Topic: A potentially very stupid question.... - page 2. (Read 2125 times)

First of all, I'm still a noob to Bitcoin in general. I found out about it during the price rise of November/December 2013, from an article on a financial website.
Everything I am explaining to you is my understanding from reading the forums and etc. Whether correct or not.  I do not have any coding or financial background.
I am not an early adopter, in comparison to others, but I believe I still am, since it has not hit mass adoption yet.

As to your question, "Why would I enter a world where 50% of all the wealth there will ever be is already held by a few?" is a valid question.

You could also ask yourself if you should continue to participate in the current world system, since 99% of all wealth is held by the few.
And the new wealth created (printed) in that system, doesn't make you richer, but actually, makes everyone poorer (through inflation).

The idea behind Bitcoin, is a "currency" that can not be counterfeited, regulated, or government controlled.
It is an experiment of a free "currency", for the free internet.
If you "invest" or buy bitcoin now, you are basically stating that you think it is a worthy idea/innovation/technology that is just starting.

Some have estimated that bitcoin could go for 10,000 USD, in the future.
In fact, some financial people are betting on it. (Personally, I think could go for millions around 2080 or so).

In theory, as time goes on, bitcoin will be worth more, since supply is limited and more people will want it. In theory.
So, in theory, you want to own (or HODL) them now, before the mass adoption, since that is when it will become expensive, in comparison to now.

Personally, I see bitcoin as a commodity currently, like gold, since using it as a "currency" has not reached mass adoption yet.

I think I got it!


Just wish there weren't a hundred more questions under each answer

You need to copy and paste the quote tags and do the editing manually. It's a bit tricky but hopefully it'll be easier with the new software.


It's all about controlled supply. The specifics (halving every ~4 years and 21M cap) are somewhat arbitrary though.


Yup

I am not facile enough with the BB code to split up your post into parts like you did with mine. Need to read a 101 on that Nevertheless....

I did not know it was a time thing rather than a difficulty thing. Honestly....I think now it makes less sense :/ I could understand reward versus difficulty, but I am having a hard time understanding reward versus time... But it does look like you saw my point on this, so I won't argue, because I am thinking at this point I need to learn something about currency

The mining being saturated is completely understood. Of course there can only be so many people cutting hair in an area with only so many heads growing the stuff.

I need to think about all this, my brain is fried right now trying to just understand the core of it.

Damn fun class though

OK, great, so I am absorbing something at least

So here's my issue....coming from the point of view of a clueless late-adopter - and like it or not, that is about 99% of people finding Bitcoin now, and in the foreseeable future:

I look at Bitcoin and see early miners holding tens of thousands of Bitcoins. These people are among the most vocal in terms of saying that Bitcoin needs to be mass-adopted, but at the same time their advice, over and over again, is "HODL" (it took me a while to get that joke - took a fair bit of reading ). So they want people to use it but they don't want to spend it? So is it a currency or a bond or a form of pork-bellies or what? (again, that may be ill-phrased - I never did Economics 101).

I come here, to Bitcointalk, where all the news breaks, and the community is active, and people are throwing around (so it seems!) Bitcoins (full ones!) here, there and everywhere. And so far, it seems impossible to even earn one. Advice given to newbies is "faucets". Meh. This is not attractive to a newb. Seems like a really good game is happening, but until you have an NFL medal, you're not ever going to get to play. And there are no more amateur teams, only pros now. Average Bob doesn't fit.

I'm uneducated about this, and I **KNOW** I am, but I am trying to be the outside observer, specifically the newbie one. If the reward was increasing and I had 10K to blow (I wish I did) then yeah, I might invest it in a startup, a mining operation, something like that.....but right now? It's decreasing, and will continue to do so. What percentage of all possible Bitcoins have been mined and are moving? 50%? Why would I enter a world where 50% of all the wealth there will ever be is already held by a few?

Again, I have to apologise, I might not be phrasing my questions properly or might be missing the point.

Any help is really appreciated. I do like to learn new things

Ist.

Your question isn't stupid at all. As you spotted already, Bitcoin is a very complex "experiment" and not much is obvious about it and its associated economics. The block reward is a form of subsidy, which skews the basics of the supply & demand model.

Just a thought:


Notice the discrepancy between time and difficulty. Block reward halving isn't linked with difficulty (rising), it's only linked with time.

Also, the problem with the more work = more reward analogy here is that as an economic principle, it only works as long as there is enough demand to absorb that work without making the price per unit of work decline on the market (again, supply & demand).


At this stage, it doesn't make sense. Mining is saturated. There is already way too much hashrate compared to the actual utility of Bitcoin IMHO. However, I would also say that mining is somewhat 'overrated', there's no point in getting into something once it reached a certain equilibrium. For instance, if there are already five different hairdressers in your neighborhood, and each of them makes enough profits to stay profitable, but none of them makes enough profit to get rich, there's no point for any one of them to close shop, neither is there any point for any new hairdresser to come to your neighborhood.

Oh, and it's heartwarming to see newcomers that are actually interested about the fundamentals like early adopters were, not just trolling and asking for free money, lulz and 2themoon

As for no longer being an early adopter at this stage, well, only time will tell, but I wouldn't be sure about that.

Your understanding is basically correct.
The only thing is that as miners leave (for whatever reason) the difficultly lowers (readjustment) and becomes easier to mine again, so thus miners can jump back in.
It is like a see-saw. The Bitcoin Protocol will keep "self adjusting" so that everything goes as designed at a constant rate.
But yes, currently, it is not profitable for new users to mine or attempt to mine. Most bitcoin users today are not miners. Those days are over.
The miners are basically gigantic farms with tens of millions invested. They are the future of mining now.

As with the 51% attack, that gets more complicated.
One thing to keep in mind is that if the 51% attack happens, the miner(s) who performed it basically killed bitcoin, thus making it worthless, thus they lose all their money.
It is not very profitable to do this. In theory, all miners want to work together, if one doesn't, everyone loses, even the 51% attacker. In theory.

To answer your question:
No one person will be mining (in a profitable way) anymore, those days are over, unless bitcoin crashes.
And it does not make sense for any new user to mine.
Bitcoin is basicly in a Phase 2 situation now, where now regular people need to get it and use it as "currency".
Phase 1 was the early adopters and miners, amongst themselves.

There is a huge flaws in that way of thinking, from the point of view of the average joe:

The early adopters in this case are techs. It was released on a crypto mailing list, and I doubt it reached many businessmen. This is evident from the fact that very few developed Bitcoin businesses exit, and that there have been so many crises around the ones that did.

OK, this makes quite alot of sense. But, and forgive me if my naivetee is getting in the way of sense here, wouldn't the whole deflationary concept still apply if people were aware the supply was finite? But it might have the effect of being a bit more accessible to the people who came late to the party. Sorry, that is not clear, let me be a windbag explain...

As I understand it:

- Miners secure the network, and process transactions. But as it is at the moment, there's NO attraction to being a miner AT ALL. It costs tens of thousands to even get into the game, and you're gambling that the Bitcoins you MIGHT mine (if you're lucky) will keep enough value that your hardware will eventually pay itself off. I would love to see how many new investors go down the mining route. Seems to me that the miners are the early adopters. So the less attractive mining gets, the less that enter the activity and the more that drop out, unable anymore to keep up with the constant demand for new hardware, rising power costs, and lowering rewards (again, assuming Bitcoin doesn't explode). Wouldn't this lead to an ever-decreasing number of miners, and the ultimate threat of a 51% situation?

Sorry, as I was typing that, I guess I realised that what I am asking is this: As a non-early adopter, why would I bother to go into mining. And why would it make sense to anyone else?

I might not be making sense here, due to my general ignorance, as Stephen Fry would phrase it

I think your question is intersting.  The answer I quoted seems to have most of it.  Also, consider this, if you're trying to kick off the bitcoin project, who do you want to reward more: the early adopters who invested time and possibly money on something which wasn't so clear whether it was a joke?  or the late bandwagoners who are just doing what everyone else is doing?  I think if you think of it that way, it's clear that you want to reward the early adopters and then they have incentive to bring more value to their greater holdings by getting more and more people involved. 

First, as bitcoin is mined, over time the amount of bitcoin entering the ecosystem reduces. This is called the "miners reward".
This was designed intentionally to created a "currency" that is deflationary or some think dis-inflationary.
As time passes and less bitcoins are released into the ecosystem (making them rarer), the price for a bitcoin should rise (making each more valuable).
This is the opposite of the current world banking system.
As world governments make (or print) more money and release it into the ecosystem, the more products cost to purchase.
In inflation, prices for products go up over time, in relation to a steady fiat ($1).
In deflation, prices for products go down over time, in relation to a steady bitcoin (1btc).

Second, low amount of bitcoins in the beginning and more bitcoins later, would be what the current world currency system is. (Low to High)
Bitcoin is an experiment in the opposite. (High to Low)

Third, Bitcoin is designed to release a steady amount of bitcoins into the ecosystem at a constant rate (averaging around 10 minutes).
No matter how many miners work, or how powerful they are, Bitcoin is designed to "readjust" to "balance out" again, to regain to 10 minute constant.

Basically, it is a steady decentralized release of "currency" into the world, in a deflationary manner, to guarantee that over time, each bitcoin is more valuable.
Current system is a unsteady centralized release of "currency" into the world, in a inflationary manner, to guarantee that over time, each USD/EUR is less valuable.

Well wouldn't you say that:
- the savers of bitcoins have been the ones who have benefited most
- It would encourage people to join in, rather than seeing it as being "too late in the game"
- Bitcoin is surely inflationary??

Like I said, no economics knowledge here at all, just trying to work it out.

No sorry,I didn't mean that they should be unlimited. I agree that they should have fixed limit of coins. I meant why does the reward not increase with the difficulty rather than decrease.

Like I said, I am probably asking a stupid question.

It would punish the early miners and as such would probably have meant that no one would try to improve the miners.
Crypto as an idea is supposed to be different the normal fiat currencies that are inflationary i.e. bad for savers and good for those who aret stupidly risking their money on risky wall street trades.  It's money for the people.

you can't trust something illimited ...  see the human bank structure.

Hello all,

I'm fairly new to Bitcoin and very new to these boards. I've begun trying to learn as much as I can about the currency, and the more I read, the more questions I have! Honestly, this is the funnest learning experience I've had since I figured out that you could throw jelly and it'd stick to the wall

The part I am having the most difficulty with is the whole "Is Bitcoin deflationary etc" thing - trying to get that figured out in my head, coming from a background of absolutely no economics knowledge whatsoever.

So, my (probably daft) question is this:

Why is Bitcoin structured so that the amount of coins mined reduces? Would it not make more sense that the number would be low in the beginning and then rises with the difficulty? A sort of more work = more reward thing?

I'm pretty sure that I am missing a BLATANTLY obvious point here, but I'd much appreciate enlightenment.

Thanks

Ist.