after all the transactions that the block can contain are exhausted, they move to a new block?

Not sure if I understand what you ask.

I'll try to clairfy. I mine block 2.

so, block [1] -> [2]

is this correct?

this block is now available in the chain to be used.

Each blocks store transactions? if so, when do they need block 2 instead of block 1?

Each block only store transactions which happened during that ~10 minutes span. Transactions which happened previously are stored in older blocks.

So you always need all the blocks if you want to be a "full-node" and not rely on a trusted node to provide you with valid and relevant information. The whole blockchain is currently ~15GB, which is a problem for some devices.

Before you start mining, you actually include a special transaction in the transaction list you are trying to "archive". This special transaction ("coinbase" transaction) is a transaction without input, but with an output amount of (currently) 25 btc, and an output address (obviously yours, though you could be altruistic).

and if the block succeeds, that block is yours? first come first serve?

Yes... but I'd not say that the block is "yours" because everyone else will accept it. Its just that you are the beneficiary of the coinbase transaction, you got the reward. There is no other "advantage"... you can not falsify this block more than anyone else.

Basically, you do not receive 25 individual bitcoins. You receive control over the output of the (coinbase) transaction which has an amount of 2'500'000'000. First time you spend it, you make a new transaction using that previous output as input, then 1 or many outputs.

so I control that portion of the block chain. If I don't spend them, they are not in the system? and my block is sitting idle?

The block is publicized, everyone relies on it. Unless you spend the reward (coinbase transaction), it has an "unspent output", and everyone knows it. All blocks are basically "sitting idle". It is just an archive.

Note that if you think you are smarter and modify your client to include a 2000 btc reward AND you are lucky to actually find the solution, other nodes on the network will ignore your block.

I think the last few posts should allow people to understand that:
1) you can not issue more coins than expected
2) there is no such thing as a BTC entity, or a mBTC entity that you could somehow create
There are just transactions, with amounts and outputs. Other nodes will discard your transaction if output > input, and they will also discard your mined block if it doesn't include a regularly sized reward or too low difficulty.

[smoth]

so where is this 21 million number remaining coming from that people keep talking about?

also years down the line, when there are no more blocks left, where do you store transactions? If it is 15gb and the complexity of the solution is growing exponentially, what happens years down the line, say 2020

[klapmongool]

Weird discussion guys.

I think it is pretty simple:

There is a fixed total possible amount of bitcoins (21 million). Since you can make smaller portions of a bitcoin like milibitcoin etc (and there is no technological limit to this?) you potentially have an unlimited amount of 'coins'. The fact that the total amount of bitcoins doesn't change only makes this system more fucked up. This just means that all the ´value´ that the world is going to subscribe to bitcoin in the future will go straight into the pockets of the bitcoin owners.
...

So your point is, by converting euros to cents, you are increasing the money supply by 100. You are confused, and you are also in the camp of people who believe that the Bitcoin system is based on tokens.

Having no understanding of the system do not make your criticism pertinent. But it seems that this thread is not really about pertinence, its rather about circlejerking...

BTW, there is a limit in divisibility, 10^-8. I'm sure you'll find something "very interesting" and relevant to say about that...

I'm sure that whatever I say about anything you will be able to find a way to ignore the most important things in my post and insult everyone in the thread.

Go ahead and believe what you want. I'm out.

[Kloot]

so where is this 21 million number remaining coming from that people keep talking about?

hardcoded into the protocol

also years down the line, when there are no more blocks left, where do you store transactions? If it is 15gb and the complexity of the solution is growing exponentially, what happens years down the line, say 2020

1) *blocks* are just records of transactions over some period (~10 minutes) and cannot be exhausted, only the *reward* (amount of BTC generated) per solved block drops to 0 over time
2) nobody knows what to do if BTC grows to cover a significant percentage of the world's financial traffic, the protocol (requiring clients to store/verify the entire blockchain) doesn't scale

Why don't you just read the paper or, you know, the BTC wikipedia page?

[cheapsheep]

so where is this 21 million number remaining coming from that people keep talking about?

also years down the line, when there are no more blocks left, where do you store transactions? If it is 15gb and the complexity of the solution is growing exponentially, what happens years down the line, say 2020

21 million comes from the fact that reward is halved every 4 years (actually, it is every 210'000 blocks, which should be about 4 years since 1 block takes 10 min).
First 4 years, the mining reward was 50 btc.
We are now in the 2nd 4-years slice, mining reward is 25 btc.
This is why it is said that bitcoin is deflationary.

There will always be blocks. The miners actually get the reward + the transaction fee that users include. After 2140, miners will only be paid by transaction fees, but new blocks will continue to be created.

Regarding the future, and the increase in transactions (size of the blockchain), I'm not sure... things are not "finalized". There is a limit on each block size, which has an effect on the maximum number of txn/block.

Some people argue that it should remain limited, some argue that block size should be increased.