Topic: mining technical question (Read 680 times)

wonder how it is possible?

once you reach 21,000,000 then does it mean bitcoin transaction is not possible?

Because by verifying the transaction,miners build a block and get reward. But since it can not mined then they will either has to verify for free?
Or the reward shifts to payment transaction fee may be?

How would money supply of bitcoins can exceed 21 million, I would love to pursue this one along with fractional-reserve banking term. That link has nothing in it though.

Here is a scenario:
Imagine total of BTC1000 in actual currency exists...

Alfred owns all of it an deposits this BTC1000 into an on demand checking account at a bank.
(Total bank deposits BTC1000, Total bank loans BTC0, Reserve on hand BTC1000, Reserve 100%)

Betty receives a loan from the bank of BTC800.
(Total bank deposits BTC1000, Total bank loans BTC800, Reserve on hand BTC200, Reserve 20%)
So the bank has loaned out a "fraction" of their deposits, not a "multiple" of their deposits.

Betty uses the BTC800 to purchase something from Charlie
Charlie deposits the BTC800 that he just received from Betty into his own checking account.
(Total bank deposits BTC1800, Total bank loans BTC800, Reserve on hand BTC1000, Reserve 55%)
Notice the BTC1800 in deposits at the bank from BTC1000 currency limit. This is how "fractional reserve" multiplies money.
Notice the bank still only has BTC1000 in reserve on hand.  There is no increase in the actual amount of bitcoins in existence, but if you add up how much each individual thinks they have, the total is greater than the BTC1000 limit. Meanwhile, nobody believes they have accepted a bitcoin backed banknote, since they can all see that they've actually received real bitcoins that they deposited at the bank.  Lets carry the process forward and see what happens.

Denise receives a loan from the bank of BTC640. (re-loaning out the same money that was already loaned out to Betty, and deposited by Charlie)
(Bank deposits BTC1800, Bank loans BTC1440, Reserve on hand BTC360, Reserve 20%)

Denise uses the BTC640 to purchase something from Elliot
Elliot deposits the BTC640 that he just received from Denise into his own checking account.
(Bank deposits BTC2440, Bank loans BTC1440, Reserve on hand BTC1000, Reserve 41%)

Francine receives a loan from the bank of BTC512. (re-loaning out the same money that was already loaned out to Betty and Denise)
(Bank deposits BTC2440, Bank loans BTC1952, Reserve on hand BTC488, Reserve 20%)

Francine uses the BTC512 to purchase something from George
George deposits the BTC512 that he just received from Francine into his own checking account.
(Bank deposits BTC2952, Bank loans BTC1952, Reserve on hand BTC1000, Reserve 34%)

Hanna receives a loan from the bank of BTC409. (re-loaning out the same money that was already loaned out to Betty, Denise, and Francine)
(Bank deposits BTC2952, Bank loans BTC2361, Reserve on hand BTC591, Reserve 20%)

Hanna uses the BTC409 to purchase something from Ivan
Ivan deposits the BTC409 that he just received from Francine into his own checking account.
(Bank deposits BTC3361, Bank loans BTC2361, Reserve on hand BTC1000, Reserve 30%)

At this point we already have BTC3361 in deposits from that single BTC1000.  Alfred, Charlie, Elliot, George, and Ivan all believe that they are the true owners of this money since they each received real bitcoins and then deposited it into their own checking account.  Where did the extra BTC2361 come from? Meanwhile the bank has re-loaned out the same money over and over without a single cent of it having been repaid yet.  The bank's "fractional reserve" never fell below 20%, and yet somehow they've managed to loan out "multiple of its reserves".

This process can continue over and over, expanding the money supply until there is BTC5000 in deposits, since the maximum the bank can ever have in reserve is the full BTC1000 of physical cash in existence.  This would result in BTC5000 in deposits, BTC4000 in outstanding loans waiting on repayment, and BTC1000 in reserves.

-snip-

Now miners get rewarded when they generate hash of current block with 25 BTC.

Does it mean miners calculate hash of every block in the blockchain to produce hash?

-snip-

{...} The miner builds a block header, and then repeatedly tries different nonce values until they find a block header that results in a low enough hash value.  If they've tried ALL possible nonce values and failed to find a "winning" block, then they generate a new block header (changing the timestamp, or the transctions that contribute to the merkle root).

 -snip-

Then since blockchain can only grown and never stay in same place or be reduced, in the future I presume hashing will take longer and longer.
Thanks.

I am going over the coindesk's explanation of mining process which seems to be easiest to follow through.

http://www.coindesk.com/information/how-bitcoin-mining-works/

Now miners get rewarded when they generate hash of current block with 25 BTC. Does it mean miners calculate hash of every block in the blockchain to produce hash?
Then since blockchain can only grown and never stay in same place or be reduced, in the future I presume hashing will take longer and longer.
Thanks.,

mining block will take same time (at least it is projected like this), so ~10 minutes per block, but block reward will be halved again and again in the future.

to amazing sources for better understanding:

https://en.bitcoin.it/wiki/Controlled_supply

when will be halved:

http://bitcoinclock.com/
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ok so i take it that, verifying transaction does not involve verifying all blocks in the blockchain, it involves verifying just one block for every transaction.?