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Mining for newbie

Discussion in 'Newbie Lounge' started by FR3D1, Jun 14, 2014.

  1. FR3D1

    FR3D1 Member

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    Hi all,
    I have been researching on digital mining but having a hard time understanding it. I have asked someone and the best answer I got is its a project that when you sign up they give you an equation to solve and rewards you with coins. That all I know about it. Can somebody here please explain to me how exactly it works. I also have a few questions in mind.
    1. Is bitcoin and litecoin similar if not same thing?
    2. What do you get out of it?
    3. Is it like web hosting?
    4. Is it part of the mining industry?
    Thanks for reading.
     
  2. Davo1111

    Davo1111 Member

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    FR3D1

    FR3D1 Member

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  4. starkers92

    starkers92 Member

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    1. Different coins.
    2. A digital currency, growing in popularity but not exactly accepted worldwide (currently).
    3. No.
    4. No.

    Simple answer, don't bother with mining, it's not worth it any more.

    EDIT: Mining is the searching for the 'key', if you find this so-called key, you get a prize. This prize is some of the coin, which you can exchange to real money. It costs initial hardware + electricity to find these coins, and the more that are found the harder it is to subsequently find more (called difficulty). It has now gotten to the point were you need specialized hardware (that is very energy efficient) in order for it to be worthwhile.

    Cryptocurrencies are liced with speculation - Be *extremely* wary of investing, particularly in mining hardware.
     
    Last edited: Jun 16, 2014
  5. SLATYE

    SLATYE SLATYE, not SLAYTE

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    BTC mining is analogous to gold mining. You do a lot of work and every so often you find a bit of gold. If lots of people mine for gold, it becomes harder to find more.

    With bitcoin mining, the computer does the work instead of you. However, it's a lot of work - for a normal PC, with coins as rare as they currently are, mining one BTC (value around $1000, give or take 50%) will cost you several thousand dollars (at least) in electricity. There are special devices that can do it much more efficiently than a normal PC can, but obviously you have to buy those. Since bitcoins are always getting harder to find (ie more mining needed to get one bitcoin) mining hardware doesn't have a very long useful life - after a couple of months it'll be costing more to run than it's making. At this point you would need to upgrade, which obviously means spending more money. Fancy video cards (AMD ones in particular) are also very good at mining; at least with this when the cards are no good for mining any more you can use them for gaming instead.

    I decided to skip that and just buy BTC outright. No different to any other investment, except that it's extremely volatile and there's pretty much no legal protection from theft or anything else. Obviously the rule here is to only risk what you can afford to lose.
     
  6. the3coopers

    the3coopers Member

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    What nobody seems to explain particularly well is who actually donates the "prize".

    It's all very well mining for these things, but who actually pays for them?

    As an outsider it all seems like some perverse, highly expensive pyramid marketing scheme.

    It was created by the Video Card manufacturers, right?

    So they charge like $500 each for the graphics cards, then trickle a bit of each sale back into the "BitCoin Economy". Then people buy massive numbers of graphics cards and use thousands of dollars worth of electricity chasing and collecting something that doesn't actually exist. :confused: :lol:
     
  7. SLATYE

    SLATYE SLATYE, not SLAYTE

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    Why do you go to work each day? It's not like the money you apparently earn actually exists in any meaningful way - it's just a bit of information stored by your bank. Even if they paid in cash, what's the actual value of a $50 note? It's just a bit of plastic!

    The answer, of course, is that your money has value because the Australian Government says so - and a lot of people are willing to trust the government enough to exchange that money for stuff that you want. It's a bit of a circle, because they only exchange the money for stuff that you want because they know that other people will exchange the money for stuff that they want, and so on.

    There are plenty of examples where the government hasn't been trusted, with the result that another form of currency takes over. See Zimbabwe, where the US dollar became fairly popular because the Zimbabwe dollar was suffering from ridiculous inflation. Again, it's a circle - once one person refuses to accept the Zimbabwe dollar for buying their goods/services, people who want to purchase those goods/services will also refuse to accept the Zimbabwe dollar, and soon nobody uses it.



    Bitcoins have value because other bitcoin users will pay (Australian or US) money for them, and shops are increasingly willing to accept them in exchange for goods/services. On the plus side, you don't have to trust the government to keep inflation under control because the algorithm itself does that (there's a hard limit on how many coins can be mined, and they get increasingly difficult to mine as the number available decreases). On the minus side, you can't rely on the government to specify a value.


    It wasn't created by the video card manufacturers; when bitcoin started video cards were pretty hopeless at this sort of thing. It's only recently that they've become sufficiently flexible to do the required calculations.
     
  8. slavewone

    slavewone Member

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    GPU's haven't been cost effective for mining bitcoins for over a year. There was a brief dabble with FPGA's that could rival a GPU's number crunching but at a fraction of the power and also be run using a rPi or similar. After FPGA's came ASIC's, the first ASIC's to make it to market beat competitors 2 and 3 by months and cleaned up until competitors 4 and then 3 etc got their act together. The first ASIC's used 55nm tech, we are now in roughly gen 3 ASIC's and 28nm (or better?) is apparently in the wild.

    You don't actually have to physically have the ASIC laden board in your possession to mine, you can lease them, rent the equivalent hashing power, trade the hash power or buys shares in data centres full of them. The benefit of doing this is that someone else is making sure they are running all the time and likely in some location with very cheap electricity.

    To answer your questions again:

    1. Yes, they are both cryptocurrencies. No, one is a SHA256 based and the other scrypt based.
    2. The cryptocurrencies can be traded at a slowly growing collection of vendors offering goods, services and even fiat.
    3. No, although there is a cryptocurrency called namecoin that can be mined concurrently with bitcoins and a few other SHA256 cryptocurrencies that allows you to pay for domain names.
    4. Not the Mining industry, but possibly yes in that you use machine to mindlessly crunch numbers and generate pollution due to burning fossil fuels while you do it.

    Disclosure: I own shares in a few thousand ASIC ships mindlessly mining in a datacentre utilising cheap electricity and some ASIC chips mindlessly mining utilising expensive electricity on my desk. I want to sell the ones on my desk.
     
  9. JonnoHR31

    JonnoHR31 Member

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    Random newb question. Say you didn't have to pay for any of the power used to mine, how long would it take for a second hand video card (amd 7970 for example) to pay for itself through mining?
     
  10. miicah

    miicah Member

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  11. X-ZemPt

    X-ZemPt Member

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    NSA has a bunch of encrypted files that were stolen from some corporation they want to open came up with the good idea of sharing the load around to decrypt them lol :lol:
     
  12. starkers92

    starkers92 Member

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  13. JonnoHR31

    JonnoHR31 Member

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    FR3D1

    FR3D1 Member

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    so can you correct me. You dont get paid by the hashes you done but its the special keys you find. So it luck rather than the amount of work you done?
     
  15. SLATYE

    SLATYE SLATYE, not SLAYTE

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    Yes, there's a fair bit of luck involved.

    The standard solution is mining in groups. If you work with 10,000 other people and agree to split the rewards based on how much work each person has done (regardless of who actually finds each lucky value) then this dramatically smooths out the flow of money.

    Same basic approach as betting. If you bet on one thing at a time then sometimes you'll win (and make a lot of money) and other times you'll lose (and lose a lot of money). If you have a hundred people betting (and not all betting on the same thing) then normally about half will win and the others will lose, so at each step the group's total money doesn't change too much. Of course, with gambling you're pretty much guaranteed to lose more than you win, whereas with bitcoins you know the odds (ie how much electricity you have to spend, on average, per dollar earned) and only play when the odds favour you.
     
  16. the3coopers

    the3coopers Member

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    Yes, but at work each day you are actually creating or doing something tangible. Bit Mining seems to me to be vapourware.

    Yes, but they don't actually EXIST, right?

    So, why not just fake them? Just create forgeries.

    There is no "bit coin foundry" that is issuing them, since they are nothing, correct? But then again, somebody is regulating them. So WHO is doing that, the mafia?

    Bitcoins can be sold, but why would anybody buy them unless they can be bought for cheaper than they can be sold (or spent)?

    Great to have an algorithm that makes them harder to create. Stops inflation, I guess. But doesn't answer the question if who controls the entire thing.

    I was joking when I said that LOL

    But I've read and read, and simply cannot grasp the concept. Who profits from them, and the entire mining process? The power companies?

    NOTE: these are serious questions, not trolling. Is there some link that explains the concept in simple terms?
     
  17. SLATYE

    SLATYE SLATYE, not SLAYTE

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    Stock trading is doing something tangible? It's just moving money (well, digital information) from one place to another.

    That's true, in much the same way that OCAU doesn't actually exist. It is, after all, just a bunch of ones and zeros on a computer.

    The problem is that it's trivial to check whether a code is valid but very difficult to generate one that's valid (that's pretty much what mining is).

    It's like trying to pirate Windows. Sure, you can just put a random key in - and Windows won't activate because it's not a valid key. You can spend the next fifteen years testing keys until you get one that does work, but that's probably not really a great use of your time.

    No, neither the World Health Organisation nor the mafia is doing that.

    To some extent, every bitcoin miner does it. Every miner can add to the blockchain that defines what has been mined already, but every other miner checks it. If you try to do something that doesn't agree with the original bitcoin algorithm, then your own copy of the blockchain will just get ignored by the main one (main = the one that more than 50% of bitcoin miners are working with). This makes it pointless.

    There is an attack based on this, where the first step is "acquire over 50% of bitcoin mining power in the world". It's not impossible (there's actually a big mining group that's been over 50% a few times) but obviously it's hard for any one person to just decide to make an attack this way.

    Two reasons:

    (1) Speculation, as on the stock markets. I think I can buy them cheaper now than I'll be able to sell them for later.

    (2) As with normal money, because what I get (money/bitcoins) is worth more to me than what I give away (goods/services). Most shops at the moment will just accept bitcoins as payment and immediately convert them to US dollars for stability (bitcoin is by no means stable). There are fees associated with this, but there are fees associated with using a credit card too, or with PayPal, or with anything else.

    As above, everyone and no-one.

    If you make a chance to the algorithm, it's no longer bitcoin. You can continue mining these new coins of yours, but they won't be accepted by any of the standard bitcoin mining systems because they don't pass the tests for valid bitcoins. This is pretty much what LiteCoin and DogeCoin are. LiteCoin was designed specifically to be harder to mine using purpose-built hardware (ie it runs better, relatively, on general-purpose CPUs). DogeCoin was just created as a bit of fun based on a Reddit meme, and it's gotten entirely out of hand.

    To put it another way, if you want to do anything non-standard then you have to persuade everyone to accept it. Otherwise you just get ignored. Since persuading everyone to accept it is pretty much impossible, no changes can be made.


    Power companies obviously profit, as does AMD (video cards) and the companies that make purpose-built bitcoin mining hardware. Those are all indirect profits.

    Direct profits come from speculation and fees. Speculation is trivial - I buy bitcoins when they're trading at $1 each and sell them when they're trading at $1000 each. Profit of $999 per coin, minus whatever inflation the dollar has undergone in that time. Fees are also easy. The mining groups generally keep a small share of the profit for themselves, as a fee for facilitating the mining process. Companies that do the conversion from bitcoin to $AU or $US also charge fees.
     
  18. OP
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    FR3D1

    FR3D1 Member

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    so is it fair to say that you are reward coin for finding the special prize, the more hashes you get through (kH/s) the bigger chance you have of finding the key before somebody else? (if bitcoins were real money it would be the same as ringing up some competition and the more you ring the higher chance they will pick up?) and about the betting thing what exact does people bet for?
     
    Last edited: Jun 20, 2014
  19. SLATYE

    SLATYE SLATYE, not SLAYTE

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    Yes, pretty much. As above, if you get lots of people working together and sharing the profits then the income is much more stable.

    It was just a generic example. Your example of calling up for a competition is better.

    Edit: a nice bit of info here. Using a fancy mining ASIC, you've still got a ~84% chance that it'll never find a lucky block and will therefore never earn anything. Working with a mining group where there are a thousand of those ASICs (or equivalent processing power) means that it's pretty likely that one of them will find a lucky block fairly frequently. If your one is the lucky one then this is bad (you get 0.025 BTC instead of 25 BTC for your efforts). On the other hand, even if your one isn't the lucky one you still get 0.025 BTC for helping to search, and you get 0.025 BTC quite frequently.
     
    Last edited: Jun 20, 2014
  20. OzTurkish

    OzTurkish Member

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    This is facinating I've only had a brief read over the basics of mining
     

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