How exactly did Bitcoin get dug up？ After reading the second, I understand

Recently, with the global out-of-stock of graphics cards caused by mining, many netizens began to pay attention to Bitcoin, but they knew little about where Bitcoin was. Although there are many popular science articles about Bitcoin on the Internet, it is difficult to understand the true meaning of Bitcoin without relevant financial knowledge.

Therefore, today, the author will try to introduce the principle of Bitcoin and why Bitcoin generates value in the most straightforward words, so that everyone can understand this "virtual payment system" more intuitively.

Super mine

1. Origin of Bitcoin

To fully understand the origin of Bitcoin, we have to mention the existing financial system.

As we all know, money itself has no value. At first, human beings traded by barter, but there were many inconveniences, so it was difficult to exchange what they needed. So money came into being. Through the intermediary of money, different items can be priced according to their rarity, which simplifies the transaction process.

Although currency trading has many advantages, it also has a fatal disadvantage, which is centralization. 100% of the existing currency in the world is issued or abolished by the national central bank, and ordinary people cannot participate in currency issuance or central bank accounts. If the central bank keeps issuing money, it will dilute the money in people’s hands and reduce the purchasing power of money.

This is by no means alarmist. Such incidents have happened in some countries in the world.

For example, in Zimbabwe, in recent years, the government has issued a large number of excessive currencies, which led to the near collapse of Zimbabwe’s economy, and finally it had to introduce the US dollar into the local legal tender. Now Zimbabwean economists are considering alternatives to bitcoin.

For example, in India, on November 8, 2016, Indian officials suddenly announced that banknotes with denominations of 500 rupees (worth 7 US dollars) and 1,000 rupees (worth 15 US dollars) were abolished in the early hours of the 9 th, which caused 85% of the property in the hands of Indian people to instantly become waste paper.

In order to solve this problem, Satoshi Nakamoto, the father of Bitcoin, put forward the concept of decentralization in 2009, that is to say, issuing money on open source software and building a P2P network on it to build a decentralized payment system. Many readers see this and don’t understand. What is decentralization? What is P2P network?

Let’s take the popular WeChat payment in China as an example. Although WeChat and Bitcoin are both virtual payment systems, every transaction of WeChat must be conducted in the banking system, and the bank is the center of WeChat payment. Decentralization is peer-to-peer transaction, which is not affected by any other factors.

P2P network is better understood. P2P is the abbreviation of peer-to-peer, that is, "partner-to-partner", also known as peer-to-peer network. For example, if you download a movie through iQiyi, you will transfer the movie from the iQiyi server to your computer. And if you download a movie from P2P resources, it is downloaded from other P2P users’ computers that already have this movie resource, and if other P2P users need this resource, they can also download it from your computer.

Bitcoin is like this movie.It does not exist in the central server like the central bank, but in hundreds of millions of computers in the world. Since the issue, theoretically, no one can control the number of bitcoins, nor can it artificially manipulate the currency value by manufacturing a large number of bitcoins.The design based on cryptography can make bitcoin only be transferred or paid by the real owner, and the security is excellent.

However, Bitcoin is not perfect, and there is a fatal flaw that prevents it from becoming legal tender, which we will talk about below.

2. How is Bitcoin produced?

First of all, let’s take a look at the "blockchain". The core principle of Bitcoin is "blockchain". Each block corresponds to a bill. Linking all blocks is a blockchain, and any transaction information and transfer records are recorded in the blockchain. It should be noted that the blockchain exists throughout the Internet, so any bitcoin holder is not worried about the loss of Bitcoin.

Every other time, the Bitcoin system will generate a random code on the system node, and all computers in the Internet can look for this code. Whoever finds this code will generate a block and then get a Bitcoin. This process is what people often say. Mining.Calculating this random code requires a lot of GPU operations, so miners purchase massive graphics cards to get bitcoin profits faster, which is also an important reason for the recent shortage of graphics cards.

Some people say that there will be more and more bitcoins, and finally there will be no value at all? Of course, Satoshi Nakamoto also thought of this problem. There is another mechanism in the Bitcoin system:That is, the total amount of Bitcoin is limited. In the first four years, the total amount will generate 10.5 million BTC, and the output will be halved every four years. In the fourth to eighth years, it will generate 5.25 million BTC, and in the eighth to twelfth years, it will only generate 2.625 million BTC, and so on. In the end,The total amount of bitcoin generated is close to 21 million BTC.

At present, a bitcoin is divided into eight decimal places based on the current data structure, that is, 0.00000001BTC, and the smallest unit for miners to dig bitcoin is 0.00000001BTC.

Generally speaking, Bitcoin is like a golden mountain with a total of 21 million gold coins. To get it, players need to use the computing power of computers to calculate a set of numbers that conform to specific laws according to existing algorithms.

Of course, these math problems are becoming more and more difficult with the increase of existing bitcoin.

3. Why can Bitcoin generate value? What are the disadvantages?

In fact, this question itself is wrong. As mentioned above, any currency itself has no value. Only a sufficient number of people believe in currency can make it have "value", and this "value" is quoted. But now many people believe that bitcoin can bring them wealth, so bitcoin has produced "value".

Let’s review the characteristics of Bitcoin.

1. The total amount is limited, only 21 million BTC.

2. Anyone can issue Bitcoin, but it is more and more difficult to issue it.

3. Compared with the central bank currency, it is safer and almost impossible to be stolen.

4. The transaction process is completely anonymous and cannot be traced.

Based on the above advantages, more and more people are willing to convert their wealth into equivalent bitcoin, and at the same time cancel the legal tender representation of these wealth, so the price of bitcoin has started to rise continuously. The more people believe in Bitcoin, the fiercer the price rise of Bitcoin will be. Of course, the incident that Bitcoin soared 21,000 yuan and fell to 17,000 yuan a few days ago belongs to speculation. The long-term advantage of Bitcoin cannot be influenced by speculation. In the end, Bitcoin will be relatively stable in the total wealth it really represents, but at this stage, the price fluctuation of Bitcoin is still too intense.

Judging from the performance of Bitcoin at this stage, Bitcoin has a low liquidity level and high liquidity risk, so it can’t effectively perform the three basic functions of currency, such as trading medium, pricing unit and value storage, and can’t become a real currency.

Coupled with the limited number of bitcoins, deflation will become more and more serious. Imagine if you replace the global currency with Bitcoin. If a person owns 10,500,000 BTC, he will own half of the world’s property in the years to come! And pay attention to this wealth is permanent. Therefore, it is completely impossible for Bitcoin to completely replace money.

4, mining income analysis

Finally, let’s talk about the analysis of mining income. The mining cost mainly includes replacement: mining machine (or ordinary home computer), electricity fee and house rent. Because the computing power of Bitcoin is too complicated, the computer work in ZOL evaluation room may not progress for several months, so here we take — — Taking the mining of Ethereum (a virtual currency similar to Bitcoin) as an example, we conducted an experiment on the mining income of mainstream graphics cards for everyone.

For mining, the graphics card is the core, and the rest are auxiliary accessories. Considering that everyone uses different platforms, the mining cost considered here only includes the price of the graphics card and the electricity fee. For the electricity fee, we refer to the second step of Beijing’s ladder electricity price of 0.5383 yuan/kWh.

The specific test results are as follows:

【Radeon RX 580 graphics card】

Power consumption of the whole machine: 243W W.

Computational force: 22.4M

Graphics card price: 1999 yuan

Number of ETH excavations every 24 hours: 0.015

Revenue generated every 24 hours: 24.48 yuan.

Estimated return time: 81.66 days.

【Radeon RX 470 graphics card】

Power consumption of the whole machine: 159W W.

Computational force: 24.3M

Graphics card price: 1599 yuan

Number of ETH excavations every 24 hours: 0.017

Revenue generated every 24 hours: 27.9 yuan

Estimated return time: 57.31 days.

【Radeon RX 480 graphics card】

Power consumption of the whole machine: 171W W.

Computational force: 24.4M

Graphics card price: 1999 yuan

Number of ETH excavations every 24 hours: 0.017

Revenue generated every 24 hours: 27.87 yuan.

Estimated return time: 71.73 days.

【Radeon RX 560 graphics card】

Power consumption of whole machine: 97W

Computational power: 9.2

Graphics card price: 999 yuan

Number of ETH excavations every 24 hours: 0.006

Revenue generated every 24 hours: 10.09 yuan.

Estimated return time: 99.01 days.

【GeForce GTX 1060 graphics card】

Power consumption of the whole machine: 175W

Computational power: 22M

Graphics card price: 1999 yuan

Number of ETH excavations every 24 hours: 0.015

Revenue generated every 24 hours: 24.86 yuan.

Estimated return time: 80.41 days.

【GeForce GTX 1070 graphics card】

Power consumption of the whole machine: 220W

Computational force: 25.7M

Graphics card price: 2899 yuan

Number of ETH excavations every 24 hours: 0.017

Revenue generated every 24 hours: 28.84 yuan.

Estimated return time: 100.52 days.

To sum up the data, we can find that Radeon RX 470 graphics card is the fastest, only taking 57.31 days. GeForce GTX 1070 has the worst overall efficiency, and it takes 100.52 days to return to its original cost.

Please note, however, that the return time of this test is only calculated by the value of the graphics card, and the platform cost and site cost are not calculated. There are many sudden situations in the actual operation of the mining machine, such as downtime, hardware damage, power failure and so on. Therefore, readers who intend to mine should also carefully consider that mining is difficult to make a profit without very low-cost electricity.

Write at the end:

With the orderly implementation of cashless society, paper money will inevitably disappear in the long river of history with the passage of time. Digital currency in the future is believed to be similar to Bitcoin, but it is by no means a limited supply.

Instead, when the ability of human beings to produce wealth can be completely matched by the computing power of computers, the issuing speed of electronic money is directly proportional to the computing speed of computers or slightly exceeds a certain ratio to create moderate inflation. In the future, mining will also create value instead of wasting electricity.

In the end, digital currency achieved the match between the slight change of productivity and the difficulty of computing power, which may be the final form of human currency!