Posts tagged bitcoin

Genjix Descibes The “Work” That Bitcoin Mining Performs

A post by Amir Taaki (genjix) on Bitcoin Media (@BitcoinMedia) describes how and why bitcoin mining performs “work”.  Excerpts:

Another property of a good hash function is small changes in input lead to large changes in output. This makes it difficult (practically impossible) to reverse a hash function.

A bitcoin miner is constantly hashing a block to see if it passes the above check. If not then it slightly modifies the block and tries again. It keeps doing this until it finds a block that passes. A valid block has been found, and the miner will broadcast this block to the network.

A miner’s task is to make a block and keep modifying that block so that it produces a different hash, until that hash passes a [specific] test. 

Creating a block is not easy. It takes computational processor cycles. Ergo it takes electricity. Ergo it costs money. Creating a block usually has miniscule profit or even negative expected value. As more people mine and create blocks, the network drives up the difficulty squeezing out all the profit.

via bitcoinminer:Previous Posts

Alexander: Back in May 2011 I wrote about the idea of an inflationary bitcoin economy. Finally someone has implemented a very similar project. (… I’m assuming their phrase ‘negative interest’ means inflation. Do any [armchair] economists out there know if I’m wrong on this?)

Introducing The Occcu - 99% Unlike Bitcoin via bitcoin

A new complementary currency, the Occcu, falls under the category of a “basic-income currency” which is like a form of social security paid to all individuals.  About the only thingOcccu has in common with Bitcoin is that they both can be traded person-to-person online.

A promotional flyer for the Occcu describes it as “a fair global currency”.  To prevent hoarding the Occcu imposes “demurrage” (negative interest).  You’ll want to spend your Occcus right away as anything you don’t spend loses its value — 25% of any unspent balance after thirty days goes back to the community chest.

The currency can be spent from a mobile through the web interface.  Paper checks are available but simply act as a receipt for the payment recipient to hold until the sender manually enters the information at a later time once connectivity is available. 

The currency was introduced at the recent World Economic Forum in Davos.

The name Occcu comes from OCCupy-CUrrency, a currency that would be desirable to (some/many in) the Occupy movement.  Users registered with the Occcu.com website receive a chunk of the currency during sign-up and will receive the basic-incoome allotment monthly.  The Occcu website lets registered users view and place ads for trade, make payments and P2P transfers.

It is not apparent yet how counterfeiting will be prevented as currently a single individual can create multiple identities and receive the full basic-income for each.

There have been calls from some individuals for Bitcoin to be forked or to be superceded with an alternate blockchain to introduce features such as demurrage.  Many Bitcoiners are attracted to Bitcoin specifically because its current economic properties.   The the software could technically accommodate these changes, buy-in would need to come from these individuals as they hold the power to refuse to switch to software the devalues the currency they hold.

However just as Bitcoin was the catalyst for the conversation on various aspects of money the Occcu will likely cause further conversation as well.

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1.99 BTC, 1 BTC in bitbill form and 0.99 BTC in a mobile wallet.

Dwolla - $1 Million Per Day Transaction Volume (via bitcoin, Previous Posts)

The leading payment gateway allowing Bitcoiners in the U.S. to move funds to and from Bitcoin exchanges has reached a new milestone. Today Dwolla shared via a blog post that it is now processing $1 million dollars worth of transactions per day.

Dwolla’s CEO Ben Milne (@bpmilne) was interviewed for a story in Silicon Prarie News and in the video of that interview he shares his belief that the products coming out of Dwolla will, in five to ten years, be part of everyone’s daily life.  Referring to the next product to be released “I think noone sees this one coming.”

It was little over a month ago that Dwolla announced it had first reached $1 million per week and as the infographic for this post shows, Dwolla’s growth has “hockey sticked”.   With Dwolla being among the least expensive methods for transferring USD funds ($0.25 to send money) and the fact that those transfers are non-reversible (no chargebacks) it is used widely with Bicoin exchanges.  When Dwolla’s previous milestone was reached, Milne had commented “I can’t go a day without talking about [virtual currency] or being asked about it”.

There are now at least six market exchanges where Dwolla transfers are accepted:

• Bitcoin7
• Camp BX
• ExchangeBitcoins.com
• Intersango.us
• Mt. Gox
• Tradehill

There also are fixed-rate exchanges accepting Dwolla funds as well.  In addition, individual traders in the U.S. using the #bitcoin-otc marketplace and Bitmarket.eu OTC exchanges are mostly fond of Dwolla as well.

When there are complaints, generally these have to do with the amount of time that passes for new Dwolla customers after signup as the underlying ACH transaction take several days to complete.  Additionally, funds must be held in a Dwolla account in order to send instantly so even customers with verified accounts are often frustrated waiting on ACH transfers.

Dwolla’s acknowledges that clearing times for transactions between Dwolla and the banks are too long and is making progress with a method for resolving this.  Banks and credit unions with FiSync will allow transfers to clear instantly or at least on the same day, in many instances.  The trials have begun and at least one credit union has gone live with FISync..

Banks do already have same-day transfer wire transfer services however the fees and inconveniences for those mean they are not feasible for use by individual traders and consumers for transactions.  The industry is dabbling with a same-day ACH method but that appears to be gaining little traction.

These aim of these efforts is to provide low cost, non-reversible payments that clear nearly immediately.  This  is the reason Bitcoin has such a bright future.  When bitcoins are transferred, the transaction is instant, funds are available for spending within minutes and the fees for doing so are just a fraction of those charged by Dwolla even.

The ability to transact between bitcoins and funds from banks is crucial to Bitcoin’s success and without Dwolla, Bitcoin would not be where it is today.  It appears that without Bitcoin, Dwolla would likely not be where they are today either.  It is great to see them succeed.

I bought a bitbill today — the card will represent 1 BTC costs 1.45 BTC and will come in the mail sometime in the next few weeks. I did this because my bitcoins have doubled in value, and I don’t want to just sit on them. I distributed some BTC back into the economy through transaction fees by moving BTC across my computing devices (desktop, tablet, phone)

A visitor submitted a post to share this photo.

I’m somewhat confident that the bitcoin economy in its current form is going to be gone by the end of the year.

I don’t see how limiting the number of bitcoins in circulation to avoid inflation (only to bring on deflation) while giving out bitcoins in a manner that rewards those with the most (for lack of a better phrase) real-world capital is going to work. Sounds really regressive to me…

1. Why not “tax” users based on the number of transactions performed? The amount of distributed blockchain computing you are asked to do for the p2p network should be proportional to the amount you spend.
2. Why not allow companies to bid on CPU (or GPU, FPGA, XBOX, etc.) cycles? These companies could pay a Bitcoin Trust which pays out bitcoins to users who are willing to perform blockchain work or contract work (with these companies) in addition to their required tax.

Operated in a transparent p2p manner the Bitcoin Trust would serve as a distributed central bank that controls the value of this computation based e currency.

The bitcoin economy would still offer anonymity, 24-7 transactions. Payments would still be non-reversible. The decentralization aspect is weakened — as the Trust will need to maintain capital, sign contracts, etc. — although I see no reason that this couldn’t be decentralized somehow as well.

… More to come

Difficulty adjusts to 244,139, a 55% increase (Total network hashing: 1,747 Ghash/sec)

The recent difficulty threshold for generating bitcoins went from 157,426 to 244,139, representing a 55% increase in just under 10 days.  The difficulty readjusts every 2,016 blocks and today this happened when block 124,992 was reached.

The hashing strength of the entire Bitcoin network is now at least 1,747 Ghash/second using the new difficulty measurement.  Early calculations for the next adjustment indicate continued rapid growth however with nearly two weeks left before that happens there’s little certainty as to what level will be reached.  It is quite possible though that difficulty will increase another 30% or more, especially considering the current high levels in the BTC/USD market rate.

Supplies of certain models of GPU hardware desired by miners, such as the ATI Radeon HD 58XX and 59XX have sold out globally now that the manufacturer no longer produces them.  At the same time, supplies for the latest high-end graphics card, the AMD Radeon HD 6990 remain very tight.

Miners not using the high-end hardware, most of whom who already are in pools, are finding that their existing mining capacity yields less and less with each jump in difficulty.  The mining profitability level is high enough yet that few except for those running the most inefficient hardware will continue mining.

New capacity is coming not just from individuals entering mining and adding a second or third rig, but from those doing so commercially, including a recent rush of those wanting to raise equity to start commercial mining operations.

A higher total network hashing strength allows there to be greater trust that an attacker cannot control, exclude or modify the ordering of transactions processed as the result of mining activity.  But by some estimates, the Bitcoin network now has as much computing power as half of all the Top 500 Supercomputer projects combined.

Some in the Bitcoin community believe that “too much computational power is being expended to protect too little value”.  Whether or not any alternatives to Bitcon’s proof-of-work method would be successful however is a topic up for debate.

Mining difficulty lags price and has quite some distance to go yet before it catches up to the level after the market price rallied.  If the price stays elevated, or increases from here, GPU miners might face a threat from one or more of the capital-intensive FPGA and ASIC initialtives.

Until that time though, there’s another difficulty adjustment period or two for miners to continue reaping the rewards.

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When we say that a currency is backed up by gold, we mean that there’s a promise in place that you can exchange the currency for gold. In a sense, you could say that Bitcoin is “backed up” by the price tags of merchants – a price tag is a promise to exchange goods for a specified amount of currency.

I think I just wet myself. This project is the perfect blend of open source software, economics, and community engagement!

What is Bitcoin? The first digital currency that is completely distributed. The network is made up of users like yourself so no bank or payment processor is required between you and whoever you’re trading with. This decentralization is the basis for Bitcoin’s security and freedom. 

via ericmortensen

vruz: bitcoin not under the radar anymore. statedept taking notice for sure. whilst this is probably disruptive and an important threat to corporations/government plutocrats, I’m more interested in building an alternative worldwide internet without the tight grip of corporatist control.