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What is Bitcoin Cash? [The Ultimate Basic Beginners Gu >

Started by admin, Oct 15, 2019, 06:20 pm

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What is Bitcoin Cash? [The Ultimate Basic Beginners Gu >
Updated - February 26 2019.
TL;DR.
Bitcoin Cash is a hard-fork of Bitcoin. The fork happened in August 2017, after a bunch of Bitcoin's community members wanted to create a new protocol with larger block size. The original Bitcoin Cash blocks had an upper block size limit of 8 MB.
If you want to buy Bitcoin Cash quickly and easily with your credit card check out the Blockgeeks Exchange!
What is Bitcoin Cash?
Bitcoin Cash (BCH) is a cryptocurrency that was created on August 1, 2017, when a section of the Bitcoin community decided to fork away from the main protocol. Bitcoin has been riddled with a bunch scalability issues and according to these community members, the problem could be solved by just increasing the block size. After a long stand-off, they finally decided to create their own cryptocurrency with a block size that had an upper limit of 8 MB as opposed to the original 1 MB. According to them, the increased block-size will allow for more transactions to be processed.
We are not going to be telling you which side is right and which side is wrong, that is totally up to you. In this guide, we are going to be telling you about all the incidents that have led up to the creation of Bitcoin Cash. This is purely for educational purposes.
How do bitcoin transactions work?
Bitcoin was introduced by an unknown man/woman/group going by the pseudonym, Satoshi Nakamoto in their, now legendary, research paper "Bitcoin: A Peer-to-Peer Electronic Cash System". What bitcoin provided was a peer-to-peer decentralized, digital currency system. The entire system of bitcoin functions due to the work done by a group of people called "miners".
So what do these miners do? The two biggest activities that they do are:
Mining for blocks. Adding transactions to the blocks.
Mining for blocks.
All the miners use their computing power to look for new blocks to add to the blockchain. The process follows the "proof of work" protocol and once a new block has been discovered, the miners responsible for the discovery get a reward, currently set at 12.5 bitcoins (it is halved after every 210,000 blocks), however, this isn't the only incentive that the miners have.
Adding transactions to the blocks.
When a group of miners discover and mine a new a new block, they become temporary dictators of that block. Suppose Alice has to send 5 bitcoins to Bob, she isn't physically sending him any money, the miners have to actually add this transaction to the blocks in the chain and only then is this transaction deemed complete. In order to add these transactions to the blocks, the miners can charge a fee. If you want your transaction to be added quickly to these blocks, then you can give the miners a higher fee to "cut in line" so to speak.
For a transaction to be valid, it must be added to a block in the chain. However, this is when a problem arises, a block in the chain has a size limit of 1 mb and there are only so many transactions that can go at once. This was manageable before, but then something happened which made this a huge problem, bitcoin became famous!
The bitcoin scalability problem aka does size matter?
Yes, bitcoin became popular and with that came its own series of problems. In this graph you can see the number of transactions happening per month:
Image source: Wikipedia.
As you can see, the number of monthly transactions is only increasing and with the current 1mb block size limit, bitcoin can only handle 4.4 transactions per second. When bitcoin was first created, the developers put the 1mb size limit by design because they wanted to cut down on the spam transactions which may clog up the entire bitcoin network.
However, as the number of transactions increased by leaps and bounds, the rate at which the blocks filled up were increasing as well. More often than not, people actually had to wait till new blocks were created so that their transactions would go through. This created a backlog of transactions, in fact the only way to get your transactions prioritized is to pay a high enough transaction fee to attract and incentivize the miners to prioritize your transactions.
This introduced the "replace-by-fee" system. Basically, this is how it works. Suppose Alice is sending 5 bitcoins to Bob, but the transaction is not going through because of a backlog. She can't "delete" the transaction because bitcoins once spent can never come back. However, she can do another transaction of 5 bitcoins with Bob but this time with transaction fees which are high enough to incentivize the miners. As the miners put her transaction in the block, it will also overwrite the previous transaction and make it null and void.
While the "replace-by-fee" system is profitable for the miners, it is pretty inconvenient for users who may not be that well to do. In fact, here is a graph of the waiting time that a user will have to go through if they paid the minimum possible transaction fees:
Image courtesy: Business Insider.
If you pay the lowest possible transaction fees, then you will have to wait for a median time of 13 mins for your transaction to go through.
To repair this inconvenience, it was suggested that the block size should be increased from 1mb to 2mb. As simple as that suggestion sounds, it is not that easy to implement, and this has given rise to numerous debates and conflicts with team 1mb and team 2mb ready to go at each other with pitchforks. As already mentioned, we want to take a neutral stance in this whole debate and we would like to present the arguments made by both s >
Arguments against block size increase.
Miners will lose incentive because transaction fees will decrease: Since the block sizes will increase transactions will be easily inserted, which will significantly lower the transaction fees. There are fears that this may deincentivize the miners and they may move on to greener pastures. If the number of miners decrease then this will decrease the overall hashrate of bitcoin. Bitcoins shouldn't be used for everyday purposes: Some members of the community don't want bitcoin to be used for regular everyday transactions. These people feel that bitcoins have a higher purpose than just being regular everyday currency. It will split the community: A block size increase will inevitably cause a fork in the system which will make two parallel bitcoins and hence split the community in the process. This may destroy the harmony in the community. It will cause increased centralization: Since the network size will increase, the amount of processing power required to mine will increase as well. This will take out all the small mining pools and give mining powers exclusively to the large scale pools. This will in turn increase centralization which goes against the very essence of bitcoins.
Arguments for the block size increase.
Block size increase actually works to the miner's benefit: Increased block size will mean increase transactions per block which will in turn increase the amount of transaction fees that a miner may make from mining a block. Bitcoin needs to grow more and be more accessible for the "common man". If the block size doesn't change then there is a very real possibility that the transactions fees will go higher and higher. When that happens, the common man will never be able to use it and it will be used exclusively only by the rich and big corporations. That has never been the purpose of bitcoin. The changes won't happen all at once, they will gradually happen over time. The biggest fear that people have when it comes to the block size change is that too many things are going to be affected at the same time and that will cause major disruption. However, people who are "pro block size increase" think that that's an unfounded fear as most of the changes will be dealt with over a period of time. There is a lot of support for block size increase already and people who don't get with the times may get left behind.
In order to solve the scalability issues there were two suggestions made:
Before we go into any of them however, let's understand the fundamental difference between a soft fork and a hard fork. A fork is a condition whereby the state of the blockchain diverges into chains where a part of the network has a different perspective on the history of transactions than a different part of the network. That is basically what a fork is, it is a divergence in the perspective of the state of the blockchain.
What Is A Soft Fork?
Whenever a chain needs to be updated there are two ways of doing that: a soft fork or a hard fork. Think of soft fork as an update in the software which is backwards compatible. What does that mean? Suppose you are running MS Excel 2005 in your laptop and you want to open a spreadsheet built in MS Excel 2015, you can still open it because MS Excel 2015 is backwards compatible.
BUT, having said that there is a difference. All the updates that you can enjoy in the newer version won't be visible to you in the older version. Going back to our MS excel analogy again, suppose there is a feature which allows to put in GIFs in the spreadsheet in the 2015 version, you won't see those GIFs in the 2005 version. So basically, you will see all text but won't see the GIF.
What Is A Hard Fork?
The primary difference between a soft fork and hard fork is that it is not backwards compatible. Once it is utilized there is absolutely no going back whatsoever. If you do not join the upgraded version of the blockchain then you do not get access to any of the new updates or interact with users of the new system whatsoever. Think Playstation 3 and Playstation 4. You can't play PS3 games in PS4 and you can't play PS4 games in PS3.
Andreas Antonopoulos describes the difference between hard and soft fork like this: If a vegetarian restaurant would choose to add pork to their menu it would be considered to be a hard fork. if they would decide to add vegan dishes, everyone who is vegetarian could still eat vegan, you don't have to be vegan to eat there, you could still be vegetarian to eat there and meat eaters could eat there too so that's a soft fork.
However, for any major changes to happen in bitcoin, the system needs to come to a consensus. So, how does a decentralized economy come to an agreement upon anything? Right now the two biggest ways that is achieved are:
Miner Activated: Basically changes that are voted on by miners. User Activated.: Changes that are voted on by people with active nodes.
Before we go on any further, we need to understand what Segwit is.
What is segwit?
We won't go very deep into what segwit is but in order to get why bitcoin cash came about, it is important to have an >
When you closely examine a block, this is what it looks like:
Image Courtesy: Riaz Faride.
There is the block header of course which has 6 elements in it, namely:
Version. Previous block hash. Transaction merkle roots. Epoch time stamp. Difficulty target. Nonce.
And along with the block header there is the body, and the body is full of transactions details. So, what does a bitcoin transaction consist of? Any transaction consists of 3 elements:
The sender details which is the input. The receiver details i.e. the output. The digital signature.
The digital signature is extremely important because it is what verifies whether the sender actually has the required amount of funds needed to get the transaction done or not. As you can see in the diagram above, it is part of the input data. Now, while this is all very important data there is a big big problem with it. It takes up way too much space. Space that already is in limited availability thanks to the 1 mb block size. In fact, the signature accounts for nearly 65% of the space taken by a transaction!
Dr. Peter Wuille has come up with a solution for this, he calls it Segregated Witness aka Segwit. This is what will happen once segwit is activated, all the sender and receiver details will go inside the main block, however, the signatures will go into a new block called the "Extended Block".
So what this will do is that it will create more space in the blocks for more transactions. Now that you have a very basic understanding of what segwit is, let's checkout its pros and cons.
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What are the pros and cons of segwit?
Pros of segwit:
Increases the amount of transactions that a block can take. Decreases transaction fees. Reduces the size of each individual transaction. Transactions can now be confirmed faster because the waiting time will decrease. Helps in the scalability of bitcoin. Since the number of transactions in each block will increase, it may increase the total overall fees that a miner may collect.
Cons of segwit:
Miners will now get lesser transaction fees for each individual transaction. The implementation is complex and all the wallets will need to implement segwit themselves. There is a big chance that they may not get it right the first time. It will significantly increase the usage of resources since the capacity, transactions, bandwidth everything will increase.
When the developers built SegWit they added a special clause to it. It can only be activated when it has 95% approval from the miners. After all, it is a huge change in the system and they figured that getting a super majority was the way to go. However, this caused a disruption in the system. Most miners don't want segwit to be activated. They are afraid that since the available block space will increase, it will drastically reduce the transaction fees that they can get. As a result, they stalled segwit which in turn infuriated the users and businesses who desperately want segwit to be activated.
Eventually, they came up with the idea of a UASF aka User Activated Soft Fork called BIP 148.
What is a BIP?
BIPs or Bitcoin Improvement Proposals is a design document which introduces various designs and improvements to the bitcoin network. There are three kinds of BIPs:
Standards Track BIPs: Changes to network protocol, transaction and blocks. Informational BIPs: Dealing with design issues and general gu > So what is BIP 148?
The BIP 148 is a user activated soft fork i.e. a soft fork that has been activated by the users. What it states is that all the full nodes in the bitcoin networks will reject any and all blocks that are being created without segwit ingrained in it. The idea is to motivate the miners to put segwit activation in the blocks that they mine for it to be part of the system.
It is hoped that by encouraging more and more miners to come over to the BIP 148 side, eventually the 95% threshold limit will be crossed and segwit will be activated. There are legit fears of a chain split happening but that can be easily avoided if just 51% of the miners come over to the BIP 148 side. Have more than half of the miners to the other side will greatly reduce the hash rate of the legacy chain i.e. the original chain.
Going by the co-ordination game-theory, the miners will be compelled to come over to the other side with the majority. This however raised a serious concern. What if the changeover doesn't happen smoothly and what if it does cause a legitimate chain split? This could spell disaster and this is the exact issue raised by the mining company Bitmain. So, as a contingency plan for BIP 148, Bitmain proposed a UAHF aka User Activated Hard Fork.
What is the UAHF?
The User Activated Hard Fork is a proposal by Bitmain which will enable the construction of a whole new form of bitcoin and blocks with larger sizes.. Since this is a hard fork, the chain will not be backwards compatible with the rest of the bitcoin blockchain. The biggest reason why this looks so appealing is because the hard fork does not require a majority of hashpower to be enforced. All nodes who accept these rule set changes will automatically follow this blockchain regardless of the support it gets. At the same time, many people just weren't happy with the idea of signatures being kept separate from the rest of the transaction data, they considered it to be a hack.
Bitmain visualizes this as a voluntary escape for everyone who is not interested in following up with the BIP 148 proposal. If you don't like it then jump ship and you can be a part of this new chain. At the "Future of Bitcoin" conference a developer named Amaury Séchet revealed the Bitcoin ABC (Adjustable Blocksize Cap) project and announced the upcoming hardfork. Following the announcement, and after Bitcoin ABC's first client release, the project "Bitcoin Cash" (BCC) was announced which came into full effect on August 1.
What is Bitcoin Cash?
This is how Bitcoin Cash project website is defining itself: "Bitcoin Cash is peer-to-peer electronic cash for the Internet. It is fully decentralized, with no central bank and requires no trusted third parties to operate." Did you notice the emphasis on the words "peer-to-peer electronic cash"? It is done by design because the primary motivation of bitcoin cash's existence depends solely on carrying out more transactions as Jimmy Song points out in his Medium article.
Bitcoin Cash (BCH) is a lot like Bitcoin but has some very noticeable differences:
The blocksize is 8 mb. It won't have segwit. It won't have the "replace by fee" feature. It will have replay and wipeout protection. It offers a way to adjust the proof-of-work difficulty quicker than the normal 2016 block difficulty adjustment interval found in Bitcoin.
Since BCH is a result of a hardfork, anyone who possessed BTC got the equal amount of coins in BCH PROVIDED they didn't have their BTC in exchanges and were in possession of their private keys at the time of the hardfork. So now let's go through certain interesting features of Bitcoin Cash.
How Bitcoin Cash prevents replay attacks?
One of the best features of Bitcoin Cash is how it circumnavigates one of the biggest problems that any cryptocurrency can face post-forking, the replay attack.
What is a replay attack?
A replay attack is data transmission that is maliciously repeated or delayed. In the context of a blockchain, it is taking a transaction that happens in one blockchain and maliciously repeating it in another blockchain. Eg. Alice is sending 5 BTC to Bob, under a replay attack she will send him 5 BCH as well, even though she never meant to do that.
So, how does bitcoin cash prevent replay attacks? (data taken from Andre Chow's answer in stack exchange)
Using a redefined sighash algorithm. This sighash algorithm is only used when the sighash flag has bit 6 set. These transactions would be invalid on the non-UAHF chain as the different sighashing algorithm will result in invalid transactions. Using OP_RETURN output which has the string "Bitcoin: A Peer-to-Peer Electronic Cash System" as data. Any transaction which contains this string will be considered invalid by bitcoin cash nodes until the 530,000 th block. Basically, before that block you can split your coins by transacting on the non-UAHF chain first with the OP_RETURN output, and then transacting on the UAHF chain second.
How does Bitcoin Cash attract miners?
Any cryptocurrency depends heavily on its miners to run smoothly. Lately, bitcoin cash has attracted a lot of miners which has significantly improved its hash rate. Here is how they did that. For this, we will take the brilliant Jimmy Song's help again.
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Bitcoin cash has a set rule as to when it decreases its difficulty. Before we see the rule it is important to understand what Median Time Past (MTP) is. It is the median of the last 11 blocks that have been mined in a blockchain. Basically, line up the last 11 blocks one after another and the time at which the middle block is mined is the median time past of the set. The MTP helps us determine the time at which future blocks can be mined as well. Here is a chart of the MTP of various blocks:
Image courtesy: Jimmy Song Medium article.
So, this is the rule for difficulty adjustment in bitcoin cash: If the Median Time Past of the current block and the Median Time Past of 6 blocks before is greater than 12 hours then the difficulty reduces by 20% i.e. it becomes 20% easier for miners to find newer blocks. This gives the miners some power to adjust difficulty, eg. checkout the 13-hour gap between blocks 478570 and 478571. The miners may have simply been doing this to make the blocks easier to mine.
Another interesting thing to note is how and when the difficulty rate can adjust in a cryptocurrency. This is a graph which tracks the difficulty rate of BCH:
Image courtesy: Bitinfocharts.com.
The difficulty rate adjusts according to the amount of miners in the system. If there are less miners, then the difficulty rate goes down because the overall hashing power of the system goes down. When bitcoin cash first started it was struggling a bit to get miners, as a result its difficulty dropped down drastically. This in turn attracted a lot of miners who found the opportunity to be very lucrative. This caused an exodus of miners from BTC so much so that the hashing power of BTC halved, decreasing the transaction time and increasing the fees. Reports on social media stated that BTC transaction were taking hours and even days to complete. Here is the graph that shows the drop in hash rate of BTC:
Image courtesy: Investopedia.
What is the Hash War?
As of right now, there is a war taking place inside the Bitcoin Cash community. This war has been dubbed the "Hash War" and it may have single handedly plunged the entire market.
The hash war is basically a civil war between two rival factions within the Bitcoin Cash community:
Bitcoin ABC: Bitcoin Adjustable Blocksize Cap is the camp that's being led Roger Ver and Bitmain CEO Jihan Wu Bitcoin SV: Bitcoin Satoshi's Vision is led by Craig Wright (who claims to be Satoshi Nakamoto) and billionaire Calvin Ayre, the owner of the largest BCH pool, CoinGeek.
On November 2018, Bitcoin Cash went through a hard-fork and split into Bitcoin Cash ABC and Bitcoin Cash SV.
Both these chains are utilizing there hash power to mine the longest chain. Whoever has the longest and more efficient chain, becomes the dominant Bitcoin Cash chain.
So, this brings us to the obvious question.
Why is the hash war happening? Why are Roger Ver and Craig Wright at each other's throats?
Well, there are two reasons:
Block size (surprise surprise!) Changes to the Bitcoin Script.
Block Size.
Bitcoin ABC wants a block limit of 32 mb while Bitcoin SV wants a block limit of 128 mb, i.e. nearly 4 times that of the upgraded Bitcoin ABC block size.
Changes to the Script.
As you may already know, Bitcoin transactions are coded by using "Script" We have a detailed two-part guide which will help you understand how script works .
One thing that you need to remember here, script is a purposefully simple and non-versatile language. It is not a highly-functional, Turing-Complete language like solidity which is used to create smart contracts. Script's only purpose is to give form to Bitcoin transactions.
In August 2018, Bitcoin ABC introduced two new opcodes in the Bitcoin Cash script, with a hardfork. Those opcodes being:
These opcodes basically brought in "smart contract-like" functionality into Bitcoin Cash by allowing the transactions to check and validate the signature on an external message, coming from a trusted external data source or oracle.
This change wasn't acceptable to Bitcoin purists.
According to them, these opcodes and functionalities were never a part of Satoshi Nakamoto's original vision. They wanted a Bitcoin Cash which was close to the original blueprint as possible. Hence, Bitcoin SV was born.
Bitcoin SV is not going to use these new opcodes. In fact, it will use two of the original Satoshi opcodes (OP_LSHIFT and OP_RSHIFT) which had been deactivated in the new version of Bitcoin Cash.
The Ugly Side of The Hash War.
We will try to keep a very neutral stance here, but we need to report on just how ugly this war has become. More than Bitcoin ABC vs Bitcoin SV, this has become Roger "The Bitcoin Jesus" Ver vs Craig "I am Satoshi" Wright.
There has been blatant name calling and negativity from both the the sides. In fact, some of the arguments have been no different than over-the-top pro-wrestling style rants. This one being top of the bunch:
And then there is also the email that that Wright sent Ver, which we can't post here because of its strong content. You can read it here .
Ver, on his part, had this to say about Wright, "Satoshi or not, the things Craig Wright is saying are exactly the things that caused me to sign up for Bitcoin in the first place."
Who is Winning the War?
Let's look into both the camps and see who is winning the Hash War. All graphs are taken from coin.dance .
Since this battle is all about the hashrate then we might as well check who is doing the best in that regard:
It looks like Bitcoin ABC has had a superior hashrate than Bitcoin SV for the most part, in the beginning. There were some instances when Bitcoin SV was able to overtake Bitcoin ABC, but for the most part, Bitcoin ABC has been superior hashrate-wise....right until 3rd December 2018.
After that, it looks like Bitcoin ABC has suffered a big downturn in its hashrate while Bitcoin SV seems to have gotten the slight upper hand.
One day after the fork, 16th November 2018 , Bitcoin cash ABC raced ahead with 50 blocks. ABC seems to have a better overall POW strength than SV.
#3 ABC vs SV Nodes.
Let's look at how many nodes are in Bitcoin Cash ABC as opposed to Bitcoin Cash SV.
Bitcoin ABC has 1028 nodes right now. The number of nodes has decreased after seeing a peak on 16th August 2018.
Now, let's look at Bitcoin SV nodes.
Bitcoin SV has a total of 542 nodes. The total number of nodes increased dramatically since 15th November 2018, i.e. the date of the Bitcoin Cash/Bitcoin SV hard fork. After reaching its peak, the number of nodes has been pretty consistent.
#4 Community Approval.
Let's look at which project is getting more approval from the companies and community.
According to coin.dance, 71.8% of the community supports Bitcoin ABC while Bitcoin SV has 44.9% of the support.
BTC Hashrate vs ABC+SV.
Getting out of this civil war, let's look at the big picture and see how BTC's hashrate compares to that of ABC and SV's combined.
As you can see, BTC far exceeds both of them combined.
What is the future of Bitcoin Cash?
In short, we don't know. We have no idea how bitcoin cash is going to turn out in the future nor do we know the long term repercussions that it will have on BTC. What we do know is that this is the first time that anyone has successfully hard forked from BTC whilst keeping the records of the existing transactions.
What we have here is a very interesting experiment which will teach us a lot of lessons moving forward. At the same time, the 8 mb block size is definitely a very alluring aspect and it remains to be seen how this affects the miners in the long run.
However, the Hash War has opened up a very intriguing situation. With the sheer number of Bitcoin forks out there, it may dilute the value of Bitcoin even more. The current market crash has been largely attributed to this war. The sad part is that the hash war has become really ugly. Let's hope that we get out of this unscathed.
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What Is Bitcoin?
Simply put, Bitcoin is a digital form of cash. But unlike traditional fiat currency, there is no central bank controlling it. Each unit of Bitcoin is unique and cannot be copied or destroyed, and it runs on top of a distributed network, maintained by thousands of computers around the world.
Through the past decades, the creation of pretty much everything, from the web to word processors to network programming, was highly dependent on the fact that digital information could be quickly and easily copied at close to zero cost. Certainly, several computer and network technologies were developed based on this universal property of data.
It was only a matter of time before computer scientists and developers started to wonder about the other half of the data economy. What if data couldn't be copied? What if there were such a thing as a unique piece of data, and what if it could be transmitted from user to user? These questions and their practical ramifications eventually made it pretty clear that unique data that can't be copied could be used as digital cash.
Although there were other types of digital currencies, Bitcoin was the first one to implement cryptographic techniques, marking the start of cryptocurrencies. Most people have little or no experience with this particular kind of digital currencies, so they might ask "what is Bitcoin?" or might want to know how Bitcoin works. The underlying technology that makes cryptocurrencies so unique is fascinating, but probably one of the most complex topics to the majority of us.
What is Bitcoin?
As mentioned, Bitcoin was the first cryptocurrency to be ever created. It is a digital form of money that is highly resistant to frauds and is used within a decentralized financial system.
When it comes to Bitcoin as money, it can be described as a digital currency that runs on a distributed (peer-to-peer) economic system. In this context, Bitcoin may also be referred to as BTC or bitcoin (with lower "b").
As digital cash, Bitcoin is maintained by thousands of lines of code. It is based on an open source software that is being regularly improved by a large community of developers. Initially, such software was also referred to as Bitcoin, but in order to prevent misunderstandings, the major Bitcoin client software was officially rebranded to Bitcoin Core in 2014.
Bitcoin is not issued nor controlled by a single authority or entity but is rather sustained by many computers (nodes) spread around the world. The Bitcoin network is based on a distributed ledger called blockchain, which is responsible for maintaining an organized list of all transactions. These transactions are grouped into linked blocks, forming a chain of blocks (hence, blockchain).
Due to their various qualities and functionalities, it is quite common to see people confused about the differences between Bitcoin and blockchain as they are closely related, although distinct concepts. But what exactly is blockchain?
Blockchain.
Essentially, a blockchain is a series of records, very much like a general ledger or a flat database. But its uniqueness comes from the mechanism it uses to validate and protect those records.
The problem of unique and unalterable data has bothered programmers since the earliest days of digital storage. If data on a disk can be so easily changed, who is to say which is the legitimate and true version? It's a hard question and one that had few answers until the early 1990s when the first archetype of a blockchain was created by Stuart Haber and W. Scott Stornetta. They were the first to apply cryptographic proofs to secure a chain of blocks as a way to prevent data tampering. The work of Haber and Stornetta certainly inspired the work of Hal Finney and many other computer scientists, eventually leading to the creation of Bitcoin. The Bitcoin whitepaper was published in 2008 by the Satoshi Nakamoto, and the first block was mined on January 3rd, 2009.
Distributed and secure.
The technology underlying Bitcoin is designed to preserve the integrity of data and transactions. First, every transaction is digitally signed and verified through cryptographic techniques that ensure the funds cannot be spent more than once. If confirmed to be valid, the transaction is permanently recorded in the blockchain through a process known as mining (which involves more cryptography). This might seem to be a lot of additional effort, but it has a very profound effect on the safety of the system. Altering the Bitcoin blockchain requires the entire structure to be unraveled record-by-record, something which is a practical impossibility even for the most powerful computers.
Another important layer of security relies on the fact that the data is distributed through a myriad of network nodes across the world (each one holding a copy of the blockchain data). This means that even if data is managed to be altered on one node, the other network participants would easily recognize it as corrupted since it wouldn't match any of the other copies. This process is governed by a consensus algorithm called Proof of Work. Unraveling dozens, hundreds or thousands of copies of the same data simultaneously is many orders of magnitude harder than doing it once, which is why the data is so secure. In addition, a distributed system is much more resistant to failures and cyber attacks, because it does not rely on a single data center as traditional centralized systems do.
The blockchain technology gave birth to a unique and un-copyable piece of electronic data that could also be tracked through a series of distributed ledger entries, leading to the creation of Bitcoin as a decentralized and cryptographically secure digital currency. The Bitcoin Protocol is designed in such a way that no more than 21 million coins will be issued. New coins are generated through the process of Bitcoin mining, which relies on cryptographic hash functions and is regulated by the Proof of Work (PoW) consensus algorithm.
In other words, the blockchain acts as a distributed ledger that records all transactions, and that is highly resistant to modification and frauds. The database records can't be altered, nor can they be tampered without an impractical amount of computing power. Therefore, the network can enforce the concept of "original" digital documents, making each Bitcoin a unique and uncopyable form of digital money.
The power of unique data.
Most of the value in digital technology up until now has been derived from easily replicated data, and much of the future power in technology will be derived from utilizing unique pieces of information and analyzing how they might interact. Complex financial transactions, for example, will be far more accurate and far less open to mistaken interpretation as a result of innovative advances like Bitcoin.
Cryptocurrencies are already being used in a wide range of contexts. The blockchain technology makes it possible for users to perform financial transactions with significantly lower fees, without having to rely on third parties, like banks or financial institutions. Moreover, the blockchain architecture guarantees an accurate and unalterable trail of data that can be audited and preserved for many decades, making it suitable for a wide variety of applications, not necessarily related to financial transactions.
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What is bitcoin, how does it work and what affects its price?
Follow the author of this article.
Follow the topics within this article.
F ew technologies have the ability to stir passionate online debate and baffle the vast majority of the population as bitcoin. The virtual currency rocketed in value last year before crashing at the start of 2018.
But bitcoin appears here to stay, at least for the time being. Although the price has fallen since the start of the year to around $6,400 (£4,900), well below its peak of $20,000, it is still above its price a year ago and interest in it continues.
There have been spikes along the way, possibly caused by mass computer trading or short sellers jumping ship and encouraging buyers to flood back in.
It all leaves investors with a slew of questions. Is Bitcoin the future of currency? Is it.
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Bitcoin News.
Whale Moves 1000 BTC to External Wallet -- Prepare to HODL? - BeInCrypto October 14, 2019.
What Is Bitcoin?
Information.
Bitcoin is a decentralized peer-to-peer network that enables easy transfer and storage of money in its 'blockchain. It is an open source meaning anyone can make use of its' platform, and it is also decentralized, meaning that, any central authority does not regulate it. It was created by anonymous cryptographer called Satoshi Nakamoto in 2009.
THE TEAM.
Bitcoin was created by an anonymous name called Satoshi Nakamoto Other notable names rumored to be part of the team include.
Hall Finney mentioned as one of the people that remodeled bitcoin network. Nick Szabo worked as part of the team that developed the application. He made a comment about "bit gold," which later metamorphosed to bitcoin. Craig Steven is a former academic to have supervised the creation of bitcoin.
The practical uses of Bitcoin.
Bitcoin is one stop shop for exchanging goods and services around the globe. Bitcoin is widely being used for investment either by itself or anything associated with it. It can be used to create and store digital assets such as academic credentials, financial agreement, properties, It is for payment of services, school fees, royalty fees, Bitcoin is used advance learning and research. It is widely .used to create applications such as mobile application, e-payment app.etc.
Bitcoin Mining.
If you have the required hardware, you can mine bitcoin even if you are not a miner. There are different ways one can mine bitcoin such as cloud mining, mining pool, etc. For cloud mining, all you need to do is to connect to the datacenter and start mining. The good thing about this is that you can mine from anywhere and you don't need a physical hardware to mine.
For mining pool, all you need to do is to join a mining group, and if that team solves a computational problem, blocks are added to the blockchain, they get the reward and you get a share of it based on your contribution.
PoW algorithm-SHA-256 is used for mining. Which utilizes a lot of computational power.
How Does Bitcoin Mining Work?
Bitcoin mining saps energy, costly, uses more power and also the reward delays. For mining, run software, get your wallet ready and be the first to solve a cryptographic problem and you get your reward after the new blocks have been added to the blockchain.Mining is said to be successful when all the transactions are recorded in the blockchain and the new blocks are added to the blockchain.
Notes for investors.
Die-hard Bitcoin supporters believe that bitcoin is the future; we are just scratching the surface. Considering the continuous rise of bitcoin in the market capitalization, it is one investment every investor needs to take advantage of it.
The current market capitalization of bitcoin stands at an all-time high of $109 billion. As at January 2016, bitcoin was traded at I BTC for $970 but today is being traded at $6,600 for 1 BTC.
From the statistics presented above, it that bitcoin is one investment, you will never regret embarking on. It keeps recording an impressive results daily in the cryptocurrency market.
Cryptocurrency investment is speculative, and it involves unquantifiable risks - the market is full of uncertainty, susceptible to attack and capital loss, and sensitive to secondary issues, time may do not permit to mention here. Seek advice before investing.
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Bitcoin.
Bitcoin is a decentralized digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: transaction management and money issuance are carried out collectively by the network.
The original Bitcoin software by Satoshi Nakamoto was released under the MIT license. Most client software, derived or "from scratch", also use open source licensing.
Bitcoin is the first successful implementation of a distributed crypto-currency , described in part in 1998 by Wei Dai on the cypherpunks mailing list. Building upon the notion that money is any object, or any sort of record, accepted as payment for goods and services and repayment of debts in a given country or socio-economic context, Bitcoin is designed around the idea of using cryptography to control the creation and transfer of money, rather than relying on central authorities.
Bitcoins have all the desirable properties of a money-like good. They are portable, durable, divisible, recognizable, fungible, scarce and difficult to counterfeit.
Bitcoin can also be a store of value, some have said it is a "swiss bank account in your pocket".
Stored Bitcoins: Cannot be printed or debased. Only 21 million bitcoins will ever exist . Have no storage costs . They take up no physical space regardless of amount. Are easy to protect and hide . Can be stored encrypted on a hard disk or paper backup. Are in your direct possession with no counterparty risk. If you keep the private key of a bitcoin secret and the transaction has enough confirmations, then nobody can take them from you no matter for what reason, no matter how good the excuse, no matter what.
Topic central.
A. Bitcoin is a peer-to-peer currency. Peer-to-peer means that no central authority issues new money or tracks transactions. These tasks are managed collectively by the network.
Q. How does Bitcoin work?
A. Bitcoin uses public-key cryptography, peer-to-peer networking, and proof-of-work to process and verify payments. Bitcoins are sent (or signed over) from one address to another with each user potentially having many, many addresses. Each payment transaction is broadcast to the network and included in the blockchain so that the included bitcoins cannot be spent twice. After an hour or two, each transaction is locked in time by the massive amount of processing power that continues to extend the blockchain. Using these techniques, Bitcoin provides a fast and extremely reliable payment network that anyone can use.
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What Is Bitcoin?
How this digital currency works and why it's so controversial.
Behind the Bitcoin.
Other Cryptocoin Examples.
Cryptocoin Mining.
Bitcoin is a virtual currency that gained recognition after its price-per-coin rose above $13,000 in early 2018. The cryptocurrency (one of many) is at the center of a complex intersection of privacy, banking regulations, and technological innovation. Today, some retailers accept bitcoin, while in other jurisdictions, bitcoin is illegal.
Cryptocurrency Defined.
Cryptocurrencies are lines of computer code that hold monetary value. These lines of code are created by electricity and high-performance computers.
Cryptocurrency is also known as digital currency . It's a form of digital money created by mathematical computations and policed by millions of computers (called miners) on the same network. Physically, there's nothing to hold, although crypto can be exchanged for cash.
Crypto comes from the word cryptography , which is the process used to protect the transactions that send the lines of code for purchases. Cryptography also controls the creation of new coins. Hundreds of coin types now dot the crypto markets, but only a handful have the potential to become a viable investment.
Governments have no control over the creation of cryptocurrencies, which is what initially made them so popular. Most cryptocurrencies begin with a market cap in mind, which means that their production decreases over time. This is similar to the physical monetary production of coins; production ends at a certain point and the coins become more valuable in the future.
What Are Bitcoins?
Bitcoin was the first popular cryptocurrency. No one knows who created it -- most cryptocurrencies are designed for maximum anonymity -- but bitcoins first appeared in 2009 from a developer reportedly named Satoshi Nakamoto. He has since disappeared and left behind a bitcoin fortune.
Because bitcoin was the first major cryptocurrency, all digital currencies created since then are called altcoins, or alternative coins. Litecoin, Peercoin, Feathercoin, Ethereum, and hundreds of other coins are all altcoins because they are not bitcoin.
One of the advantages of bitcoin is that it can be stored offline on local hardware, such as a secure hard drive. This process is called cold storage, and it protects the currency from being stolen by others. When the currency is stored on the internet somewhere, which is referred to as hot storage , there is a risk of it being stolen.
On the flip side, if a person loses access to the hardware that contains the bitcoins, the currency is gone forever. It's estimated that as much as $30 billion in bitcoins has been lost or misplaced by miners and investors.
Why Bitcoin Is so Controversial.
Various events turned bitcoin into a media sensation.
From 2011 to 2013, criminal traders made bitcoins famous by buying them in batches of millions of dollars so they could move money outside of the eyes of law enforcement and tax collectors. Subsequently, the value of bitcoins skyrocketed.
Scams, too, are very real in the cryptocurrency world. Naive and savvy investors alike can lose hundreds or thousands of dollars to scams.
Bitcoins and altcoins are controversial because they take the power of issuing money away from central banks and give it to the general public. Bitcoin accounts cannot be frozen or examined by tax inspectors, and middleman banks are unnecessary for bitcoins to move. Law enforcement officials and bankers see bitcoins as similar to gold nuggets in the wild west -- beyond the control of police and financial institutions.
How Bitcoins Work.
Bitcoins are completely virtual coins designed to be self-contained for their value, with no need for banks to move and store the money. Once bitcoins are owned by a person, they behave like physical gold coins. They possess value and trade just as if they were nuggets of gold. Bitcoins can be used to purchase goods and services online with businesses that accept them or can be tucked away in the hope that their value increases over time.
Bitcoins are traded from one personal wallet to another. A wallet is a small personal database that is stored on a computer drive, smartphone, tablet, or in the cloud.
Bitcoins are forgery-resistant because multiple computers, called nodes, on the network must confirm the validity of every transaction. It is so computationally intensive to create a bitcoin that it isn't financially worth it for counterfeiters to manipulate the system.
Bitcoin Values and Regulations.
A single bitcoin varies in value daily. Check places like Coindesk to see current par rates. There's more than $2 billion worth of bitcoins in existence. Bitcoins will stop being created when the total number reaches 21 billion coins, which is estimated to be sometime around the year 2040. By 2017, more than half of those bitcoins had been created.
Bitcoin currency is completely unregulated and completely decentralized. The currency is self-contained and uncollateralized, meaning there's no precious metal behind the bitcoins. The value of each bitcoin resides within the bitcoin itself.
Bitcoins are stewarded by miners, the network of people who contribute their personal computer resources to the bitcoin network. Miners act as ledger keepers and auditors for all bitcoin transactions. Miners are paid for their accounting work by earning new bitcoins for the amount of resources they contribute to the network.
How Bitcoins Are Tracked.
A bitcoin holds a simple data ledger file called a blockchain. Each blockchain is unique to each user and the user's personal bitcoin wallet.
All bitcoin transactions are logged and made available in a public ledger, which ensures their authenticity and prevents fraud. This process prevents transactions from being duplicated and people from copying bitcoins.
While every bitcoin records the digital address of every wallet it touches, the bitcoin system does not record the names of the people who own wallets. In practical terms, this means that every bitcoin transaction is digitally confirmed but is completely anonymous at the same time.
So, although people cannot easily see the personal identity or the details of the transaction, they can see the verified financial history of a bitcoin wallet. This is a good thing, as a public history adds transparency and security to every transaction.
Banking or Other Fees to Use Bitcoins.
There are small fees to use bitcoins, which are paid to three groups of bitcoin services:
Servers (nodes) that support the network of miners Online exchanges that convert bitcoins into dollars Mining pools.
The owners of some server nodes charge one-time transaction fees of a few cents every time money is sent across their nodes, and online exchanges similarly charge when bitcoins are cashed in for dollars or euros. Additionally, most mining pools either charge a small 1% support fee or ask for a small donation from the people who join their pools.
While there are nominal costs to use bitcoin, the transaction fees and mining pool donations are cheaper than conventional banking or wire transfer fees.
Bitcoin Production Facts.
Bitcoin mining involves commanding a home computer to work around the clock to solve proof-of-work problems (computationally intensive math problems). Each bitcoin math problem has a set of possible 64-digit solutions. A desktop computer, if it works nonstop, might be able to solve one bitcoin problem in two to three days, however, it might take longer.
A single personal computer that mines bitcoins may earn 50 cents to 75 cents per day, minus electricity costs. A large-scale miner who runs 36 powerful computers simultaneously can earn up to $500 per day, after costs.
A small-scale miner with a single consumer-grade computer may spend more on electricity than they will earn mining bitcoins. Bitcoin mining is profitable only for those who run multiple computers with high-performance video processing cards and who join a group of miners to combine hardware power.
This prohibitive hardware requirement is one of the biggest security measures that deter people from trying to manipulate the bitcoin system.
Bitcoin Security.
People who take reasonable precautions are safe from having their personal bitcoin caches stolen by hackers.
There are two main security vulnerabilities when it comes to bitcoin:
A stolen or hacked password of the online cloud bitcoin account (such as Coinbase) The loss, theft, or destruction of the hard drive where the bitcoins are stored.
More than hacker intrusion, the real loss risk with bitcoin revolves around not backing up a wallet with a fail-safe copy. There is an important .dat file that is updated every time bitcoins are received or sent, so this .dat file should be copied and stored as a duplicate backup every day.
The public collapse of the Mt. Gox bitcoin exchange service was not due to any weakness in the bitcoin system. Rather, the organization collapsed because of mismanagement and the company's unwillingness to invest in appropriate security measures. Mt. Gox had a large bank with no security guards.
Abuse of Bitcoins.
There are three known ways that bitcoin currency can be abused:
Technical Weakness: Time Delay in Confirmation.
Bitcoins can be double-spent in some rare instances during the confirmation interval. Because bitcoins travel peer-to-peer, it takes several seconds for a transaction to be confirmed across the P2P computers. During these few seconds, a dishonest person who employs fast clicking can submit a second payment of the same bitcoins to a different recipient.
While the system eventually catches the double-spending and negates the dishonest second transaction, if the second recipient transfers goods to the dishonest buyer before receiving confirmation of the dishonest transaction, then the second recipient loses the payment and the goods.
Human Dishonesty: Pool Organizers Taking Unfair Share Slices.
Because bitcoin mining is best achieved through pooling (joining a group of thousands of other miners), the organizers of each pool choose how to divide bitcoins that are discovered. Bitcoin mining pool organizers can dishonestly take more bitcoin mining shares for themselves.
Human Mismanagement: Online Exchanges.
With Mt. Gox as the biggest example, the people running unregulated online exchanges that trade cash for bitcoins can be dishonest or incompetent. This is similar to Fannie Mae and Freddie Mac investment banks going under because of human dishonesty and incompetence. The only difference is that conventional banking losses are partially insured for the bank users, while bitcoin exchanges have no insurance coverage for users.
Three Reasons Why Bitcoins Are Such a Big Deal.
There is a lot of controversy around bitcoins.
Not Created by a Central Bank or Regulated by Any Government.
Banks don't log money movement, and government tax agencies and police cannot track the money. This may change, as unregulated money is a threat to government control, taxation, and policing. Bitcoins have become a tool for contraband trade and money laundering because of the lack of government oversight. The value of bitcoins skyrocketed in the past because wealthy criminals purchased bitcoins in large volumes. Because there is no regulation, people can lose out as a miner or investor.
Bitcoins Completely Bypass Banks.
Bitcoins are transferred through a peer-to-peer network between individuals, with no middleman bank to take a slice. Bitcoin wallets cannot be seized or frozen or audited by banks and law enforcement. Bitcoin wallets cannot have spending and withdrawal limits imposed on them. Nobody but the owner of the bitcoin wallet decides how the wealth is managed.
Bitcoin Transactions Are Irreversible.
Conventional payment methods such as a credit card charge, bank draft, personal check, or wire transfer benefit from being insured and reversible by the banks involved. In the case of bitcoins, every time bitcoins change hands and change wallets, the result is final. Simultaneously, there is no insurance protection for a bitcoin wallet. If a wallet's hard drive data or the wallet password is lost, the wallet's contents are gone forever.
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Bitcoin USD.
$ 8,281.22.
Previous Close $8,265.09.
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Key Data.
Open $8,265.09 Day Range 8,241.01 - 8,336.39 52 Week Range 3,167.82 - 13,813.79.
Performance.
5 Day 0.79% 1 Month -18.91% 3 Month -23.36% YTD 122.54% 1 Year 28.02%
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Recent Cryptocurrency News.
MarketWatch.
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Make sure your heirs get your digital assets -- and hackers don't.
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U.S. created 501,000 fewer in past year than previously reported.
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Is Bitcoin a Safe Haven?
The world's largest cryptocurrency had an awful week even though there was plenty of political and economic uncertainty.
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Bitcoin.
For all future releases Just for the upcoming release Send me a reminder 1 trading day before.
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Bitcoin News.
The very word Bitcoin has almost become synonymous with that of cryptocurrency. It's basically just a medium of conducting digital.
Bitcoin Analysis & Opinion.
Weekly Technical Analysis For October 14th to 18th, 2019 EUR/USD.
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What is Bitcoin mining?
As mentioned in an earlier section, one can think of Bitcoin as one big global ledger system that records transactions (or 'moving money') between one person to another. Whenever Bitcoin transactions are processed on the Bitcoin network - that means Bitcoin is moved from one person to another - someone has to make sure all the transactions are recorded properly and that the ledgers on all the systems are synchronized all over the world.
In the case of Bitcoin, this process is not done by people or companies, but by thousands of computers all over the world that are all connected to the internet. These computers are knowns as 'miners', but they should really simply be called 'computers that process transactions'.
To do this processing in a very secure way, these computers need to perform very complicated calculations that take a lot of computing power, and in turn, require a lot of energy and expensive and specialised processing equipment. Someone - the owner of the computers - needs to pay for all this equipment and electricity, so they need to be compensated for all the money and effort they are putting into making this network work. They earn this compensation through newly minted Bitcoin - so in short all new Bitcoin that is created acts as a reward and incentive mechanism for people to contribute their computers to the system to help process transactions.
Another way to look at it is to consider what would happen if a large bank built the world's biggest global transaction processing system: they would spend a few billion dollar on it and then charge everyone transaction fees to recoup this cost. With Bitcoin mining, the cost of this global system has just been spread over thousands of computers, and they recoup their cost through newly minted Bitcoin. In short, it's simply a democratisation of financial infrastructure.
Additional resources.
Are Bitcoin and other cryptocurrencies used by criminals?
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