Topic Wiki

Editor’s note: I know enough about this topic to be dangerous, but I’m not a true expert so please feel free to add to or edit anything in this wiki that will improve it. The FAQs contain many oversimplifications but that is intentional to make the information relatable to the audience. Thanks!

Frequently Asked Questions

What are blockchains and bitcoins and what is the difference?
A blockchain is the fundamental element in a crypto currency system. A blockchain is an accounting ledger. Each block contains a bunch of journal entries (i.e. a chronological record of transactions) that gets encrypted (by miners) but can be downloaded and read by anyone on the network. Why the blockchain ledger is secure and how we can vouch for its integrity is a slightly more advanced topic.

An accounting ledger typically keeps track of money, and a blockchain is no different. But the only type of money that it can accurately track is digital money that lives on the blockchain network. So dollars, euros, etc are out. The digital money that lives on the blockchain is called a crypto currency, and the most well-known one at this time is Bitcoin.

Currently there are a few major blockchain networks: the Bitcoin Network, the Ethereum Network, and the Litecoin Network. Each one has its own currency, which are Bitcoin, Ether, and Litecoin, respectively.

I’m just a simple DDFer and not an accountant + cryptographer + hacker all at the same time. Can you make this a little simpler to understand?
Let’s try an analogy. There is a certain website called Dansdeals.com and it has quite a following. Some of the followers are just users/readers but others are more active and produce value for the website. When they provide value, they earn currency for their work – called “EQP” and “HT”. So we have something we will call the Dansdeals Blockchain Network that is simply a record keeper of various ongoing deals and it issues a native currency that is fractionable (10,000 EQP = 1 HT). This is similar to the Blockchain network recording financial transactions and issuing bitcoins. The ones who work for the network (miners) earn bitcoins and everyone else needs to buy it to participate.

The analogy improves if you imagine that the Dansdeals website visitors have to pay a small amount, let’s say 5 EQP, in order to access a deal or a code that is recorded on the network. If the website has 30,000 followers who love deals, but only 1,000 active members who earn EQP, then you can see that there is a need for a marketplace to be created where you can buy EQP for later use.

Of course, websites are not networks, and this analogy is far from perfect. But useful.

How much is a Bitcoin worth
No one knows. A few people are speculating its worth based on the potential that Bitcoin will one day become a major world currency that people use in their daily lives. Most people though are speculating its worth based on what the next new investor will pay them for it (google “Greater Fool Investing”).

Even if a crypto currency becomes dominant, who says it will be Bitcoin? Maybe it will be Schmitcoin?
This is completely possible. Bitcoin and Ether are the most likely at this point, but their long term survival is not at all guaranteed.

So why all the fuss about Bitcoin? Shouldn’t we wait for Schmitcoin and its cousins to come out?
You could, but you don’t want to ignore how hard it is to start up a network from scratch. It may be that as little as one person can create rival code to compete with the existing digital currencies and blockchains, but one person is not a network. You need a lot of highly technical and motivated people to join you and also to invest their time, energy, and money in making that network run. It’s a highly specialized group of people, and most of the people who would fit that profile are already tied up with an existing network. So it’s not impossible, especially in the long-term, but even if it does happen it would be unlikely to pop up overnight and so Vegas odds for Bitcoin are way shorter.

Let’s go back to the Dansdeals analogy. Imagine that Dansdeals is not the only such website, and there are other websites in existence that provide similar services. For the sake of the analogy let’s call them MMS and OMAAT. They too have big enough followings to survive independently, and even though each one offers a slightly different flavor that differentiates them, anyone on one of the networks could also get their most important needs met on one of the other networks. In this analogy, do you think it’s worth collecting EQP/HT or not? After all, Schmansdeals.com could open up one day and all the business could move there.

The argument for the difficulty of starting up a rival blockchain network is much stronger than in the analogy (especially if we start to include “smart contracts” in the discussion), but the basic idea that you need a critical mass of follows to be successful and compete with existing rivals is the same.

« Last edited by yuneeq on December 25, 2017, 01:05:21 AM »

Author Topic: BitCoin Master Thread  (Read 347465 times)

Offline yuneeq

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Re: BitCoin Master Thread
« Reply #840 on: January 24, 2018, 02:02:43 PM »
Is it still worth to invest in mining?

If you live in a country with free or nearly free electricity then yeah.
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Offline Moshke

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Re: BitCoin Master Thread
« Reply #841 on: January 24, 2018, 02:41:10 PM »
If you live in a country with free or nearly free electricity then yeah.
Why not worth paying?

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Re: BitCoin Master Thread
« Reply #842 on: January 24, 2018, 02:53:43 PM »
If you live in a country with free or nearly free electricity then yeah.
And if I have access to such, do you want to set up a mining JV?
I've been waiting over 5 years with bated breath for someone to say that!
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Offline yuneeq

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Re: BitCoin Master Thread
« Reply #843 on: January 24, 2018, 04:11:38 PM »
Why not worth paying?

Mining equipment is expensive, as tech gets better your equipment will eventually be obsolete. Electricity costs required to mine is also not far off from the price of Bitcoin. All that hassle is not worth it for little if any return. If you want to make money off Bitcoin, you should either purchase Bitcoin or sell mining equipment.

And if I have access to such, do you want to set up a mining JV?

Nah
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Re: BitCoin Master Thread
« Reply #844 on: January 24, 2018, 04:27:01 PM »
Mining equipment is expensive, as tech gets better your equipment will eventually be obsolete. Electricity costs required to mine is also not far off from the price of Bitcoin. All that hassle is not worth it for little if any return. If you want to make money off Bitcoin, you should either purchase Bitcoin or sell mining equipment.

Nah
So you aren't that much of believer after all?
I've been waiting over 5 years with bated breath for someone to say that!
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Re: BitCoin Master Thread
« Reply #845 on: January 24, 2018, 04:35:28 PM »
So you aren't that much of believer after all?

Believer in mining as a business? Not for me.
Thankfully I'm busy with other things.

Also I didn't mention that some of the countries with cheap electricity are cracking down on miners so there's always that risk as well.
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Re: BitCoin Master Thread
« Reply #846 on: January 24, 2018, 04:36:57 PM »
Electricity costs required to mine is also not far off from the mining reward of Bitcoin.
FTFY
Feelings don't care about your facts

Offline yuneeq

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Re: BitCoin Master Thread
« Reply #847 on: January 24, 2018, 09:16:14 PM »
Sign up quick - We're almost at the end!

http://ponzicoin.co
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Offline henche

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Re: BitCoin Master Thread
« Reply #848 on: January 25, 2018, 03:10:38 PM »
https://www.dailywire.com/news/26342/bitcoiners-are-wildly-overconfident-their-ability-jared-sichel

Quote
Since Dec. 1, Bitcoin’s transaction fees have ranged from $6 to $55. Transaction confirmation times have skyrocketed, too.


What do they mean by transaction fees? I thought it's all free in the blockchain?  And what do they mean by transaction confirmation times? I thought it's all in the blockchain instantly.

Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #849 on: January 25, 2018, 03:13:07 PM »
What do they mean by transaction fees? I thought it's all free in the blockchain?  And what do they mean by transaction confirmation times? I thought it's all in the blockchain instantly.
Did you also think the Easter Bunny was real?
I just found a new supply of forks!

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Re: BitCoin Master Thread
« Reply #850 on: January 25, 2018, 03:13:34 PM »
Did you also think the UPS Method was real?

ftfy

Offline yuneeq

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Re: BitCoin Master Thread
« Reply #851 on: January 25, 2018, 04:23:06 PM »
https://www.dailywire.com/news/26342/bitcoiners-are-wildly-overconfident-their-ability-jared-sichel

What do they mean by transaction fees? I thought it's all free in the blockchain?  And what do they mean by transaction confirmation times? I thought it's all in the blockchain instantly.

Nope, Bitcoin is not close to free.
Every time you send a transaction you pay the miners a fee to add your transaction in the next block. While this fee used to be nominal, when transactions skyrocketed, the blocks became full. Now to get your transaction confirmed you had to compete with others trying to send and therefore fees skyrocketed while the entire network slowed to a halt. This is a scaling issue but sadly many Bitcoin Core developers consider it a feature. There are solutions proposed but they are still not close to implementing anything yet.

Bitcoin Cash (BCH) forked from BTC mainly because this issue was being ignored for too long. BCH raised the block size limit and transaction fees are about a penny or 2.
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Offline henche

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Re: BitCoin Master Thread
« Reply #852 on: January 25, 2018, 05:23:27 PM »
Nope, Bitcoin is not close to free.
Every time you send a transaction you pay the miners a fee to add your transaction in the next block. While this fee used to be nominal, when transactions skyrocketed, the blocks became full. Now to get your transaction confirmed you had to compete with others trying to send and therefore fees skyrocketed while the entire network slowed to a halt. This is a scaling issue but sadly many Bitcoin Core developers consider it a feature. There are solutions proposed but they are still not close to implementing anything yet.

Bitcoin Cash (BCH) forked from BTC mainly because this issue was being ignored for too long. BCH raised the block size limit and transaction fees are about a penny or 2.

Oh. I thought that the miner's fee was financed by giving them new bitcoin (i.e. inflation).


Offline yuneeq

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Re: BitCoin Master Thread
« Reply #853 on: January 25, 2018, 05:30:20 PM »
Oh. I thought that the miner's fee was financed by giving them new bitcoin (i.e. inflation).

Block reward and transaction fees are not really related. A miner will get the basic block reward of 12.5 bitcoin no matter what. But the miner also has some space available in the block that they can fill with transactions (tx). This does not incur any cost on the miner. So as long as there is space in the block the miner can either mine the block without Bobs tx for a reward of 12.5 btc, or the miner can include Bobs tx, which propbaly pays very little fee, for a reward of 12.500001 btc. A rational miner will always choose 12.500001 over just 12.5 even if the difference is really small. Fees increase if there are more tx than can fit into a single block. In that case a rational miner will pick the tx with the highest fees and not include the tx with very low fee.

https://bitcoin.stackexchange.com/questions/64355/bitcoin-block-reward-for-a-tiny-transaction
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I've been waiting over 5 years with bated breath for someone to say that!
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Offline yuneeq

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Re: BitCoin Master Thread
« Reply #855 on: January 25, 2018, 08:40:06 PM »
https://www.bloomberg.com/news/articles/2018-01-25/ripple-wants-xrp-to-be-bitcoin-for-banks-if-only-the-banks-wanted-it

I hate XRP and hopefully it collapses. It's a new layer on the old financial system.
Even if banks end up using something like XRP on their end, they'll still charge companies the same fees, same processing time, and charge a huge premium for extra fast same day processing. There's no chance they'll pass on the savings to us.
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Offline davidrotts63

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Re: BitCoin Master Thread
« Reply #857 on: January 29, 2018, 08:26:29 AM »
Nope, they were different links ;D
This will be harder for for the mods to catch? No?
Does the reporting actually do anything?
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Re: BitCoin Master Thread
« Reply #858 on: January 29, 2018, 08:44:40 AM »
This will be harder for for the mods to catch? No?
Does the reporting actually do anything?
it disappeared pretty fast!

Why don't mods only allow posting links once member has 25 posts. Same thing should be put back in place for new threads..

Way to much spam these days.

Offline davidrotts63

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Re: BitCoin Master Thread
« Reply #859 on: January 29, 2018, 08:52:52 AM »
it disappeared pretty fast!

Why don't mods only allow posting links once member has 25 posts. Same thing should be put back in place for new threads..

Way to much spam these days.
Agreed, something like that should be done (or mods have to give us more time to have fun). Additionally the question that you used to have to answer to open an account should be reinstated. (maybe another question that can be Googled, yet these spammers aren't smart enough to think of)
(Quit) pulling out the flowers, and watering the weeds. -Peter Lynch