CryptoCurrency: Who asks for the work?

[TopStar74]

I have read about Cryptocurrency, blockchain, mining etc. from dozens of websites enough to make my head spin. I now have a fair idea of what it is, how it functions etc. But website after website only repeats the same information and jargon without explaining the A-Z of it from where the demand starts.

So I understand all these huge datacenters now exist in random places around the world to apparently solve hugely complex computational problems, and when exploring more I understand all of them are trying to crack the SHA-256 hash function. This utterly baffles me.

As much as I understand this is what's going on, what I don't understand is

1. Where is the demand for the work coming from?

2. Who is requesting this type of work in such large numbers? Is it Scientists? Spies? Organisations?

3. Why are they requesting this work for these people?

4. What will cracking these things solve? Isn't cracking that hash an illegal thing? I mean isn't that got something to do with passwords?

5. If it is not just for cracking that hash, what else is it used for?

It is disappointing that not a single website I read, including Wikipedia explains who is asking for such work to be done, why is there such a great demand for such activity (cracking hashes!)

Would be grateful if I can get any replies please!

TS74

[NotSure]

Crypto experts will be able to explain in all properly, but very quick answer - the people 'asking' are those that wish to transact, and the process you describe is called "mining". The reward is cryptocurrency.

How does Bitcoin mining work?

Mining (blockchain mining, in general) leverages economic incentives to provide a reliable and trustless way of ordering data. The third parties ordering transactions are decentralized, and they receive monetary rewards for correct behavior. On the contrary, any misbehavior results in a loss of economic resources, at least as long as the majority remains honest.

In the case of Bitcoin mining, this result is achieved by creating a succession of blocks that can be mathematically proven to have been stacked in the correct order with a certain commitment of resources. The process hinges on the mathematical properties of a cryptographic hash — a way to encode data in a standardized manner.

https://cointelegraph.com/bitcoin-for-beginners/how-to-mine-bitcoin-a-beginners-guide-to-mine-btc

[JohnB]

You might be interested in the environmental cost of all that mining. Every transaction on Bitcoin requires mining to validate it, and according to https://digiconomist.net/bitcoin-energy-consumption a single transaction has

Carbon Footprint:1278.36 kgCO2
Equivalent to the carbon footprint of 2,833,278 VISA transactions or 213,059 hours of watching Youtube.

Electrical Energy:2291.95 kWh
Equivalent to the power consumption of an average U.S. household over 78.56 days.

Electronic Waste: 385.60 grams
Equivalent to the weight of 2.35 iPhones 12 or 0.79 iPads.

I don't think those people requesting BitCoin be bought, sold, or give to Ukranian charities understand this

[Urbandreamer]

You might be interested in the environmental cost of all that mining. Every transaction on Bitcoin requires mining to validate it, and according to https://digiconomist.net/bitcoin-energy-consumption a single transaction has
....
I don't think those people requesting BitCoin be bought, sold, or give to Ukranian charities understand this

I would hesitate to speculate upon what unknown people do or don't understand.

I am however aware of digiconomists response when China banned bitcoin mining and I'm afraid that has lead me to distrust them as a valid source of information. Prior to that I had some faith that they attempted to produce honest estimates even though I was dubious of their methodology.

As for, per transaction. That's a very dubious measure. Increasing or decreasing the number of transactions has little impact on the energy consumption.

It's interesting that most however believe that bitcoin's CO2 footprint increased when China banned it's mining. Not something that I think most would wish.

It has been argued that in order to reduce our CO2, we need to mine more bitcoin. The argument goes along the lines that we need more renewable energy. Indeed we need an excess of it so that low wind conditions are less of a problem. Why build excess generation if you can't sell it's output? By creating a demand we create the conditions for investment. Especially if such demand can cheaply be turned off.

Try a web search, the argument does exist.

Here is a sample article.
https://www.businessofbusiness.com/arti ... renewable/

Back to "who asks for the work", it's people like me or others like the owner of Bedford's football team.

[GoSeigen]

So I understand all these huge datacenters now exist in random places around the world to apparently solve hugely complex computational problems, and when exploring more I understand all of them are trying to crack the SHA-256 hash function. This utterly baffles me.

If it baffles you I think you should pat yourself on the back for having grasped the idiocy of bitcoin. The fact is that the "work" is number crunching for the sake of number crunching and serves no useful purpose whatsoever. Once it's finished the result is of no use to anyone and whatever energy has been used has gone (almost) completely to waste. It's the most absurd thing imaginable.

Now you've hit on an interesting point which is that if a Bitcoin 2 could be made which did useful work like sequencing the DNA of all living species or solving differential equations for engineers then that may even be interesting for me. The problem is that sort of work is difficult to fit to the requirements of bitcoin -- e.g. the work must be known to have been completed correctly in a fairly predictable time, which is why the useless work currently being done was selected.

[The above should be roughly correct -- bitcoin experts please correct any major misconceptions...]

GS

[Urbandreamer]

If it baffles you I think you should pat yourself on the back for having grasped the idiocy of bitcoin. The fact is that the "work" is number crunching for the sake of number crunching and serves no useful purpose whatsoever. Once it's finished the result is of no use to anyone and whatever energy has been used has gone (almost) completely to waste. It's the most absurd thing imaginable.

GS

This really doesn't belong on DAK.

Moderator Message:
I agree. Moved. C.

However the inhabitants of Yap use to travel from their island to quarry limestone, for which they had no useful purpose. They tried to ban a European from importing the limestone, for which they had no use. What was so special about the limestone if they didn't "use" it. Well in fact they did use it, as money. Their island had no limestone.

If money is cheap to produce, it's worthless. This is why they stopped using leaves as money in the USA, or sea shells. Both of which were once used in parts of the USA.

Of course most money is once again cheap to produce. Most countries are producing it in ever increasing amounts.

I suggest that you follow NotSure's link as that explains why the bitcoin protocol makes it expensive to "mine" bitcoin.

Of course you could buy gold coins from the Royal Mint.

We shouldn't debate the "use" of gold coins or expense of producing them, especially on DAK, should we. After all it's a “barbarous relic" isn't it? After all it's still only $35 per troy ounce, the same as when that claim was made. If not, then what changed about gold?

[justfisk]

1. Where is the demand for the work coming from?

Proof Of Work is Truth
In a world where Truth has been turned on its head, its difficult to know what or whom to trust.
Politicians and Central Bankers over the years have undoubtedly shown that they are ok to wave truth aside on a whim.
Rather than trusting anyone or any Central Body, Proof Of Work allows the Human race to verify Truth and guarantee the Security of the blockchain.
By expending Energy it transmutes this fundamental commodity of the Universe (energy) into digital Gold.
Other options require having to trust other Entities thereby achieving the same corrupt practices at play with the current economic model today.
Proof Of Work guarantees Security as it makes it virtually impossible for a malicious agent to gain majority control of the hashrate and "take over" Bitcoin in a 51% Attack. Work has to be done to identify the longest Chain. The more Hashrate grown by the Bitcoin Blockchain, the more secure the Hardest Money known to Man becomes. The more transactions blocks there are, the more Costly it would be to undo those Transactions. By expending "Work", it makes it too expensive for an Attacker.
Apart from Security and Truth provided, Proof-Of-Work also makes it possible to have one of the most crucial things in Bitcoin; the difficulty Adjustment.
As more Mining nodes join the Bitcoin Blockchain, the difficulty adjustment increases so that new blocks are added on average every 10 minutes. This maintains the "hardness" of the money. When Money appreciates, it usually incentivizes people to print/mine more of it. However due to the ingenuity of the difficulty adjustment, it means more mining hashrate would never equal more supply of Bitcoin.
It rather leads to an increase in the Energy and Security of Bitcoin which in turn increases its value further.

Without Proof Of Work, there will be no Bitcoin.
So far there is no other way to guarantee its Security, Truth, immutability and Network sanctity.
It is one of - if not - THE most important concept of Bitcoin.

Tribute to Adam Back, the creator of Proof of Work (originally developed to solve problem of Email spamming)

JF

[Urbandreamer]

I hesitate to suggest this, but are we actually, and should we, be attempting to answer the OP?

SURE, it's a valid question. On DAK there were two people who attempted to answer. Two who argued against bitcoin.
The OP seems happy with the result. Possibly it was a simple question.

Was it?

Can I STRONGLY argue that we, and I, need to start arguing that ANY questions about crypto be quickly moved to here with a stub and redirection left. It's more work for the moderators than I would like.

Possibly we should do our own moderation by stating that they need to post the same question on this board as in (well my opinion) they will only receive arguments against crypto on other boards, rather than any answer to such questions.

DAK should not be a board for debate!

[TopStar74]

"The OP seems happy with the result."
I did not say that! I only try to login occasionally here. My lack of a quicker response does not mean I agree

I was expecting "straight answers to factual questions" as is the description of this board. It is a valid question and has a reason for being on this board, although I am not an expert on these boards to decide where it should go. I did not find any other relevant place it would have been more suitable. Apologies!

NotSure and JohnB's kind replies do not actually answer my question. I did not want to know about environmental impact. Neither does the "very helpful but completely pointless to me" reply "The people asking are the people who wish to transact" Although I see it was genuine.

My question was trying to understand who are these people who would request number crunching on such a massive scale. I thought all the scientists sequencing DNA mostly have their own organisation's supercomputers and they would also probably for security not outsource this even if it is "distributed computing". If it is just random people submitting puzzles to generate money, then I completely understand bitcoin (and the sheer ridiculousness of it's existence).

Thank you and sorry for any confusion this question has created in terms of which board it should be in.

[NotSure]

NotSure and JohnB's kind replies do not actually answer my question. I did not want to know about environmental impact. Neither does the "very helpful but completely pointless to me" reply "The people asking are the people who wish to transact" Although I see it was genuine.

Apologies, I clearly misunderstood your question. I though you were asking "why do people crunch lots of pointless numbers". An answer is that this how transactions are carried out. So the people "asking" for all this work are the people who wish to buy, sell or trade crypto, i.e. the people who wish to transact.

Could you be more specific? Or was the question somewhat rhetorical?

Thanks.

[Gilgongo]

So I understand all these huge datacenters now exist in random places around the world to apparently solve hugely complex computational problems, and when exploring more I understand all of them are trying to crack the SHA-256 hash function.

I'm not an expert, and while I'm not not sure what gives you the impression they're trying to crack SHA-256, I think your main question relates to miners hashing transactions. Hashing is essential to crypto since it guarantees one of the blockchain’s most important features – immutability. Miners contribute computing power to the network in order to make it work. In return, they get fees and (less commonly with Bitcoin and not on all systems) new coins.

As to the people who want that work done - it's anyone who transacts on the network (and that's not just buying or selling stuff, it's all the exotic instruments of the "normal" markets as well).

Best read this for more info though:

https://www.buybitcoinworldwide.com/mining/

[GoSeigen]

My question was trying to understand who are these people who would request number crunching on such a massive scale. I thought all the scientists sequencing DNA mostly have their own organisation's supercomputers and they would also probably for security not outsource this even if it is "distributed computing". If it is just random people submitting puzzles to generate money, then I completely understand bitcoin (and the sheer ridiculousness of it's existence).

Thank you and sorry for any confusion this question has created in terms of which board it should be in.

I do believe I answered your question. How did my post not address the question as posed above?

GS

[Mike4]

Surely nobody asks for the 'work' to be done. The Bitcoin infrastructure demands the work in order to verify transactions. Lots of nodes verify a given transaction and if 51% of nodes agree its valid, it is accepted as valid.

All explained in the Bitcoin "White Paper" which is the foundation document for the design of Bitcoin. Only nine pages but phenomenally dense information full of arcane concepts, and it defeated me after a few pages.

https://bitcoinwhitepaper.co/bitcoin.pdf

Edit to add:
This page seems to render it down into muppetspeak that even I have a chance of understanding.
https://bitcoin.co.uk/white-paper/