Who wants to Learn about Cryptocurrencies First Hand?

[psionl0]

(Incidentally, I did look around, myself, to see if I could find anything about the legality of this kind of thing. There's heaps of reports available, but nothing that specifically touches on this specific kind of legal question. At least nothing that 15-20 minutes of clicking around could throw up.)

I'm pretty sure that there is no statute governing the design of crypto currencies/ (How would they be enforced?)

OTOH if you believe that a contract you have entered into has been breached then you are always entitled to sue for the damages that you have suffered because of the breach. No doubt, the courts would hear the case even if if involved the design and use of a crypto currency.

 

[Chanakya]

I'm pretty sure that there is no statute governing the design of crypto currencies/ (How would they be enforced?)

OTOH if you believe that a contract you have entered into has been breached then you are always entitled to sue for the damages that you have suffered because of the breach. No doubt, the courts would hear the case even if if involved the design and use of a crypto currency.

Well yes, those were my very thoughts. Which is why I'd originally asked if this very case, ROI I mean to say, might be thought of as an implicit contract. (Like Chris said, there were these pre-mined coins, and it was clearly agreed they wouldn't stake it. It was on that basis that people like Chris spent time and effort and money on infrastructure to mine ROI. Further, I don't know if any transactions actually took place, but anyone who'd bought ROI clearly would have bought it on the basis, on the assumption, that those pre-mined coins wouldn't be staked. Yet stake it they did, the developers. I'm not a legal professional, but common sense would suggest there's at least a fighting chance of showing that there's an implicit contract there, that has been breached. Which might, conceivably, open up the possibility of redressal.)

In any case, I realize there are early days. No doubt there are plenty of questions around cryptos that don't yet have clear Yes or No answers, and that will get worked out eventually over coming months and years.

 

[ChrisBFRPKY]

OK, I understand. psionl0 clarified this a few posts up: BTC did not come with pre-mined coins, so no question of this particular screw-up being replicated there. That much seems straightforward, and reasonable.

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Incidentally, is there any technical and entirely innocent reason why a developer might have pre-mined coins of some crypto? Because if there isn't, then the very presence of pre-mined coins is a clear red flag.

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As for ROI reviving, one part of it is clearly the investor sentiment thing. But that apart, has the technical part of it actually been resolved? The developers had pre-mined those coins, then earned humongous returns on them despite promising not to. So what happens to those coins now?

I mean, I guess you need to figure out if the technical issue is over and done with now. Because if it is, then it is just a question of investor sentiment. So that, while obviously there's no guarantee, but if luck's one your side, then it may well revive. But that's only provided the premined coins are no longer a factor, not otherwise.

With the proof of work coins it's common to have a premine to build the coin. The development team will normally use those coins for promotions and giveaways. Of course it's absolutely normal to expect the team to keep part of the premine coins after all, they're not building the project for good will or peace on Earth. Usually a small percentage of coins going to the dev team is acceptable and normal.

 

[Chanakya]

With the proof of work coins it's common to have a premine to build the coin. The development team will normally use those coins for promotions and giveaways. Of course it's absolutely normal to expect the team to keep part of the premine coins after all, they're not building the project for good will or peace on Earth. Usually a small percentage of coins going to the dev team is acceptable and normal.

And that sounds entirely reasonable.

Like I was saying, these are early days for cryptos, kind of the wild wild west sort of thing. No doubt going forward some sort of standard, some sort of convention, will end up evolving, as far as how much of pre-mining is acceptable. Because on one hand to allow developers to merrily pre-mine away as much as they want (and by "allow", I mean by others participating in cryptos that already have very large amounts of pre-mined coins, in other words by not shunning such coins where the pre-mined amount is beyond a certain acceptable limit), and then expecting (hoping?) they'll keep their word about not staking, seems like, as you'd said earlier, an unreasonable degree of trust to ask for and to extend, and a clear recipe for disaster.

 

[Mike!]

If this has been explained already, I apologize, but I'm completely confused by a few things. Can someone answer these questions in a way any idiot can understand?

1. How can you "mine coins"?

2. How does "mining" something that doesn't exist in the physical world consume vast amounts of energy?

3. Where does the high end graphics card come into play?

You mined gold by digging it out of the ground, or panning it from a stream, etc. In every case, the gold was already there, it had to be found and gathered. These "coins" don't exist, how are they created from, what appears to be nothing more than computational energy consumption? If that's the case, where's the "value" come from?

 

[psionl0]

If this has been explained already, I apologize, but I'm completely confused by a few things. Can someone answer these questions in a way any idiot can understand?

It's been explained many times but no harm in covering it again.

1. How can you "mine coins"?

A "block" is a chunk of data that contains information. One of the pieces of information is how many coins are credited to the account of the person who "mines" the block.

2. How does "mining" something that doesn't exist in the physical world consume vast amounts of energy?

In order to successfully add a block to the blockchain a miner has to create a block that has a "low enough" SHA checksum. They do this by adding a number called a "nonce" to the blockchain. If the checksum is too big then they have to guess another nonce. The smaller the required checksum, the more guesses they have to make.

Since miners all over the world are competing to get the next valid block, a miner has to "guess and check" very rapidly if they are to have a chance of winning. This is what takes up all the energy.

3. Where does the high end graphics card come into play?

This is the level of hardware you need to get the guessing running as fast as it does.

You mined gold by digging it out of the ground, or panning it from a stream, etc. In every case, the gold was already there, it had to be found and gathered. These "coins" don't exist, how are they created from, what appears to be nothing more than computational energy consumption? If that's the case, where's the "value" come from?

Crypto mining is not a physical process.

You need to remember that money is not a physical thing. It exists as entries in a ledger or as numbers stamped on tokens. The blockchain is just a ledger that records all of the transaction made since the block was first created in 2009.

 

[shemp]

This is all you need to know about money:

 

[Mike!]

It's been explained many times but no harm in covering it again.


A "block" is a chunk of data that contains information. One of the pieces of information is how many coins are credited to the account of the person who "mines" the block. In order to successfully add a block to the blockchain a miner has to create a block that has a "low enough" SHA checksum. They do this by adding a number called a "nonce" to the blockchain. If the checksum is too big then they have to guess another nonce. The smaller the required checksum, the more guesses they have to make. Since miners all over the world are competing to get the next valid block, a miner has to "guess and check" very rapidly if they are to have a chance of winning. This is what takes up all the energy.
This is the level of hardware you need to get the guessing running as fast as it does.


Crypto mining is not a physical process.

You need to remember that money is not a physical thing. It exists as entries in a ledger or as numbers stamped on tokens. The blockchain is just a ledger that records all of the transaction made since the block was first created in 2009.

Okay, did you miss the part about any idiot understanding it?
How is the highlighted creating anything that could remotely be considered a tangible asset? It really does look like "money from nothing" to me, so I'm clearly missing something.

I get that our (U.S. dollar) money is no longer backed up by the gold reserves in Fort Knox, but it does still carry the weight of the U.S. Treasury behind it, not just faith alone. There's a reason Monopoly money is worthless outside the game.

 

[The Great Zaganza]

Tangible in the sense of unique and transferable.

Value comes from utility, convenience and availability.

 

[psionl0]

Okay, did you miss the part about any idiot understanding it?
How is the highlighted creating anything that could remotely be considered a tangible asset? It really does look like "money from nothing" to me, so I'm clearly missing something.

You are not an idiot. You just resist the notion that something that is just 1's and 0's on a computer network could have "value". But something is only worth what somebody is willing to pay for it and rightly or wrongly, lots of people are willing to pay large sums of USD for exclusive ownership of some of this digital data.

I get that our (U.S. dollar) money is no longer backed up by the gold reserves in Fort Knox, but it does still carry the weight of the U.S. Treasury behind it, not just faith alone. There's a reason Monopoly money is worthless outside the game.

The USD represents a debt owed by the Fed/Treasury so it is not purely a digital asset. The Fed's assets are primarily IOUs (bonds) issued by the US government which backs up the USD.

Other than that, the USD has "value" for two reasons: The US government mandates that it is "legal tender" (must be accepted to settle a debt) and you must use USD to pay your taxes (this creates demand for the USD).

Monopoly money might not be worth anything in the real world but within the game, it is something that you fight hard to get.

 

[ChrisBFRPKY]

If this has been explained already, I apologize, but I'm completely confused by a few things. Can someone answer these questions in a way any idiot can understand?

1. How can you "mine coins"?

2. How does "mining" something that doesn't exist in the physical world consume vast amounts of energy?

3. Where does the high end graphics card come into play?

You mined gold by digging it out of the ground, or panning it from a stream, etc. In every case, the gold was already there, it had to be found and gathered. These "coins" don't exist, how are they created from, what appears to be nothing more than computational energy consumption? If that's the case, where's the "value" come from?

Hi Mike,

1. Coin mining boils down to a computer program running on a network. Somewhere on the internet there is a network of computers running the same cryptocurrency coin program and working together. When you mine for coins you add your computer into that network and assist the other computers by doing work. Your computer works and you get paid for this work. The more work your computer does, the more you get paid.

The concept blew my mind sometime in 2013. My computer could actually work for me 24/7 and make money. Been hooked ever since.

If you were asking "How" you can get started, the easiest way would be to sign up with Nicehash. It's now a matter of clicking a few buttons to start mining. When I started in 2013 I had to download mining software, create batch files, join pools, install wallets etc. Now one can mine on Nicehash and get paid in Bitcoin.

2. The computer/miner consumes energy to do work. Typically when mining, a PC runs at 100% cpu load. There are other versions of mining equipment too but for now let's focus only on the home computer miner. More computers running a mining program use more electricity. Easy.

3. Graphics cards are another type of mining equipment often used. Some cryptocurrencies use a mining algorithm that can be run on a graphics card. Kinda like servers use graphics cards for video acceleration and deep learning. The GPU is like a CPU and while some cryptocurrencies can be mined with graphics cards some cannot.

Yep Gold is already there and I do like shiny precious metals. But I can't mine gold. We don't have any that I know of in Kentucky and I have an uncooperative back. I can task my PC to mine cryptocurrency and buy Gold with the profits though.

 

[The Great Zaganza]

So I have mined ROI coins on two machines to the same wallet, and the program doesn't sync them, even when the ledger is supposedly up-to-date.
This looks like a flaw that could be exploited.