Quote from: kripke on April 24, 2011, 02:49:34 AM

I'm ill-informed and completely new to this so please forgive my impertinence.

From my very limited understanding of what Bitcoin mining involves my first impression is that it seems a colossal waste of energy.

My understanding is that a computer mines bitcoins by solving mathematical puzzles whose difficulty increases as time goes on. These puzzles are pointless in that they do not pertain to anything in the real world. Completing these puzzles does not achieve anything unlike something like Folding@Home or SETI.

Electricity is used to power computers to complete these puzzles. All of the overheads (energy, hardware, time, effort etc) are less than the price fetched by the resultant bitcoins so for some people it makes sense to devote their computer or server farm's time to mining them. This much is crystal clear.

It seems to me though that this is very strange exercise. Nothing real is being produced by the huge amount of electricity used to mine these bitcoins. Something virtual, certainly, but it seems odd that something virtual should have to have so much real tangible energy spent on it to imbue it with value.

I understand that there has to be some sort of labour process (machine rather than human in this case) for the Bitcoin to have any intrinsic value, but this does seem to be quite an energy inefficient way to go about it.

I think I have probably misunderstood something quite fundamental. I'm not trying to criticise this community but rather just understand exactly how this Bitcoin mining works and see what I've failed to understand.

I think you are missing the point. Things have value because humans perceive them to have value.

The so called "real" money at your bank are also just ones and zeros on a computer. HOwever, it's much worse than bitcoin. The only way new USD or Sterling can by created is for the Government or individuals to borrow their own currency into existence from international banks.

Thus the private banking cartel is able to create money from nothing and profit from the interest thereof. Indeed the whole income tax system it can be agued is a necessary evil to fund the government bond market. This is where *your* (and your children's) future income and wealth are pledged as collateral for government loans.

In our system money IS debt, and the only way to pay off the debt is to issue more money which means even more debt. This is why in the UK despite having grown our GDP by 400% since 1980 we are being asked to work *even longer* before we retire. This is because any increase in GDP is met by a concomitant increase in debt. If you think this is insane...it's because it is.

Bitcoin is not just some scam to make money, it is also an attempt to take away the power of corrupt central banks and governments. Bitcoins are debt free money that *the banks can't control*...think of it as daylight spilling onto the vampire squid of banking.

check out money as debt on youtube for an interesting look at fractional reserve banking.