Bitcoin Lovers

Bitcoin is a relatively new form of currency that is just beginning to hit the mainstream, but many people still don’t understand why they should make the effort to use it. Here are ten good reasons why it’s worth taking the time to get involved in this virtual currency.

When you pay a cheque from another bank into your bank, the bank will often hold that money for several days, because it can’t trust that the funds are really there. Similarly, international wire transfers can take a relatively long time.

Bitcoin transactions are generally far faster. Transactions can be instantaneous if they are “zero-confirmation” transactions, meaning that the merchant takes on the risk of accepting a transaction that hasn’t yet been confirmed by the block chain. Or, they can take around ten minutes if a merchant requires the transaction to be confirmed. That’s far faster than any inter-bank transfer.

What’s that you say? Your credit card transactions are instantaneous too? Well, that’s true. But your merchant (and possibly you) pay for that privilege. Some merchants will charge a fee for debit card transactions too, as they have to pay a ‘swipe fee’ for fulfilling them. Bitcoin transaction fees are minimal, or in many cases, free.

Remember what happened in Cyprus in March 2013? The Central Bank decided to take back uninsured deposits larger than $100,000 to help recapitalize itself, causing huge unrest in the local population. It originally wanted to take a percentage of deposits below that figure, eating directly into family savings.

That can’t happen with bitcoins. Because the currency is decentralized, you own it. No central authority has control, and so a bank can’t take it away from you. For those who find their trust in the traditional banking system eroding, that’s a big benefit.

Once bitcoins have been sent, they’re gone. A person who has sent bitcoins cannot try to retrieve them without the recipient’s consent. This makes it difficult to commit the kind of fraud that we often see with credit cards, in which people make a purchase and then contact the credit card company to make a chargeback, effectively reversing the transaction.

This is a big one. Most online purchases today are made via credit cards, but in the twenties and thirties, when the first precursors to credit cards appeared, the Internet hadn’t been conceived. Credit cards were never supposed to be used online. They are insecure. Online forms require you to enter all your secret information (the credit card number, expiry date, and CSV number) into a web form. It would be more difficult to think of a less secure way to do business. This is why credit card numbers keep being stolen.

Bitcoin transactions don’t require you to give up any secret information. Instead, they use two keys: a public key, and a private one. Anyone can see the public key (which is actually your bitcoin address) but your private key is secret. When you send a bitcoin, you ‘sign’ the transaction by combining your public and private keys together, and applying a mathematical function to them. This creates a certificate that proves the transaction came from you. As long as you don’t do anything silly like publishing your private key for everyone to see, you’re safe.

The problem with regular fiat currency is that governments can print as much of it as they like, and they frequently do. If there are not enough US dollars to pay off the national debt, then the Federal Reserve can simply print more. This causes the value of a currency to decrease. If you suddenly double the number of dollars in circulation, then that means there are two dollars where before there was only one. Someone who had been selling a chocolate bar for a dollar will have to double the price to make it worth the same as it was before, because a dollar suddenly has only half its value.

This is called inflation, and it causes the price of goods and services to increase. Inflation can be difficult to control, and can decrease people’s buying power.

Bitcoin was designed to have a maximum number of coins. Only 21 million will ever be created under the original specification. This means that after that, the number of bitcoins won’t grow, so inflation won’t be a problem. In fact, deflation – where the price of goods and services falls – is more of a problem for bitcoin than inflation.

Sometimes, we don’t want people knowing what we have purchased. Bitcoin is a relatively private currency. On the one hand, it is transparent; everyone knows how much a particular bitcoin address holds in transactions. They know where those transactions came from, and where they’re sent.

On the other hand, unlike conventional bank accounts, no one knows who holds a particular bitcoin address. It’s like having a clear plastic wallet with no visible owner. Everyone can look inside it, but no one knows whose it is.

In a conventional banking system, you have to trust people to handle your money properly along the way. You have to trust the bank, for example. You might have to trust a third-party payment processor. You’ll often have to trust the merchant, too. These organizations demand important, sensitive pieces of information from you.

Because bitcoin is entirely decentralized, you need trust no one when using it. When you send a transaction, it is digitally signed, and secure. An unknown miner will verify it, and then the transaction is completed. The merchant need not even know who you are, unless you’ve arranged to tell them.

There is no other electronic cash system in which your account isn’t owned by someone else. Take PayPal, for example: if the company decides for some reason that your account has been misused, it has the power to freeze all of the assets held in the account, without consulting you. It is then up to you to jump through whatever hoops necessary to get it cleared so that you can access your funds. With bitcoin, you own the private key and the corresponding public key that makes up a bitcoin address. No one can take that away from you (unless you lose it yourself).

In spite of the amazing advances in home office colour printing technology, most national governments take a fairly dim view of you producing your own money. With bitcoin, however, it is encouraged. You can certainly buy bitcoins on the open market, but you can also mine your own if you have enough computing power. After covering your initial investment in equipment and electricity, mining bitcoins is akin to producing money out of thin air. And who wouldn’t like their computer to earn them money while they sleep?

Source : coindesk.com

At first, miners could only use their central processing unit (CPU) to mine, but this was not very power efficient and bogged down the system resources of the host computer. Miners then moved on to using the graphical processing unit (GPU) in computer graphics cards as they were able to hash data much faster than CPU's, around 50x to 100x, and this required less power. Eventually, the Bitcoin mining industry recognized the need for special equipment and this led to the development of field-programmable gate arrays (FPGA's). These FPGA's were specialized machines that repurposed existing technology and attached to computers using a USB connection while using much less power during mining than GPU's and helped to free up system resources on their host computers.

Today, application-specific integrated circuit (ASIC) miners are the new wave in the evolution of mining Bitcoin. These ASIC machines mine at unprecedented speeds, from 5GH/s to 1,500 GH/s, while consuming much less power than FPGA or GPU mining rigs, but are only available from a few manufacturers such as Butterfly Labs and Avalon at this time.

Butterfly Labs produces the most cost-efficient and power-efficient mining hardware in the industry available for both entry-level miners and experienced miners alike. Their smallest model, the Bitforce ASIC SC 5GH/s model is priced at $274 and is a great choice for those just getting started mining Bitcoin because they offer greater speed and reduced power consumption as opposed to GPU and FPGA mining. Additionally, Butterfly Labs offers a vast array of ASIC miners that include a 25GH/s, 50GH/s, and an unprecedented 1,500 GH/s model.
For more information go to: www.butterflylabs.com.

Avalon also produces ASIC miners that run at speeds greater than 65 GH/s and use a modular case system that allows users to add another 20 GH/s at a later time. However, they release their machines in batches and their machines use more power than the Butterfly Labs machines running at similar speeds. At this time, all ASIC miners produced by Avalon have been reserved and there is no announcement on future availability.
For more information go to: http://launch.avalon-asics.com/#home

 Source : Bitcoinmining.com

While the actual process of mining is handled by the mining hardware itself, special software is needed to connect your miners to the blockchain and your mining pool as well, if you are part of a mining pool. The software delivers the work to the miners and receives the completed work from the miners and relays that information back to the blockchain and your mining pool. The software can run on almost any operating system, such as OSX, Windows, Linux, and has even been ported to work on a Raspberry Pi with some modifications for drivers depending on your mining setup.

Not only does the software relay the input and output of your miners to the blockchain, but it also monitors them and displays general statistics such as the temperature, hashrate, fan speed, and average speed of the miner.

There are a few different types of mining software out there and each have their own advantages and disadvantages, so be sure to read up on the various mining software out there.

A user can have one or more bitcoin addresses from which bitcoins are sent or received using either a website or downloaded software often called a "wallet" like a digital wallet. Users can obtain new bitcoin addresses as needed. Many bitcoin services provide addresses tied to a user's individual account to hold funds on the user's behalf.

The matching private key is often stored in a digital wallet or mobile device and protected by a password or other means of authentication. Each bitcoin transaction is signed by the private key of the user initiating the transaction.

Various vendors offer banknotes and coins denominated in bitcoins; what is sold is really a bitcoin private key as part of the coin or banknote. Usually, a seal has to be broken to access the key, while the receiving address remains visible on the outside so that the balance can be verified.

The Bitcoin network protocol operates to provide solutions to the problems associated with creating a decentralized currency and a peer-to-peer payment network. Key among them is the use of a blockchain to achieve consensus and to solve the double-spending problem.

A bitcoin is defined by a chain of digitally-signed transactions that began with its creation as a block reward through bitcoin mining. Each owner transfers bitcoins to the next by digitally signing them over to the next owner in a Bitcoin transaction. A payee can then verify each previous transaction to verify the chain of ownership.

The network timestamps transactions by including them in blocks that form an ongoing chain called the blockchain. Such blocks cannot be changed without redoing the work that was required to create each block since the modified block. The longest chain serves not only as proof of the sequence of events but also records that this sequence of events was verified by a majority of the Bitcoin network's computing power. As long as a majority of computing power is controlled by nodes that are not cooperating to attack the network, they will generate the longest chain of records and outpace attackers.

The network itself requires minimal structure to share transactions. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will. Upon reconnection, a node will download and verify new blocks from other nodes to complete its local copy of the blockchain.

Source : Wikipedia

Bitcoin is a cryptocurrency where the creation and transfer of bitcoins is based on an open-source cryptographic protocol that is independent of any central authority.Bitcoins can be transferred through a computer or smartphone without an intermediate financial institution.The concept was introduced in a 2008 paper by a pseudonymous developer known only as "Satoshi Nakamoto", who called it a peer-to-peer, electronic cash system.

The processing of Bitcoin transactions is secured by servers called bitcoin miners. These servers communicate over an internet-based network and confirm transactions by adding them to a ledger which is updated and archived periodically using peer-to-peer filesharing technology.In addition to archiving transactions, each new ledger update creates some newly minted bitcoins. The number of new bitcoins created in each update is halved every 4 years until the year 2140 when this number will round down to zero. At that time no more bitcoins will be added into circulation and the total number of bitcoins will have reached a maximum of 21 million bitcoins.To accommodate this limit, each bitcoin is subdivided down to eight decimal places; forming 100 million smaller units called satoshis.

In August 2013 Germany's Finance Ministry subsumed Bitcoins under the term "unit of account"—a financial instrument—though not as e-money or a functional currency.Although bitcoin is promoted as a digital currency, many commentators have criticized bitcoin's volatile exchange rate, relatively inflexible supply, high risk of loss, and minimal use in trade.

Source : Wikipedia