Difference between revisions of "Outerz0ne 9/BTC Talk"

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In this way, bitcoins are mined like gold used to be, in quantities that are small relative to the total supply, so that the supply grows slowly. There is an upper limit of twenty-one million new coins built into the software; the last one is projected to be mined in 2140. After that, it is presumed that there will be enough traffic to keep rewards flowing in the form of transaction fees rather than mining new coins. For now, the bitcoins are initially issued to the miners, but are distributed when miners buy things with them or sell them to non-miners
 
In this way, bitcoins are mined like gold used to be, in quantities that are small relative to the total supply, so that the supply grows slowly. There is an upper limit of twenty-one million new coins built into the software; the last one is projected to be mined in 2140. After that, it is presumed that there will be enough traffic to keep rewards flowing in the form of transaction fees rather than mining new coins. For now, the bitcoins are initially issued to the miners, but are distributed when miners buy things with them or sell them to non-miners
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* http://blog.priceonomics.com/post/47135650437/are-bitcoins-the-future
  
 
====How does it (Bitcoin) work?====
 
====How does it (Bitcoin) work?====

Revision as of 06:19, 5 April 2013

Rough draft edit heavily!

Abstract

State of the bitcoin address, Pizza, Pirates, and Profiteers: The Bitcoin has come a long way in its first 4 years as a crypto currency. Bursting bubbles and resurgence, the bitcoin has comeback to a greater acceptance and wider audience than ever before, breaking all time highs with prices in the $90+ range. This talk will cover everything you NEED to know about bitcoin, from a consumer and manufacturer standpointAcquisition to Spending (including mining crypto currencies and the future of mining) Staying secure anonymous with bitcoin, the infrastructure behind bitcoin, and the things you can do with bitcoin.

Webpage layout

General

What is a crypto currency?

Cryptographic currencies are currencies represented by units of complex cryptographic math problems.

What is Bitcoin?

What is Bitcoin? Bitcoin is many parts of a whole. not only is it a a new kind of digital currency. It's the first decentralized digital peer to peer crypto currency not regulated or controlled by a single organization, government, person or entity. It is also a complex peer to peer network. The network or blockchain helps regulate scarcity, and market stability. Bitcoin is completely decentralized, with no central server or trusted parties, because everything is based on crypto proof instead of trust. Bitcoin dose not rely on any physical note or representation.

http://www.youtube.com/watch?v=Um63OQz3bjo (what is bitcoin) (exerpt: http://www.newyorker.com/online/blogs/elements/2013/04/the-future-of-bitcoin.html)

In many ways, bitcoins function essentially like any other currency, and are accepted as payment by a growing number of merchants, both online and in the real world. Bitcoins are generated at a predetermined rate by an open-source computer program, which was set in motion in January of 2009. This program produced each one of the nearly eleven million bitcoins in circulation (with a total value just over a billion dollars at the current rate of exchange), and it runs on a massive peer-to-peer network of some twenty thousand independent nodes, which are generally very powerful (and expensive) G.P.U. or ASIC computer systems optimized to compete for new bitcoins.

Bitcoin releases a twenty-five-coin (originally 50 bitcoins) reward to the first node in the network that succeeds in solving a difficult mathematical problem requiring a certain amount of brute-force computation (known as a proof-of-work calculation.) The solution is then broadcast throughout the network, and competition for a new block and its twenty-five-coin reward begins.

At first, anyone armed with an ordinary computer could download and run the Bitcoin software and gather (or “mine”) bitcoins. The more computing power you can dedicate to Bitcoin calculations, though, the better your chances of arriving first at each solution. This feature of the system, by design, resulted in a kind of computational arms race that strengthened the network by rewarding increased computing power. Four years into the Bitcoin project, only very powerful, purpose-built machines have enough muscle to keep pace with existing network nodes.

In this way, bitcoins are mined like gold used to be, in quantities that are small relative to the total supply, so that the supply grows slowly. There is an upper limit of twenty-one million new coins built into the software; the last one is projected to be mined in 2140. After that, it is presumed that there will be enough traffic to keep rewards flowing in the form of transaction fees rather than mining new coins. For now, the bitcoins are initially issued to the miners, but are distributed when miners buy things with them or sell them to non-miners

How does it (Bitcoin) work?

Brimstone: Magic? Tuttle: No little brimstone, its simple, complex math and science that gets things moving on good lady bitcoin. First off, But before we get into the back bone of the system, we would like to demonstrate some various exchanges in real time for you guys. (tuttle hands brimstone $20) brimstone sends the market rate of bitcoin to tuttles wallet, tuttle sends those bitcoin to pizza for coins and orders a pizza, the trick is concluded when the pizza arrives at the end of the talk. magic!

(information goes here --->) (https://en.bitcoin.it/wiki/Introduction) Creation of coins

New coins are slowly mined into existence by following a mutually agreed-upon set of rules. A user mining bitcoins is running a software program that searches tirelessly for a solution to a very difficult math problem whose difficulty is precisely known. The difficulty is automatically adjusted regularly so that the number of solutions found globally, by everyone, for a given unit of time is constant: an average of 6 per hour. When a solution is found, the user may tell everyone of the existence of this newly found solution, along with other information, packaged together in what is called a "block".

Blocks create 25 new bitcoins at present. This amount, known as the block reward, is an incentive for people to perform the computation work required for generating blocks. Roughly every 4 years, the number of bitcoins that can be "mined" in a block reduces by 50%. Originally the block reward was 50 bitcoins; it halved in November 2012. Any block that is created by a malicious user that does not follow this rule (or any other rules) will be rejected by everyone else. In the end, no more than 21 million bitcoins will ever exist.

Because the block reward will decrease over the long term, miners will some day instead pay for their hardware and electricity costs by collecting transaction fees. The sender of money may voluntarily pay a small transaction fee which will be kept by whoever finds the next block. Paying this fee will encourage miners to include the transaction in a block more quickly.


Sending payments

Suppose Alice wants to send a bitcoin to Bob.

   Bob sends his address (from which the public key can be derived) to Alice.
   Alice adds Bob’s public key and the amount of bitcoins to transfer to a message: a 'transaction' message.
   Alice signs the transaction with her private key.
   Alice broadcasts the transaction on the Bitcoin network for all to see. 

(Only the first two steps require human action. The rest is done by the Bitcoin client software.)

   Details about the transaction are sent and forwarded to all or as many other computers as possible.
   A constantly growing chain of blocks that contains a record of all transactions is collectively maintained by all computers (each has a full copy).
   To be accepted in the chain, transaction blocks must be valid and must include proof of work (one block generated by the network every 10 minutes).
   Blocks are chained in a way so that, if any one is modified, all following blocks will have to be recomputed.
   When multiple valid continuations to this chain appear, only the longest such branch is accepted and it is then extended further. 


Each balance is simply associated with an address and its public-private key pair. 

A Bitcoin address mathematically corresponds to a public key

What is a blockchain?

https://en.bitcoin.it/wiki/Block_chain A block chain is a transaction database shared by all nodes participating in a system based on the Bitcoin protocol. A full copy of a currency's block chain contains every transaction ever executed in the currency. With this information, one can find out how much value belonged to each address at any point in history.

Every block contains a hash of the previous block. This has the effect of creating a chain of blocks from the genesis block to the current block. Each block is guaranteed to come after the previous block chronologically because the previous block's hash would otherwise not be known. Each block is also computationally impractical to modify once it has been in the chain for a while because every block after it would also have to be regenerated. These properties are what make double-spending of bitcoins very difficult. The block chain is the main innovation of Bitcoin.

Honest generators only build onto a block (by referencing it in blocks they create) if it is the latest block in the longest valid chain. "Length" is calculated as total combined difficulty of that chain, not number of blocks, though this distinction is only important in the context of a few potential attacks. A chain is valid if all of the blocks and transactions within it are valid, and only if it starts with the genesis block.

For any block on the chain, there is only one path to the genesis block. Coming from the genesis block, however, there can be forks. One-block forks are created from time to time when two blocks are created just a few seconds apart. When that happens, generating nodes build onto whichever one of the blocks they received first. Whichever block ends up being included in the next block becomes part of the main chain because that chain is longer. More serious forks have occurred after fixing bugs that required backward-incompatible changes.

Blocks in shorter chains (or invalid chains) are called "orphan blocks", and while they are stored, they are not used for anything. When a block becomes an orphan block, all of its valid transactions are re-added to the pool of queued transactions and will be included in another block. The reward for the orphan block will be lost, which is why a network-enforced 100-block maturation time for generations exists.

Because a block can only reference one previous block, it is impossible for two forked chains to merge.

It's possible to use the block chain algorithm for non-financial purposes: see Alternative chain.

The block chain is broadcasted to all nodes on the networking using a flood protocol: see Block chain download.

Where are Bitcoins stored?

In order to work with Bitcoin a wallet is a requirement. It's probably the safest to use a full Bitcoin client like the original one. However when just started out with small amounts you might choose security over ease of use.

    • Blockchain.info; hosted online wallet. Create when just getting started, the added benefit is that you can deposit money via Bank/Mobile to fund your account right away.
    • Electrum; a thin client. Like the Blockchain wallet this uses a remote server to retrieve the transaction data. Once installed you can start working with Bitcoin immediately.
    • Original Bitcoin client; the original or "reference" client. It takes a while to get started with this client since it needs to download all the transactions before you can actively use it.

How can one use Bitcoin?

renting servers, buying socks, stuff

Historic Events with Bitcoin.

10k pizza extra credit if pizza arives when talking about pizza) Cyprus mega april fools we broke 100

Acquiring

Where can I purchase Bitcoins?

There are tons of options of getting Bitcoin. Here are a couple of solutions if you have a better solution for a certain region please let me know.

Inside the US

  • Coinbase

Coinbase wants to be the Paypal for Bitcoin. Just hook up your bank account and you can instantly exchange Bitcoin.

  • Bitinstant

BitInstant enables you to make local cash deposits for Bitcoin. Just go down to wallmart for instance and have your Bitcoin in your account without problem. There is also an option to deposit using Dwolla.

Other locations How do you Buy Bitcoins

LocalBitcoins Mtgox

Spending

Where can I spend Bitcoins?

Mining

How do I start mining?

For the most basic of mining, you simply need the reference client, and a mining program. This is solo mining. You're literally trying possible values for the next block until you find the block and get the reward, or someone else finds the block and you start over again.

How do I mine and win?

To hedge your luck with luck of others, you should join a pool. This way, if any of them find the block, they've already agreed to share the winnings with you. There's numerous pools, but you should probably find one with a reasonable hashrate, easy to use website and helpful support channel. In your pool's web interface there should be a place to specify a payout address and threshold. This address can any valid address, a personal wallet, a cloud wallet, an exchange or many more.

What do I mine with?

Originally, CPUs were used for mining. After time, people adapted GPUs to run much, much faster than CPUs and get a higher hashrate and consume less power. Early 2011, code for FPGAs, Field Programmable Gate Arrays, was released online which increased the hashrate and lowered the power usage yet again. Early 2013, after much speculation, promises and the longest pre-order by multiple companies ever, the chinese company Avalon finally started shipping ASICs, Application Specific Integrated Circuits, for computing double SHA256 sums.

As for software to drive this hardware, pooler's fork of cpuminer seems to be the best for CPU mining, cgminer seems to be the best for GPU and some FPGAs. Other FPGAs should come with their own software. Avalon uses a fork of cgminer for their ASICs.

Terminology

  • Difficulty: This is a value in the algorithm for the coin that changes based on the network hashrate so that blocks are found at a set rate. This helps with inflation. This updates at a set block interval for the coin.
Payout Types
  • PPS: Pay per share: This is simply a set price for each share. This updates when difficulty is retargetted.
  • DGM: Double Geometric Method: This method offers more predictable payouts as it takes the luck of the pool into account. When the pool has good luck, the pool operators get a little extra to pay the miners when the luck of the pool is not good.
  • POT: Pay on Target: This "puts the fun back in mining" the difficulty of shares are taken into account when submitted.

Trading

Scraps to be worked into the page/talk

Topics

  • What is bitcoin
  • Who made bitcoin
  • The blockchain, and infrastructure
  • Security, wallet security
  • Anonymity
  • Mining and the future of mining
  • Buying
  • Spending
  • The 10,000btc pizza
  • Trading
  • Other currencies
  • You run barter town, future of bitcoin and economics


Who made bitcoin

In 2008, Satoshi Nakamoto, the founder of Bitcoin, whose real identity is not known, cleverly combined existing peer-to-peer network technologies, cryptographic techniques, digital signatures, and the potential power of network effects to design and develop the Bitcoin system. Nakamoto was very clearly motivated in this effort by the fallout from the 2008 financial crisis. When the experiment was launched and the first fifty bitcoins (the so-called genesis block) were mined, in January of 2009, he (or she, or they) included this line of text along with the data: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

Until his disappearance from the Web, around the spring of 2012, Nakamoto was a visible participant on cryptography forums, where he discussed Bitcoin freely, and published a nine-page paper outlining the details of the project. These posts reveal that even in 2008, Nakamoto was able to respond to concerns regarding the scalability of bitcoin with remarkable prescience; he clearly understood the ramp-up of computing power that would be required for producing bitcoins as the system grew.

   Only people trying to mine new coins need to run network nodes And at first, most users ran network nodes, but as the network grew beyond a certain point, mining increasingly became the domain of specialists with server farms of specialized hardware.

A casual review of Nakamoto’s various blog posts and bulletin-board comments also confirms that, from the first, Bitcoin was devised as a system for removing the possibility of corruption from the issuance and exchange of currency. Or, to put it another way: rather than trusting in governments, central banks, or other third-party institutions to secure the value of the currency and guarantee transactions, Bitcoin would place its trust in mathematics. At the P2P Foundation, Nakamoto wrote a blog post describing the difference between bitcoin and fiat currency:

(nytarticle)

Infistructure

Bitcoin Wallets

Use of the phrase "Official Bitcoin Client"

For reference, I would avoid using this phrase to describe the client available at Bitcoin.org and instead use a more accurate substitution such as "Bitcoin Reference Client", "BitcoinQT Client", or the "Original Bitcoin Client". Bitcoin.org uses both of the latter two.

Getting Bitcoin

There are tons of options of getting Bitcoin. Here are a couple of solutions if you have a better solution for a certain region please let me know.


Inside the US

  • Coinbase

Coinbase wants to be the Paypal for Bitcoin. Just hook up your bank account and you can instantly exchange Bitcoin.

  • Bitinstant

BitInstant enables you to make local cash deposits for Bitcoin. Just go down to wallmart for instance and have your Bitcoin in your account without problem. There is also an option to deposit using Dwolla.

Other locations

How do you Buy Bitcoins

LocalBitcoins

Mtgox

Mining, future of mining

buying, selling, trading

Pizza, pirates, and profiteers

One could rightfully assume anything could have gotten the ball rolling on bitcoins, little bits of ones and zeros being worth anything more than the pixie dust they're printed on. anything... but some think it was a pizza. A ten thousand bitcoin pizza. Worth over a million dollars at todays exchange rate. (ounce.me pizza tracker) but it was never about the money it was about sending a pizza, because back on may 21st 2010 bitcoins were worth nothing more than maybe 3 cents per btc. A user names laszlo on bitcointalk.orgs forums convinced an other user to trade the gift pizza a real tangeable delicious representation of all that good in the world, for play internet money. Sure it was no huge gamble at $25 usd online at pappa johns, a trade moved things forward in the bitcoin world Pizzaforcoins.com will exchange your bitcoin for pizza today, atabout the rate of $17 usd, thats no million dollar pizza but its the best play internet money can get.

Other early adopters of the bitcoin had other goals in mind, more nefarious ones. deep down in the in the dark vast malestroms of the dark net beyond 4chan where Anything goes, the humble bitcoin was being offered for hitmen, prostitutes, and a cahcophny of other seedy acts. but from beyond the anarchy came a a black market with the ease of use of amazon.com, knock offs, forgeries, and even fake mustaches, all kinds of goods could be found on the silkroad run by a mysterious figure known only as dread pirate roberts from its start, speculators have believed that a the majority of bitcoin has been funnelled through silkroad

from the darkness of the deep web we move on to the gold rush that not only pushes bitcoin along but is the building block it relies on, miners, in the beginning mining was easy, a few spare cycles throwing hashes at things, you could do it with a cpu, but you could do more with a couple cpus, with time and the value of bitcoin rising ledway to gpu miners, then grafics clusters, to render farms, step 1 gather bitcoin, step 3 profit. whoever has the bigest shovel gets the most gold. bigger systems arise from fpga's and on to the asic. with the promice on the horizon of easier money what does the sly shark like businessman do? invent an impossible machine to crunch numbers and sell it for bank, or pretend you have the magical machine, pre sell for bitcoin then scrooge mc duck it in your inflation vault? the answer is actually both. avalon invented an impossable machine, and bfl sold a promice both making out like bandits.

other currencies

the future

Interesting Bitcoin Videos

Neat Linkz Doodz!

presented by

  • Brimstone

Lover of pie, distributed system, and money, brimstone started in Alabama, but now lives in Atlanta. He finds it hard to talk about himself.

  • Will Tuttle
    • 1EJ7z9qyUPpdCzAsCsY1nQ7t47GqGwjyC6

Feejee mermaid owner, part time circus geek, inventor of the digital viewmaster, Tuttle started out in nashville but now lives in huntsville. He finds it easy to talk about himself, but is a slacker.