Bitcoin mining problems
By Milly Bitcoin – May 16, 2013
One of the most common questions about Bitcoin mining. What are they doing? What problem are they trying to solve? Can it be solved with pen and paper? Are they wasting resources? Are they using the computer power to hack something? This post deals with the problem being solved. See Bitcoin Mining: What’s it All About? for more info about mining.
The problem being solved is cryptography. It turns one string into another string. A simple cipher would be multiplying by 6.
1 >> 6
2>>12
3 >> 18
…
You input one string and you get another one out. The are are problems with using “multiplying 6″ as scheme. The biggest problem is that it is pretty easy to figure out the original number by just diving by 6! Also, the number will get larger and larger.
To get around this all kinds of complicated mathematical operations are done on very long strings of numbers. It would take a very long explanation of the algorithm used and below is diagram of one step of one hash. Those things on the right are special mathematical functions that are tedious to calculate and require a computer.
The new Bitcoin miners do the step above below many times to do one hash. Then it does about 65, 000, 000 hashes per second so it might not be worth while to use pen and paper.
You can try it yourself at a web site . Put in a value in the top and you will see a string come up in the bottom. Then you have to keep changing the input by adding stuff until the answer starts with a zero.
With Bitcoin is more complicated because certain information has to be included, including the hash from the last block. That way the current block depends on all the blocks before it. The “difficulty” is changed by simply increasing the number of zeros in the start of answer (0h4fgs64j…, 00h3uyf8h…, 000yheofle… ) so it is harder to find the answer. As more people mine, the problem becomes more difficult and it adjusts so the problem is solved every 10 minutes on average.
Source: cointext.com
The Problems with Bitcoin: Revised List
- Weak/confusing denominations
- Costs money to spend money, not exactly free (exchange/transaction fees)
- Not useful for conventional transactions
a) Backing up constantly after buying/selling
b) Small purchases
c) Not widely accepted
- Commercial prices require frequent fluctuations to match BTC value
- Conversions to other currencies subject to daily/monthly limits
- Lost Bitcoins=Double Whammy "Consider it a donation to all other bitcoin users."
(26,600 BTC have already been lost/"destroyed" and counting)
- Requires Internet, even with offline transactions
- Mining is:
a) resource-hungry (Blockchain
The problems with Bitcoin
From least to worst, IMO:
- Weak/confusing denominations, no face values attached
- Costs money to spend money (transaction fees)
- Not useful for conventional transactions
a) Backing up constantly after buying/selling
b) Small purchases
c) Not widely accepted
- Commercial prices will require frequent fluctuations to match BTC value
- Conversions to oth...br>
- Subject to:
a) monopolization/money power
b) manipulation
c) panic
d) liquidity taking and making
e) demurrage
- Gov't interventions or interference possible
- Scale: Once fully mined, if one unit/Satoshi = 1 cent USD, Bitcoin will equal a 21 Trillion dollar economy, or 420% larger than the estimated currency in circulation worldwide circa 2009 (= 4
Bitcoin
I'm wondering if the topic of Bitcoin has been discussed here before.
To give an overview, Bitcoin is the worlds first peer-to-peer digital currency. It allows you to send any amount of money to anyone on the planet at any time nearly instantly for nearly zero fees and do so anonymously.
The governing bitcoin protocol is entirely open source since it was launched in 2009 and has been reviewed by the best security experts and hackers alike looking to find any weakness of which none has been discovered.
Since it is peer-to-peer the entire bitcoin supply is enforced by the collective agreement of all of the individual users
Related posts:
- Bitcoin mining arms
- Bitcoin mining October 2011
- Bitcoin mining whirlpool
- Bitcoin mining for Mac
- Bitcoin mining odds