Bitcoin Mining Quotes

Residents of Niagara Falls, New York complained that bitcoin miners powerful cooling fans, necessary to keep the computers from overheating, were drowning out the sound of the area's massive waterfalls. China, not exactly known for its environmentalism, banned mining due to its massive energy use. Of course, it was welcomed by Texas.

The purpose of mining is not the creation of new bitcoin. That’s the incentive system. Mining is the mechanism by which bitcoin’s security is decentralized.

He lied,” she said. “There is no way for us to seize bitcoins. Well, there is no current way for the federal government to seize bitcoins at will; in order to do that we’d need one of the creators of the currency.” She paused and watched me very closely for a reaction. This was all still gibberish to me. This was something out of a science fiction novel, or a Stephen King movie with Tom Cruise where Tom Cruise has to run someplace from some people—because that’s what Tom Cruise does, he runs while looking concerned and futuristic. Therefore, I decided to look surprised and thoughtful. “Yes.” She nodded; she believed I was following her train of thought. I wasn’t following her train because mine had derailed on thoughts of a running Tom Cruise…weird little man.

Ethereum is the second-biggest cryptocurrency in the world after Bitcoin. It’s also very different from Bitcoin in its structure and purpose. Ethereum wasn’t developed as a currency alone. Its innovation lies in opening the blockchain up to development for different applications outside currencies and finance. Developers can build software on top of Ethereum’s blockchain, and use the network’s distributed ledger to build trust for all kinds of applications. Since the Ethereum blockchain is decentralized, once a developer has built an application, it can’t be censored or taken down by any authority. That application lives as long as the Ethereum blockchain continues.

A coder and independent security researcher named Sergio Lerner conducted a detailed analysis of the block chain at the time Satoshi was still mining. He concluded that Satoshi had mined at least one million bitcoins – more precisely 1,148,800. Lerner felt that if any of these coins had been spent, it would not be difficult to work out Satoshi’s identity – the recipient of the coins would know, unless the sender had sent the coins anonymously. But it appears that none of them were ever spent.

Some cryptocurrencies, like Bitcoin, require significant energy consumption for mining and transactions, which has raised environmental concerns. It's unsustainable. The costs of crypto outweigh the benefits – at least aside from small niche use cases.

The foundational idea behind institutions is creating trust between strangers in society. We have laws and systems in place to make it possible for millions of people who don’t know each other to live in proximity to one another. However, the creators of blockchain felt these institutions were failing.

It’s the same situation as gold and gold mining. The marginal cost of gold mining tends to stay near the price of gold. Gold mining is a waste, but that waste is far less than the utility of having gold available as a medium of exchange. I think the case will be the same for Bitcoin. The utility of the exchanges made possible by Bitcoin will far exceed the cost of electricity used. Therefore, not having Bitcoin would be the net waste.

The word “mining” is somewhat misleading. By evoking the extraction of precious metals, it focuses our attention on the reward for mining, the new bitcoin created in each block. Although mining is incentivized by this reward, the primary purpose of mining is not the reward or the generation of new coins. If you view mining only as the process by which coins are created, you are mistaking the means (incentives) as the goal of the process. Mining is the mechanism that underpins the decentralized clearinghouse, by which transactions are validated and cleared. Mining is the invention that makes bitcoin special, a decentralized security mechanism that is the basis for P2P digital cash.

Bitcoin’s Test Blockchains You might be surprised to learn that there is more than one bitcoin blockchain. The “main” bitcoin blockchain, the one created by Satoshi Nakamoto on January 3rd, 2009, the one with the genesis block we studied in this chapter, is called mainnet. There are other bitcoin blockchains that are used for testing purposes: at this time testnet, segnet, and regtest. Let’s look at each in turn. Testnet — Bitcoin’s Testing Playground Testnet is the name of the test blockchain, network, and currency that is used for testing purposes. The testnet is a fully featured live P2P network, with wallets, test bitcoins (testnet coins), mining, and all the other features of mainnet. There are really only two differences: testnet coins are meant to be worthless and mining difficulty should be low enough that anyone can mine testnet coins relatively easily (keeping them worthless). Any software development that is intended for production use on bitcoin’s mainnet should first be tested on testnet with test coins. This protects both the developers from monetary losses due to bugs and the network from unintended behavior due to bugs.

Bitcoin was in theory and in practice inseparable from the process of computation run on cheap, powerful hardware: the system could not have existed without markets for digital moving images; especially video games, driving down the price of microchips that could handle the onerous business of guessing. It also had a voracious appetite for electricity, which had to come from somewhere - burning coal or natural gas, spinning turbines, decaying uranium - and which wasn't being used for something arguably more constructive than this discovery of meaningless hashes. The whole apparatus of the early twenty-first century's most complex and refined infrastructures and technologies was turned to the conquest of the useless. It resembled John Maynard Keynes's satirical response to criticisms of his capital injection proposal by proponents of the gold standard: just put banknotes in bottles, he suggested, and bury them in disused coal mines for people to dig up - a useless task to slow the dispersal of the new money and get people to work for it. 'It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.

To understand how commodity money emerges, we return in more detail to the easy money trap we first introduced in Chapter 1, and begin by differentiating between a good's market demand (demand for consuming or holding the good for its own sake) and its monetary demand (demand for a good as a medium of exchange and store of value). Any time a person chooses a good as a store of value, she is effectively increasing the demand for it beyond the regular market demand, which will cause its price to rise. For example, market demand for copper in its various industrial uses is around 20 million tons per year, at a price of around $5,000 per ton, and a total market valued around $100 billion. Imagine a billionaire deciding he would like to store $10 billion of his wealth in copper. As his bankers run around trying to buy 10% of annual global copper production, they would inevitably cause the price of copper to increase. Initially, this sounds like a vindication of the billionaire's monetary strategy: the asset he decided to buy has already appreciated before he has even completed his purchase. Surely, he reasons, this appreciation will cause more people to buy more copper as a store of value, bringing the price up even more. But even if more people join him in monetizing copper, our hypothetical copper-obsessed billionaire is in trouble. The rising price makes copper a lucrative business for workers and capital across the world. The quantity of copper under the earth is beyond our ability to even measure, let alone extract through mining, so practically speaking, the only binding restraint on how much copper can be produced is how much labor and capital is dedicated to the job.

The transaction history is the currency, there’s no difference between the two.

Bitcoin became completely decentralized in 2010 when owner Satoshi Nakamoto handed control to Gavin Andersen. It is the vision of the owners and supporters for Bitcoin to remain a viable currency even if the owners are not around to authorize control.

Since 2010 to today, people have become more aware of the possibility of a failed economy. Once people realized cryptocurrency could become a viable solution for a global currency and economic repair, they started turning to Bitcoin. They understand if their local economy fails, digital currency can serve as a backup.

In 2011, Bitcoin first gained attention from criminals using Silk Road. Silk Road was a dark net website for illegal activity such as illegal drugs and stolen credit cards. Criminals used Bitcoin payments to cover their identity.

In November 2013, the world’s first Bitcoin ATM opened in Vancouver, Canada.

Blockchain secures a decentralized network.

The Bitcoin Blockchainis the public ledger containing all of the transactions that have been made in the history of Bitcoin. Since there is no central governing body or database, the ledger sits on a network made up of every computer running the Bitcoin software

More generally, the Blockchain can potentially affect any part of our lives where we need to verify identity, conduct a transaction, or secure a contract.

By far, the most popular of the peer-to-peer exchanges is LocalBitcoins. On LocalBitcoins, you can meet nearby people interested in selling Bitcoin. Then, you can trade with them online or ask to meet up in-person to trade Bitcoin for cash.

At the time of this writing, the difficulty is so high that it is profitable only to mine with application-specific integrated circuits (ASIC), essentially hundreds of mining algorithms printed in hardware, running in parallel on a single silicon chip.

The beautiful thing about Bitcoin is that it is not reliant on any gatekeepers.

assumption.Blockchain contracts and transactions take place on a shared network. The users on the network also pitch in to verify the transactions of others. Instead of a central authority charging a fee to verify your transaction, you verify another transaction on the network in exchange for your own transaction getting processed.

strength.The idea behind blockchain is to replace institutions with technology that can do the job better and empowers individuals. If you could create a way for strangers to trust one another without needing a bank or a government as an intermediary, you’d tackle one of society’s biggest bottlenecks.

I am sure that by now you have understood the basics of cryptocurrencies and how the Ethereum system works. In this chapter, we will look at the fundamental differences between Ethereum and Bitcoin and why the former is said to be better than the latter. Block time One of the main differences between the two cryptocurrencies is the block time. The block time refers to the time taken by the network for confirmation. It is important for a network to have shorter block times to mine more coins. This is a disadvantage with Bitcoins as the average time taken is 10 minutes. On the other hand, Ethereum block time is set at 14 to 15 seconds. This makes it extremely fast and great for miners. It also makes the network more efficient. According to some reports, an altcoin named as the ripple is said to be even faster coming in at 3.5 seconds. However, it is not as secure as Ethereum and less reliable as well. Several Bitcoin users have wanted this change in the system to keep up with Ethereum. However, it does not look likely that the company will introduce this change anytime soon. In fact, several other altcoins such as LiteCoin and monero are creating waves in the field of block times and making it difficult for Bitcoin users to keep up with the pace. Model The economic model of Ethereum is much different from that of Bitcoin. We already read that there can be only 21 million Bitcoins that can be mined. This means that it will be easier to keep track of the currency. On the other hand, an infinite number of Ether can be mined thereby making it difficult to keep track of it. This, however, is said not to impact the value of Ether, as the number of coins in circulation will not affect its value. It is not known as to how long it will take to mine 21 million Bitcoins. Some believe that it will take another 15 years while some think it will take 100+ years. There is news that finite ethers will be mined by the end of 2017 thereby making it a bit more stable.

Work is another prominent word in the vernacular of bitcoin mining, in this case conveying the sense that the currency’s underlying value isn’t based on nothingness but on labor, and hard labor at that. In fact, computational difficulty is its defining feature. The harder it gets, the more real-world resources get spent performing the task, mostly in the form of electricity. Some crypto-economists argue that these inputs are what give bitcoins real value. Just as important, the amount of work—the computing equivalent of man-hours—gives legitimacy to the ledger, in that it represents a significant collective investment in assuring its integrity.

Miners are set the task of solving the puzzle for two reasons. One, it imposes a cost on mining, since the computing power it demands is expensive, in terms of both the machinery and the electricity it uses. That helps to regulate mining and create a reciprocal relationship between what otherwise would be free bitcoins and the work required to obtain them. And two, it creates a competition with a payout at the end, which incentivizes the miners to do the work needed to confirm the transactions.

The problem is, with so many mining rigs now in play and only so many block prizes handed out, it can be a long time before a low-powered rig’s winning number comes up for a twenty-five-bitcoin prize. That’s why all but the very biggest of mining operators these days join mining pools, which divvy up the aggregate intake according to each member’s contributed computation power, with the smaller members typically receiving just fractions of a bitcoin each month.

Now, the obvious response is that a state like Venezuela can still try to beat someone up to get that solution, do the proverbial rubber hose attack to get their password and private keys — but first they’ll have to find that person’s offline identity, map it to a physical location, establish that they have jurisdiction, send in the (expensive) special forces, and do this to an endless number of people in an endless number of locations, while dealing with various complications like anonymous remailers, multisigs, zero-knowledge, dead-man’s switches, and timelocks. So at a minimum, encryption increases the cost of state coercion. In other words, seizing Bitcoin is not quite as easy as inflating a fiat currency. It’s not something a hostile state like Venezuela can seize en masse with a keypress, they need to go house-by-house. The only real way around this scalability problem would be a cheap autonomous army of AI police drones, something China may ultimately be capable of, but that’d be expensive and we aren’t there yet.41 Until then, the history of Satoshi Nakamoto’s successful maintenance of pseudonymity, of Apple’s partial thwarting of the FBI, and of the Bitcoin network’s resilience to the Chinese state’s mining shutdown show that the Network’s pseudonymity and cryptography are already partially obstructing at least some of the State’s surveillance and violence. Encryption thus limits governments in a way no legislation can.