Total cryptocurrency noob

Cryptocurrency discussions
Knooot
Posts: 11
Joined: Sat Oct 18, 2014 7:26 pm

Re: Total cryptocurrency noob

Post by Knooot » Mon Oct 27, 2014 3:15 pm

Realise this is probably just the noob in me talking, so not looking for a reply to this post, but I find myself thinking what a pity it is that there isn't anything in the technology that prevents the centralisation of mining (Ie something that prevented the use of mining 'farms'/super high powered computer technology). Far better for everyone to have a closer to equal share, than have all the bitcoins in the hands of... who? I would imagine most governments will be mining bitcoins.

okpatriot
Posts: 29
Joined: Sun Oct 12, 2014 11:09 pm

Re: Total cryptocurrency noob

Post by okpatriot » Mon Oct 27, 2014 5:27 pm

Knooot wrote:Realise this is probably just the noob in me talking, so not looking for a reply to this post, but I find myself thinking what a pity it is that there isn't anything in the technology that prevents the centralisation of mining (Ie something that prevented the use of mining 'farms'/super high powered computer technology). Far better for everyone to have a closer to equal share, than have all the bitcoins in the hands of... who? I would imagine most governments will be mining bitcoins.
On the surface I could see your veiw, but there are a lot of factors involved. 1st, as long as no single entity controls 51% or more of the hashpower then things are fine. 2nd mining farms and high powered asic's are good. The more of them are and the more difficult it is to mine, the harder it is for someone to gain 51% of the network. They make the network secure because of this. Granted it is now harder for the small guy to get in and mine bitcoin with basic computer hardware, but those same small guys can easily just go buy bitcoin on the market with the money they would have spent on hardware and electricity costs. Often times buying cryptocoins is far more productive than mining. With mining, the difficulty is always going up on popular coins, so your hardware mines less and less coins over time... Thus requiring you to invest in more hardware to keep generating a good amount of coins. You can put hardware online today that mine a single bitcoin in a day and a year from now it might take that same hardware 6 months to mine a single bitcoin due to increases in the the coin's difficulty. Mining is a real money pit and a big loss if you are not good at it.

Keep in mind bitcoins are an equal share for the most part because you can buy them on an open market. Since mining is hugely expensive, not only from the cost of equipment, but also the electric bill to power the farm..... Most miners aren't sitting on their bitcoins. They mine them and cash them out for fiat to pay their bills, while taking a small profit on the top. They may hold some of them long term, but if they don't sell them.... They can't pay the bills and stop mining. Without miners the network dies. Therefore the bitcoins get released into the system for everyone else to buy on the market and creating liquidity.

In a nutshell buying bitcoins is an investment, mining bitcoins is a job.

To put a spin on all of this, the main reason why 99% of the hundreds of altcoins exist is solely as a way for small guys to indirectly mine for bitcoins. If you look at the charts for nearly every altcoin, once they hit an exchange the price is high due to the hype, then the price slowly declines over time. Small miners mine these new altcoins from the moment they launch and are easy to mine, sell them immediately for bitcoin while the exchange rate is high and move on to the next coin to repeat again. Since altcoin developers and communities don't have all the investment capital that bitcoin has, they cannot keep up with development, marketing, creating long term popularity, or merchant adoption. Altcoin people often complain that the miners mine and dump all their coins... Thus dropping the price of the coin, leading to the coins demise... But the reality is that without the miners, the network would not function and the real fault is the developer teams not being able to keep up with the network. This is what has happened to maxcoin as an example. The dev team has kept killing off the block reward in an attempt to reduce sell pressure from the miners which is just a duct tape patch rather than a real solution. This has made mining maxcoin unprofitable and the network has lost a ton of hashpower and thus lost some of it's security because miners have left the network. The real problem with maxcoin has never been the sell pressure from miners, but the developers not creating enough demand to raise buy support to a level that can match the selling by the miners. This is a complete 180 to bitcoin where they have created enough demand to meet anything the miners can generate. They have this advantage, partially because they were the first coin and also due to the millions upon millions of dollars being invested into startups (half a billion this year alone) offering services, products and other things related to bitcoin. Simply put they have the first man advantage and an amount of marketing and development that a steam locomotive couldn't knock over.

The balance of a crypto coin's ecosystem is delicate and requires a balance of buy support vs. sell pressure from the miners. Get the balance too far one way or the other and bad things happen. The best way to keep that balance it to use development and marketing to always keep things weighted on the side of buy support... Therefore price rises and you're always attracting miners which will create a stronger and more secure network as well as generating coin to meet demand. Almost all altcoins fail because they cannot do this. Simply using a new hashing algo or some new feature is not enough to make people want to buy and use the currency. You have to market the coin in a way that creates a reason for people to want to use it.

Knooot
Posts: 11
Joined: Sat Oct 18, 2014 7:26 pm

Re: Total cryptocurrency noob

Post by Knooot » Mon Oct 27, 2014 6:51 pm

Great post, thanks very much. WIll watch vid/read pdf after work later. I am sure plenty of others will too.

I don't actually mind that mining is not really worth it for somebody like me, and actually can appreciate the costs and difficulties involved in running a mining operation. I was thinking along the lines that if the ability to mine is weighted towards those with capital to invest, it would be a pity if those very few owning everything today etc ended up with all the bitcoins too...

okpatriot
Posts: 29
Joined: Sun Oct 12, 2014 11:09 pm

Re: Total cryptocurrency noob

Post by okpatriot » Mon Oct 27, 2014 10:15 pm

Knooot wrote:Great post, thanks very much. WIll watch vid/read pdf after work later. I am sure plenty of others will too.

I don't actually mind that mining is not really worth it for somebody like me, and actually can appreciate the costs and difficulties involved in running a mining operation. I was thinking along the lines that if the ability to mine is weighted towards those with capital to invest, it would be a pity if those very few owning everything today etc ended up with all the bitcoins too...
Yeah, unless they are someone like george soros or a government... They wouldn't be able to afford to sit on those coins for too long.

corwill
Posts: 1
Joined: Wed Jun 29, 2016 3:47 pm

Re: Total cryptocurrency noob

Post by corwill » Wed Jun 29, 2016 4:03 pm

I didn't know much about cryptocurrencies either but then I've heard you can use them for gambling and since I like to play my night away, I've started reading more about it. I don't know, I'm still not sure about this whole thing but it seems like cryptos are getting more and more popular and more people are getting into them...

I think this is the right time to at least start getting familiar with bitcoin and other forms of altcoins, they seem to be getting more and more popular. Do you guys think they will still be a good investment in a year or so?

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