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  1. #21
    Senior Member harbl_the_cat's Avatar
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    Mining bitcoin certainly isn't for the average Joe BUT the same hardware that made mining bitcoin profitable 2 years ago (that IS accessible to the common Joe) can still be used to mine other emerging currencies today, and in fact - there is a mass exodus away from mining bitcoin with GPU mining rigs as bitcoin ASIC mining rigs start hitting the market, and those with GPU's are starting to mine other currencies.

    Interestingly enough, even though bitcoin literally has appreciated 5000% - the hardware that bitcoin miners use has NOT similarly increased in price - which is exactly why I don't think it's too late (for now) to get into mining digital currencies.

    For those who don't know, the basic mechanic of how digital currency is created, is an algorithm has to be processed by a computer in order for a block of currency to be created. This processing requires significant processing power that increases exponentially the longer it's been processed. Furthermore, since the return (i.e - the number of coins created when the algorithm is solved) decreases as more of them are created, significantly more processing power is needed to solve it, but solving it returns less than it would have earlier.

    You literally can think of it like gold mining. Once a prospector finds a mine, they can go in with picks and shovels and find huge payloads of gold. The more that mine has been mined, the more energy they need to expend to find the gold, and the ore grades diminish. Digital currency mining is a lot like that - but just as miners can move on to newer gold mines (or mines for other minerals), digital currency miners can (and do) move on to other new currencies with which they can use their picks and shovels to yield more productive loads of a different currency.

    Now, the hardware one could use to mine currencies are simply processors like those found in your smart phone, on your laptop, or on your computer. Originally it started out with CPU's, but the hashrate (i.e. - the rate at which the hardware can solve the algorithm and generate the currency) of most CPU's for bitcoin and litecoin was literally measured in the tens of hash's. Then, the market realized that GPU's like those found in commercially available graphics cards generate hashrates considerably faster (measured in the hundreds - thousands) than CPU's - so GPU mining became popular. Eventually one company started making custom "Application Specific Integrated Circuit" cards (i.e. - ASIC cards) specifically designed to mine bitcoins with hashrates in the millions - billions.

    These cards of course were pretty expensive - and can only be used to mine bitcoin - so that is why mining bitcoin is really beyond the ability of the common Joe. There's quite a bit of risk associated to mining with ASIC's - namely the cost and the fact that they are only capable of mining whatever they were designed for. If Bitcoin crashes and never recovers (unlikely), folks holding bitcoin ASIC's will be holding really expensive table weights.

    In that sense, bitcoin is the "gold" of digital currency. It is hard to mine and there isn't much of it. Conversely, Litecoin is the "silver" of digital currency - there's more of it, and it's easier to mine (relative to bitcoin) - so most the tools one could formerly use to mine bitcoin (except for the ASIC cards, I believe) can be used to mine litecoin. Once litecoin becomes too hard to mine, they can mine peercoin. Once peercoin becomes too hard to mine, they can mine namecoin, and the list goes on, and on and on.

    One of the beauties of bitcoin is the developers made it open source, so really, with a little bit of effort, any programming team can create their own digital currency. Ultimately, it will be the market that determines which one is valuable - which is another beauty of the whole system - it is completely free market unlike the rigged systems of government currencies and bonds, stocks, commodities and real estate.

    The best analogy you can think of is starting a mining business that mines for copper, but in the process, discovers deposits of lead, aluminium, tin, and zinc. The mining company has all the tools - (the earth movers, the strip miners, chemical paths, mortars, etc.) it needs to extract all those minerals - but can chose to focus on specifically mining for one vs the other depending on market demand. Again that is EXACTLY how digital currency mining works.

    Unlike real world commodity mining, where governments and banks set the price of real commodities, individual digital currency miners and consumers are the ones who set the market price through free market exchanges that literally CANNOT be co-opted by the government. As mentioned earlier, unlike fiat currencies where the bank and government are a counter party to a transaction of fiat currency - there are no counter parties in a transaction of digital currency between two people.

    It's super easy to start up mining - easier than building a website in fact. The difficulty comes in optimizing mining operations to yield the most productive payout AND following the markets for the different currencies to determine which one is more profitable to mine.

    I spent $600 for a gaming rig. I did next to no research into it, beyond some of the basics. The graphics card on the box I bought might not have been optimal for mining - BUT my intention is to learn how to improve operations so I can build up a mining farm AND out what I mine for. Right now that knowledge simply does not exist, which is why I think it's not too late to start getting into it.

    In the same way folks in the early 1990's didn't know the best approach to do website hosting, web development, or build e-commerce systems - some of the early pioneers of the internet revolution emerged and became fabulously wealthy. In the same token, many (but not all) of the digital currency pioneers today I know with absolute certainty will be similarly rewarded.

    Another analogy of the FUTURE of digital currency you can apply is the simple analogy of forums like GOC, CGN, etc. 15 years ago, it would have been unthinkable for anyone to build up web based communities like this that today have tens - hundreds of thousands of users. In the process of creating them, early adopters (such as Green Tips at CGN and even jwire here) were able to capitalize on the emerging prevalence of them.

    By the same token, 10-15 years from now, people will be using digital currencies the way they use web forums - and the folks who started building up mining and trading operations today will probably be taking year long vacations at 5-star, all inclusive resorts in the Caribbean. Those who get into it later will probably be able to monetize on it still - but the BIG money (pardon the pun) will come to those who get in early.

    FYI, here's a listing of a FEW digital currencies, IIRC, there are at least a dozen others:

    http://www.businessinsider.com/price...encies-2013-11
    Last edited by harbl_the_cat; 12-19-2013 at 12:12 PM.

  2. #22
    Member awndray's Avatar
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    Here is a list of others.

    http://www.coinwarz.com/cryptocurrency

  3. #23
    Senior Member harbl_the_cat's Avatar
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    Quote Originally Posted by awndray View Post
    Here is a list of others.

    http://www.coinwarz.com/cryptocurrency
    Awesome, thanks! I was looking for that site

  4. #24
    Canadian ForcesMember MPH's Avatar
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    The problem with Bitcoins right now is people are hoarding them do to the recent rise in their worth, rather than actually spending them on goods and services like they we supposed to. Prices will fall soon.
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  5. #25
    Senior Member harbl_the_cat's Avatar
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    Quote Originally Posted by MPH View Post
    The problem with Bitcoins right now is people are hoarding them do to the recent rise in their worth, rather than actually spending them on goods and services like they we supposed to. Prices will fall soon.
    That's not a problem - that's how free markets work.

    Prices SHOULD be set by supply and demand. People hoarding bitcoin just acts as a supply constraint - which if anything, SHOULD serve to drive the price up (provided demand remains the same). If demand for them decreases (such as by government's clamping down on them) that should send the price down.

    Nobody is SUPPOSED to do anything. They are SUPPOSED to do what in their opinion is the most prudent decision with the circumstances before them. In the case of currency, you can save it or spend it - that's it. If someone holding onto BTC does either of those things - they are doing what they are supposed to be doing with it.

    Now, the big driver of BTC (and all digital currencies) is the fact that government's around the world are exponentially increasing the supply of the fiat currency they issue and enforce usage of. Even with yesterday's taper announcement - the US Federal Reserve is STILL creating $75 billion NEW US dollars a month. Digital currencies have hard caps on how many of them can be created - so if anything, the price rise of the currencies I think is more reflective of the fact that with it's decentralized nature, the market for it cannot be controlled by the central banks - and so, inflows and outflows of capital into the market are determined by transactions between actual market participants.

    I had an interesting discussion with some coworkers on the subject today who disbelieve that digital currency could ever become wide spread, and quite legitimately, he brought up the point that old guys (baby boomers) probably would have a hard time buying into them. I agree - I think they are more likely to run to precious metals than digital currency (I think they will). But by his own admission - what YOUNG people want is the convenience that comes with modern day fiat currency, which digital currency certainly provide.

    The one thing digital currency and gold and silver have in common that is fundamentally important is CONSTRAINED SUPPLY. This is the biggest appeal to both of them and as government fiat currency systems collapse whether due to deflation or inflation - this reality of both asset classes will become very apparent and widely accepted. It is my opinion that's the point where it will probably be too late to get into it and expect to make big gains on it.
    Last edited by harbl_the_cat; 12-19-2013 at 01:06 PM.

  6. #26
    Member awndray's Avatar
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    Quote Originally Posted by harbl_the_cat View Post
    I had an interesting discussion with some coworkers on the subject today who disbelieve that digital currency could ever become wide spread, and quite legitimately, he brought up the point that old guys (baby boomers) probably would have a hard time buying into them.
    These are probably the same types that say we will never see the day that the electric car makes it, or that the computer is just a trend.

  7. #27
    Senior Member harbl_the_cat's Avatar
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    Quote Originally Posted by awndray View Post
    These are probably the same types that say we will never see the day that the electric car makes it, or that the computer is just a trend.
    Exactly.

    Interestingly enough, I think most of these people still cling to the belief that fiat currencies are valuable because they can go to a store and buy things with them - even though the inflation rate for them are schizophrenic, arbitrary, and controlled by a small handful of bankers and politicians.

    Case in point - this is the bitcoin inflation and monetary base chart. It is known in advance how many bitcoins there ever will be, and the rate for how many can be created is directly correlated to how much has been created (and thus predictable)



    Compare that to the historical inflation rates and currency supply of the USD.





    What this means is both supply and the rate of supply increase is predictable with digital currency (the way it should - in order to provide stability), whereas the US dollar (like all fiat currencies) are a total basket case - which is the reason there is the insane boom/bust cycle with the US dollar driven economy (i.e. - the global economy).

    One point to consider with Bitcoin using these charts is that at the time this chart showed, there was $7.2 trillion US dollars. Let's say the peak of bitcoin has been reached (which it hasn't yet) - and there are 21 million BTC in existence.

    If 1% of all US dollars that existed on the planed were invested in BTC, the USD price for bitcoin would be something in the order of $34,000 USD per BTC.

    Keep in mind that the US has since created an extra few trillion since that chart's last data point AND at present there are at present only 12 million BTC mined. I can't find the data, but I believe it's pretty close to $10 trillion USD in existence right now - and with that, with a 1% move into BTC - that would be about $83,000 per BTC.
    Last edited by harbl_the_cat; 12-19-2013 at 01:57 PM.

  8. #28
    Martyr of Traditional Anarchy Mad Hatter's Avatar
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    SoSo my question is: Are you actually buying digital funds or investing in these company's stocks? What happens then when the current fiat monetary system collapses?
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  9. #29
    Member awndray's Avatar
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    Some people buy the currency with fiat. Some people accept the currency in exchange for goods and/or services. I imagine some people are investing in some of these companies. Most people are mining their own. The real money-maker, I believe anyway, is in selling the dedicated hardware that everybody is buying. Either start selling them yourself, or invest in those vendors.

  10. #30
    Senior Member harbl_the_cat's Avatar
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    Quote Originally Posted by Mad Hatter View Post
    SoSo my question is: Are you actually buying digital funds or investing in these company's stocks? What happens then when the current fiat monetary system collapses?
    I'm starting to mine it myself, personally. The way I look at it, if digital currency collapses, I'll have some pretty kicking computer hardware - so it's not like it's a total loss.

    Who knows what will happen if/when the current monetary system collapses - maybe a gold standard, maybe violent chaos, maybe widespread acceptance of digital currency.

    I do agree with awndray too though, I think some of the companies emerging making ASIC cards and even graphic cards are probably going to be quite profitable.

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