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Author Topic: Cryptocurrency?  (Read 13492 times)

Reelya

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Re: Cryptocurrency?
« Reply #60 on: January 18, 2018, 09:11:41 am »

There's an optional "tip" along with each transaction, so when you ask for a transaction, you specify how much the miner gets. Effectively this acts as a secondary market, since miners will choose to process the transactions in the queue with the biggest tip in each block.

This is also a factor in those times people say there was a really long time to get their transactions confirmed: if you're willing to pay a high tip, you'll be in the next available block, however, if you specify an average tip, then you're going to be bumped down the queue for a while until the transactions slow down (e.g. when its night-time at the high-volume trading hubs).

So, while there are no actual fees that are specified by any sort of centralized mechanism, the available transaction slots are effectively auctioned off. The transaction cost spiked from $6 to something in the $20+ dollar range over a couple of weeks. This was purely because of the increased media exposure due to the price spike. e.g. many holders of bitcoin might have decided to sell when it hit $15000, so that would cause more network congestion, thus causing the effective tip size that you need to pay to rise.

Remember, the creator of Bitcoin never said it was meant to be a system that was meant to scale to a global financial system. It was built merely as a "proof of concept" for the basics of a distributed currency. And as a proof of concept it works fine: it answers the question "can you make a digital currency that has no centralization, yet the network still operates?" Effectively, it's a prototype system that implements the bare-bones version of the concept. Naturally, exposing the prototype system to real-world conditions is going to teach us something about how to build a better one. So the issues with bitcoin don't necessarily reflect the potential of the blockchain technology itself. It's just one implementation.

You can tweak the numbers in the code just a little and get versions of Bitcoin that have vastly higher amounts of transaction capacity, so the current transaction capacity isn't a relevant rebuttal to the concept. However, the distributed nature of the system means that core changes are "conservative" because a majority of the hashing power (e.g. miners) needs to agree to any changes in the protocol. This is the main reason that the network doesn't scale quickly with users. Also, the miners might benefit the most, when there's a specific amount of demand for transactions relative to actual capacity. They're not going to want to massively expand capacity, if that means that the transaction fee approaches zero, because then the profit per block goes down. What will cause them to increase capacity is in fact competition from other coins, since if you have multiple ways to pay, you're going to choose the one with the lowest transaction fees. So, for this to actually right itself might need to wait for a viable rival coin to emerge. So, the optimal situation might not be "one true coin", but a mix of coins, all competing, thus each network has an incentive to keep the transaction fees down.

The two simplest ways to increase capacity are to lower the difficulty cap, or to increase the block size. Increasing the block size increases the number of transactions in a block, while lowering the difficulty means that blocks are generated faster. e.g. a 5 minute blocktime for Bitcoin would double the capacity, while decreasing the minimum time to confirm a transaction. And to do this change, you only really need to change one value in the code: target block time, and the self-regulating aspect of it takes care of the rest.

Another proposed change is one that doesn't have a set block size, but a variable size. Blocks that have more transactions in them would be considered better blocks than ones with less transactions in them. However, remember we're only talking bitcoin here. Many of these issues aren't relevant to newer coins that have modified codebases that have taken some of the problems into account. One example of a "new" coin is "bitcoin cash". What bitcoin cash is is a hard-fork of the bitcoin blockchain, and every block after the fork has a blocksize 8 times bigger than "traditional" bitcoin. Effectively, any balance someone held in Bitcoin before the fork, they also have in Bitcoin Cash, but they're now separate coins. So there's an interesting thing in that "hard forks" (a blockchain splits into two now-incompatible branches) duplicate all your currency, but in now-separate ledgers.
« Last Edit: January 18, 2018, 09:56:03 am by Reelya »
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JoshuaFH

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Re: Cryptocurrency?
« Reply #61 on: January 18, 2018, 10:11:39 am »

Aren't there a finite number of bitcoins that can ever be made though? How do you do transactions once it hits that cap?
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Sheb

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Re: Cryptocurrency?
« Reply #62 on: January 18, 2018, 10:15:23 am »

Aren't there a finite number of bitcoins that can ever be made though? How do you do transactions once it hits that cap?

IIRC, the amount of bitcoin produced by block is set to go down, so that the total number approaches (but never reach) the total number.
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Reelya

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Re: Cryptocurrency?
« Reply #63 on: January 18, 2018, 10:21:56 am »

Aren't there a finite number of bitcoins that can ever be made though? How do you do transactions once it hits that cap?

You need to read up more on it, this shows that you don't know how the basics work.

Basically, how it works is your balance is determined by previous transactions. So if there's some previous block where you were awarded 0.5 bitcoins, you can then request a transaction to give some or all of that to someone else. Unlike dollars, which are divisible by 100, Bitcoin is divisible by 100 million, so the "cent" to Bitcoin's "dollar" is 1/(10^8) of a Bitcoin. This is the smallest amount that you could allocate in a transaction.

So, there's nothing mathematically "special" about the coins themselves. You just add up the value of transactions to you, then deduct the value of transactions you made to other people, and that's how much bitcoin you "own". The media confuses this all the time: they make claims such as you're solving special equations to make the coins. Which is complete bullshit. The coins you get for completing the block are no more inherent in the computation process than the "gold star" sticker your teacher gave you for coming first in a maths test is inherent in the maths test: it's really that simple. Whoever solved the math problem first gets free coins. The coins themselves have nothing to do with the math problem, per se.

Basically, it's just a convention: when you make a block, you're allowed to add your own transaction on the front say "+5.0 coinz for me. yay!". It's no different to any other transaction, except it only has a recipient and no sender.
« Last Edit: January 19, 2018, 03:25:43 am by Reelya »
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Sheb

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Re: Cryptocurrency?
« Reply #64 on: January 18, 2018, 10:29:47 am »

Yeah, I guess he meant "Once the free coins aren't being handed out, won't miners just stop processing transactions?".
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Reelya

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Re: Cryptocurrency?
« Reply #65 on: January 18, 2018, 10:31:04 am »

Well on that matter, nope. That's what the transaction fees are for.

However, if the transaction fees and the bonus coins both disappear, then the network is designed to respond to that. Basically, hashrate would plummet (since it wouldn't be cost-effective), increasing block time, which would cause the difficulty factor to plummet as well, which would speed up block production again, but with a much simpler crypto problem to solve.
« Last Edit: January 18, 2018, 10:40:27 am by Reelya »
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JoshuaFH

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Re: Cryptocurrency?
« Reply #66 on: January 18, 2018, 10:34:33 am »

Well, thanks for explaining. I guess the concern then is that mining would be disincentivized as time goes on, and that transactions would get slower and slower, also as blocks get bigger?
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Reelya

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Re: Cryptocurrency?
« Reply #67 on: January 18, 2018, 10:57:16 am »

Well that's why it has a reactive difficulty setting. The difficulty setting constantly goes up or down in response to the block time. So if mining is dis-incentivized, that would cause the block time to increase, which would cause difficulty to be revised downwards, which would speed things back up to the original block time.

Max™

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Re: Cryptocurrency?
« Reply #68 on: January 18, 2018, 11:35:23 am »

Yeah there is a bit of clever forward thinking and that's only the prototype coin. A prototype with a value which at this point is almost like if you were working in a gas station and someone comes in to buy $20 worth of gas with walking liberty half dollars in almost uncirculated condition... you're gonna slap your own $20 in the register and run in a panic to get them graded. Yeah they're theoretically just 50 cents each but due to the rarity and fame it's gonna work out totally different should you find a buyer.

In a sense a bitcoin is almost like a collectible coin but they won't get taken out of circulation and you won't have hordes of angry numismatists marching on your home if you dice them up in little pieces.
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Sheb

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Re: Cryptocurrency?
« Reply #69 on: January 18, 2018, 12:16:02 pm »

Kinda same here. It's not so much hate of cryptocurrencies in general or of blockchain technology, as dislike of the obvious bubble (and the huge waste of electricity that the bitcoin bubble is causing).
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milo christiansen

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Re: Cryptocurrency?
« Reply #70 on: January 18, 2018, 08:10:57 pm »

Are you guys sure that is the cause of the PC part price inflation? Mining nowadays is done with purpose built units, GPU mining is no longer profitable.
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Re: Cryptocurrency?
« Reply #71 on: January 18, 2018, 08:12:47 pm »

There are several things, GPU mining bitcoins isn't, but there are some coins that you can use shit like a 1070 or better on.
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Sheb

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Re: Cryptocurrency?
« Reply #72 on: January 19, 2018, 02:26:20 am »

There are several things, GPU mining bitcoins isn't, but there are some coins that you can use shit like a 1070 or better on.

You even have some coins (like Bitcoin Gold) where making GPU mining a valid strategy is even the explicit goal.
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Loud Whispers

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Re: Cryptocurrency?
« Reply #73 on: January 22, 2018, 07:58:39 pm »

Regarding bitconnect
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Jimmy

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Re: Cryptocurrency?
« Reply #74 on: January 23, 2018, 04:48:56 am »

Like the majority of high-yield, high-risk investments, there's always going to be good odds you'll get burned. Anything more than a 4% P.A. return has good odds of biting you in the ass.

Still, it's always nice to dream about sinking a few thousand into it a decade ago and cashing out a millionaire. But then, so is dreaming about winning the lottery.
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