Darvond: Cryptocurrency already confuses me. I suppose this thread may have literal, "Old man yells at cloud" energy. My understanding is the following: Using mathematical hashes, calculations are made to resolve these hashes which then allows you to take a portion of
??? which has value because
???.
In essence, a MLM/Pyramid scheme for tech bros, as I understand it.
Thing is, all that processing power used could be used for other things like distributed computing, and the technology behind it used for some actual application.
Then there's NFT. Which is in essence, a dynamo labeler that uses all the power of Greenland to produce one label. Which idiots then can attempt to claim ownership over
specific instances of things, without the actual credentials of ownership or sanity.
The idea could be used for smart contracts or unique ballots that could be verified as untampered.
But instead we have techbro art theft, thanks to the bad idea of some wastrel billionaire.
Goddammit. Technological innovation held back by Silicon Valley "Get Rich Quick" schemes.
Primer Transactions made with bitcoin need to be recorded in a ledger to keep it functional, legitimate, and secure. Except instead of all the transactions being processed through a cashier / bank / credit card, the info is kept in the blockchain that is being tracked by many, many miners instead of one institution. To ensure the value of bitcoin increases, there's a max supply ceiling. Once that ceiling is reached, no more bitcoins will be produced to ensure its price stabilizes and miners will be awarded with fiat currency transaction fees to continue maintaining the blockchain.
Nowadays, it's unprofitable to mine bitcoin for the average person. Really big mining farms with dedicated computers called ASICs in countries with extremely cheap electricity are profitable with these operations. Most average people who do mine are mining alternative cryptocurrency (altcoins) usually under a proof-of-work (POW) model.
In POW models, the blockchain spits out hashes (a hex code) for each transaction and all the miners connected to the network rush to solve the code using their GPUs simultaneously. The first GPU to solve the code is awarded with some cryptocurrency, usually bitcoin from the company managing that network or altcoin. This is the reason why it gets a lot of harsh criticism for its electricity usage because millions of GPUs on the network are trying to solve the hash inefficiently.
Some prominent altcoins acknowledge the issue and are switching over to proof-of-stake (POS) models that are much more energy efficient where the ledger will be checked every n transactions and the hash is much easier to solve without requiring multiple GPUs. Instead, miners will wager their coins and are proportionately awarded based on how much they wager if their ledgers are legitimate. If there's any fraud, that miner's coin stake is forfeited.
Mined or rewarded crytocurrency can be traded for real fiat currency on the market and interested buyers can also buy bitcoin or altcoins too like a commodity they can later sell when it increases in value. They don't have intrinsic value, but is entirely based on trust. For example, a $100 USD bill equivalent takes only $0.14 to mint, so people put $99.60 worth of trust into that bill when they use it that's backed by its government. In this case, people will put anywhere from $0.5-26.2k to mine one bitcoin depending on their costs and the remaining value of the bitcoin reflects the trust people have in the blockchain / decentralized ledger. The same principle applies for altcoin, but with smaller amounts compared to bitcoin.
Pros / Cons Advocates for cryptocurrency claim the decentralized currency is a way for average folks to escape the fiscal and monetary influences of their government. There are incentives to use crypto if your currency is hyperinflated and you can't trust the value of your labour will be honoured if your currency is hyper volatile. The transactions were considered anonymous and secure from governments. It has also created a rise of millionaire investors who bought into the system very early considering bitcoins were worth very little when they started. They are also nice for people who want to subsidize their expensive GPU purchases.
The cons of the technology are its electricity consumption for POW models, which is equivalent to Switzerland's electricity consumption. Companies managing the exchanges or mining have had a history of being hacked and losing millions and billions. It is also used by some people for illicit transactions, such as drug and sex trafficking. The decentralization also means there's no regulation in the price, creating its price volatility. Just as some people have become millionaires from cryptocurrency, many people have lost heavily on their investments; this has been seen by critics as a transfer of wealth from companies and normal people to tech-literate people. People can lose their wallets. And lastly, how practical they are depends on how many businesses see its legitimacy and are willing to accept it as a form of payment.
Blockchain Technology Applications Blockchain technology can make a difference in our lives. The most famous example is F@H run by global researchers. Instead of hashes being solicited by the blockchain, protein rendering requests are solicited for instead. People's GPUs will render the protein animations and will send the data back to the researchers for analysis to understand how proteins will interact with other proteins and viruses to better understand diseases like COVID-19, Alzheimer's, etc.
Please feel free to correct if I got anything wrong. I don't personally mine except for occasional contributions to F@H, but have curiosity in the technology.
