Civil Services Mains 2020 Results: In or Out ? Way ahead, gratitude and Pain

DeekshitaPsaid

necromancersaid

@DeekshitaP I’ll try to explain with an example. Bitcoin, it’s essentially digital gold. There will be only 21 million bitcoins ever produced, so a finite amount and it’s also ‘mined’, albeit digitally. So think of it like that, digital gold. 

If you want it, you either buy it using other currencies at the value it is trading, exactly like gold. Or you mine it. Every 10 minutes or so one block of bitcoin is released. If you’ve played Minecraft, it’s like every ~10 minutes one diamond block is spawned somewhere in the map. You have to find it. If you have fast hands, you can mine quicker, if you have more hands to help, even faster. But the problem is, you have many more people competing for it along with you. 

How it’s actually mined is, a hash problem is generated and you have to solve it. Essentially guess a 64 digit number. A conventional computer could do it since a block is just 1MB, but it takes time. And you have to be fast. So people buy GPUs and set up big rigs so that their probability of finding it increases. Whoever solves the problem gets a block. That’s why you’ll find huge rigs in countries like Iran (essentially cut off from the world market due to dollar blockade). You don’t have the conventional regulations applying on this so you can (almost) freely use it.

Now you can see, there’s huge demand for this ‘digital gold’. Now the rest is just how the market works. Demand and supply. Limited supply, huge demand, so the price goes up. 

I’d say it’s a system of trust and verification. Since in the mining part, you’re essentially verifying other transactions. Trust, because essentially it’s just trust among the world that yeah bitcoin has value. Exactly like gold. Gold doesn’t exactly have anything that makes it so valuable over any other commodity. Demand and supply yeah, but it’s just mutual trust in the world that yeah we’ve assigned a value to this. 

This is how I understand it and hope I’ve cleared it for you too

Thanks a lot! This was actually explained really simply :)