I am sick to death of people responding to my question with logistics of "how to" mine data or just that you are solving "mathematical concepts" and "algorithms." What I do understand is this - some "organization" seems to think it is worth A LOT of money to have the public data mine for them (i.e.: bit coin payments for solving data). My question is what is this data used for, who is using it, and why? No one seems to know and anytime I've encountered a secret this well hidden, it usually is nefarious under the surface.

  • Just to give an example for those sheeple who gave me negative feedback for asking a question - if some stranger came up to you and asked you to deliver a package for $1,000 to another stranger, and when asked what was in the package, just replied with "stuff - it doesn't matter" would you deliver it? Who knows what you're doing or what the reprocussions are? This "blind trust" mentality is disconcerting to me in an age when rampant identity theft, privacy infringements, and hacking are on the rise Aug 19 '14 at 1:03
  • I don't see how your package delivery analogy relates to your question. Are you asking how do you know the solution found isn't useful for something else?
    – greatwolf
    Aug 19 '14 at 5:43
  • 3
    Undid the downvote: found the question legit, though a bit conspiranoic. The software is open source, so to keep with your analogy the package you're asked to deliver is made of transparent plastic so you can clearly see to the content: paper sheets with long excerpts from accounting books, listing inputs and outputs plus a final set of seemingly-random numbers. Plus, from time to time, the recipient just throws it into the garbage bin right away saying "thanks, but too late" (and then refuses to pay you, the darned!)
    – Joe Pineda
    Aug 19 '14 at 22:37
  • Good analogy Joe Aug 26 '14 at 1:57

The algorithm of choice is two rounds of SHA256, which has completely arbitrary outputs and a massively unsearchable output space. To this end, there is no data mining or valuable calculation actually being done. Here's what's really happening:

Every so often, the rules of the Bitcoin protocol set a difficulty number. This number sets a sort of target for a value miners are looking for. Since the output of SHA256 is essentially random with respect to its input, miners are all just looking for some random value in a given field that makes SHA256(SHA256(x)) return a value within a specified range. Such a value is considered a "solution" to the mining problem, but really it's less like math and more like throwing darts while blindfolded until you hit the bullseye. The changing difficulty number ensures that block solutions will be found at regular intervals no matter how many people are mining.

This solution does not hold any valuable data or information of any kind, except that it proves that someone somewhere had to have done a lot of work to find a value that produced the desired output. This also means that for someone else to fake that data they would also have to do a lot of work.

Since each block of data references the block before it, these hashes - and the work it took to create them - also stack up, meaning that older data would require a TREMENDOUS amount of computational power to falsify, since you'd also have to falsify every block that came after it, faster than the entire network combined is solving new blocks. This is the entire underlying security mechanism of Bitcoin: Data in the Blockchain represents a consensus and this is the way a network of people with no other trust mechanism reach a consensus.

This is likely why you've had such a hard time finding an answer to your question: There isn't anyone you're solving algorithms for and the only "why" is "because it's hard work, and fraudsters would have to do more hard work than everyone else combined to lie to the network."

Finally, as to the "someone thinks this is worth a lot of money" - there are two sources of mining income. The first is transaction fees paid by those whose transactions are in the mined blocks, which seems pretty reasonable given that the miners' work is the only reason that data will be trustable. The second is the block reward.

One of the more difficult problems to solve when decentralizing a currency is deciding who gets the initial run of the stuff. In this case, it was decided that the miners who are doing valuable work to secure the network should receive that initial issuance, in the form of a "block reward." Every so often this reward is cut in half and eventually it rounds down to zero. At that point all 21 million bitcoins that will ever exist will have been mined and the only reward miners will continue to receive is the transaction fee.

  • I appreciate your information and am really trying to digest and consider it - but I think I'm just too much of a skeptic to think the process is futile (other than the intrinsic labor involved) and the process of generating the currency is essentially valueless. Are you able to tell me what source has helped you determine that there is no underlying purpose to the data - especially since the algorithm SHA256 was designed by the NSA and published by NIST in 2001? Aug 19 '14 at 1:26
  • Just to validate my claim, the NSA holds the U.S. patent to SHA256 - Patent #6829355 under the title of Lily Glenn. Reminder here, the original name for the internet was Darpanet - so it sounds to me like bit coin miners are doing authenticity certification for the U.S. government. Aug 19 '14 at 1:32
  • The code is open source. The chance of someone not noticing purposeful data patterns as your query suggests is minuscule and doing could possibly allow profits of ~$13000 per 10 minutes; great incentive to investigate. Let's say all possible hashes (guesses) were recorded from miners though. That data only proves how secure and predictable SHA256 is as an encryption protocol. The difficulty (number of guesses to "win") has been increased since BTC's inception and is done so very simply. SHA256 has always held up to scrutiny. Aug 19 '14 at 5:24
  • 1
    It is not the "process of generating the currency." It is the process of securing the network. It was a choice by the designers of the software to make the initial issuance of the currency to those who were securing the network, but aside from that choice the two are unrelated. Mining is nothing more than doing a lot of work so that others have to do more work in order to cheat, plain and simple. The monetary side was simply psychological - an incentive to do the work. Aug 21 '14 at 2:39
  • True. It's network security but I felt this instance needed to aim at the monetary side since OP's query used the $1000 package analogy Aug 26 '14 at 1:59

The fact that all those hash computations (and the electricity burned in them!) serve no other useful purpose than securing the Bitcoin network is well-known, it's actually one of main criticisms of this crypto-currency (and its derivatives who use the same concept of proof-of-work).

Paul Krugmanhas decried it, ecologists have decried it, others have decried it as well. So far, only miners of Primecoin (and its derivatives) do work with actual value outside securing the network (i.e. finding long chains of prime numbers). Now you can go doubly paranoid trying to find whom you're finding long prime chains for, and for what nefarious purpose...

(Actually, this research benefits the NSA, CIA, MOSSAD, DGSE et al. just as much as your college's math department).

There are some coins coming, such as Permacoin and Maidsafecoin, which actually reward you for storing data - thereby converting your harddrive into part of a distributed, redundant cloud storage.

Triple conspiranoid points if you can guess whose information you're preserving, and what it may be: Wikipedia backups? Unauthorized government leaks? Info. gathered by Big Brother from unsuspecting innocent citizens? Detailed terrorist plans? Bomb designs? Child porn? 3D-printable guns? All of the above???

  • I don't think, given our current climate, that OP's query is unwarranted. Do you? Aug 20 '14 at 3:13
  • @AussieCryptocurrency in a way, yes it is. By definition, you cannot prove you did not do anything, you can only prove you did do something. You may give alibies, but if I question your original purpose, I may question your alibies as well, and your witnesses, their alibies, etc. ad nauseam. No amount of evidence is enough to convince he who from the very beginning has made up his mind about something. But you do can point out plenty of other, very smart people see things the same way - which isn't his'. Theoretically you do can outsmart everyone else, though very rare it'd be...
    – Joe Pineda
    Aug 20 '14 at 16:49
  • I know what you're getting at. It's almost like creationists decrying evolution. But let's not go there. I think your analogy used earlier was perfect. We've yet to hear back from OP though... Aug 26 '14 at 2:02

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