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Author Topic: Do miners add any significant value to a coin any more?  (Read 724 times)
Titan
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February 19, 2014, 05:16:42 AM
 #1

This is a provocative question. All your input is welcome!

I see that the miners are not fulfilling their original purpose anymore and that is to move the block chain forward and provide network nodes to support the network.

The latest developments show that mining is more and more a random disruptive process by big pools.
Providing a certain quality of service for the coin network is getting harder and harder to achieve.

The pool operators have no sense for the purpose of the coin networks to be transaction networks that require to operate within certain parameters.

Today from the cost perspective it does not take much to operate a global network of core network nodes to support a coin network. On the other hand one can drive a coin network with a couple of GPUs or even CPUs in the cloud in a reliable way.

Certainly this destroys the mining community effect for a coin, but how many miners really support a coin?
All the money that is in this mining game only distracts people form the real purpose of the coin networks to be transaction networks. Nothing more nothing less.

It also distracts people from building interesting software on top of the coin networks and move the technology forward, because of the constant battle with the random mining crowd to keep the network going.

The tokens used for transactions don't have to have an intrinsic value. The value should be in the network and the services it provides.

So I don't see the value of this random mining process any more.

Titan

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adhitthana
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February 19, 2014, 07:11:24 AM
 #2

This is a provocative question. All your input is welcome!
Seems ike a good question.

Quote
I see that the miners are not fulfilling their original purpose anymore and that is to move the block chain forward and provide network nodes to support the network.
How could they do things differently?

Quote
The latest developments show that mining is more and more a random disruptive process by big pools.
Can you explain a little more for the uneducated (that;s me
)
Quote
Providing a certain quality of service for the coin network is getting harder and harder to achieve.

The pool operators have no sense for the purpose of the coin networks to be transaction networks that require to operate within certain parameters.
Because they are in it for a quick buck?

Quote
Today from the cost perspective it does not take much to operate a global network of core network nodes to support a coin network. On the other hand one can drive a coin network with a couple of GPUs or even CPUs in the cloud in a reliable way.
Would this still be decentralised?

Quote
Certainly this destroys the mining community effect for a coin, but how many miners really support a coin?
All the money that is in this mining game only distracts people form the real purpose of the coin networks to be transaction networks. Nothing more nothing less.

It also distracts people from building interesting software on top of the coin networks and move the technology forward, because of the constant battle with the random mining crowd to keep the network going.

The tokens used for transactions don't have to have an intrinsic value. The value should be in the network and the services it provides.

So I don't see the value of this random mining process any more.

Titan
Is there a better way to do it? If it's the way mentioned above can you explain a little more?
Thank you
GigaCoin
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February 19, 2014, 07:29:26 AM
 #3

I've been predicting this for the past month, the whole mine and dump concept is purely driven by greed and wasn't sustainable. Miners are running out of buyers who always end up holding a bag, there is no profit for the vast majority of altcoin buyers. You're right as POW main purpose was to sustain the network and provide some kind of sustainable rewards to miners, it wasnt meant for mine-dump get rich quick which is what it turned into.

This is why i think POS has a brighter future than POW.

Titan
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February 19, 2014, 03:53:32 PM
 #4

I've been predicting this for the past month, the whole mine and dump concept is purely driven by greed and wasn't sustainable. Miners are running out of buyers who always end up holding a bag, there is no profit for the vast majority of altcoin buyers. You're right as POW main purpose was to sustain the network and provide some kind of sustainable rewards to miners, it wasnt meant for mine-dump get rich quick which is what it turned into.

This is why i think POS has a brighter future than POW.

Is there a better way to do it? If it's the way mentioned above can you explain a little more?
Thank you

I think what Sunny King did with the POS scheme was very important, but in the end it focuses again on the mining aspect and how to keep the miners from selling their coins, by providing often unsustainable rewards.

Still it is very important to understand the paper that inspired the POS idea:
http://www.links.org/files/decentralised-currencies.pdf
In short: If you have a checkpointing system you don't need a lot of power to make the bitcoin protocol work.

So one could completely throw out the POW aspect or at least reduce it back to the point where the wallets of the core network nodes mine some coins to keep the system going.

I would maybe care less about the mining aspect, if the mining pools would support the primary network operation, but they don't and there is no reason to believe that they will in the future.

It is not possible any more to run a reliable network with big mining pools constantly interfering with the network operation and having malfunctioning pools completely paralyzing a network for days without the operators taking any responsibility.

Maybe cutting out the mining aspect would also cure the problem of the valuation of the coins.
Currently there are two concepts intermingled: On the one hand the valuation of the coins that is related to the electricity cost to produce them and the valuation of the coin network, the services, and the business model.

The value of a coin can be inflated by a lot of mining power on the network, making it more expensive to produce the coins.
This is a kind of measure of popularity of the coin, but in the end this popularity has to be payed for.

So now essentially the investors in the coins are paying for a mining service that gets more and more expensive and also is more and more disruptive to the networks, instead of supporting the development of services, marketing and other aspects of a coin.

It is like paying more and more for a utility and the service worsens to a point where it starts to disrupt the whole business.
It's like to pay a gang of bullies to beat you up every day. It does not make sense.

Quote
Today from the cost perspective it does not take much to operate a global network of core network nodes to support a coin network. On the other hand one can drive a coin network with a couple of GPUs or even CPUs in the cloud in a reliable way.
Would this still be decentralised?

We already see Scrypt ASIC prototypes today in the 5 - 10 GH/s range on the pools. This is also a kind of centralization that happened for bitcoin. I think the value of the bitcoin system lies in the reliability of the system due to the distributed nature.

In the end everyone can now create a coin network and I think it will not be considered as currency in the future, but rather as a cheap way to build a global transaction network for businesses, and cut out systems like visa and mastercard.
In a sense a transition form the walled Unix systems to the open Linux.

Titan

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February 19, 2014, 04:21:22 PM
 #5

Agreed. Mining has become a way for certain people to justify 'fairness' in distribution.

I tend to prefer coins that don't rely on miners and have most coins already minted. I think the market will take care of proper distribution based on supply and demand individual psychology.

Quark, devcoin, cab, zeta, premine are all coins that rely on the market rather than miners to determine distribution at this point. Preminecoin is obviously the most extreme, but I like watching these coins (if I don't invest) solely to see what a post-mined coin will be like - think about Doge in 2 years.

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February 19, 2014, 04:49:58 PM
 #6

In terms of securing the network and providing nodes, no. Miners do not consistently provide that service any more.

However, miners still provide "value" as they are spending "resources" (hardware/electricity) to obtain these little nifty digital bits.

I have seen a paradigm shift that clearly started with the whole FTC pump: once it was the inherent value of the protocol and network that brought value, now it's about the communities or pump mechanics that provide most of the value to a particular coin market. There are some coins that are using this shift to their own advantage by providing infrastructure that is appealing to the community, but many times it's all about a pump scheme.
Titan
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February 19, 2014, 05:20:39 PM
 #7

In terms of securing the network and providing nodes, no. Miners do not consistently provide that service any more.

However, miners still provide "value" as they are spending "resources" (hardware/electricity) to obtain these little nifty digital bits.

Yes, the miners produce the blocks at high cost due to the popularity/difficulty mechanism, but in the end it is not necessary to run the network at 10GH/s for proper operation.

I have seen a paradigm shift that clearly started with the whole FTC pump: once it was the inherent value of the protocol and network that brought value, now it's about the communities or pump mechanics that provide most of the value to a particular coin market. There are some coins that are using this shift to their own advantage by providing infrastructure that is appealing to the community, but many times it's all about a pump scheme.

Agreed! The coin life cycles are getting better and better managed, but only for the purpose to keep the money printing machine going.
Nothing new to see here, mostly. 


Titan
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February 19, 2014, 05:35:44 PM
 #8

Agreed. Mining has become a way for certain people to justify 'fairness' in distribution.

I tend to prefer coins that don't rely on miners and have most coins already minted. I think the market will take care of proper distribution based on supply and demand individual psychology.

Quark, devcoin, cab, zeta, premine are all coins that rely on the market rather than miners to determine distribution at this point. Preminecoin is obviously the most extreme, but I like watching these coins (if I don't invest) solely to see what a post-mined coin will be like - think about Doge in 2 years.

DOGE hit some nerve with the community and now also FLAP.
I think it would be interesting to study the demographics of the users.
Both have some marketing power, that will give it some life, maybe.
When people start losing money the fun will be over.

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February 19, 2014, 06:29:39 PM
 #9

Agreed. Mining has become a way for certain people to justify 'fairness' in distribution.

I tend to prefer coins that don't rely on miners and have most coins already minted. I think the market will take care of proper distribution based on supply and demand individual psychology.

Quark, devcoin, cab, zeta, premine are all coins that rely on the market rather than miners to determine distribution at this point. Preminecoin is obviously the most extreme, but I like watching these coins (if I don't invest) solely to see what a post-mined coin will be like - think about Doge in 2 years.

DOGE hit some nerve with the community and now also FLAP.
I think it would be interesting to study the demographics of the users.
Both have some marketing power, that will give it some life, maybe.
When people start losing money the fun will be over.

I definitely believe a demographic study would show many interesting results. And to be honest, confirm many results already anticipated.

I do find it interesting how so many of these coins are being treated as businesses of some sort with marketing gimmicks, road maps, workflows, brand loyalty, infrastructure, and growth projections. As a matter of fact, I have begun calling coins in market terms.
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February 19, 2014, 06:44:32 PM
 #10

The problem i guess is if you dont have people mining, what keeps the block chain secure? And why would I mine if Im not getting anything for it?

Im not exactly clear on proof of stake, could someone please explain like Im five?

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Titan
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February 19, 2014, 07:06:47 PM
 #11

The problem i guess is if you dont have people mining, what keeps the block chain secure? And why would I mine if Im not getting anything for it?

Im not exactly clear on proof of stake, could someone please explain like Im five?

CryptoCaptain,
Read this paper, it is a bit tough, but very enlightening.
http://www.links.org/files/decentralised-currencies.pdf

Spending so much computing power on hashing like Bitcoin, still does not really solve the fundamental consensus problem.

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