joustmaster
offcumdun
Mining will always continue. But mining that releases bitcoins will half and half until it ends. Then it will be driven by fees only from mining.
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Crispy
The following psytrance is baṉned: All
The reward for mining would be transaction fees.
littlebabyjesus
one of Maxwell's demons
The problem is far more fundamental than that - the process of mining doesn't just unlock more bitcoins. It also unlocks the next block. For mining to continue after all the bcs have been released, the only income for miners will be transaction fees. In the current bubble, transaction fees constitute something around 5 per cent of miners' income. Bitcoin is barely used as a currency. Even where it is, the model for expansion is that both sides - vendor and buyer - only go into bc to do the transaction, converting back to fiat (real!) currency straight away. And at risk of sounding boring, I do think it is worth repeating that currently its main use is to buy drugs. If you're buying something legit, why bother with this nonsense?
8ball
Decolonise colons!
There's something I'm missing here. They keep mining after the mine is empty?
It's not money.
Sorry, but this is important. It's not money. No values are pegged to it, nothing uses it as its unit of account. There is thus no analogy with "printing" more of it.
There are several other reasons why this concept is bogus: firstly, you have to mine more bitcoins in order to keep the blockchains working, or you have to otherwise find a way to compensate people for doing the proof of work. So what happens when the coins run out? You tell me.
Secondly, money isn't really "printed" any more anyway. It is almost entirely created by private financial institutions issuing loans. If they ever decided bitcoin was actually a credible basis for money, they could create bitcoin based loans in any case, thus increasing the bitcoin money supply.
8ball
Decolonise colons!
So they have to mine in order to add new transactions to the ledger, is that right?
littlebabyjesus
one of Maxwell's demons
Yes, you're missing that the primary purpose of mining is to unlock the next batch of transactions. Approximately once every 10 minutes, a new block is unlocked. As a reward, whoever unlocked it gets currently 12.5 bc.
This is where the analogy of mining fails. They aren't mining for coins. They're using their computer to solve calculations and being granted as a result a lottery ticket that might win them a bitcoin.
littlebabyjesus
one of Maxwell's demons
YEs.
Right. And if transaction fees have to go up by a factor of 20 (on today's basis) or 100 (for example, as proof of work gets harder), there comes a point at which bitcoins fundamental use value might not be big enough to support the fee.
littlebabyjesus
one of Maxwell's demons
Yep. Something else worth repeating many times. bc is NOT money. Hence people now arranging to do transactions in it that check in and out of the block as quickly as possible.
8ball
Decolonise colons!
It appears to have a (very volatile) dollar value pegged to it. And the "printing" thing was an analogy.
But the bit I was missing was that you need more coins to keep the blockchains working - there's something wonky in my understanding here. I figured one coin could be traded many times, in which case as long as the coins are subdividable, why would things conk out when you hit the coin limit (speaking on a technical rather than economic level)?
8ball
Decolonise colons!
I get this. But I thought those coins could then be traded back and forth and used as currency.
The gist here seems to be that you also need to mine in order to trade, and not just that but that you need new coins in order to keep trading, which *seems* to not make sense on several levels. You can generally trade a unit of currency (whether abstract or in a physical form) many times.
8ball
Decolonise colons!
Doesn't that mean it's likely to be a very high-friction currency?
You misunderstand what "pegged" means. It doesn't mean that there is a translation exchange. If bitcoin was pegged to the dollar, that would mean its exchange rate with the dollar was fixed.
Many prices are pegged to the dollar, in that their price in dollars doesn't change in the short term just because dollar's value on the global exchange changes. This is one of the features of money -- people price in it. Not just that you "can pay in it", but the price itself is based on the currency. Nothing is actually priced in bitcoins. If something costs me 0.2 bitcoins today, it might cost me 0.1 or 0.5 bitcoins tomorrow.
Analogies aren't just platonically ideal forms. They have to be an analogy of something. What was your printing thing an analogy of? Be careful that you don't come up with something that I've already explained why your analogy fails, though. Make sure you know what you really mean and what the implications are before you handwave my response away.
What you are missing is that you think people mine for coins. They don't. They system relies on a load of calculations to reevaluate all the current ownership of bitcoin every 10 minutes. If this doesn't happen, the whole system doesn't exist. When people "mine" what they are doing is taking part in this recalculation. The chance to win a bitcoin is just the reward for doing this. Once the coins are gone, who is going to do the recalculation and why?
littlebabyjesus
one of Maxwell's demons
You don't need new coins to keep trading, but once the new coins stop coming out you remove the reward for mining that currently constitutes mining's main attraction. Bitcoin would need to take over the world of finance to make transaction fees from mining worth the current bubble prices. That's currently physically impossible as the blocks are already full with the current tiny levels of transaction.
My guess is that the crash will come at the point where the miners check out en masse, either as a rational response to the diminishing returns or due to external factors such as China banning bc mining (which it very well may do and very soon). At the moment you have miners forming alliances with local govt in China in return for cheap lecky. Ending this kind of arrangement could crash the whole thing, possibly in hours if it causes a crisis in which no new blocks are unlocked (the difficulty level of the maths is only adjusted every two weeks, and a lot can happen in two weeks).
How do you think that "trading" actually happens? What is the mechanism?
You trade in Sterling because somebody you trust is keeping track of who owns what. So they just update the numbers in their records. None of that applies to bitcoin.
joustmaster
offcumdun
Transaction fees are quite interesting. They are voluntary. I never had to pay them when I started using bitcoin.
Equally. The miners do not have to include any transactions in their mined block at all, if they don't want.
Equally. The miners do not have to include any transactions in their mined block at all, if they don't want.
8ball
Decolonise colons!
Not really, with cash you're trusting in the authenticity of a certificate, and from there in the future value and tradability of it. While you have recourse to a list of serial numbers, you don't know who owns what at what time (I'm aware physical cash is a miniscule proportion of economic exchange these days by the way).
With bitcoin I thought that blockchain was a non-editable (for mathematical reasons) ledger of who owns what, and the mining was what you did to create tradeable units. So the blockchain is the record of trades and ownership, and similar technology was used to create more "coins" (because the non-editability means you can make them unique).
I've probably got that wrong at some point, having gleaned bits from several articles that glossed over a lot of technical elements, but if you or someone else here can point out where the error is in a non-patronising manner or provide a link that would be handy (not that I'm likely to be buying in).
You just contradicted yourself. Physical cash is indeed a minuscule proportion of economic exchange... so why focus on that? It's almost irrelevant in the scheme of things. No, the way you trade in Sterling these days is almost wholly by trusting a third party to keep the ledger. This means banks, in case it isn't obvious, who are keeping track of how much is in everybody's account. Cash is just the oil smoothing over the last few percent as and when it is brought into or out of the banks.
This is also why banks can increase the money supply so easily. All they have to do is put different numbers in their ledger in the form of a loan and boom -- there it is. More money.
Yes
No. The mining is what happens to update the ledger.
No, the release of coins is just done as incentive so that people "mine" to update the ledger.
joustmaster
offcumdun
The blockchain is only a log of transactions.
But until there are 21 million bitcoin, each blockchain will have an extra transaction on it giving out some free bitcoins to the miner who mined that block.
This will go on for something daft like 100 years, halfing the number given out every now and then. I think something like 99% will be release in the next 15 years.
joustmaster
offcumdun
I'm interested in what would happen if a huge number of miners left. I don't think I agree that it would collapse in the 2 week period. It might struggle.
I'm more interested in what a majority group can get away with doing to hack or break the blockchain
littlebabyjesus
one of Maxwell's demons
Important point, this. The sum total of all the money in the world (disregarding for the moment the thorny issue of interest) is zero - money is a record of obligations: I owe you, you owe them, etc. Bitcoin isn't money. It's a commodity.
8ball
Decolonise colons!
It seems to be a pre-borked system designed to create irrational economic inequalities, burn up heaps of natural resources and waste a huge amount of time.
8ball
Decolonise colons!
Ok, so do coins just "pop out" of the process of updating the ledger?
Almost like (this is an analogy, try to relax into it), they're keeping economic records in the hope of finding a diamond bullion hidden in one of the books as they're writing the transactions into it?
I thought the transaction part and the finding of new coins was different - think that's where I went wrong.
BigTom
Well-Known Member
although if you don't pay transaction fees, your transactions sits in limbo waiting for someone to take pity on you and add your transaction into the block. Paying fees is the only way to ensure your transaction is completed in a reasonable timeframe, if you don't or pay low fees you will wait for an unstated period of time, as miners include transactions with higher fees than yours in the block.
BigTom
Well-Known Member
It seems to be a pre-borked system designed to create irrational economic inequalities, burn up heaps of natural resources and waste a huge amount of time.
Libertarianism
littlebabyjesus
one of Maxwell's demons
Each new block is a record of who has what. Updated as you say at every node in the system so it can't be cheated (although this is also a weakness in that it creates limits on the size of the block). Mining releases blocks. Currently each block has 12.5 more bt on it than the previous one, with those 12.5 bc credited to the account of whoever mined the block.
joustmaster
offcumdun
Here is the most recent block.
1020 transactions giving 1.7 BC in fees and 12.5BC of reward.
It even has a nonce
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