My attempt at an ELI5 for cryptocurrency to help my friends.
This is a long one so fair warning and no there is no tl;dr. I've only been at this for about 6 months and worked up this paper the other day for my friends who are interested but know very little about this. Hopefully whoever reads this can make in corrections as I am far from an expert. Blockchain Cryptocurrency, Bitcoin, Ether are all blockchains. Blockchains are basically a spreadsheet (LEDGER) that is duplicated multiple times across a network and updated regularly simultaneously. There is no centralized version of this ledger. It is hosted simultaneously by thousands/millions of computers. These ledgers will update on their own, Bitcoin as an example automatically checks itself every 10 minutes. Each of these 10-minute increment of transactions (in bitcoins case transactions would be sending or receiving bitcoins from one person to another for goods or services) are called BLOCKS. For these blocks to be confirmed, accepted, and updated to the ledger nodes are required. Nodes (Mining/Forging) A node is a computer running the blockchain software on the network. The blockchain software will automatically download the entire ledger of all transactions since its inception. At regular intervals, the software will take the transactions of a block (data on the ledger) and convert them into a mathematical puzzle to be solved by randomly chosen nodes (MINING). Mining requires powerful processors (typically GPUs) and substantial quantities of energy to receive mined tokens profitably. When a specific number of nodes solve the puzzle with the same answer they are basically confirming that the data on the block is accurate as multiple independent nodes found the same answer. When confirmed, the block gets added to the previous blocks making a chain of blocks aka a blockchain. As an incentive to run your computer as a node you are rewarded with TOKENS. If a single person or group of people wanted to manipulate the ledger, the amount of machinery and electricity used to achieve the majority of miners thus allowing you to manipulate the ledger is so exponentially expensive that it serves no reasonable purpose. This is an example of a Proof of Work Blockchain System (computer solves puzzle and rewarded with tokens) Tokens Tokens are part of the core of the blockchain. They are an incentive to validate transactions and create blocks. They gain intrinsic value based on the blockchain they are associated with. Some blockchains grant token holder’s different abilities. With Bitcoin, tokens are needed to pay for transaction fees. Others allow voting rights on how certain blockchain functions are managed. There is a limited amount of Bitcoin that will ever be released to nodes (21 million expected to be all be released by 2033) which also keep inflation from being a problem. Blockchains can create their platform with whatever number of tokens they would like and release them or create means to mine them as they see fit. Essentially, as with any other fiat money (currency that a government has declared to be legal tender NOT backed by a physical commodity), as adoption and trust increases the value of the token will increase. If most people accept Bitcoin for services and stores accept Bitcoin for goods than it is as good as the next currency. Wallets Whether you mine for tokens, are paid in tokens for goods or services or purchase tokens from a person or currency exchange you need a place to store them securely and a way to send and receive them. Cryptocurrency Wallets don’t store currency, they hold your public and private keys that interface with the blockchain so you can access your balance, send money and manage your funds. The public key allows others to send money to the public key only. A wallet that is "offline" (see Hardware or Paper below) cannot access funds or send money unless it is accessed with another form of wallet, either desktop, online, or mobile. 1) Desktop Wallet - Installed on your computer and are only accessible from that SINGLE computer. Very secure but if someone hacks your computer you are exposed. 2) Online Wallet - Run remotely (cloud based) and are far more convenient to access but make them more vulnerable as they are controlled by a third party and are also vulnerable to hacking attacks. Exchange wallets are online wallets but you are not in control of the private key. View it as a wallet that is lended to you so you can trade. The wallet is technically not yours. 3) Mobile - Ran on an app and are useful as they can be used anywhere including retail stores 4) Hardware - Private keys are stored on a tangible device like a USB drive. They can make transactions online but they are stored offline. Compatible with web interfaces and support many but not all currencies. To use, plug into a computer, enter a pin, send currency and confirm. Safest form of storage. 5) Paper - Basically a physical printout of your private and public keys. It is not stored online anywhere and the only way transactions can happen is if you transfer money with the help of an Online wallet. Example of a Public Key = 1A684DbsHQKPVCWgaUsYdF4uQGwTiA9BFT Example of a Private Key = E9873D79C6D87DC0FB6A5778633389F4453213303DA61F20BD67FC233AA33262 Most wallets provide a Recovery Mnemonic Passcode that is a series of words (typically 12 to 24 words) in a specific order. If you lose your login information for your wallet you can supply the mnemonic passcode and retrieve your lost login information. If you lose your login information and your mnemonic passcode your wallet will be inaccessible and your tokens are lost to you. The above basically describes a first generation Blockchain Cryptocurrency such as Bitcoin. It is used basically as currency with no centralized entity regulating the release of additional currency and keeping the ledger of where the money is going secure and extremely safe from manipulation. Second Generation Blockchain The second generation blockchains sprung out of this environment with something more valuable. Utilizing the blockchain system to allow applications to be ran on top of a decentralized secure system. Instead of just recording transactions, contracts could be transmitted the same way. More complex transactions (SMART CONTRACTS) allow for things such as: - Funds to be spent only when a required percentage of people agree - Manage agreements between users (such as insurance) - Provide utility to other contracts - Store information about an application such as domain registration information or membership records This basically can allow applications to be ran on top of the blockchain system. This can cut out the middleman for many real-world applications (mortgages, banking, communications, security confirmations etc.) Proof of Work/Proof of Stake As I mentioned earlier, Proof of Work (PoW) requires nodes to solve a mathematical puzzle which is rewarded with tokens. Proof of Stake (PoS) is different, the tokens with proof of stake systems are pre-mined meaning they are all created when the blockchain system is created. Blocks are not verified by the typical method. The block validator uses the blockchain software to stake their tokens and are chosen based on specific factors depending on how many tokens the person holds and for how long. Depending on how many tokens they hold will restrict the quantity of blocks they can validate. If they own more they can validate more often but all validators will be chosen randomly keeping the rewards fairly distributed (unlike PoW which typically reward the first completed.) The blockchain still requires a mathematical puzzle to be solved but it is much easier than PoW requiring far less time and energy. If the blockchain has premined all of their tokens then new tokens cannot be mined for rewards in PoS. The reward for staking your tokens to be a validator is a portion of the transaction fee that is charged as part of normal transactions on the blockchain. That is why PoS miners are called forgers. If manipulation is attempted than their stake can be taken from their wallet adding more motivation to prevent data manipulation. Fork Some cryptocurrencies may need to update or upgrade the coding of their blockchain software. When this happens usually a fork occurs. This basically means the cryptocurrency splits into two separate cryptocurrencies. Because the nature of blockchain technology, they are decentralized and autonomous so the older version cannot be deleted or removed. If people choose to continue using the old version they can. For mining/forging purposes the nodes will need to choose which they will mine/forge and download the blockchain software on their computer to proceed. When the fork occurs, anyone holding tokens in the original currency will be given the same number of tokens in the forked currency. (When Bitcoin forked to Bitcoin Cash, anyone holding x amount of Bitcoin would receive a new wallet for Bitcoin Cash also containing x amount of Bitcoin Cash.) This is called a Hard Fork and all previous transactions are made invalid. There are also Soft Forks, in this case it is backwards compatible and all previous transactions are valid. This can result in two currencies but in most cases, it doesn’t as it is usually accepted by most miners/forgers because it is backwards compatible. Exchanges Online currency exchanges allow you to buy, sell or exchange fiat money (USD, EUR, etc) with digital currencies or in most cases digital currencies for other digital currencies. There are a large variety of different exchanges that are operated in multiple countries but there are around a dozen that the majority of cryptocurrency trading volume are present on. Not all cryptocurrencies will be listed on all exchanges, some have specific prerequisites to be listed on their exchange and there may be fees associated as well. Once your account is set up you will have a list of all available cryptocurrencies to trade. Each currency will have an associated online wallet with the public key address allowing you to send that specific currency to that wallet. (Many exchanges are having delayed or canceled identity verification, currency transfers and lack sufficient customer support due to the influx of new traders) Examples of top exchanges: 1) Coinbase (trades fiat) 2) GDAX (trades fiat) 3) Gemini (trades fiat) 4) Changelly (trades fiat) 5) Bittrex 6) Binance 7) HitBTC 8) EtherDelta 9) Bitfinex 10) Kraken 11) Bithumb 12) Bitstamp 13) Poloniex 14) OKEx Sending/Receiving Tokens All wallets have the ability to send digital currency to other wallets. The function is relatively easy, make sure the currency you are sending is going to the appropriate wallet for that currency. Ethereum tokens cannot be sent to a Bitcoin wallet for example. (The tokens aren’t actually moving location; the list of transactions/ownership is what is stored in the wallet). Triple check the wallet private key you are sending the tokens to. If you type the wrong address the tokens will be lost in nearly all incidents. Some mobile wallets allow you to scan a QR code that will automatically enter the public key rather than copying/pasting or typing out the public key. Taxes As of January 1, 2018 it appears that taxing on digital currency has changed. Every trade between any digital currencies (Bitcoin to Ether, Ether to Litecoin etc) will be a taxable transaction. If you hold the currency for longer than one year than you will pay capital gain tax when it is traded or sold (15%-20%) and if you sell or trade in less than a year you will have to add the profit to your taxable income to adjust your tax bracket. Altcoins Altcoins are basically any coin that is not Bitcoin. Most cryptocurrencies do not have a native blockchain (their own independent dedicated blockchain). Bitcoin, Ether, Ripple, Waves, NXT, Cardano all have their own native blockchain. Many other cryptocurrencies run on other cryptocurrency’s blockchains. Litecoin runs on Bitcoins blockchain, hundreds run on the Ethereum blockchain. These currencies act as smart contracts running on the adopted blockchain. DApps (Decentralized Applications) For a blockchain application to be considered a DApp it must be 1) Open source, code available to all 2) Decentralized, uses blockchain cryptographic tech 3) Incentive, must have tokens to fuel itself 4) Algorithm/Protocol, generates tokens and has a built-in consensus mechanism (mining/forging.) There are 3 types of DApps, each basically piggybacks off the platform of the previous Type 1 – Have their own blockchain (like bitcoin) Type 2 – Use the blockchain of Type 1 DApps Type 3 – Use the protocol of Type 2 DApps ICO (Initial Coin Offering) Much like an IPO (Initial Public Offering) that offers stock in a private company to the public, an ICO raises money for new Cryptocurrency ventures. Typically, a minimum investment is required in the form of a cryptocurrency such as Bitcoin or Ether and the investor is given tokens of the cryptocurrency at a reduced cost. Due to the fact that ICO’s are so new, government agencies have not begun regulating these ventures making them extremely risky as anyone with a competent coder can create and market a cryptocurrency that can be used to swindle investors who aren’t cautious. The US government no longer allows its citizens to participate in ICO’s and if you are using a computer with an IP address located in the United States, ICO’s websites will not allow you to invest. Research 1) Whitepapers – Each cryptocurrency will have their own dedicated websites and most will have a whitepaper that has a description of what their cryptocurrency is designed to do. 2) Roadmaps – Also on each cryptocurrency’s website, they tend to have a roadmap or timeline as to when they are planning to complete certain milestones be it added features to the blockchain or wallet or any other important events. 3) Coinmarketcap.com – List of every available cryptocurrency, the exchanges they trade on, market cap, trade volume, available tokens, newly created tokens etc. 4) Reddit.com (cryptocurrency subreddit) – Subreddits focused on cryptocurrency as well as specific subreddits focused on individual cryptocurrencies. Be cautious as many people on these sites are uninformed and/or are trying to manipulate the market by fooling others to buy or sell based on fraudulent information. 5) Bitcointalk.org – Forums specific to individual cryptocurrencies. There is a lot of self-marketing (bounties) on this site. Take what they say with a grain of salt 6) TwitteFacebook (Social Media) – Many times news from team members or the cryptocurrency’s social media page will break news before it is listed on any of the above-mentioned outlets. Find out who is working for the cryptocurrency you are interested in and start following the team’s social media. Don’t forget to look at their linkedin accounts if available, previous employment and behavioral history to confirm they are competent. 7) Github - Code from projects can be uploaded here and reviewed for issues and revisions. Common Terms/Slang Shilling – covert advertising, personally endorsing a token so as to manipulate the price to either recoup a loss or increase gains on a token the individual owns. FUD – Fear, Uncertainty, Doubt; another method to manipulate the price of a token the person owns by making others second guess their investment decision on a specific token. FOMO – Fear Of Missing Out; buying a token (usually after the price has already increased) hoping they haven’t missed the majority of a price increase. Shitcoin – A cryptocurrency that has become worthless overtime or a scam operation. To the Moon – Massive increase in a token’s price. I'm sure there are probably revisions to be done on this as I am still getting my head around all of the concepts. Any help to this would be appreciated.
Blockchain, the technology of distributed ledger that supports Bitcoin, is the wave of the financial future. By transforming industries with advanced and optimized architecture, this ingenious technology eliminates intermediaries in many essential services, reducing costs and increasing efficiency. However, blockchain technology and its applications are still in their early years, so different concerns do exist. https://smartcryptosolution.org/
Businesses around the world are exploring innovative ways to harness the disruptive power of blockchain technology to securely exchange stocks and assets.
Several government authorities, institutions, and businesses have tested the blockchain development technology and found it incredibly safe and immutable. Is blockchain technology powerful enough to stop cybercriminals, improve security and transparency in all transactions?
Decentralization, cryptography and consent are the three defining characteristics of blockchain technology contributing to its immutability.
When you own a bitcoin, use digital keys (a public and private key pair) to confirm your ownership and access to funds in a secure cryptosystem.
Whenever there is a digital asset transaction, its details are stored in a block that includes the data, the hash and the hash of the previous block.
The data present in a block vary depending on the type of blockchain.
For a bitcoin transaction, the data would be the details of a transaction such as a sender, the recipient and the value of coins.
The hash is a unique string of encrypted data defined to identify the corresponding block and its data.
This hash is processed with new transactions to create a new hash for the next chain block.
Because each block is bound to its previous block by hashing, any change in any part of the data would change all the hashes, making all subsequent blocks invalid and false.
Each time a new transaction is launched in a public blockchain, it is transmitted via an open peer-to-peer (P2P) network, accessible to all.
A group of people working on the peer-to-peer bitcoin network, also called miners, uses its computational power to record transactions and verify their accuracy by solving a complex cryptographic puzzle, also called "proof of work".
Whenever the miners solve the puzzle and mines the block, they must be validated by the remaining nodes in accordance with the consent protocol.
If the block is validated, it will be added to the blockchain of the network and the miner who will have solved the puzzle will be rewarded with a cryptocurrency blockchain.
On the other hand, private blockchains operate on authorized networks in which only certain access rights are assigned to the selected entities and create new transactions on the channel.
All blocks in the blockchain are linked in chronological order and are monitored via P2P nodes, making record tampering or network corruption highly uncertain.
If someone needs to hack the bitcoin blockchain, then they have to hack not just a block, but all the previous blocks, and then repeat the work validation chain on all the computers connected via the peer-to-peer network in a very short time, which is almost impossible.
Does this mean that blockchain technology is extremely unalterable? Well no. We should rather consider scenarios in which the blockchain can be altered. If a miner or a mining pool controls more than half of the hash power on a blockchain network, the power would be reconcentrated into a single entity, thus opening the door for attacks and illegal gains. Conclusion In conclusion, it can be said that absolute immutability does not exist. But this decentralized and distributed digital blockchain ledger has enormous potential to meet the ever-changing needs of different sectors. And without a doubt, the cryptocurrency market will be safer and more reliable in the near future.
How I created a genius crypto product... that I couldn’t give away
This sub is full of success stories, but it might be useful to have the odd failure story too. First up: I didn’t pour my life savings into this project, or anything like that. I put in money I was prepared to lose, which is fortunate, because that is what has happened. Do not feel pity for me, the only loss was to my dignity. The Problem to Solve I wanted to capitalize on the enthusiasm around crypto. I’m not a programmer, so I thought I could try and come up with a related physical product – “selling shovels to the goldminers” type of thing. From my hazy understanding of bitcoin, I knew that the safest way to store your private keys was a print out or handwritten piece of paper. The next obvious thought is “a piece of paper is a bit crap for storing a lot of money” - or to paraphrase Ellen recently: “Who wouldn’t feel safe with their life savings on a piece of paper that could go into the washing machine”. Possible Genius Solutions I had several thoughts around this. I had seen the Cryptosteel wallet, which does look pretty good, but (with all due respect, they’ve actually sold some units) it is kind of fiddly. Some of the ideas I had:
A piece of metal + an engraving tool – engraving is actually difficult, especially where one character misread can invalidate the key
A piece of metal + a permanent marker – This is an okay idea, but still seems kind of crude.
Waterproof paper + a fireproof bag – I actually got a sample bag from Alibaba, but they seem to be made of fibreglass, and so have a bunch of warnings about keeping away from children.
A piece of soft metal (like on a fire extinguisher inspection date sticker). This seems cunning, but very susceptible to being crushed.
Final Genius Solution I finally settled on a carbon fibre tube with aluminium cap, and a rubber o-ring so the thing would be waterproof. It looks kinda cool (to me, but not anyone else it seems), and it can store multiple bits of paper with various keys on them. It can also fit a Ledger Nano S inside it, which could possibly survive that theoretical washing machine event. Getting the Product to Market Of the available URLs, I chose the clever name of ‘CryptoStrong’. In retrospect, this does seem a bit similar to Cryptosteel, but it wasn’t a conscious choice. I got the URL and set it up as a Shopify store. Shopify was great for making the home page, but (at the time, it may have changed) was difficult to make any other pages that looked good. I took a bunch of photos, got some 3d artwork made up using www.blenderartists.org/ I converted over to a Wordpress account so I could make a fully custom page. For the store part I used Woocomerce because it is well supported and relatively cheap for a low volume store. Shipbob was the distribution agent. They have been very helpful, and the systems have all worked well for the test orders I put through. Marketing the Product For this, I used Google Adwords. Now, I’m sure Google Adwords can be effective if you know how to use it, but if you don’t, it seems you can spend quite a bit without getting any results. People come to your page, but then immediately leave, which is not brilliant for making sales. I made some special landing pages offering a 90% discount, but this still managed to get zero sales. Loss of Steam After this process I had lost enthusiasm for the project, and so stopped working on it. Shipbob who have the remaining inventory have recently updated their policy to include a minimum monthly account charge. This means that doing nothing will now have a fee (which is fair enough, they’re a business). Trying to give away for free I don’t really understand how to use twitter apart from lurking, so I haven’t figured out how I could get a sample to Twitter influencers. I have had some success today using the subreddit FREE/ which is nice. My Learnings Here is the bit where I impart the vast knowledge this experience has bestowed on me:
Internet marketing is difficult – might be worth paying someone to do it unless you are willing to invest a lot of time in figuring it out.
Doing a business on your own can be a bit dispiriting – Having a business partner might mean you need to share profits, but half of something is better than all of nothing.
Minimum Viable Product (MVP) should include the distribution – Package and post the MVP yourself, don’t jump to a distribution centre before you confirm you can get actual orders.
Test interest in your product with free samples. If you can’t give it away, that might be a sign that you can’t sell it!
Thank you for reading. I still have a bit of stock to liquidate, so please use coupon code below for free twin pack (+ free shipping if you’re in the continental USA): https://cryptostrong.com/products/ Coupon code is: audub Edit: I got first genuine sale via this giveaway process. And the giveway seeme to go well. Thanks to those that participated - I'm just about out of stock now.
Novice, Intermediate or Expert? A Quiz to Test Your Bitcoin Knowledge
Think you know the ins-and-outs of bitcoin? Test yourself with 30 questions that grill you on Bitcoin’s history, technology and politics. The 30 questions are split up into three segments ranging from novice to intermediate to expert, and cover a wide range of topics across the Bitcoin landscape. If you get stuck or want to check your answers along the way, an answer sheet has been added below the quiz. Of course, these questions cover only a few points about Bitcoin so far — with so many new developments taking place, there is always more to learn. Good luck! Novice Questions 1. Who created bitcoin? a. Vitalik Buterin b. Gavin Andresen c. Satoshi Nakamoto d. Charlie Lee e. Jackson Palmer 2. What is the original document that proposed Bitcoin, considered by many in the space to be a “must read”? a. The Bitcoin White Paper b. The Golden Proposal c. E-Money: Bitcoin and the Blockchain d. The Bitcoin Manifesto e. The Bitcoin Constitution 3. What is the name of the bitcoin exchange from Japan that famously collapsed in 2014 due to a devastating hack? a. Tradehill b. Bitstamp c. Mt. Gox d. Blockchain.info e. Bit Trade 4. How many bitcoin will ever be created? a. Unlimited b. 77,340,109 c. 3,500,000 d. 21,000,000 e. 18,650,000 5. What is the name of the off-chain scaling solution that is being developed to mitigate bitcoin’s fees and long transaction times? a. Instasend b. Second Layer Network c. Lightning Network d. Quick Net e. The Bitcoin Payment Network 6. Which of the following statements is NOT true about bitcoin wallets? a. Wallets can come in many forms, as long as they hold your private keys. b. Wallets have addresses that anyone can use to see the current number of unspent bitcoins in them. c. The only thing someone needs to access a wallet is the private key. d. It is possible to send bitcoin by signing the transaction offline and then broadcasting the transaction later. e. To open a wallet you must submit a request to the wallet provider. 7. What is the name of the technology underlying Bitcoin? a. Bitchain b. Blocklink c. Blockchain d. CoinLedger e. Satoshisquare 8. True or false? Bitcoin can be sent to an Ethereum address. a. True b. False 9. The first underground marketplace on the dark web which used bitcoin as its native currency and was created by Ross Ulbricht was called: a. Black Onion b. BTC Market c. East India Trading Company d. Silk Road e. Worldwide Drug Emporium 10. Bitcoins can be divisible down to the eighth decimal point. What is that unit called? a. Bit b. Satoshi c. Naki d. Shill e. Bitsat Intermediate Questions 11. Which traditional stock exchange was the first to list bitcoin futures contracts? a. The New York Stock Exchange (NYSE) b. The Intercontinental Exchange (ICE) c. The Chicago Mercantile Exchange (CME) d. The Chicago Board Options Exchange (CBOE) e. None of the above. Futures contracts are only available on cryptocurrency exchanges like BitMex and Bitfinex. 12. The computers that find new blocks are called: a. Accountants b. Miners c. Mitigators d. Associates e. Verifiers 13. Which of the following is NOT true about Bitcoin Cash, a fork from Bitcoin? a. Bitcoin Cash was created over an ongoing debate within the Bitcoin community over scaling and transaction speed. b. Roger Ver uses bitcoin.com to convince new investors that Bitcoin Cash is the original bitcoin. c. Bitcoin Cash is commonly referred to as “Bcash” because (some) bitcoin proponents don’t want to give the forked currency the brand recognition that Bitcoin has accumulated since 2009. d. Bitcoin Cash uses the SHA-256 hash function (the same as Bitcoin). e. Bitcoin Cash removed its block size limit completely. 14. Where is the Bitcoin processing server located? a. Washington, D.C., USA b. London, England c. Undisclosed location d. The United Nations votes on a new location every two years e. None of the above — Bitcoin has no processing server 15. What date was the Bitcoin network launched? a. November 5, 2008 b. May 1, 2010 c. January 3, 2009 d. December 31, 2008 e. April 23, 2010 16. When was Bitcoin’s all-time high exchange rate achieved (as of 9/11/18)? a. January 12, 2016 b. July 15, 2017 c. December 17, 2017 d. August 3, 2018 e. January 10, 2014 17. Which of the following statements is true? a. Bitcoin is owned by the NSA. b. By 2030, all bitcoins will have been mined. c. Bitcoin has smart contract capabilities. d. Before Satoshi created Bitcoin, he and a group of developers premined roughly 1 million coins. e. Only select people can mine bitcoins. 18. How often, on average, can we expect a new block be found by miners? a. > 1 second b. 2 minutes c. 10 minutes d. 60 minutes e. 6 hours 19. What is Bitcoin Pizza Day, May 22nd? a. A day every year where people who hold bitcoin pay forward a random pizza to a stranger b. The day when a computer programmer, Laszlo Hanyecz, paid 10,000 bitcoins for two pizzas in 2010 c. The day Satoshi announced his favorite food is pizza d. The day Vitalik compared bitcoin’s security to that of a soggy pizza e. A day sponsored by Pizza Hut where you can pay for pizza with bitcoin 20. How many new bitcoins should be created each day with the current block reward, on average? a. 2,200 except for February 29 on leap years b. 1,800 c. 5,000 d. 7,200 e. 150 Expert Questions 21. What is the difference between a soft fork and a hard fork? a. A soft fork happens when the code of a project is copied with permission of the original developers. A hard fork happens when the code of a project is copied without the permission of the original developers. b. A hard fork is a backwards-incompatible protocol change because it makes previously invalid blocks or transactions valid. A soft fork is a backwards-compatible protocol change because it makes previously valid blocks or transactions invalid. c. A hard fork occurs when miners in a mining pool cannot agree on how the block reward should be divided. A soft fork occurs when miners in a mining pool collectively decide to change how block rewards should be distributed. d. None of the above. 22. What does ASIC stand for? a. Applied Socioeconomic Investment Compository b. Application Specific Integrated Circuit c. Anonymous Spending Instrument for Cryptocurrencies d. Alternative Synthetic Interoperability Circuit e. Antiquated System for Implied Cryptography 23. What does an ASIC do for Bitcoin? a. Allows consumer access to high-level investment information, similar to a Bloomberg terminal b. Allows users to trade cryptocurrencies between different blockchains c. Anonymously allows users to send cryptocurrencies that aren’t entirely private d. Performs one specific task of solving a mathematical problem in order to find a new block e. Allows developers to cross reference current technology stacks with older languages 24. Is Bitcoin truly anonymous? a. Yes, people who use bitcoin cannot have their transactions traced by anyone. b. No, bitcoin addresses are derived from IP addresses. c. No, all transactions are recorded on a global transparent ledger that can be traced using analytical technologies. d. No, addresses openly show the name of the user. e. No, bitcoins can be linked to a user’s social security number. 25. What is SHA 256? a. A secure hashing algorithm used by Bitcoin, originally designed by the NSA b. A set of rules that miners and nodes must follow c. A scheme devised by Craig Wright to convince people he is Satoshi d. An annual conference in New York for blockchain enthusiasts e. The language Satoshi and early developers used to communicate behind closed doors 26. What is a nonce? a. An empty value in each block that is filled by the miner of that block b. Another name for a node c. A mining device faster than an ASIC d. A part inside a processing chip used in mining e. A name for a troll in Reddit forums 27. What is “difficulty” in relation to Bitcoin? a. A measure of how hard it is to explain what Bitcoin is b. A measure of how difficult it is to find a hash below the target c. A measure of long it takes to send bitcoin between addresses d. A measure of how difficult it is for bitcoin to move a certain number of basis points e. A measure of how hard it is for Bitcoin to recover to its all-time high 28. What is multi-sig verification? a. An older method of confirming bitcoin transactions now replaced by single-sig verification b. Verification that a user is allowed to hold bitcoins in a certain address by requiring multiple signatures from friends and family c. A form of verifying if someone is telling the truth by having multiple signatures from people monitoring the event taking place d. A process by which miners select which transaction to verify by having three other miners create a signature giving permission for the transaction to be verified e. A technology to verify wallets by requiring multiple signatures to process a single transaction with enhanced security 29. Bitcoin consumes roughly 1 percent of the world’s energy consumption. What does this mean about its security? a. A malicious actor doesn’t need to consider the total energy consumption in order to successfully execute a 51% attack. b. Bitcoin is secure to the point that it would require approximately 0 .0001% of the entire world’s energy consumption to attack the network. c. Bitcoin is secure to the point that it would require approximately 1% of the entire world’s energy consumption to attack the network. d. A malicious actor would need 10 times the amount of Bitcoin’s energy consumption in order to successfully attack the network. 30. What is a Merkle Root in Bitcoin? a. A hash of all transactions in a block that allows any specific transaction to be verified without downloading the entire blockchain b. A series of complex data that uniquely identifies the owner of an address c. A program designed by David Merkle that uncovers the largest inactive bitcoin wallets d. A cryptocurrency developed by the chancellor of Germany e. A part of a complex system of underground “roots” that power the Bitcoin blockchain How did you do? Answers:
c. Satoshi Nakamoto
a. The Bitcoin Whitepaper
c. Mt. Gox
c. Lightning Network
e. To open a wallet, you must submit a request to the wallet provider.
d. Silk Road
d. The Chicago Board Options Exchange (CBOE)
e. Bitcoin Cash removed its block size limit completely. (The limit is actually 32MB.)
e. None of the above — Bitcoin has no central server
c. January 3, 2009
c. December 17, 2017
c. Bitcoin has smart contract capabilities
c. 10 minutes
b. The day when a computer programmer, Lazlo Hanyecz, paid 10,000 bitcoins for two pizzas in 2010
b. A hard fork is a backwards incompatible protocol change because it makes previously invalid blocks or transactions valid. A soft fork is a backwards compatible protocol change because it makes previously valid blocks or transactions invalid.
b. Application Specific Integrated Circuit
d. Performs one specific task of solving a mathematical problem in order to find a new block
c. No, all transactions are recorded on a global transparent ledger that can be traced using analytical technologies
a. A secure hashing algorithm used by Bitcoin, originally designed by the NSA
a. An empty value in each block that is filled by the miner of that block
b. A measure of how difficult it is to find a hash below the target
e. A technology to verify wallets by requiring multiple signatures to process a single transaction with enhanced security
c. Bitcoin is secure to the point that it would require 1% of the entire world’s energy consumption to attack the network. (side note: bitcoin mining, while energy intensive, can be done in an eco-friendly, even carbon-neutral, manner. And it’s getting better all the time.)
a. A hash of all transactions in a block that allows any specific transaction to be verified without downloading the entire blockchain.
I NEED HELP! Can anyone read over my explanation of cryptocurrency and make sure I am making sense?
Hey all, I am currently going to be working on a project that concerns blockchain and cryptocurrency. In order to do so, I am writing a proposal for an advisor to read over and approve. I need to explain cryptocurrency in it, but I also need to make sure I am correct in my explanations and that I a make sense. If someone could read over my explanation, it would be super super appreciated. The audience of the proposal are CS profs, so they aren't exactly familiar with blockchain, but will be familiar with things like private/public key encryption and data structures. Here it is: In recent years, blockchain and digital currencies have rocketed in popularity. Many have realized blockchain technology has the potential to revolutionize society. In general, blockchain can be thought of as a decentralized monetary system shared across the world via the internet, while remaining almost free to use. One may compare the basic functions of a cryptocurrency to the functions of a bank. Apart from how one uses it, owning a variety of cryptocurrency is no different than owning some amount of U.S dollars. For instance, owning one 'Bitcoin' has an equivalent value in USD (currently, 1 Bitcoin is equal to 8513.08\$). Despite being unofficial and not endorsed by any government, value is attributed to these currencies through adoption and speculative investment. Much like stocks, the value of these currencies is very volatile, so many have found it to their advantage to speculate on the price in the hopes of earning some money. Cryptocurrency, however, does not just strive to copy and replace the traditional banking system. For example, unlike U.S currency, no one can just 'print' more Bitcoin. Rather, Bitcoin has a cap of 21 million coins. In this respect, cryptocurrencies are more like gold than normal USD. Despite this, cryptocurrencies put forth clear advantages to traditional banking. They are decentralized and cryptographically secure. Unlike traditional banking, no 'middleman' exists or is necessary to make transactions with bitcoin. Furthermore, transactions are validated and confirmed through a network of 'miners'. All this works because of blockchain which is by its very definition and use-case decentralized. The blockchain solves one of the most prominent roadblocks with a digital and decentralized money system, which can be explained through the 'double-spend' problem. The double-spend problem occurs when some person (person A) owns some amount of money. For example, person A owns 50\$. Person A sends some other individual 50\$. At the same time, Person A creates the same exact transaction but to yet another individual. Clearly, both these transactions cannot go through, since Person A only owns 50\$, not 100\$. Blockchain solves this issue. In essence, blockchain is a ledger that can be downloaded by anyone with an internet connection. This blockchain serves as 'memory' for digital monetary systems. Anyone who downloads and uses a blockchain on their computer can be said to be a 'blockchain node'. Anytime a transaction is created, it is recorded onto the blockchain (the ledger), which then updates, via the internet, every other blockchain anyone else has downloaded. The blockchain keeps track of every single transaction ever made, therefore keeping track of how much money everybody owns. Before a transaction is recorded onto the blockchain, however, it must be confirmed and validated. This is where the network of miners come in, and a process of validation known as 'proof of work' occurs. Essentially, this means a few users (chosen at random) running blockchain nodes, who have also designated themselves as a miner, run through every transaction a user made in order to make certain the money exists and can be transfered. In order to remain decentralized, more than one miner is chosen, and they must all agree to the validity of a transaction. Since these miners are connected over the internet, agreeing becomes a simple matter of first individually checking the validity of a transaction, and then checking if the other miners have also agreed. If a transaction cannot be confirmed, it is considered invalid, and so the blockchain is not updated with this transaction. A simple and useful way to conceptualize the blockchain, then, is as a linked-list of transactions that everyone owns, and is updated if a transaction is found to be valid. The process of confirmation and validation, however, must be executed by a computer processor (in many cases, multiple computer processors) somewhere in the world. This means someone's computer needs energy for the computing power required to verify a transaction. Since very few people would offer up their resources to process arbitrary transactions for free, there must be some incentive involved for users to offer up their processing power. For cryptocurrencies, the incentive becomes generating more of the cryptocurrency one is mining for. At a basic level, however, adding some transaction to a blockchain is a simple activity and not at all resource-intense. It would be very easy to add many of one currency to a blockchain if there was nothing to stop it, therefore drastically increasing supply and making the currency worthless. In order to solve this, mining new transactions or 'adding a new block', is intentionally designed to be very resource-intensive through the use of some very intense mathematical problems. There is a prescribed difficulty for these math problems that goes up over time, so it is impossible to ever reach the ultimate supply cap of a currency. Blockchain nodes are differentiated through private-public key encryption. Once a user downloads the blockchain, it encrypts itself and the user receives a private and public key.The public key can be shared with anybody and serves as an address people may send currency to. In the blockchain, transactions made by any one user are associated with this public key. That is, the public key serves as an identifier in the blockchain entry. This doubles as a identification mechanism, too. Before sending a transaction a user must confirm who they are by signing the transaction with their public key, which may only be done if they also own the private key. It becomes very important to keep the private key safe; losing or giving away one's private key will lead to the compromise of any and all funds of cryptocurrency owned by that key. It is useful to think of the blockchain in terms of an infinite state-machine. That is, the machine has a start state but no defined end-state. One may think of each transaction as a state of this machine. A new transaction creates a new unique state for the machine. These states are kept track of by an internal data structure (IE: the linked-list). All of this creates what we know as the blockchain.
Many people think that 51% attacks are always intentional, but what I'm finding is that it is easy for a pool to unintentionally execute a 51% attack. In my quest to make our pool as profitable as possible, I've discovered that the algorithm many pools use to compute profitability is often delayed in determining the most profitable coin. If you select to mine that coin and the other pools don't arrive until later, then you can be finding many blocks in a row and be executing a 51% attack without intending to do so. And it's not as if you can be "good for the network" and stop doing this. Switching coins frequently is the only way to maintain profitability when there are so many altcoins available to mine. Most of these coins have such low hashrates that even a few miners joining in can result in blocks being found repeatedly until the next difficulty adjustment. One of our challenges has been to figure out how to allocate hashpower such that we are profitable but don't destroy coins and lose the value in the blocks we have previously mined.
Bounties don't work
It seems that the latest trend in bitcoins is offering "bounties" to people to settle grudges: https://bitcointalk.org/index.php?topic=649176.0. To me, these seem pointless. If the guy at which this bounty is targeted had all of those bitcoins, he would have paid them already. Bounties are good at getting a lot of people to do a little, such that nobody actually completes the job. When you are not guaranteed any payment, then there is little incentive to see the job through once it gets a little difficult. After all, you could do 99% of the work, and then find that someone else did 100% of the work a day earlier, which means you earn nothing. Therefore, the Nash equilibrium of this "game" is that nobody should play. Someone offered sum of money (I believe it was $100k) to develop a software development project on /bitcoin recently, but one of his conditions was that the project had to be completed within 30 days. That was one of the worst examples of bounties I've ever seen. First, no resilient software can be developed within 30 days, no matter how many people or how much money you throw at it. Even if someone completes the task, the offerer will end up with garbage. Second, such a bounty doesn't make sense economically. Since it is reasonable to assume that the most competent software developers are employed, they recognize they can't put in enough hours in 4 weekends to stand a shot at winning the bounty. Of the unemployed developers, those who are working on successful projects see more money in their own projects, so they won't be working on the bounty. That leaves the least competent, unemployed developers to compete for the bounty.
You should have a sell point for if the cycle breaks, too
The stable price is starting to nudge towards breaking out of the bubble cycle - but this also happened during the time bitcoins were worth near $450 as well. moral_agent's bubble charts suggest that we would not expect significant rises to begin for another week, with prices nearing $1000 by July 1. Therefore, there is nothing out of the ordinary as of yet. Breaking the bubble cycle would have serious consequences on the outlook for bitcoins, because it means that the assumptions that most of us hold about adoption and fundamentals are wrong. Given that the pattern has held for several bubbles, such an event would be extremely concerning and I would be looking to sell unless I could figure out what assumption was wrong. Buying or holding stocks that you don't understand is always a way to lose money. While many people have correctly started to plan when to sell at the top of the next bubble, people should also have a signal for when to cut losses if the cycle breaks. One clear signal would be if the price crosses the lower boundary before the next bubble, but it could be too late by the time that happens. In fact, if the price remains steady, the lower boundary won't be crossed until early August, by which time the smart investors will have long recognized that things have changed. I need to think about this idea some more and see what other indicators could provide a better lead time in the case of the bubble cycle breaking.
Be wary of "adoption" stories
There seem to be a lot of bitcoin adoption stories in /bitcoin lately, but most of them are about companies that have decided to accept bitcoins on a trial basis for small parts of their business in small geographical areas. I would imagine that many of the merchants in BitPay's and Coinbase's counts are not accepting bitcoins for all products as we imagine they are. You also never read stories there about companies that discontinue accepting bitcoins. It's difficult to get a handle on how many companies do that.
Where are hardware wallets?
The most important hindrance to consumer adoption of bitcoins right now is the lack of hardware wallets. A wallet that looks like a credit card could sign transactions internally and broadcast them through a magnetic stripe. Such a device would be compatible with all existing POS hardware as long as those devices got a software upgrade. Bitcoin adoption will surge once these wallets are available, because they are much simpler than using a phone with QR codes. Yet, it seems puzzling that there are companies with millions being thrown at them for payment processing, and not one well-funded company is developing a hardware wallet. Hardware wallets have the potential to allow consumers to ignore public and private keys. They could simply display how much money a person has, and allow people to pay by swiping. Because they don't actually "hold" money, you can send people three copies of the wallet, and they keep the others off-site in safety deposit boxes for use if the first fails. A keypad or fingerprint scanner can enable two-factor authentication on these devices, which can permanently destroy themselves if too many invalid combinations are entered.
Syscoin, Fidelity, and the Indian Ministry of Finance
https://youtu.be/zIkgF5OlhIQ SYSCOIN -Some of you may have noticed today the huge rise in price of syscoin. But what is syscoin? I certainly didn’t know before today. Syscoin is ebay for the blockchain. You can download their wallet to buy, sell, or trade anything online. There are tons of perks with this that you wouldn’t get with a site like ebay, however. The first is obviously cost. It’s much cheaper to post something on Syscoin’s network than to sell it on a centralized platform like ebay. Your money is also much more secure on Syscoin, due to their built-in escrow system. This means you you can send funds to a mutually agreed upon third party until the goods or services arrive. Also, you no longer need a really long account address. Using Syscoin’s blockchain you can setup an alias to make the process of buying and selling easier. Building on that, you can also use the wallet to send and receive encrypted messages, so you can communicate with others on the marketplace. All of these things are done on a lightning fast network which just a few months ago initialized Segregated witness, also known as segwit. Even as the network grows, scaling will not be a factor.There are many more exciting features coming to Syscoin by the end of this year, like their emergence on the Microsoft Azure Marketplace. Also, their marketplace will have a mobile version. Really great work is coming from this team and I wish them the best of luck. FIDELITY -For those of you like me that also have stocks or mutual funds in your portfolio, you might be surprised to find out that Fidelity is bringing integration for blockchains to their website. They will display your assets you currently have listed on Coinbase. For those of you that have cold wallets, you might be out of luck. However, this is a step in the right direction! The fact that investment companies are now looking at cryptocurrencies as equals to stocks is a really great sign. CEO of Fidelity even went on to say “I love this stuff - bitcoin, ethereum, blockchain technology - and what the future holds”. INDIA MINISTRY OF FINANCE -On May 20th the Indian Ministry of Finance announced that it would be taking inputs from the public on whether virtual currencies should be banned, regulated, or observed. This news is huge for the rest of the world. If India were to regulate the sale of cryptocurrencies like Japan did in April, it would open up a brand new market for those seeking to trade in their Rupees for a stronger currency. No doubt about it, Bitcoin and other cryptocurrencies are performing much better than most if not all government backed currencies. QUESTIONS FROM YESTERDAY -Rick Breezy commented: ”Clayford08, I put my LTC on a paper wallet and put a passphrase on it, I went to go an sweep it on to a wallet and it won't let me, it needs to be decrypted? Any help to get my LTC on to me ledger nano from my paper wallet would be appreciated with a 1ltc coming your way. Thank you for what you do!” Go to https://liteaddress.org/ and type in your private key in the wallet details section. Once you do that, it will give you the public key you need to import your wallet. You can't import an encrypted wallet without decrypting it first. Hope this helps! -Brian Turner commented: “I've got a stupid question. I used shapeshift to swap ETH for GTN, but I used my coinbase ETH wallet address for the destination. I can see my Golem using Etherscan, but I don't know how to transfer or get access to them. Am i screwed until coinbase adds GTN to their platform?” If the address you sent the golem to is not an actual golem address, hopefully it will cancel the transaction and send you back your ETH. If not, then you might need to contact shapeshift to see if there is anything they can do. Using the ETH wallet, if you try to input an invalid address, it will not allow you to send. I'm assuming this didn't happen. I would wait a bit to see if it goes through and then contact shapeshift. INVESTMENTS FOR THE WEEK -Right now I see ripple dropping below 10k satoshi. If you can get a buy in on this ground level, now is a great time to buy and hold. Also, Digibyte is in a great place to buy. If you can buy in around 500 satoshi, scoop up as much as you can. As always, I tell everyone to invest in Ethereum. If you can’t afford an entire Ether just buy what you can. Remember to never invest more than you can afford to.
Stock prices and game controller movements should be public broadcast using reversed secure-hash as a realtime replacement for digital-signatures
Example: SHA512 on the output of SHA512 on its own output... n levels deep, or any secureHash function that is not known how to reverse compute at reasonable speed. Each stock price or mouse X and Y position would be streamPositive minus streamNegative, and each of those streams would be the linkedlist length of publicly know hashes that (when hash of hash of hash...) lead to the name of something in the world, an arbitrary hash that is the result of many such hashes. At each fraction of a second, everyone broadcasts a previous hash value of 1 of 2 streams which they have precomputed both of. This is proven to the public by it hashing to what was already publicly known. If any sum of streamPositive plus streamNegative for any such number (which moves on a dimension on the integers) exceeds the current time, then "double spending" has been detected and that dimension (stock symbol or game controller dimension etc) is invalidated, at least in those who notice this and tell others about it. The main benefit is its so small a data and fast to compute that we could in realtime agree on much higher dimensional vectors, positions of 1 dimensional movement of many things. For example, we could play rock paper scissors between 7 billion people at once. I find it more interesting to explore a game of odd number of many players which each choose 1 of 2 things (up or down, or maybe left or right), and in each continuous moment, a round of the game, whichever thing gets the least people gambling on it (in pretend money or numbers) wins that round. There is no way to fake predicting which of 2 things will be least popular if there is motivation to be the least popular, if game rules are defined that way to move score between the players. Its another kind of rock paper scissors. I dont much like pointless gambling, but life is a gamble in its many forms and contexts, and theres many ways to make it more gameful to hook things together to influence eachother and allow people and computers to trust what others message them about, such as reverse hashes which they only know how to compute forward. Imagine if I encoded a bitcoin private key with lots of money in the timing of when I publish the inverse SHA256 (what SHA256s to what is publicly known) and kept doing that with other privatekeys I own, then people would become interested in finding SHA256s anywhere on the Internet, in a steganography way or out in the open or anywhere between, so that stream of reverse hashes (as far as I precomputed it and gave the last to publics first seen and went backward) would become valuable as people interpret it, and other things could be written in it. It could become more reliable than tor for anyone to get a message out from anywhere without any internet addresses involved, even if written on paper slowly or in snail mail. To summarize, reverse computing can be a replacement for digital signatures because precomputing privately allows the practical effect of reverse computing what public knows. Using reverse secure hashes, someone could broadcast potentially as fast as realtime audio, every up and down tiny change in the audio amplitude, thousands of times per second, revealing these faster or slower depending on the shape of the wave at the time, and only those streaming at the time would be able to find such a record-like curve.
Please remove the link; it contains enough of your private key to make brute-forcing it worthwile. – maservant Dec 31 '16 at 12:40 add a comment 2 Answers 2 5)Regarding potential collision of private keys with mnemonics: yes there such collision, and it would be equal to two people randomly choosing or guessing the same private key (i.e., if the initial entropy for a mnemonic is the same entropy for an elliptic curve private key). Otherwise, the keyspace of private keys is the referenced above in ... A Bitcoin wallet is as simple as a single pairing of a Bitcoin address with its corresponding Bitcoin private key. Such a wallet has been generated for you in your web browser and is displayed above. To safeguard this wallet you must print or otherwise record the Bitcoin address and private key. The bitcoin network is the 21 million limit. This limit is enforced by the economic incentives of both the social and technical network, and any bitcoin not accessible for private key spending is instead held by the network itself, to be spent in exchange for hashed electricity. The hacker had by that time guessed almost seven hundred (732) private keys. Private keys are extremely confidential to blockchains and are knows by the user only and cracking them single-handedly is a very statistically improbable task. Knowing an account’s private key allows the user to make transactions through that account.
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