I know a tiny bit about cryptocurrency and am willing to help others get into it AMA
primesuspect
Beepin n' BoopinDetroit, MI Icrontian
DISCLAIMER: My BTC, ETH, and LTC trading are at what I would call a noob level, but that is at least better than knowing nothing about it. I've been dabbling in BTC and other cryptocurrencies for a bit and made a tiny bit of money doing such, so I'm willing to answer any basic questions if you have any.
I don't recommend crypto trading on a large scale. I've kept my trading pool under $100 just for fun and learnings.
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How did you begin?
Can you still mine BTC? If so what do the computer cycles actually do?
Since the idea (from my limited understanding) of BTC is to eliminate taxes, is there a way of purchasing and/or selling without fees?
The #1 thing anyone here needs to know about crypto: use NiceHash. Easy GUI. Automatically selects the most profitable algo every day. Easy to cash out your bux. Even a $250 graphics card can easily make $100+ a month, factoring in a 10 cent/kWh power bill.
The days of complicated command lines and hand-picking your cryptocurrency are done.
NiceHash. Learn more.
//EDIT: No, you cannot mine BTC with a graphics card. It is not profitable. That's why all the other coins exist! You are also not likely to escape the IRS if you generate or obtain sums of money you would deem useful or exciting.
Okay... Someone explain to me why this has value? The machine crunches math problems, does it go back to a centralized server somewhere as sort of a distributed computing resource? Does it just do it to do it? I've never quite understood why making your GPU work was trade-able to some perceived monetary value?
Cryptocurrency has no intrinsic value. It does nothing useful or humanitarian. People like money. Making it only consumes energy. It has value because people believe it does. Value is assigned because people collectively agreed that it has material utility, or because it makes a political statement with emotional value.
The same is also true of the US dollar.
Seriously? So in terms of F@H, the computer cycles do something. You're saying that mining crypos does absolutely nothing but trade electricity for internet points? I figured there was some sort of back end selling your computer cycles to equate the value of the currency you got back.
Essentially, that's it: BTC and other cryptos have value because others think they do.
There are some new cryptocurrencies that do solve humanitarian puzzles, rather than useless encryption puzzles, to verify transactions. That's how crypto works: puzzles confirm an authentic transaction and reward a fraction of a coin as a reward. But these humanitarian currencies are rather new and not especially profitable.
Actually, it sounds more and more like real money every day. LOL.
That's the highest level. The next level down is: They have value because exchanges exist with sufficiently low skills necessary where people will agree to convert it to other currencies at a given rate.
Coins spike in value when major exchanges add support for them. Otherwise, trading them is sufficiently difficult that their value is depressed. Higher liquidity = higher value.
To add to what @Thrax said about processing power. The mining puzzle is created, solved, and rewarded with BTC just to show that each BTC transaction was validated by someone unassociated with that transaction. Parties wanting to insert a bad transaction would race against the entire mining network to validate it. Chances are practically 0 that they get to sign off on it by solving the computational puzzle multiple times in a row (unless they controlled more than half the mining network). And the validation puzzle can't be pre-computed because each puzzle depends on the outcome of the last puzzle the network solved.
tl;dr processing proves crowdsourcing.
Unfortunately the system is designed to make the artificial puzzle harder as more computational power is brought to bear on it, so there are more and more cycles being spent per transaction.
Which $250 card are you referring to? Closest seems to be R9 290X?
The RX 480 makes about $95 per month. Of course, that's why it's not $250 anymore. But it should be.
I'm going to hijack your thread a little bit, @primesuspect (although I prefer to think of it as augmentation):
I purchased two of @Thrax 's vidja cards a while back to put into an ethereum miner that I built out of a milk carton and some plywood. It was a fairly difficult project (mostly just getting ubuntu to recognize the video cards), but I'm happy I did it. While I had previously purchased BTC for $, this was my first attempt at a crypto miner, and I learned a ton. Would definitely suggest. I find myself understanding a lot more about crypto and being far less scared to trade, plus, to me it's still all 'fun money.' I don't have the drive to 'make a good investment' that I had when originally purchasing BTC with $.
The miner is now mining ZEC, which I then turn around and trade for BTC, ETH, and Siacoin. At this point, the miner has paid for itself and is pure profit - although that took a solid few months, more than I expected. I also have the added benefit of being allowed to run the miner at work, as we pay for power by the circuit as opposed to by the kWh.
At the time, our landlord also was looking to get rid of some Antminer S7s, so I picked those up from him. Although they don't mine very quickly, I found myself making a couple hundred bucks every few weeks. Nothing to sneer at.
Worth pausing to discuss our landlord - he runs a MASSIVE mining rig out of his side of the datacenter. It stands taller than a man, and is just a nightmare conglomerate of GPUs. I'm not sure what he mines, at the moment.
About a month later, I managed to purchase an Antminer S9 straight from Bitmain. This constituted a fairly sizable investment for a pure hobbyist, so there was definitely a little unpleasant feeling that I had to get over. However, I consoled myself with the knowledge that the S9 was going through third party channels for three times the price I was paying, so while the worst case scenario was 'lose all your money,' the second worst case scenario was 'get the miner and sell it for three times the price you bought.' I figured I could take that risk.
I have had the S9 running since... what, September? And even with the 'bitcoin crash' recently, I have made six times my money back. Again, though, remember that I am being granted free power, and this is liable to change at any time.
Fairly recently (as alluded above), I began trading BTC, ETH, ZEC, and SC back and forth using Shapeshift. During this most recent 'crash,' I have managed to 'save' 3% - including all the fees of trading (which are infinitesimal compared to trading stocks). So, I'm no genius or anything... but I am struck with how EASY it is to get going. I keep a google spreadsheet of all my transactions, all the money I've lost to fees, all the money I've gained/sheltered (already counting the loss from fees), and how much each transaction netted/lost.
My total investment was something approaching $2000 - the etherum miner was $600, and the Antminer S9 was ~$1200 or $1300 at the time, and I probably spent another $100 somewhere, because my stupid brain has a tendency to round down ($1297? that's practically $1200!).
The only major concern I have is that I am treating BTC like a commodity instead of a currency. The pragmatic side of me knows that it CAN'T be a currency right now due to its volatility, and that I should go ahead and trade and gamble and play... but the idealistic side of me knows that the more we treat it like a commodity, the less chance it has of BECOMING a currency some day - and the more we think of it as a commodity, the more we're willing to accept government regulation on it (whereas we might not be so accepting of government regulating a currency that doesn't belong to them). Since an ideal crypto has a very good chance of taking financial control AWAY from the government, my idealistic (and partially conspiracy-theory) side gets worried whenever I play into what the government wants me to do... worried that I'm contributing to a long term plan to dismiss, devalue, and ultimately eliminate cryptocurrencies from the realm of stable, mature financial tools.
Finally... one of the things I find when discussing crypto is that the EXTREMELY uninformed tend to come out of the woodwork and present themselves as experts. I've been dismissively told 'what's the big deal? I have paper that I can spend right here in my pocket' (the question being why do we need crypto, the bias being 'because I can't think of a reason, there mustn't be one'). I've been told 'bitcoin can't be stable because it's not directly attached to a commodity' (when examples of stable currency unattached to commodities exist and indeed thrive). I've been told that bitcoin is not fungible (maybe I just misunderstand the definition? It's not like each individual BTC has its own unique name...). I've been told that bitcoin has proven itself to be too unstable to use as a currency (implying that BTC is fully mature and done growing into its stability). I've been told that 'mining' is a silly concept in general because the total amount of currency could be released all at once for ease's sake (totally ignoring... well... there are a LOT of problems with that statement, too big for a parenthetical summary).
So... this is a fantastic hobby. I have a lot of fun with it, and I don't need to be hands on all the time. It's mostly automated, and is available when I WANT to play with it... but - this post aside - I tend to stay fairly quiet about it, given how much people seem to already 'know' about it.
Just make sure you report your net profits to the Feds on your taxes, that's where it has the most potential to get ugly (other than making stupid decisions and losing your shorts trading), sounds like you are keeping excellent records which is either a really good or really bad idea
Thanks @Myrmidon. I didn't intend for this post to turn into a mining post because I know NOTHING about currency mining, but of course I am talking to a community of PC-building geeks so of course it will turn to that, and I'm very glad to defer to people who know what they're talking about on the mining aspect. I was talking more about BTC and cryptocurrency basics (101 level).
I'm new to this - good to know not to trust opinionated people, thanks for the great tips @Myrmidon.
Just bought a used PC on eBay for the graphics card... see if I stick to mining and get the system to pay for itself by year's end.
How far does everyone trust their cryptocurrency to be kept safe from theft?
Alright, this is one I can answer
There is some confusion about the difference between cryptocurrency accounts and wallets.
You can TRADE cryptocurrency on simple sites and apps like Coinbase or (soon) Robinhood, but you have to understand something fundamentally important: THEY are holding on to your currency (like a bank), but UNLIKE banks, they are not regulated or protected or insured... so if your currency gets stolen (and this has happened more times than you'd probably like to know), you are fully exposed to loss. See Mt Gox as one example of a currency exchange getting screwed over and tons of people losing their shorts in the mess...
To keep your currency safe, you should get a digital wallet (like Electrum or Blockchain). YOU are responsible for your own currency and you hold it with your own keys, etc. The chances of you personally getting hacked are infinitesimally smaller than a big, juicy exchange being targeted.
That means when you want to trade currency, you take it out of your wallet and move it INTO the exchange to trade... On the flip side, if you want to pull currency from the exchange, you would pull it FROM the exchange into your wallet.
It's much safer if you're holding onto it rather than letting it sit on somebody else's exchange.
Why would you want to keep your currency on an exchange rather than in a wallet unless you were trading/selling?
I think most people don't even realize the difference between exchanges and wallets which is why I brought it up
How do you spend your cryptocurrency on goods and services?
It costs like a $1+ fee (lately) to move any BTC to a different address or wallet, or to pay for anything, right?
I probably did emphasize the 'mining' part of what I do a little much. See? threadjacking. But to even it out... trading is really easy and much faster than stock market trading! 10/10 would recommend!
Wisdom. So far my records are in fact excellent, BUT I haven't cashed out for $, which means I am not liable for taxes... yet. My biggest concern is figuring out how to report the ~$40 I spent on steam games last year with bitcoin. This might be a good year to start looking into charitable donations to offset BTC gains...
The time it takes to trade from your wallet to an exchange, then from an exchange to dollars can be the difference between jumping on a good sell price or not - not to mention having to be focused for that long. The difficulty in setting up a wallet is already a bit much for someone who doesn't already know crypto, and even if you DO, it's still extra steps to do a thing - yes, it's simple, but you know how the layman is with computers. We still have people reusing passwords. Additionally, EMT noted - every transaction takes a fee. Usually the fee is pretty small, though, since it's a fee based on amount of data transferred, not amount of money transferred. Look up 'dust transactions' for a really interesting look at this... there are transactions so small that the fee to transfer them in a reasonable amount of time would cost more than the transaction (and this problem should get fixed in time).
There exists a third party payment processor called BitPay. Steam was using this processor for a while. After purchasing a game, Steam would redirect to BitPay, who would provide a temporary wallet address, and say 'I have to see a payment of 0.xxx BTC within 15 minutes.' If they saw the payment, they'd put the transaction 'in escrow' until the payment was fully confirmed on the network (once fully confirmed, the transaction was greenlit). If they didn't see the payment, the transaction was canceled.
Without a payment processor, it's a little more like using something like Google Wallet or VenMo to pay someone. You tell the person over whatever medium to send you money, you provide the public key to your wallet (analogous to your gmail address for Google Wallet), and you wait for funds to show up. The 'buyer' can tell you where the funds are coming from if they like (by providing their own public key).
Yeah, but the fee is set by the sender. It's actually one of the more clever parts of the technology - there's incentive to keep your miner going even once the blockchain is all mined out - your miner will continue validating these transactions, and get paid by that fee. Miners traditionally validate the higher-fee transactions first, so if you don't need to send IMMEDIATELY, you can save a couple bucks with a low fee. The more people use the network, the more 'high-fee' senders will show up, and the higher the fee will get... thus incentivizing more people to buy miners to get in on the easy money, thus increasing the throughput of the network, thus reducing the amount of transactions waiting on the network, thus reducing the fee. Although I'm not a HUGE free-market fan, this is basically free market for fees... fee market.
...I'll show myself out.
You may already be aware of this, but if you're not, I might be about to make your life a lot easier...
https://shapeshift.io/
The exchange rates are fairly reasonable, and cutting out the step where you have to push to an exchange first means you can jump on the rates faster... plus fewer transactions = fewer fees.
@primesuspect
I was re-reading my post (because I'm a horrible narcissist with nothing better to do at 12:22 AM) and something occurred to me:
Upon rereading that, I realized that it sounds like I might be alluding to you, and I'm over here facepalming at how thoughtless I probably sound. I'm probably jumping at shadows here, but I just wanted to let you know I am ABSOLUTELY NOT alluding to you (or anyone else here!) in any way, shape or form.
u buddy
Thanks @Myrmidon! In a follow-up question: imagining a point-of-sale transaction where I don't want to wait 15 minutes; is it possible to farm the transaction fee processing to a specific individual (e.g. my home system, the store's system) to speed things up? Or is this one of those "trusted third party for a reason" things?
Dunning–Kruger effect, isn't it? You know a little, but not enough to know how little you actually know. It's the reason I've stayed out of this discussion, even though I dabble in various cryptocurrencies. The important thing to keep in mind is this isn't so much investing in stocks or buying a commodity. You're playing a game of currency speculation, converting USD to Bitcoin/ether/litecoin/dickels/ripple/ and then converting back when the exchange rate is more favorable.
If you imagine trading cryptos like exchanging Yen for Euros a-la a smalltime George Soros, you're already heads and tails above most people playing the game.
If you also understand short-term and long-term capital gains tax rates, then you're just stellar.
I don't believe the thing you're suggesting is possible... Each transaction is broadcast to the network at large, and each node on the network attempts to "prove" your transaction along with a bunch of other transactions... Nodes check to make sure you had the coin you're saying you spent, and when satisfied that everything is okay, publish the transaction into a block.
You could maybe theoretically set your home network up such that only your node receives the transaction and starts working...? But your node would have to publish that transaction plus all other current transactions faster than any other node on the network, lest a different block (sans your transaction) get selected as the agreed history. Regardless, your node would still have to publish the block to the rest of the network and have it be accepted before the transaction is complete, and that's the part that takes fifteen minutes, so you wouldn't speed things up anyway.
The disclaimer here is that I learned about transactions by reading the original Satoshi white paper, and with the forks that btc has undergone, perhaps things have changed? I think I've represented this correctly, but someone should correct me if I'm wrong.
Lastly... In terms of speeding up transactions, take a look at the lightning network project. I don't know shit about it, but I believe speedier transactions are its goal.
Agreed. The merchant who accepts Bitcoin payment instantly is opening themselves up to fraud in the current protocol. The risk is small because
(a) Legitimate wallet apps on buyers' phones don't allow them to attempt a double spend, and
(b) If they succeeded at cancelling their own payment and it's proven intentional, it would be a criminal/civil offense. Maybe no precedent for the court case yet.
I think the crux of the issue that I have with this statement is that in any scenario where these are an issue, the merchant would have to be deliberately using BTC in a way it is not meant to be used. I think you're talking about the point at which the transaction is verified on the network but not yet confirmed - that is, published, but not yet used in the hash for future blocks. I believe this is commonly called 'verified,' but I don't think that term was used in the white paper, so that might just be a term that sites like blockchain explorer use. Regardless, I believe this counts as a 0 confirmation transaction.
I guess I shouldn't say 'in a way that it is not meant to be used.' You can use it any way that you want. However, yes, a merchant would be extremely ill-advised to release their product without confirming payment, as there are a few attacks that can be used to double-spend, and their likelihood of success decreases radically with each subsequent confirmation.
But this 'lack of instant payment' is not BTC's problem, or even fault. Consider how our current monetary service works - your credit card is not inherently instant, either. Instead, you need a big, fat, third party company (sometimes multiple) between you and the merchant. You make the agreement to pay the merchant, and the third party company - let's say it's only Visa, to simplify - agrees to pay on your behalf. The merchant says 'well, Visa's agreement to pay is as good as payment to me,' so they CONSIDER the payment as made... so on the 'surface,' it looks instant. But in reality, the charge won't post to your account for minutes, hours, and in some cases days. And even then, you may not even PAY the balance for days, weeks, or (if you keep a balance every month) even months! So just how 'instant' was that payment transfer?
Consider how 'instant' a wire transfer is, too - and that's bank to bank, effectively analogous to wallet-to-wallet!
In reality, being able send wallet-to-wallet across the world on BTC in ~15 minutes is much faster than sending cash across the world any way you look at it... and BTC can do it without the benefit of third parties or escrow accounts. It's just lacking the ILLUSION of instant-speed that our current monetary system has, because our current monetary system has so many more third-party tools. Imagine what would happen if someone like Bitpay got big enough (we're talking paypal-sized) to 'guarantee' payment the way Visa does? Suddenly payments WOULD become instant. indeed, framed in this light, it's extremely disingenuous to suggest (not that you are) that BTC isn't good enough or adoptable because it 'isn't instant.'
Furthermore, BTC does have an inherent way to make 'instant' payments happen - just increase your fee. Remember that the fee is set by the sender/buyer! And while that may feel a bit un-adoptable, consider that credit cards charge a much higher fee - it's just paid by the seller. Consider that if a seller doesn't have to pay credit card fees, they could stand to cut prices and still make more money on a sale by taking BTC (although let's be real, what seller is going to cut prices when they could just quietly ignore that they're no longer paying transaction fees?).
Lastly... you mention that the risk is small to merchants who take 'instant-speed' payments... actually, if we're talking 0 unconfirmed, the risk is quite large (if you're talking instant via escrow, or instant via high-fee, then it's low-to-nil, but for other reasons than you've cited) 0-unconfirmed payments are not terribly difficult to attack, and any time money is involved, SOMEONE will be around to try and steal it. This is why I say BTC wasn't 'meant to be used' that way - the security failure at 0-unconfirmed is apparent and well known... and while that sounds scary, accepting a 0-confirmation payment is kind of like accepting IOUs instead of actual money - it's a bit silly to complain when the IOU (or 0-confirmation) doesn't produce funds down the road. It's a corner on the playground that we don't need to pad. This is actually what makes BTC so impressive - the network itself, operating in a decentralized state with no governing body, and subject to no national government... is actually very robust and (so far) has had very few security problems.
EDIT: thought about it for a bit, got a better idea of what your concerns were (I think), and totally rewrote the post.
@Myrmidon you make good sense. I just wanted to picture what that one Subway restaurant owner does to prevent BTC fraud. As well as the odd craigslist seller who accepts - I haven't been able to find info about what that goes like. I don't see people waiting around 15 min to an hour.
Also, today's transaction fee is $1-4 (absolute, never a %). So yeah the system isn't really made for buying a sandwich if you're doing direct transactions.
To bring it back to crypto trading, it's interesting to see the differences among the currencies. Do you all make bets based on how each one works? Some do lend themselves better to instant payment for example.
The transaction fees are definitely an issue for small purchases... although the correct analogue to BTC is the wire transfer right now, and you wouldn't use a wire transfer for small purchases, either. The Lightning network is supposed to help fix this, but it's a little too mind boggling for me. Either way, don't get too obsessed with instant payments or high fees... BTC is still in its infancy (it's not even all mined out yet!), and there's lots of room for inventions that can speed up payments or reduce fees.
paging @primesuspect for this one - I want to hear his strategy.
My strategy is to chart the ratio of my currencies on a per BTC basis - I have an 'equilibrium' point every day that I'm predicting based on the history (and I won't lie, it's more guesswork than not), and then I look for any news articles that might be causing people to act rashly... and try to mix that all together to capitalize on stuff. Example: I feel like ETH/BTC tends to fluctuate between 11.5 and 9.5, so one day when I saw it spike really hard down to 8.9... I didn't believe it was going to stay that pricey, so, I sold ETH into BTC. Sometimes I'm right, sometimes I'm wrong, but it's pretty fun!
I don't MAKE trades based on which technology I like better - but I did choose the things I trade INTO based on the technologies I like.