You get Paid only if you Sell your Bitcoins. Usually anyway. There are a few ways to use Bitcoins with some Online Shops, but they are few and none you've probably ever heard of.
I really dont understand the concept here.
You provide compute cycles.
Someone pays you money.
Where is the money coming from? Is someone buying your compute cycles and what are they doing with them?
You get Paid only if you Sell your Bitcoins. Usually anyway. There are a few ways to use Bitcoins with some Online Shops, but they are few and none you've probably ever heard of.
Yeah I understand they are some obscure internet currency. But bitcon mining involves what looks analogous to minting coins rather than trading them.
They created this currency. How, other than simply buying it with a fiat currency, would you distribute it? That is where the mining comes in. That is their choice of distribution. If you take the time and effort to mine these blocks, you get BTC.
No one is buying your compute cycles and they are not being used for anything except calculating hashes that are otherwise useless. To take on your own analogy:
You are burning electricity/compute power to mine for the right combination of bits that are of value as bitcoins.
I'm not criticising it, I just don't understand it.
I'll use the term mining to illustrate.
Mining involves digging up ores and selling it to people that need the metal to make things that they sell to other people. I can see where the money comes from here.
I'm struggling to see where the money is coming from in the whole bitcoin thing. Who is buying my compute cycles and what are they using them for?
What is the value in those bits though? Stuff I dig out of the ground has value because its needed to make stuff. Where is the value in my compute cycles if no one is paying for them? If they are not doing any work how can they be generating any value?
What gives paper money value?
Nobody is buying compute cycles. It is how they are distributing the currency. What is the value of any currency? What people are willing to give it. A currency that only two people use to trade is not very valuable because they can't use it anywhere. If they distribute that currency to people around the world, suddenly it becomes more valuable. This is how they distribute it, essentially randomly (since you can't control what hash your computer makes). Of course, the more hashes you make, the better chance you have of getting the block, so it does increase your chances.
Also: the term mining is just the term they use. Has no real connection as far as I know.
Usually that its backed by financial markets and international trade. And that the supply is controlled by a central bank.
I'm not sure what that has to do with leaving my PC running all night and magically making money.
Doesn't that make the "currency" essentially worthless though?
You mean you believe that is how it's controlled. Because it's controlled by belief in the system more than anything else. If you think that the USD supply is *controlled* by the central bank then I believe you are fooling yourself. Our central bank is a sham.
No, because the distribution of the currency is no different than the distribution of gold. People willing to do the work and invest in doing the work have the chance of finding the gold/bitcoins. A willingness of others to acknowledge that the gold/bitcoins has value is where the quantification of that value begins. Then comes supply/demand.
Ok, but surely the USD has more worth than a currency that is based on nothing and distributed randomly?
Gold has intrinsic value though.
article explaining the bitcoin system:
http://www.technologyreview.com/computing/37619/?p1=A1&a=f
they are merely rewarding clients for running security checks on each transaction. At some point the incentives will decline as the deflationary coin economy maximizes. You are a third party performing a service for the real transaction parties.
Gold has intrinsic value though.
Gold didn't have much intrinsic value beyond 'Oooh, shiny!' when the Gold Rush happened.
So gold is valued for being "Oooh, shiny" and a few other properties, why are bitcoins valued?
What a waste, I rather donate my cycles to something useful like F@H.
I really dont understand the concept here.
You provide compute cycles.
Someone pays you money.
Where is the money coming from? Is someone buying your compute cycles and what are they doing with them?
What a waste, I rather donate my cycles to something useful like F@H.