Why is mining so important for all Bitcoiners/altcoiners?

[salsacz]

Hi,
I am just curious. Sometimes when there is an altcoin without mining, people are very surprised or even disappointed. First generation crypto currencies are based on mining, but it can be changed in the future. Is it only that people love getting something new for "free"? So they buy gpu/cpu/asic miners, pay for electricity and enjoy new coins in their wallet? Like in some RPG? Or is it something else?

Thank you

[Rannasha]

A new coin has to be distributed in some way. Mining is one such way, where people are rewarded for helping to secure the network. This makes sense to me.

It might not be the perfect way for initial coin distribution, but it certainly beats those "investment" coins where you send some Bitcoin to an unknown user based on a promise of a new coin. Not only are you gambling that you aren't scammed, it also heavily centralizes the coins distribution, even more so than mined coins. Finally, investment-coins typically have a relatively short window of opportunity to jump in and be a part of the initial distribution. Bitcoin had over 4 years of profitable mining by everyday CPUs and GPUs. Investment-coins have a few weeks to months where you have to spot the coin, be convinced it's not a scam and send over your money (while keeping your fingers crossed it's not a scam).

[cdog]

mining keeps the entire system honest, otherwise its just monopoly money like ripple's XRP

you cant game the system with mining, you can just add hashing power if you want more coins, thats it, so simple and sweet

and if you think mining is "free" you have obviously never mined because its usually much cheaper to buy coins than mine them, but most people dont believe that so... go look at ASICs on ebay

[pandaisftw]

A new coin has to be distributed in some way. Mining is one such way, where people are rewarded for helping to secure the network. This makes sense to me.

It might not be the perfect way for initial coin distribution, but it certainly beats those "investment" coins where you send some Bitcoin to an unknown user based on a promise of a new coin. Not only are you gambling that you aren't scammed, it also heavily centralizes the coins distribution, even more so than mined coins. Finally, investment-coins typically have a relatively short window of opportunity to jump in and be a part of the initial distribution. Bitcoin had over 4 years of profitable mining by everyday CPUs and GPUs. Investment-coins have a few weeks to months where you have to spot the coin, be convinced it's not a scam and send over your money (while keeping your fingers crossed it's not a scam).

Unfortunately, we are talking about the present, where an everyday GPU will most likely never generate a profit mining bitcoin. So, where do all these GPUs go? They are either mining alt-coins to recoup or gain free profits or sold on ebay to others looking to mine alt-coins.

So basically, you have a large number of miners that get very cross when they are told they cannot mine a particular coin, because they already invested in the hardware. Even if another non-mining distribution scheme is legitimate, they won't like it because they already invested into the mining distribution scheme. (Unless that scheme involves giving out "free stuff")

IMO the only reason mining has gotten so big (and survived) is because of basically useless copy-cat coins. If you could only mine bitcoin + litecoin, the mining scene would die very quickly because of escalating difficulty. We are in a "copy-cat coin" bubble (60+ coins on CMC), and I don't think this will be a permanent thing. Once people realize that 99% of altcoins are just mine and dump schemes, no one will invest in those coins.

[allwelder]

There are many ways to distribute the coins,pow,pos,pob for XCP,and so on, so mining(pow) is neither  the only way nor the best method for distribute.

[superresistant]

It is funny to think that the early Bitcoin adopters had no problem accepting the PoW system but they can't accept the new generation of crypto-currencies with PoS.
Are you guys already too old to handle the change ?
Are you subject to cognitive dissonance ?

The worst thing is that most people against PoS are total noob that came for crap-copy-coin like Doge and shit. They have no idea what they are doing and call for scam when they see a coin they can't mine & dump.

Crypto-curreny world, what have you become ? Weren't you supposed to change the world ?

[247crypto]

but it can be changed in the future

Who pay for processing hardware and electricity?

[salsacz]

If you use raspberry pi's for securing the network, it costs you 100$ per year + 100$ original investment. If whole network can be secured by 10.000 raspberry pi's, then it costs 1.000.000$ per year.

Someone says Bitcoin mining costs 15 million $ per day. Even if he is wrong and it is 1 million $ per day, raspberry pi's are still 365x cheaper (if you use 10.000 of them).

[Rannasha]

It is funny to think that the early Bitcoin adopters had no problem accepting the PoW system but they can't accept the new generation of crypto-currencies with PoS.

That's because there are advantages that PoW offers over PoS.

Are you guys already too old to handle the change ?
Are you subject to cognitive dissonance ?

For the record, I've owned crypto-currencies since May 2013 and have only a couple of days of mining time with a crappy Nvidia GPU and I think PoW is superior to PoS. My opinion isn't driven by any investment I made into mining.

There are several problems with PoS "mining" (lets call it forging from now on, since this thread seems to be infested with NXT fanboys) that are not present in PoW-systems. For one, PoS suffers from a rich-get-richer problem, since forging typically requires coins to not move for some time (precise rules depend on the coin, PPC does it differently than NXT). This isn't an issue now, as everyone is mostly hoarding anyway, but if such a coin would be widely used as general currency, people with large quantities have relatively large amounts of coins they can save, while people with small amounts will have to spend most or all of their coins. This will cause coin ownership to become more and more centralized. A related issue is that PoS forging encourages hoarding (on top of hoarding because of expectations of higher exchange-rate).

Finally, since PoS forging doesn't require any real resources to be committed, it's hard to gain network consensus. Suppose a blockchain is forked and there are two competing forks. In a PoW-system, miners can add blocks to either of these forks, but can only commit fully to a single fork, since they need to expend resources (mining time, energy) to mine. Consequently, one fork will win out in the end as it becomes the longest, while the other chain is orphaned as miners abandon it. With PoS forging, there is nothing stopping a user to forge on both competing chains. In fact, it is economical to do so. Why bet on what you think will be the winning chain when you can back both. This can cause a situation where two competing chains coexist for a long time, damaging the credibility of the coin.

[philipma1957]

If you use raspberry pi's for securing the network, it costs you 100$ per year + 100$ original investment. If whole network can be secured by 10.000 raspberry pi's, then it costs 1.000.000$ per year.

Someone says Bitcoin mining costs 15 million $ per day. Even if he is wrong and it is 1 million $ per day, raspberry pi's are still 365x cheaper (if you use 10.000 of them).

 you are not realizing how many people live where they will spend money to heat their home.

in the usa alone 3 million homes use electric heat.   using a pc with 2 hd7950's or 2 r9 280's at lite coin will provide heat and make money. once you have that setup toss in a 49 port hub with 30 ant miner sticks.  this setup will have 60gh at btc and about 1200kh at ltc it will use about 700 watts of power.   since you set this up in an electric heated home .  you are spending no extra money on the 700 watts to mine.  


there is a real need for the above.  and in the usa alone you could have 1 million homes with 2 pc's doing the above for 5 months a year.  every watt used for the mining would be 1 less watt spent on electric heat.   your home gets the same heat from 700 or 1400 watts of pc as it does from 700 to 1400 watts of electric heat.

[cowandtea]

Hi,
I am just curious. Sometimes when there is an altcoin without mining, people are very surprised or even disappointed. First generation crypto currencies are based on mining, but it can be changed in the future. Is it only that people love getting something new for "free"? So they buy gpu/cpu/asic miners, pay for electricity and enjoy new coins in their wallet? Like in some RPG? Or is it something else?

Thank you

Erm, you need a cost for something to have value. Something free is free...

[byt411]

Well think about it, bitcoin is a decentralized currency. Instead of the banks buying paper and printing money with their machines, we "print" (mine) "money" (Bitcoins/altcoin) with our "machines" (CPU/GPU/FPGA/ASIC).

Don't treat this like a game, we aren't using bitcoins to buy weapons, and we aren't using it as a investment product either, (most people don't anyway.)

If no one mines a coin, that coin cannot process transactions, so that coin is literally "dead".

You might say we are pretending to be the government if you are stupid, but we are simply contributing to a decentralized economy.

[salsacz]

Yes, but what if there was a way to do it much cheaper? In future only some big organisations in Iceland will be mining Bitcoin by their super machines.

People in past were also sending paper postcards... But now they use emails because it is faster and cheaper.

[byt411]

Yes, but what if there was a way to do it much cheaper? In future only some big organisations in Iceland will be mining Bitcoin by their super machines.

People in past were also sending paper postcards... But now they use emails because it is faster and cheaper.

There will definitely be a way to make it cheaper in the future, since less power hungry and more powerful asics will be developed. I have no idea what you are asking... If mining stops the entire cryptocurrency network would collapse.
Any more questions?

[pandaisftw]

There are several problems with PoS "mining" (lets call it forging from now on, since this thread seems to be infested with NXT fanboys) that are not present in PoW-systems. For one, PoS suffers from a rich-get-richer problem, since forging typically requires coins to not move for some time (precise rules depend on the coin, PPC does it differently than NXT). This isn't an issue now, as everyone is mostly hoarding anyway, but if such a coin would be widely used as general currency, people with large quantities have relatively large amounts of coins they can save, while people with small amounts will have to spend most or all of their coins. This will cause coin ownership to become more and more centralized. A related issue is that PoS forging encourages hoarding (on top of hoarding because of expectations of higher exchange-rate).

In NXT (the only POS I follow currently), this is untrue. An account only has to be active for 1440 blocks before it can forge, so it doesn't matter what the user decides to do with their coins after.

Finally, since PoS forging doesn't require any real resources to be committed, it's hard to gain network consensus. Suppose a blockchain is forked and there are two competing forks. In a PoW-system, miners can add blocks to either of these forks, but can only commit fully to a single fork, since they need to expend resources (mining time, energy) to mine. Consequently, one fork will win out in the end as it becomes the longest, while the other chain is orphaned as miners abandon it. With PoS forging, there is nothing stopping a user to forge on both competing chains. In fact, it is economical to do so. Why bet on what you think will be the winning chain when you can back both. This can cause a situation where two competing chains coexist for a long time, damaging the credibility of the coin.

Also untrue in NXT, a node forging two chains at once will find their mining power reduced to zero.

[devphp]

Just look at bitcoin/litecoin difficulty chart and see the future.
If you still don't, check out this site:
http://bitcarbon.org/introduction.html

With the difficulty rising almost exponentially, and more devices being set up for mining every day, even though they are manufactured with power savings ideas in mind, it won't be long before electricity usage of PoW mining becomes noticeable to governments. First, they will ban industrial mining. They can't ban household mining, true, but they can use graded pricing to restrict that.

For example, an average household electricity usage per month is 100-300 kW, they will charge N dollars per kW within that range. Everything above that is luxury, and will be charged twice or more x N dollars per kW. Mining becomes unprofitable overnight, and requires much higher price for bitcoin/litecoin to be sustainable.

Miners will either be out of business or switch to altcoins that are still cheap. But as bitcoin's destiny is known to miners and everyone, litecoin and other PoW altcoins will soon follow bitcoin's path. Because you just can't waste limited resources of the planet for something that can be done at a fraction of the PoW mining cost. What I mean is PoS coins.

Thus, 2014 will be the year when people realize that PoW is, after 5 years of running, a dying concept that paved the way for PoS coins. New era of crypto currencies begins. In 2015 PoW cryptos will be a thing of the past, history, but not something to regret about, as it was a great run, but things change.

[superresistant]

There are several problems with PoS "mining" (lets call it forging from now on, since this thread seems to be infested with NXT fanboys) that are not present in PoW-systems. For one, PoS suffers from a rich-get-richer problem, since forging typically requires coins to not move for some time (precise rules depend on the coin, PPC does it differently than NXT). This isn't an issue now, as everyone is mostly hoarding anyway, but if such a coin would be widely used as general currency, people with large quantities have relatively large amounts of coins they can save, while people with small amounts will have to spend most or all of their coins. This will cause coin ownership to become more and more centralized. A related issue is that PoS forging encourages hoarding (on top of hoarding because of expectations of higher exchange-rate).

In NXT (the only POS I follow currently), this is untrue. An account only has to be active for 1440 blocks before it can forge, so it doesn't matter what the user decides to do with their coins after.

Finally, since PoS forging doesn't require any real resources to be committed, it's hard to gain network consensus. Suppose a blockchain is forked and there are two competing forks. In a PoW-system, miners can add blocks to either of these forks, but can only commit fully to a single fork, since they need to expend resources (mining time, energy) to mine. Consequently, one fork will win out in the end as it becomes the longest, while the other chain is orphaned as miners abandon it. With PoS forging, there is nothing stopping a user to forge on both competing chains. In fact, it is economical to do so. Why bet on what you think will be the winning chain when you can back both. This can cause a situation where two competing chains coexist for a long time, damaging the credibility of the coin.

Also untrue in NXT, a node forging two chains at once will find their mining power reduced to zero.

Agree.
Thanks for clarifying. A lot of people confuse the different PoS sytems from different PoS coins. NXT devs are far from stupid, they would not let such obvious flaws exist.

[gmaxwell]

Thanks for clarifying. A lot of people confuse the different PoS sytems from different PoS coins. NXT devs are far from stupid, they would not let such obvious flaws exist.

I am giggling right now. Best of luck to you.

[superresistant]

Thanks for clarifying. A lot of people confuse the different PoS sytems from different PoS coins. NXT devs are far from stupid, they would not let such obvious flaws exist.

I am giggling right now. Best of luck to you.

Well you know better, so what are the NXT flaws according to you ?