Can You Make Money Bitcoin Mining?

Updated on July 14, 2018
aa lite profile image

aa lite is a self-confessed geek and gamer fanatic who has put together her own gaming rigs for the past 15 years.

The bitcoin is a cryptocurrency, first suggested by Satoshi Nakamoto.  Will this be how we pay for everything in the future?
The bitcoin is a cryptocurrency, first suggested by Satoshi Nakamoto. Will this be how we pay for everything in the future? | Source

To answer the title question right away: Alas, I don’t recommend mining bitcoin. Only at times can you make money bitcoin mining: when the price of bitcoin happens to be high, and then only if you have quick access to equipment (and an energy supply) that lets you mine faster and cheaper than other people can. If you buy new equipment to mine with, you not only have to pay for it but you have to get it running while conditions for mining are still good. You have to pay for the electricity you use and the wear and tear to your equipment. You will most likely mine as part of a pool of miners, and the pool takes its little cut.

The reward for mining with any given computer setup decreases at regular intervals, as I explain below, because the amount of computing work you need to do to complete a unit of mining keeps being adjusted upward, to keep the bitcoin production rate constant while the power of the world's computing stock increases.

So, I'm not saying you absolutely can't make money, but I'm saying that looking at the past few years and what is likely to happen in the next few years, it isn't a good bet.

My Experience Bitcoin Mining

In this article I talk about my 2013 adventures in bitcoin mining. At first it seemed promising and I decided to buy some equipment to mine bitcoin. Then the equipment became outdated as month by month the speed needed to mine became greater and the rewards smaller. I believe the lessons I learned still apply today, even though the great recent increase in bitcoin price might make mining tempting.

What Does It Mean to "Mine" Bitcoin?

Most people are now familiar with bitcoin, even if they've never used it, as the new virtual currency. Bitcoin (BTC) is the first currency to be controlled by a cryptographic protocol rather than a central bank. Basically you pay for something by sending BTC from a virtual wallet in your computer to the merchant's computer.

So how can you make money from the creation of bitcoin? Well, theoretically, your computer can become a node in the network that processes and verifies the transactions. The history of all bitcoin transactions is stored in many places in the form of a “blockchain,” an encrypted public ledger. Transactions are processed by “hashing,” by creating an encrypted summary of the transactions, so that they can be added to the blockchain. When a block (batch of transactions) is processed, the person who completes the processing of the block gets 12.5 bitcoins as a reward. Creating these coins by processing transactions is known as bitcoin mining.

In 2013, when this article was first written, every block processed created a reward of 25 coins, a reward worth around $2500 at the prices at the time. In mid-2018, processing a block (which requires much more computer work than in 2013) creates 12.5 coins, a reward of around $75,000 at current prices.

How Much Can You Make Bitcoin Mining?

Here are a few examples, from a period over which the price of bitcoin varied widely and the power of the world's computers increased.

  • In the summer of 2013, the 5 Gh/s Jalapeno mining machine I bought from Butterfly Labs produced about $15 a day.
  • But, by just January 2014, the Jalapeno was hardly worth running; it only made a bit over $1 a day.
  • In January 2018, Forbes reported that video cards in good gaming PCs could make $1-4 a day mining.
  • But by mid-2018, that was down to $0.25 to $1.00 a day at most.

A Bitcoin Mining Profit Calculator

This calculator from Coinwarz calculates the profitability of bitcoin mining. Enter your hardware's hash rate (Gh/s), its power use in watts, and your electricity cost in dollars per kilowatt-hour. The calculator automatically enters current bitcoin difficulty, bitcoin block reward, and bitcoin price.

Brief Windows of Opportunity

In 2017, I wrote “Why You Shouldn’t Mine Bitcoin in 2017,” arguing that mining wouldn’t even pay back the cost of the electricity needed to do it, even if you already owned the computer doing the mining.

But in Jan 2018, after a huge rise in the price of bitcoin and a substantial rise in the speed of the graphics units in common gaming PCs, Jason Evangelho at Forbes reported that once again, video cards already installed in gaming computers, if used for mining, could make several dozen dollars a month, or $1-4 a day, mining bitcoin, “profiting enough to buy a new game every month.”

But by mid-2018 the price of bitcoin had fallen again, to $6,600, a little over half of its $11,655 value in mid-January 2018. And during these six months, along with the fall in price, the difficulty of mining also increased 250%. So hardware that made $4 a day at the beginning of the year could only be expected to make $1 a day by mid-year, and the mining difficulty rate will continue to increase even if bitcoin prices go up again.

The 2017 Bitcoin Price Spike

Bitcoin price in USD since January 2009.  From around $1000 in 2014, the price peaked in 2017 at a little under $20,000, then went down to about $6000 in mid-2018.
Bitcoin price in USD since January 2009. From around $1000 in 2014, the price peaked in 2017 at a little under $20,000, then went down to about $6000 in mid-2018. | Source

Increase in Bitcoin Mining Difficulty Since 2010

Average bitcoin mining difficulty per day
Average bitcoin mining difficulty per day | Source

Increase in Bitcoin Mining Difficulty During 2018

Bitcoin mining difficulty increased from 2T to 5T in the first half of 2018.
Bitcoin mining difficulty increased from 2T to 5T in the first half of 2018. | Source

My 2013 Adventure

In 2013 I invested in bitcoin mining as a source of passive income, to add to the income I made by publishing online. I expected that to have a chance of earning anything at all, I would have to invest in some equipment.

What You Need to Start Bitcoin Mining

Technically all you need to become a node in the network, and to start printing your own virtual money, is a computer with internet access. You can download a free wallet to your computer plus one of several free miner programs, and join in.

Sounds great doesn't it? The problem is that the computer power required is phenomenal.

How Mining Pools Work

If you work by yourself, with only a personal computer, it might be years before you see your first block. For this reason most miners join a pool, where the work and rewards are shared.

In a pool, when a block is solved and new coins created, you will only get a tiny fraction of a coin. But usually several blocks are solved in a day. The person running the pool takes a small percentage as a fee (say 3%), but you get (almost) instant gratification.

Mining Becomes More Challenging as the Network Increases in Power

One important aspect of mining is that the difficulty of solving the blocks increases with time. To solve a block (and this is greatly simplified) your computer needs to create a unique encoded summary or “hash” of the block. As the power of the network increases, the system increases the length of the hash needed—the difficulty of the solution—to keep the time needed to create a block constant.

Ideally, with superior hardware and the right price, bitcoin mining would be like having a legit money printing machine.  In practice, other people's machines may eat your lunch.
Ideally, with superior hardware and the right price, bitcoin mining would be like having a legit money printing machine. In practice, other people's machines may eat your lunch. | Source

What Equipment Do You Need to Mine Bitcoins?

So can you make money bitcoin mining with a personal computer? It does depend on how good your PC is. Strangely enough the processing needed for bitcoin mining is much better done by a graphics card (GPU), rather than a CPU. So if you have a gaming computer with a good dedicated graphics card, you can mine bitcoin, though you may mine so little that it will hardly make a difference.

Two GPU manufacturers provide the chips for all graphic cards, Radeon and Nvidia. In 2013, at least, Radeon cards were much better at bitcoin mining than Nvidia cards. There was some difference in the cards' architecture that didn't really make a difference in rendering graphics in games, but made a huge difference in mining. In early 2018, both makes were able to mine bitcoins at comparable rates.

My Nvidia GTX 660 Ti video card.  Great for gaming in 2013; rubbish at mining BTC in 2013.
My Nvidia GTX 660 Ti video card. Great for gaming in 2013; rubbish at mining BTC in 2013. | Source

My Experience Mining With an Nvidia GPU

In 2013 I decided to try bitcoin mining with my gaming PC, which had an Nvidia card, a GTX 660Ti if you are interested. The efficiency of your setup is expressed in megahash per second (Mh/s). My card worked at around 100 Mh/s.

Our pool, which had a collective power of 3000 Gh/s, sometimes hit the payload (completed our block) in less than an hour, or up to 10 hours, if we were unlucky.

I never got much of a share of the pool's haul, since I had trouble saying connected with the client and never mined a full 24 hours. I generated 0.002BTC, worth then about 20 cents. A full 24 hours of mining would have yielded closer to 30 cents.

Remember, of course, the increased electricity your graphics card uses if you run it full time, and the wear and tear that probably means it will not last as long as it normally would. So I'm not even sure mining with my graphics card in 2013 would earn money, rather than lose it. People said I might be able to do 3-5 times better with a Radeon card, or even better if my PC had two cards running in crossfire mode, but even then it honestly it hardly seemed worth the trouble.

By Jan 2014, it was definitely not worth the trouble to mine with my graphics card, because the difficulty was 50 times what it was in summer 2013.

Mining Litecoin was an alternative I considered, since Litecoin's hashing work is better suited to a GPU than a graphics card, but Litecoin also, at this point, doesn't seem worth the trouble.

In the summer this little jalapeño ASIC promised to make lots of coins.  Today it mines 0.002 BTC per day.
In the summer this little jalapeño ASIC promised to make lots of coins. Today it mines 0.002 BTC per day. | Source

My Experience Mining With an ASIC (Dedicated Mining Hardware)

In 2013, I heard about the concept of an ASIC (Application-Specific Integrated Circuit), a machine created on purpose for bitcoin mining. You connect this machine to your computer and use it insead of your own graphics card.

In mid-2013, the smallest ASIC being produced by Butterfly Labs could produce 5Gh/s, that is, it worked 500 times faster than my graphics card. Butterfly was also developing 50 Gh/s ASICs, big boys, called “Singles.” One other company, Avalon, made ASICs, but they were only selling them in batches, and there was a long waiting list; you could not get one immediately.

Butterfly Labs said their ASICs would draw 5W per Gh/s that they hash. For comparison, a 42" LCD TV is rated to use about 200W. So the 5Gh/s Jalapeno miner would use 0.6 kilowatt-hours per day, while the 50GH/s "big boy" would use 3 kWh; if you paid 15 cents for a kilowatt-hour, operating the "big boy" ASIC miner would add about $10 to your monthly electricity bill.

At the time, in mid-2013, a BTC mining profitability calculator estimated that you would earn $17 a day with the 5Gh/s Jalapeno ASIC, and $170 with the 50Gh/s ASIC, after factoring in the cost of the electricity you would use.

These machines were not cheap; the 50GH/s one sold for $2,500. However, according to the bitcoin mining profitability calculator at the time, the big boy would "pay for itself" in 15 days. And then you would be basically printing money. All you would have to do to make money would be to sign into an exchange once in a while, to sell the coins that you’ve mined.

In summer 2013, I bought a 5 Gh/s Jalapeno, which then produced about $15 a day. But the calculated profit was shrinking fast at that time. As of Nov. 2013 the estimate was already down to $3 for a Jalapeño and $30 for the 50Gh/s ASIC.

By Jan 2014, the Jalapeno was hardly worth running; it only made a little over a dollar a day. By that time, the big boy, the 50Gh/s ButterflyLabs machine, if I had bought one, would have made just over $10 a day—less than my Jalapeno was making the previous summer.

See What the 5 Ghash/s Jalapeno Looks Like

Mining With Block Erupters

There was also the option in 2013 of getting the little Block Erupter USB ASICS, which do 336 Mh/s. I had 6 of these mining for a while; they use little electricity and don't slow down your computer, so are superior to a graphics card.

I enjoyed mining with my USB Block Erupter ASICS, connected to my computer via a USB hub, but as mining difficulty kept rising, they became useless in a year's time.
I enjoyed mining with my USB Block Erupter ASICS, connected to my computer via a USB hub, but as mining difficulty kept rising, they became useless in a year's time. | Source

The Lag Time in Shipping ASICs Cost Miners a Lot of Money

In mid-2013, buying the equipment and becoming a virtual money miner seemed like a no-brainer: it seemed you would be able to recoup your investment in a few days. However, there was a catch. At that time you couldn’t just go online and buy those lovely money-making machines; you had to wait.

(You can buy these Butterfly Labs ASICS on Amazon now, of course, but you don't want to.)

When Butterfly Labs first began producing ASICs, they did it with funding from pre-orders. People paid up to be the first to get the miners, and the payments were used to develop and make them. But of course there were the predictable hitches and delays along the manufacturing way.

The bottom line was that the smallest Jalapenos only began to be shipped months after people ordered them. By July 2013 they had almost caught up with orders paid for in June 2012.

The bigger miners were delayed even more. As of mid-2013 they were shipping the Singles (50 GH/s) from the first day of pre-orders, 23rd June 2012, and with the Little Singles (25Gh/s) they had only reached 24th June pre-orders.

Buyers understood that if they could actually get their hands on these machines, they would pay for themselves within a couple of weeks, unless they were unlucky and the cryptocurrency crashed right after they got their machine.

But if you have to part with a large sum of money when you buy your machine, and not start earning for months to come, not only are you inconvenienced by delaying the return from your investment, you are losing opportunity, as other miners' computing power increases, driving up the difficulty algorithm, and yours does not.

People Bought As-Yet-Unbuilt Butterfly ASICs on eBay

At the time I am writing about, people frustrated at these expensive delays tried to get the Jalapeno, and sometimes even the big boy 50 Gh/s ASIC, faster.

Some people who were on the waiting list sold their machines on eBay; to be more precise, they sold their place in the queue. The buyer paid at the time of the sale—and obviously, paid more than they would if they bought their machine straight from Butterfly Labs—but the seller didn’t actually have the miner in his possession yet. The seller would ship the item as the manufacturer shipped it to him or her. The end buyer would, of course, pay this premium for an as yet non-existent machine because he would get his (virtual) money printing equipment faster than if he placed the order with a manufacturer.

Of course there were other risks of buying on eBay. Some offers were apparently fraudulent. One notable eBay auction involved somebody buying an Avalon ASIC worth $1500 for over $20,000!

Butterfly Labs Was Shut Down by the Federal Trade Commission

The Verge reported that in September 2014 a judge granted the Federal Trade Commission's (FTC's) request to halt the operations of Butterfly Labs, in view of complaints about the great delays in delivering outdated machines. The FTC said a Butterfly Labs representative admitted that with the passage of time, their machines had become useful only as "room heater[s]."

Profitable Mining Can’t Go On Forever

In the short term, bitcoin mining did seem to be profitable again briefly in early 2018. But in the long run, it has no real future.

Remember that the difficulty of mining increases with time. So a supermachine that can get you 1.6 BTC per day now will produce only a fraction of that in a year's time.
One of the problems of people getting these very efficient miners is that the difficulty level is likely to rise quickly once they join the network, since the protocol is set up to produce a new block of 12.5 coins about every 10 minutes no matter how powerful the machines in the network are. This will make BTC mining much less efficient.

People buying powerful machines hope other miners drop out of the network and remove some competition, but when others buy even more powerful machines than you do, your own prospects plummet.

In any case, bitcoin mining cannot go on forever. Missed opportunities may be missed for good. When bitcoin was invented, the plan was always to strictly limit the total number of coins. The block size is halved every four years, so that the increase in total currency is limited (the block size has already been halved once between 2013 and 2018). In a few year's time there will be far fewer new coins generated than there are now.

Price Volatility: The Bitcoin Pizza

In 2010, few people used bitcoins, and their value was often negotiated between buyer and seller individually. That year, engineer Laszlo Hanyecz bought a pair of Papa John's pizzas for 10,000 BTC. At today's exchange rate that is the equivalent of over $6,000,000.

I hope the pizza was worth it!

Will Bitcoins Become a Mainstream Currency, or Will They Disappear?

In early 2013 bitcoin rose to what seemed then the insane height of $260, then in April fell to $50, and then later seemed to stabilize at the $100 mark. But bitcoin has been full of surprises. In late 2017, its price peaked at about $19,000, and fell to about $6000 by June 2018.

Since bitcoin supply is strictly limited by the algorithm, bitcoin proponents have always hoped that if the coins become used by more people their price will rise. But it is equally possible that their price will fall, or even become zero.

Should bitcoins crash, there will be no IMF rescue, and no meetings of G8 leaders trying to save the currency.

It’s possible that investors who are hoarding BTCs counting on their price rising in the future are taking even bigger risks than people spending $300-$2500 on an ASIC.

If you want to invest some money in the hope that bitcoins will be worth more in the future, you could just buy coins on an exchange, rather than mining them. It’s at any rate less complicated.

But whether you buy or mine, you have to suspect that the people who are helping you invest might be making a more reliable income than you are. Recall that in the California gold rush of the 1850s the people who helped the miners by supplying groceries and jeans made a more reliable income than the miners.

And gold, don’t forget, is an actual thing with an intrinsic value. If nothing else, it can always be used to fill teeth and make earrings. Bitcoin has a certain reality and security in that it is verified by a peer-to-peer network, data stored on a huge number of computers. But it is impossible to say how stable it will be in the long term, or any term for that matter.

So What Do You Think, is Buying an ASIC on eBay and Mining Bitcoin Wise?

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Questions & Answers

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      • profile image

        Gaurav 

        2 days ago

        very helpful article. such a wonderful blog post. have a look. https://www.futuretricks.org/bitcoin-kaise-kamaye/

      • profile image

        M-Aivo 

        4 weeks ago

        You can always try bitcoin faucets. They won't make you rich, but you can set up a simple system to passively accumulate coins. More info here: https://bitmin.home.blog/

      • profile image

        Harun 

        7 weeks ago

        Hi i am Harun I have only 1000$ can i use it to mine with bitcoin?

      • profile image

        Yeah 

        15 months ago

        The pizza is now more than 20 million dollars.

      • yecall profile image

        yecall 

        2 years ago from California

        I find Bitcoin very interesting and promising. I think also that it is quite hard to understand it, not being a "techie" sort of person at all. I like the idea of its privacy and I do think it will be quite an important currency in the future.

      • moviesreviews profile image

        Cacey Taylor 

        3 years ago from San Diego, CA

        Well put together article. Whoever paid 10,000 BTC for the pizza must be kicking themselves in the foot lol.

        I hope you and your mining endeavors continue to see a profit.

        I was wondering if you foresee the BTC price to rise in the future? If so, how high do you think? I know the Winklevoss Twins predict upwards of 10,000 - Does it really have a shot?

      • profile image

        ericpfdz 

        3 years ago

        Nice article!

      • aa lite profile imageAUTHOR

        aa lite 

        4 years ago from London

        Hi f hruz and thanks for reading. I've also seen the amazing price rise recently. The problem is that since I've written this, the difficulty has risen by about 30x. The price has risen roughly 9x. According to the profitability calculator, you can make 0.04 BTC in a day if you have the 50Ghs miner from butterfly labs. Apparently you would make $32 a day with it, which is nothing to laugh at.

        The problem is getting hold of it today. And predicting how much the difficulty will rise in the future. If you get the small Jalapeño miner today, it will make you about $3 a day. So it depends on how much a Jalapeño (5Ghs) would cost you, and also whether you think this high BTC price will hold, and how much the difficulty will rise in the future months. The fact that the price is so high, will get more people into mining.

      • f_hruz profile image

        f_hruz 

        4 years ago from Toronto, Ontario, Canada

        Last I checked, the price was US$843.34 - how does this change the equation in the cost of mining?

        In any case, thanks so much for presenting all the details on ASIC's and how they are used as part of the cryptic creation and control process ... a complex mathematics / logic dream land.

        I'm sure, it's high time the whole fractional reserve banking system and the US buck as a global reserve currency be removed from the face of the earth ...

      • aa lite profile imageAUTHOR

        aa lite 

        4 years ago from London

        Yep it's definitely not worth it. The difficulty has skyrocketed in the past few weeks because of all the ASICs on the market. I think it grew 10 fold, so if you could mine 0.1Btc a day with an ASiC (for example) you will now mine 0.01Btc a day.

        Last time I looked btc price was rising nicely, but nowhere near as much as the difficulty so the ROI of an Asic would become years rather than months. Should really update the article with this information.

      • profile image

        Andrew 

        4 years ago

        Any update on your mining so far...?

      • aa lite profile imageAUTHOR

        aa lite 

        4 years ago from London

        Thanks Kathryn. I found bitcoin fascinating, but to be honest the difficulty of mining has jumped so much recently, that I can't imagine it is profitable to get into it right now.

      • Kathryn Stratford profile image

        Kathryn 

        4 years ago from Manchester, Connecticut

        I must be completely in the dark, because I have never heard of this! Fascinating, but too complicated and risky for me.

        I came here after seeing the interview of you on HubPages' newsletter. You sound interesting.

        Thanks for sharing this, and have a great night.

        ~ Kathryn

      • aa lite profile imageAUTHOR

        aa lite 

        5 years ago from London

        I agree Hollie. I guess the question is whether bitcoin is the best crypto currency we can invent or whether there is something better out there.

      • HollieT profile image

        HollieT 

        5 years ago from Manchester, United Kingdom

        Going back a few points, I've not read all the comments, but in terms of criminality, we can't ignore the fact that major banks have laundered the proceeds of cocaine on a vast scale. This is not an "alleged" occurrence, it happened. I also think it would be naïve of us to believe that vast and phenomenal sums of money made from all types of trafficking; prostitution, drugs and arms do not some how make their way through our banking "cartels" There is absolutely no way these illicit businesses could prosper and grow otherwise. And then, of course, these "legal" speculators also cause famines, poverty, war (in their greedy attempts to grasp whatever resource they deem profitable) I'm not, of course, condoning any proceeds of criminality which might be laundered through Bitcoin. I'm merely stating that we need to be realistic. If we are comparing the proceeds of illicit acts which have been laundered through Bitcoin to that of those which have been laundered through the "ethical" (?) system, pound for pound, is there really any comparison?

        As for wasting our precious resources, how could we possibly compare the over consumption of electricity for mining bitcoin with the mass manufacture of plastics and all the resources used therein: water, coal, gas and then there's the pollution of our precious air? Perhaps that's a study waiting to happen(not)?

        Bitcoin is unstable (so is fiat currency), bitcoin is used to launder money (so is our global banking system) Our energy supplies our pillaged to mine bitcoin (so is every resource we have to manufacture and produce practically every product we buy)

        The question is, which currency creates the least havoc?

        I'm not completely convinced by bitcoin, but I do believe it has potential- if the speculators don't get there first.

      • aa lite profile imageAUTHOR

        aa lite 

        5 years ago from London

        Thanks for commenting just-about. Until recently I'd vaguely heard about bitcoin, but never really paid attention to it, and certainly didn't know that you could (potentially) make money mining it.

        I also found the whole subject pretty fascinating. I couldn't really put all the information about how the system works in the hub. I strongly recommend reading more on this subject.

        From a practical point of view, a crypto currency is great in many ways. The problem is its great instability, I guess.

      • profile image

        just-about 

        5 years ago

        You have introduced me to a completely new concept - I had never heard of bitcoins until reading this hub. I'm pretty certain that I've not understood fully how money can be made. However, the idea of a single, worldwide cryptocurrency in the future sounds like a logical development as commerce for most goods and services is becoming borderless. On the other hand, it also sounds a bit sci-fi . . .

        Thank you for getting my brain cells buzzing!

      • SuffolkJason profile image

        SuffolkJason 

        5 years ago from Ipswich, Suffolk, England, United Kingdom

        I guess all online banks (with the possible exception of bitcoin) are vulnerable to hacking. It happens all too frequently to established banks. They find a way to cover the cost of fraud (LIBOR fixing, PPI mis-selling or ripping-off small businesses).

        I know that Zurker employs pentesters. The advantage that Zurker has is that it controls the Zen, so if somebody can demonstrate that they have been defrauded, then Zurker can just replace the stolen Zen.

        When somebody transfers Zen to your account at Zurker you can, with a few clicks, verify that your account has received them. Similarly if somebody mints a Zen coin, you can "deposit" the coin and check that it's valid.

        When I refer to criminals (I wrote the articles in Zentral but not Preferzen), I don't mean the people using malware. I mean the criminals that use bitcoins to launder money, to trade in drugs and worse.

      • aa lite profile imageAUTHOR

        aa lite 

        5 years ago from London

        Ok I've read the Zen faq. It seems to me that it is "verified" by a central authority rather than cryptography.

        To me it seems like it might lead to a major security problem. As in if the central authority is attacked by hackers. If this hasn't happened yet, it might be because the Zen is simply not important enough.

        The bitcoin protocol is peer to peer. The "ledger" of transactions is on the computer of anybody who uses it. To "cheat" the system, you would need to change the data on most peoples' computers (or for the majority users who probably number in the millions to be complicit on the crime). I think this gives the bitcoin a lot of security.

        I also see that when you refer to criminals you mean the people using malware. This is obviously bad, but it is not terrible. Basically what these people do is subvert the victims' computers to mine for them. The victim provides the electricity and their computer hardware, the criminal gets the bitcoins.

        This is in a way similar to the malware that adds text link ads to websites that don't use them on victims' computers, the malware authors earn from the ads, rather than the site owners.

        Don't get me wrong, I'm not defending malware spreaders. But as criminals go they are not exactly equal to drug dealers, the mafia etc. Who I think might be liking bitcoin because of its anonymity.

      • aa lite profile imageAUTHOR

        aa lite 

        5 years ago from London

        Yep I've just been reading your articles on the site you linked it. But I have to say that as you are obviously invested in Zurker (I think I joined it but haven't done anything with my account, might be much better than other social media, but all my friends are on FB, I don' t think I could move em, and a social network without people you know is not really all that useful).

        I would be interested to know how the Zen is secured, in other words how do you make sure it isn't faked. And if you take part in a transaction with Zens how do you prevent the "double use" problems. I think in Satoshi's original paper about the bitcoin protocol, the need for all the processing is I believe, exactly to prevent that problem.

        I could be wrong, but it seems to me that the question is this: a bit coin is basically a string of code. When you pay for something with your BTC, the code is transferred to another person, but what is there to stop you from using that BTC again. The answer is that with every transaction the code gets changed, in a way that requires a lot of processing power, and the peer-to-peer network lets everybody's wallet know that the old bit of code is no longer valid.

        What is Zen's solution to this? How can I know that the Zen you are offering me in payment is a real Zen? If there is a central body controlling the currency, how do we know we can trust them?

        As to who the bitcoin miners are, well they could be anybody. Yep some of them can be criminals, but as long as they are not the majority, their block chains will not be accepted by the network (from scanning Satoshi's original paper, he says that as long as the majority of the network are honestly, and not trying to attack it, it is secure).

        Anyway I guess the answer to a lot of my questions are to be found in the second link you posted. I will now go and read it.

      • aa lite profile imageAUTHOR

        aa lite 

        5 years ago from London

        You might be right. However, I wonder if any digital currency, by it's very unregulated, anonymous nature, wouldn't be used by criminals. I just think that either you have institutions through which the transactions go, i.e. banks, so it is difficult for criminals to use the money without being traced, or you have a currency without central control, which is great for criminal activity. Not really seeing how you can have an in between state.

        The electricity use worries me. The fact is that if you're using cryptography to control the currency, you have to make it need a lot of processing power to "encode", otherwise anybody could "make money" on their iPhones. As I understand it, what makes bitcoin 'real', is that the effort to fake it is equal to the effort required to make it. In a way you can't fake it, its value lies in the processing power to make it. If you're willing to put in the processing power involved, you are not printing fake money, you are making the currency.

        I am not disagreeing with your points, I'm just saying that I'm not sure you can have a digital currency that is independent of bankers, that wouldn't have these problems. Maybe the bitcoin is the best that is possible. Maybe the whole system just can't work. Which would be a pity.

      • SuffolkJason profile image

        SuffolkJason 

        5 years ago from Ipswich, Suffolk, England, United Kingdom

        I guess that "normal" currencies do have some environmental impact but you might have hoped that a digital currency, by its very nature, would have a minimal impact and not depend on vast processing power.

        I agree that traditional banks have been a disaster. I'm very much in favor of a universal digital currency so that we can all avoid banks, bankers, transaction fees and currency risks. It's unfortunate that the first digital currency to capture the media's attention was the Bitcoin which (for all the reasons I mentioned above) is of no practical use to ordinary members of the public or businesses.

        Bitcoin's volatility, its association with criminality and its lack of regulation have delayed the digital currency revolution which will see the overthrow of conventional banking.

        Perhaps Bitcoin's value will remain high until an alternative, practical digital currency knocks it off its pedestal.

      • aa lite profile imageAUTHOR

        aa lite 

        5 years ago from London

        Hi Jason, I agree with some of your points. For one thing using up the electricity to make the currency is truly bad for the environment, and i think it is a really bad by-product of the protocol which aims to keep the increase in bitcoins steady. On the other hand, do "normal" currencies not have an environmental impact, I don't know.

        I also think that the fact that it is used by criminal elements (because it is hard, although apparently not impossible, to trace the transactions) is a bad by-product.

        On the other hand, seeing how banks have messed up the world economy, for which ordinary people are suffering, and how the Fed, various national financial authorities or central banks, did nothing to prevent the 2008 crash. I am not sure that fiat currencies are doing so well. I mean look at the euro.

        Whether bitcoin prices are a bubble that will burst destroying its value, or whether its use will become widespread and prices will hold, is the big question. In think it could go either way.

      • aa lite profile imageAUTHOR

        aa lite 

        5 years ago from London

        Yep. I guess there is no risk with Adsense. But there isn't much gain either, nowadays.

      • aa lite profile imageAUTHOR

        aa lite 

        5 years ago from London

        collegedad, that is an interesting question, and I'm afraid I don't have an answer, I'm not really sure what the legal definition of a currency is, or US law.

        I guess it is not a 'fiat currency', whatever that is exactly. I suppose it could be described as a token system (although really isn't paper money just a token system really). It's creator described it as "a peer-to-peer electronic cash system".

        I think a Forbes journalist described bitcoins as more similar to rare stamp collecting, rather than currency. I think he was talking more about investors hoarding the coins, hoping that their value will skyrocket at one point

        There is no doubt that it is legal. It is also being taken seriously by the official bodies. Apparently this year anti-money laundering regulations were extended to BTC transactions.

      • WriteAngled profile image

        WriteAngled 

        5 years ago from Abertawe, Cymru

        Think I'll stick with hoping for the odd Adsense click!

      • collegedad profile image

        collegedad 

        5 years ago from The Upper Peninsula

        Ok, my first question is how are these bitcoins legal. It's illegal to create currency here in the US so is this a true currency or just a token system of sorts? I'm not trying to be disrespectful. It just doesn't make sense to me.

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