Can someone explain to me Bitcoins? [2013]

[dskneo]

sure but thats like saying tulips have the value of fertilizer behind it

A quote from a 106 page Citi report on Crypto. Take notice on what they had to say about Ethereum.

Whereas the Bitcoin protocol has largely enabled creation of Bitcoins, the Ethereum protocol is premised on the development of 'smart contracts'. These contracts are templates that can be programmed to provide any number of products or services based on a coded set of predefined rules and conditions.

The code lays out specific data triggers to initiate action, describes exactly what actions will take place, and defines the data inputs that would affirm that the transaction has been completed. Algorithms monitor for and provide the data inputs to the contracts required to begin and end transactions, scanning real-world APIs, databases, and on-chain activities. Entire transactions can be initiated, confirmed, and completed without any human intervention or third party intermediation.

This transforms the nature of commerce. An explosion of new smart contract-driven, decentralized applications (“Dapps”) is bringing a growing number of individuals and organizations into the on-chain ecosystem. These Dapps range from entertainmentdriven (games, gambling) to facilitative (identity verification, cross-chain transactions) to financial. Indeed, they have made possible a whole new branch of decentralized, distributed, peer-to-peer trade, and financial offerings where parties can transact directly with each other, bypassing traditional participants.

Its a common pitfall. Failing to see value on "crypto" only happens when you confuse Bitcoin for the entire crypto space.

Its the same thing happening when you see prominent youtubers and press blaming the GPU shortage on "Bitcoin mining". Its not Bitcoin. Its very very very specifically Ethereum, which is literally changing finance as we know it. Not an exageration.

 

[Daozang]

I haz an idea. I have a few Q6600's with the following cards amd6870, amd6950, nvidia670gtx and a i5-2400 with a 970gtx. Now i live near a lot of student accommodation and the way its set up is the rent is "X" and that includes all utilities (Gas, Electricity, Broadband)
so I'm thinking maybe I should get in touch with a student get all 4 P.C's mining 24/7 since the electricity cost would be zero and split the profits would it be worth doing ???

I did it in 2014.
I had a barebones pc in my office mining with an R9 280x.
No-one bothered with it, and the cost of electricity was nothing compared to the datacenter right next to me.
I got 0.2 BTC in a month back then.
If you can get away with 0 electricity cost, I think you should do it.
I would if I could, but my situation has changed since then and my office is not secluded next to a datacenter...

 

[Bludd]

yeah im talking specifically about bitcoin

 

[Gubbi]

Etherum uses 55kWh per transaction. While less than 10% of what Bitcoin uses per transaction, it is still more than my household uses for a week.

I'd rather buy some tulips (they are pretty).

Cheers

 

[dskneo]

Etherum uses 55kWh per transaction. While less than 10% of what Bitcoin uses per transaction, it is still more than my household uses for a week.

I'd rather buy some tulips (they are pretty).

Cheers

As with all technologies, there are generations. You are correctly skeptical about the first generation pitfalls, but you are also unwilling to see beyond it and learn it. But that doesn't stop you from sharing your uninformed opinion online.

The problem doesn't seem to be the technology, but your particular stance in life.

 

[Daozang]

Reports on electricity cost per transaction are generally very inaccurate...
An online transaction using MasterCard (3D Secure 2) will pass through, depending on many factors, at least four distinct entities (if the issuer is also the acquirer), and a lot of datacenters depending on their structure...

 

[Gubbi]

As with all technologies, there are generations. You are correctly skeptical about the first generation pitfalls, but you are also unwilling to see beyond it and learn it. But that doesn't stop you from sharing your uninformed opinion online.

Please educate my uninformed ass on how the following problems will be solved:

1. Energy consumption (cost) , 53kWh/transaction for Etherum, 685kWh/transaction for Bitcoin. (source: https://digiconomist.net )
2. Ledger size, Etherum is currently above 100GB, Bitcoin above 300GB
3. Tiny transaction volume limits.

Cheers

 

[Gubbi]

An online transaction using MasterCard (3D Secure 2) will pass through, depending on many factors, at least four distinct entities (if the issuer is also the acquirer), and a lot of datacenters depending on their structure

A direct debit transaction usually goes through these distinct entities:

1. Webserver (or similar backend to whatever client you're using).
2. Payment Gateway
3. Acquirer
4. Bank.

The bank is likely to have multiple tiers withing their infrastructure. Lets say the transaction moves through ten servers. Transaction throughput is on the order of a thousand per second. If each server uses 400W That gives you 10 * 400J/s / 1000 transactions= 4J/transaction. Compare this to Etherum's 53 kWh => 53*1000*3600 = 190800000 J. Even if the real Etherum number is lower by a factor of ten and a real direct debit transaction is higher than my calculation by a factor of ten, we're still talking almost six orders of magnitude difference.

Cheers

 

[Gubbi]

Addendum: As a means of performing trusted transactions, block chain might be viable (although, I'm not convinced there really is a need). As a currency it is completely unsuited. Bitcoin, Etherum and all other crypto coins tries to be both.

Cheers

 

[Daozang]

A direct debit transaction usually goes through these distinct entities:

1. Webserver (or similar backend to whatever client you're using).
2. Payment Gateway
3. Acquirer
4. Bank.

The bank is likely to have multiple tiers withing their infrastructure. Lets say the transaction moves through ten servers. Transaction throughput is on the order of a thousand per second. If each server uses 400W That gives you 10 * 400J/s / 1000 transactions= 4J/transaction. Compare this to Etherum's 53 kWh => 53*1000*3600 = 190800000 J. Even if the real Etherum number is lower by a factor of ten and a real direct debit transaction is higher than my calculation by a factor of ten, we're still talking almost six orders of magnitude difference.

Cheers

That is correct.
I'm pretty sure that the cost of energy for an Ethereum transaction is higher than one performed through MasterCard/Visa.
I was just simply saying that the cost that is usually being reported for such transactions is not indicative of the whole picture.

In the case of your example above (talking about 3Dsecure2), there is one more step, the ACS service provider, that is why I listed four entities minimum.
Factoring in every element, such as the back end (you need it), the countless routers and switches (the front end of a Bank has a whole lot of connections to accommodate every transaction possible), redundancy (you cannot have a single point of failure literally anywhere), disaster recovery and logistics, the cost might not be as drastically different as it might seem at first glance.

I still think it is higher, but I'm not certain it will remain that way forever.
A new cryptocurrency might actually be more efficient.

Edit.
Come to think of it, if you consider blacklisting, fraud detection and countless other systems all with their own infrastructure as part of the validation of the transaction, the actual cost is getting even higher.
We were running stress tests as part of our 3Dsecure validation today on our UAT and QA servers...
Those environments are part of the system as well...
Really not so cut and dry...

 

[dskneo]

Please educate my uninformed ass on how the following problems will be solved:

1. Energy consumption (cost) , 53kWh/transaction for Etherum, 685kWh/transaction for Bitcoin. (source: https://digiconomist.net )
2. Ledger size, Etherum is currently above 100GB, Bitcoin above 300GB
3. Tiny transaction volume limits.

Cheers

I will gladly do so and without a know-it-all attitude.

Firstly, Crypto is not Bitcoin and its not limited by what Bitcoin is trying to be (store of value) which incidentally is also limiting your beliefs on what crypto is and could be. Lesson one Bitcoin ≠ Crypto and definitely Bitcoin ≠ Ethereum

1. Ethereum (not Etherum) is leaving Proof of Work inside of 2 years time with a dramatically colossal capacity increase for a fraction of the power it uses today. It is also not a currency but it can be everything as It is a programmable decentralized world computer. Also, the final bullet in the coffin about power usage is Nano, the third generation of decentralized currency.

2. The price for each 100GB of space currently costs between 3.5€ and 6.5€ where I live. Like crypto, storage capacity is not limited by your beliefs of whats possible today. Its ever evolving. 100GB is cheap and becoming cheaper than dirt as years go by.

3. This is answered by point nº 1.




Addressing your other misconceptions in other posts:

A direct debit transaction usually goes through these distinct entities:

1. Webserver (or similar backend to whatever client you're using).
2. Payment Gateway
3. Acquirer
4. Bank.

The bank is likely to have multiple tiers withing their infrastructure. Lets say the transaction moves through ten servers. Transaction throughput is on the order of a thousand per second. If each server uses 400W That gives you 10 * 400J/s / 1000 transactions= 4J/transaction. Compare this to Etherum's 53 kWh => 53*1000*3600 = 190800000 J. Even if the real Etherum number is lower by a factor of ten and a real direct debit transaction is higher than my calculation by a factor of ten, we're still talking almost six orders of magnitude difference.

Cheers

A bank, or any other centralized record institution, with all its power efficiency (as of today), also has the following "benefits":

1. Dictate "your" account balance to suddenly become Zero, either by malpractice, error, fineprint text you didn't read, or as instructed by the government.
2. As number 1 alludes too, centralized data you don't own can be tampered with. Hope that you have a paper trails to prove you ever owned XYZ
3. "Your" money in the Bank is not actually there. They have a fraction of it available to satisfy the typical daily statistical averages. The rest is being gambled in ways that would make you sick. Your money is making them money. When it goes wrong, banks declare bankruptcy and pray the government bails them out.

Addendum: As a means of performing trusted transactions, block chain might be viable (although, I'm not convinced there really is a need). As a currency it is completely unsuited. Bitcoin, Etherum and all other crypto coins tries to be both.

Cheers

You don't need to be convinced of anything. It doens't need your aproval.. You need only to admit crypto is currently way over your understanding, and that perhaps you should educate yourself a little before blasting it online. But I can see as the conversation goes along that you slowly start to see where the issue is in the current bank model.

 

[zed]

The thing with bitcoin is I believe its like a cult (like the flatearth society) Its adherents do a lot of reading about it (more than me, but for all this reading they don't actually understand reality, I see this often with other cults/religions as well )

I mean from a quick google, look at all this bullshit 75% of bitcoin is green energy? Wow I didnt realize that china was so green ( FWIW more than half of bitcoin gets mined in china IIRC)

https://news.bitcoin.com/bitcoin-en...cient-and-greener-than-todays-banking-system/
https://www.ledger.com/energy-consumption-crypto-vs-fiat
https://medium.com/@zodhyatech/which-consumes-more-power-banks-or-bitcoins-8302750fe2bc <- wow I didnt know each ATM has 2 aircon machines, isnt that a bit wasteful with a lot of them being on the outside on the wall of a building
https://hackernoon.com/the-bitcoin-vs-visa-electricity-consumption-fallacy-8cf194987a50

All Offices (including banking,government buildings etc) in the USA uses ~200 TWhr a year, Bitcoin (worldwide) uses ~121 TWhr. For comparison Visa uses 0.2 TWhr a year ( included in this 0.2 TWhr figure are also the offices, transport energy costs, not just their data centers processing the 100+ billion transactions a year)

OK this is USA vs the world but think about it

 

[iroboto]

There are pros and cons to everything, the move to proof of stake for ethereum will be a very good move forward for the industry imo.
I liken bitcoin to gold of cryptocurrency. It's not going to be used for day to day usage because of how slow transactions are, but it can be a form of backing for all other cryptocurrencies to weigh in against.

I think ETH 2.0 is moving in the right direction. Ultimately, while i recognize many people have issues with cryptocurrency, most of it stemming from not understanding how the currency can be valued so high. And that is something that will level itself out over time of course, but the reality is, the value of something is whatever people are willing to pay. I can put my old sports car up for sale for 50K because I think it's a collectors car in mint condition, but no one wants to pay more than 9500 for it. I value it at 50, but most people don't. You don't need to sell, but that's sort of how trade works, you have buyers and you therefore must have sellers.

I think the future of this world is headed toward global services and labour, and in that type of future, if people in Japan can work in Canada without leaving Japan but do the night shift here, they're not going to want to be paid in Canadian dollars. There needs to be a universal currency out there in which everyone can work anywhere remotely and still receive the payment in a currency that is relevant to where they live. The world is quickly moving to AR and headsets, we are already moving to remote healthcare, where the service can connect you with vetted doctors to examine you health. You scale that up to global doctors servicing global patients and you need a secure form of transaction that can support all those interchanges of money without the hassle.

How long will it be until the communications latency from different time zones is sufficient enough to drive a cab remote from an office in another timezone. I don't think long to be honest, we work with certain auto-drive car companies today to support their communication services, and I gotta say, it's getting there.

It may not make sense today, but I can't help but feel we're definitely moving towards that direction.

I don't like the current version of crypto, but it's future is looking better. From the technical standpoints it's improving.

If they can solve the boom/bust part, that would be ideal. I can't use crypto to pay wages, because the value of crypto fluctuates too dramatically in a short time period. The valuation isn't as important. 1 ETH can be worth 1 million that's fine. As long as tomorrow it's not worth 1 dollar.

 

[dskneo]

The thing with bitcoin is I believe its like a cult (like the flatearth society)

Thank god its only something "you" believe. I'm not a fan of bitcoin but that sentence clearly tells me crypto is like a mystifying art to the common people. Like Which-craft.

 

[dskneo]

Ultimately, while i recognize many people have issues with cryptocurrency, most of it stemming from not understanding how the currency can be valued so high.

People don't understand that each cryptocurrency project is its own economy. Each project is its own: service provider, maker, buyer, seller. As I explained on another topic:

First you have to understand that each blockchain project has its own full blown economy. In a Proof of Work model (bitcoin, ethereum) the project needs miners to validade the transactions, thus the project pays miners a fee in the format of a coin. Miners join the project if the coin they are being paid has market value which only happens if the project succeeds.

The economy of Bitcoin, Ethereum etc allows for those prices. Its only sounds absurd when you translate the values into USD or EUR, but inside their economies, 1 Ether is 1 Ether.

 

[iroboto]

People don't understand that each cryptocurrency project is its own economy. Each project is its own: service provider, maker, buyer, seller. As I explained on another topic:



The economy of Bitcoin, Ethereum etc allows for those prices. Its only sounds absurd when you translate the values into USD or EUR, but inside their economies, 1 Ether is 1 Ether.

yea that's the challenge really, the conversion problem for most people. I read its because the market cap is still very low, so it's subject to a lot of swings as the circulation of bitcoin and ethereum is very low, but honestly I'm not sure even if all of it was mined out it was cease this movement. I guess people doni't like working in fractions? The idea that someone has to pay 0.000001 BTC for a chocolate bar might be annoying to some.

I do hope its solved eventually; I also have met people who work in the industry, and I was there at a conference once because a family member works in the industry and came to visit, and when showing these people around town, it was very apparent to me that they were so fully bought in; there was nothing I could really say at this point in time to convince them of anything. I wish them the best of course to build that community up, but most of these guys aren't thinking from a business perspective, they are just obsessed with crypto being better thinking everyone else would use their service because it's 'better'.

 

[dskneo]

But that together with the histories of the past is why we have to be pragmatical. I cannot also judge Apple the company by what some of their users sound like. It would be worth zero believe me.

For Crypto this aspect was unfortunate, as the public image sadly became what the news made of it (black markets, illegal activities etc) and the first image is what usually prevails. Just one year ago some banks in my country would block you from transferring money into legitimate legal certified crypto exchanges. They would also ban your account if you received money from them. They dictated what you could do with your money. There was no legal ground. They simply determined you could not enter Crypto.

Today, the big players turned 180º, VISA and Mastercard are actively building on crypto so that you can use them to spend your crypto. This is the same big brain play that big oil players are already doing, transforming their business from an "oil energy company" to just "energy company", adopting renewable energies and fast.

 

[manux]

The funny thing about virtual money is that it's literally just numbers. There is no reason for it needing to be complicated like mining for special numbers. It's just that how much one believes those numbers are worth something. Ofcourse reliable infrastructure that let's one own and transfer ownership of the number to someone else is also needed. Someone could start simple virtual money that is just 1,2,3,4,5,6,... There is very little need for complexity in reality.

 

[pcchen]

The funny thing about virtual money is that it's literally just numbers. There is no reason for it needing to be complicated like mining for special numbers. It's just that how much one believes those numbers are worth something. Ofcourse reliable infrastructure that let's one own and transfer ownership of the number to someone else is also needed. Someone could start simple virtual money that is just 1,2,3,4,5,6,... There is very little need for complexity in reality.

Actually no. If you just want numbers, banks and those 3rd party payment processors are already doing this well. For quite a long time actually.
The point of bitcoin (and the "inefficiency" caused by PoW) is precisely the point: no one else controls your numbers (except, of course, if the majority of the miners are controlled by one single entity). As long as you have your private key, you can transfer your "numbers" to anyone, without restrictions. There's no "blacklist," nor is it easy to implement such feature (as one would have to convince all bitcoin mining nodes to get on board with the same list). Whether this is good or not is of course debatable, but this is precisely what the earliest bitcoin proponents want from bitcoin.

In a way, the PoS (proof of stake) system makes it less robust. However, the idea is that if the number of PoS nodes are large enough (thousands, for ETH 2.0), it'd be harder to compromise the system. Also, there are many competing implementations of nodes out there, so someone can't just slip something into the node software and do something nefarious. But since there haven't a large scale PoS system out there yet (there are some smaller scale PoS systems), so whether it's robust enough remains to be seen.

 

[manux]

Actually no. If you just want numbers, banks and those 3rd party payment processors are already doing this well. For quite a long time actually.
The point of bitcoin (and the "inefficiency" caused by PoW) is precisely the point: no one else controls your numbers (except, of course, if the majority of the miners are controlled by one single entity). As long as you have your private key, you can transfer your "numbers" to anyone, without restrictions. There's no "blacklist," nor is it easy to implement such feature (as one would have to convince all bitcoin mining nodes to get on board with the same list). Whether this is good or not is of course debatable, but this is precisely what the earliest bitcoin proponents want from bitcoin.

In a way, the PoS (proof of stake) system makes it less robust. However, the idea is that if the number of PoS nodes are large enough (thousands, for ETH 2.0), it'd be harder to compromise the system. Also, there are many competing implementations of nodes out there, so someone can't just slip something into the node software and do something nefarious. But since there haven't a large scale PoS system out there yet (there are some smaller scale PoS systems), so whether it's robust enough remains to be seen.

That's just inefficient complicated solution to imagined problem for people who wear tinfoil hats or want to purchase illegal stuff/circumvent taxes. Or maybe I'm just naïve and live in a soft bubble of trust in stable society.