The public has latched onto the recent market events with an intense curiosity brought about by a greed for instant riches. In the last year alone, the value of Bitcoin has risen by 1,731%. We’re talking gold rush V2.0, baby. Money talks, and with a resounding $615 billion held up in cryptocurrencies, it is clear why this is assuredly not the first cryptocurrency article you have read — maybe even today. An unfortunate side effect of mass interest in a subject is the wildfire-like spread of misinformation. So, what exactly is a blockchain, and what can you still do now that everyone has finally jumped on the cryptocurrency bandwagon?
Bitcoin and Other Cryptocoins
Bitcoin was the first peer-to-peer decentralized virtual currency released in 2009 by the mysterious figure known as [Satoshi Nakamoto] — a notoriously mysterious character — and it has continued to be the big dog in the cryptocurrency market today in 2018.
However, there are a whole slew of other digital coins that are being feverishly bought up like stocks in the 20s. Coincidence? Some of the notable contenders out there include Ethereum, Litecoin, and yes, even Dogecoin. You can see the growing list of 1000+ cryptocurrencies here.
The technology underlying all of these crytocurrencies is know as a blockchain, and that term has taken on its own mythical level of buzzwordiness.
Blockchains
Blockchains are not black magic, they do not hold the answers to the universe, and they will not pull cold, hard cash out of thin air. They are, however, generating a rather large buzz and confusion as of late. In layman’s terms, blockchains are digital files that list accounts of the transactions that take place with forms of cryptocurrency. As the image below shows, these files — blocks — record the information in hash functions with timestamps. But these ledgers are not kept away from prying eyes by your banker, or under your own lock and key. These are public ledgers accessible by everyone, simultaneously creating a need for trust while abolishing it.
Whoever you transfer money to can see all of your previous transaction history since it is locked into the blockchain. This eternal record of transactions has understandably intrigued many. Using blockchains to store small files of data is one project that was introduced after Bitcoin started to become mainstream in 2015. Now, large corporations are frantically looking for ways to use blockchain technology in their businesses.
It is likely that blockchain technology will fundamentally change the way we use some technologies, and those uses may be in something other than accounting for monetary transactions. Blockchain has been proposed for tracking property ownership, storing large amounts of data, filing copyright, implementing micro power grid sharing, and a slew of decentralization applications of many different kinds. At this point it’s cliche to say you’re planning to “put it on a blockchain”, but that’s no joke. At some point, all of these attempts to apply the concept will result in a few that really do make sense.
With the growing number of applications for blockchain being introduced, the validity of its security is something to watch. Since the data written into the blocks cannot be tampered with or overwritten, it appears to be secure. However, as is the case with Bitcoin, if 50+% of the computers working on a network tell a lie in a consensus protocol, then it will become true. This unique security flaw is kept at bay by the communities of mining pools ensuring that no one gains such a large influence over the network.
What Does the Future Hold?
So you missed out on mining Bitcoin before it really ramped up over the past five years, and are kicking yourself for not investing in this gold mine earlier. Don’t worry; your future is whatever you make it. There is still money to be made in the game, albeit maybe not as easily as in the good ole’ days of 2010.
The average Joe simply cannot compete with monstrous mining farms that have popped up. Some are turning towards GPU mining Ethereum. Unlike Bitcoin, it can still be mined at a profit with a half decent gaming rig although a dedicated multi-card setup is better. Students living in on-campus housing are pressing their gaming machines into service since they do not pay a separate energy utility in their dorms. They have been known to set up several mining rigs with this virtually “free” energy to offset soaring tuition prices and learn a thing or two about mining.
So far we have seen a couple of standard Bitcoin price trackers, and even a Bitcoin Bot that dances whenever it receives a transaction. As Bitcoin skyrocketed through 2017 some sites were caught stealing your CPU cycles to mine covertly while others began doing it overtly as an alternative to running ads.
Don’t kick yourself for having missed the gold rush. That’s how gold rushes go. But don’t give up either. There’s plenty of room to play with the new technology and that’s what the Hackaday Community does best: find new and interesting applications for the latest and greatest. Just make sure you let us know what you’ve discovered!
as for any gold rush I regret not to own silicon shovel factory ;)
Bitcoin: a revolutionary currency… used to convert back to fiat. Oh well, I hope its alternative can do so much better that it doesn’t need to be valued in fiats.
Here are some other career choices that you artificial-raising shills can easily branch out to: Telemarketer scams, Email spammer, it support scammers, youtube clickbaiters, debt collector, specialized shit scrapers for special toilets, (this is just discovered) meme posters of the cryptocurrency subreddit(you dont have to put in any effort, just read up news and react with a video/gif. god damn it that sub is so trash
TO THE MOON!
FINDING PARADISE!
HODL
“Whoever you transfer money to can see all of your previous transaction history ”
Sort of like…
https://www.wheresgeorge.com/
?
B^)
Or CarFax?
I remember thinking back in 2010 I should try out mining just to see what it’s all about but didn’t have a great rig to test at the time so I forgot about it. Just for giggles, I gave Ethereum mining a try at the end of last year. I mined a few hundredths. It’s interesting, and I find the phenomenon of mining pools to be rather quirky side effect of the entire thing.
Eliot Phillips quipped that Hackaday used to have a folding@home group. I guess that was a mining pool for scientific advancement rather than magic internet money ;-)
The Gridcoin network/blockchain will give proof of stake tokens for volunteer scientific computations done on BOINC projects of various category. Also, with interest. Some of the BOINC projects Gridcoin currently rewards for: Einstein@Home, Asteroids@Home, SETI@Home. BTW, Folding@Home has foldingcoin and such. ;)
So, when does all the remaining and future memory space on the web get filled with blockchains that are duplicated on a multitude of machines to maintain “trust”?
There are some coins that does not have to keep the entire transaction history on the ledger. RaiBlocks (XRB) and IOTA are two examples…Blockchain for XRB are bellow 2GB, and have more than 4 million transactions. A DVD-rip is larger than that.
When the earth’s temperature has been raised to the boiling point by the electrical needs of the technology. Bitcoin (mining and transactions) already uses more energy annually than Qatar, nearly 40 TWH https://digiconomist.net/bitcoin-energy-consumption
With bitcoin and most others yes, the transaction history is public. but with some clever math, Monero and similar coins are able to prove transactions are valid, but with out publicly revealing the amount sent, the sender, or (with sub addresses coming soon) even the recipient. Some people will say you must be hiding something illegal if you use monero, but you don’t post your bank statements and credit card history online for everyone to see, do you? Bitcoin in its current form is a surveillance tool, why do you think there’s so much hype from the media? In order to actually work as a digital currency, transaction privacy is a necessity. Not trying to be a shill for monero but its important people understand this principle of digital currency
I don’t think the media hype has anything to do with pushing bitcoin as a surveillance tool. There is similar hype when gold and other precious metal prices spike.
You may be right on that point, I didn’t intend to make such a sweeping assumption. My point was that bitcoin was originally quite anti establishment, but once block chain analysis showed its relatively easy to de-anonymize transactions, the main stream opinion suddenly became more positive. Could be coincidence, but I’m sure either way, governments and advertisers etc love being able to watch peoples transactions.
The article doesn’t add much to the conversation. I have worked on blockchain for several years and have applied for a couple of patents related to it. More on that later. First let’s get a couple of things straight. Bitcoin is a completely useless currency for real transactions. It is vastly inefficient. It serves three purposes. One is to make a lot of money for the founders, the second is to facilitate hidden financial transactions, such as money laundering, and the third is for speculation. It didn’t have to be that way. For example, one of the founding principles of Bitcoin is anonymity. This is not required by blockchain. Bitcoin just wanted it to be that way. The mining process is incredibly inefficient. It only works because initially people could use spare computing cycles to mine and then, later due to speculation, it became worthwhile to invest a lot of computing power. Unfortunately that means that Bitcoin transaction and very slow and expensive to settle. It costs something like 10,000 more to process a Bitcoin transaction than a Visa transaction and takes several orders of magnitude longer to process. A Blockchain system for real transactions would work differently. First, it would be trust based. That means that people accepting the currency could specify their required level of trust for the transaction to complete. Some would be OK with transacting with anonymous users. Others would require verification of who somebody is by a trusted body. Secondly the vastly inefficient mining process must be replaced with a more efficient mechanism. The key to this is also trust. The first thing is to separate out transaction verification from creating currency. A useful Blockchain currency would not be created out of thin air but would be backed by real assets. There are several ways to do that. US Dollars are backed by the US government. A cryptocurrency could be backed by anyone. For example, Apple could issue Apple Bucks or I could issue Dave bucks. The key to whether people accept the currency is how much they trust the issuer. This doesn’t work with anonymous currency issuers. Nobody should trust an anonymous currency issuer (like Bitcoin issuers) but they do when speculating. Verification should be a service that is paid for, like the small fees that Visa charges to process a transaction (the merchant fees etc. go to the banks, not Visa). The key is to have multiple TRUSTED processors who can update the blockchain, and then to make the blockchain available to view by all participants so that the transaction processing is transparent. By using multiple trusted processors to handle updates instead of mining, the verification costs are dramatically lowered. Of course, the processors could, in theory, collude but because their actions are transparent and because they would have a reputation that they care about, this should be less of a concern than with a large Bitcoin miner gaining control of the mining process. Nowadays there are a very small number of Bitcoin miners doing most of the mining and you have no idea whether they can be trusted.The important factors are having HIGHLY TRUSTED verifiers, having enough verifiers such that they couldn’t easily collude, having an open market for verifiers so that, if people suspect collusion, they can change verifiers and transparency of processing to users of the currency by them being able to view the blockchain.
BTW my patents focus on using blockchain style ledgers for IOT. One was about building such blockchains into IOT objects to record ownership and ownership changes for provenance (does the person selling actually own it? Is it genuine or a fake?) and for managing control of the objects.
Will the value of Bitcoin collapse? This all depends on whether Bitcoin continue to have real world value. So long as it remains useful for hiding monetary transactions, the value could go much higher but I fully expect governments to crack down on its use as they don’t want hidden monetary transactions. When that happens, Bitcoin becomes no longer useful for laundering money and other hidden transactions and the currency will collapse when the bubble bursts.
Hello Dave,
Glad I could read your input. I am new on here and have been scrolling to see who’s best to help me understand Cryptos better. Kindly let me know what secure means to contact you as I really need to start making some money. I am not dumb so excuse me if i am wrong with my message input
I have looked into cryptocurrency a little myself. How do you feel about the petrodollar that is backed by oil?
I saw Dave Jones do a video on the eevblog about hardware wallets. It’s not a stretch to imagine that they could begin accepting cryptocurrencies from a physical device instead of cash.
I just had to comment because I feel like I’m pointing out the obvious things that nobody else seems to be saying. I’ll go back to listening
In the past, companies have issues scrip, which is currency backed by the resources of the business. In the future, it may be that companies will issue scrip in the form of cryptocurrencies. People may trust some large businesses more than some governments and would be willing to accept such currency. Startups issuing ICOs are doing something similar except that they do not have many resources to back the currency, only a promise that they will. You could also have a cryptocurrencies (or regular currencies) backed by a resource such as oil. In that case, its value would vary with the price of the resource, e.g. oil.
>”US Dollars are backed by the US government.”
US Dollars are created by the government issuing bonds, and they derive their value from the fact that the Federal Government has to buy the bonds back using the money that is created by the banks. It’s not backed by the US government directly, but by the fact that -somebody- needs the money back, so there’s a guaranteed demand for it – and when there’s demand, the price goes up.
In contrast, the value of physical items like gold derives from the fact that they’re at least useful for something. People may speculate and hoard it to create price bubbles, but at the end of the day somebody needs it to do something, and that’s why people are willing to trade it.
The most basic problem of Bitcoin is that they carry no obligation or need to accept the money back, and lack any tangible value, so they’re properly and fundamentally funny money. They’re just created, and then they exist. You buy something with a Bitcoin, and you might as well have drawn a number on a scrap piece of paper, and pretended that it’s money. On a later day, when somebody comes back to you with that piece of paper, you can just say “Lol, nope”.
Absolutely, although I view the basis for trusting government issued currency is because they can tax their citizens.
I don’t see how taxing gives the currency any value.
The idea of fiat currency is that the issuer has to BUY it back, essentially the government has to sell services to the public. The debt obligation is supposed to force the government to not just print money and buy things. They’re supposed to be by doing something useful that the people would want to pay for in order to gain the money back.
Taxation means the government prints it (issues bonds), buys things using the money, and then just takes the money back, without returning any value for the value they gained. That essentially makes it funny money again, and the only reason people need the money is because the government says everyone -must- pay their taxes in that currency.
It’s not an issue of trust, but an issue of “we’ll put you in prison if you don’t”.
All money is “funny” in some sense. It’s not a problem. The value of a dollar is the least common denominator.
In a pure barter economy, you might get ten casks of fine ale for your cow. Nobody cares if a cask goes for $1 and a cow for $10, or if a cask costs $100 and a cow $1000. The “value” of a dollar is the thing in the middle that relative prices are computed in. It’s an arbitrary choice of unit.
Now what _does_ matter are long-term contracts written in dollars that are written with long-run expectations of inflation (change in the value of money) built in. If your blacksmithing salary is fixed at $1 per day for the next year, you surely care about the different arbitrary prices above. Ditto your mortgage and bank deposits.
And this is why the Fed targets a stable rate of inflation first, and then a rough level of inflation (with respect to the potential unemployment tradeoff) second. When prices fluctuate wildly, it makes it hard to write long-term contracts, blacksmiths refuse to work, and the economy goes to heck.
But yeah. Money is funny. People have made careers out of trying to explain it. This is Hackaday.
Of course this depends on your understanding of what the government is.
If you’re an idealist and say the government is the people, then there’s no problem because the value gained by the government using the newly created money goes to the people, and taxing the money back therefore works because the same people who pay the tax also gain the value. The money pops into existence and then vanishes just to facilitate the movement of value among the people.
But, if you view the situation by the lens of real politics and real economy, where the government is indeed a wholly separate organ (a special interest group / elite) from the rest of the society, then the situation changes entirely: the government buys value from the public using money they made up, and then snags the money back to avoid returning the value. They do return some value as public services to keep up appearances and avoid direct revolts, but they always give back less than what they gain. In this case the money is created to benefit the elite, and the people are being held at gunpoint and told to play along.
>”And this is why the Fed targets a stable rate of inflation first, and then a rough level of inflation”
The pessimist’s view, and to reference the “realpolitik” above, is that there’s no reason for the FED to target a permanent positive level of inflation. They could just as well be maintaining zero inflation, and many argue they should.
Reason being that this inflation is possible by always creating more money than there is need for. Again, ideally, the new money would be spread evenly among the public and the permanent inflation could be accounted for in contracts, and every now and then you just agree to take off a zero from all prices and values. No problem.
But, because the new money isn’t spread evenly, but it’s held again by the economic-political elite who created it, it becomes a form of indirect taxation, for which there is no return of value, representation, or anything – and this is the primary reason why FED is maintaining inflation. That’s what makes the dollar funny money, and a problem.
“The value of a dollar is the least common denominator”
ORLY? Whose dollar? Most of my friends see almost no value whatsoever in their dollars until they can convert them back to Sterling, oe Euros, or… you see the problem here? The Canadian Dollar is no more special than any of the other government-backed currencies – You did mean the CANADIAN dollar, right? ;-)
Bitcoin: All the disadvantages of a gold-based currency combined with all the disadvantages of a fiat currency!
It is not important but that is not how it works. Governments can issue currency without having any bonds. It doesn’t affect the point we agree on though, which is that is a currency backed by nothing and with no inherent use should have no value. Others argue that if people think a currency has value it does. Bitcoin has a very inefficient trading process and its only real value is in facilitating anonymous transactions, such as money laundering. If that stops so will Bitcoin.
Money itself is an abstraction, a convenient tool to facilitate trade. A $100 bill isn’t inherently worth anything, its a piece of paper. The value comes from people reaching a consensus to use these abstractions for trade. Same applies to crypto currencies, if enough people are willing to use it as a trade medium, then its worth whatever value the consensus reaches. Currently these techs are still novel and finding their footing, so consensus on their value and adoption have not reached an equilibrium yet. This may take decades, but I believe crypto currencies will become the dominant from of money once the kinks are worked out. It probably won’t be bitcoin but at least its paved the way. Another value backing crypto currencies is the autonomous security, and lack of central point of failure. With government backed currency, the value is depends on the success of that government. Whereas a global currency would be better able to dampen swings in monetary value that are caused by localized economic/political issues.
While what you say is true, it is all about trust and efficient transaction processing. People trust that the US government will back the dollar with real resources if necessary. Bitcoin’s Achilles heel is its hugely expensive and inefficient transaction processing mechanism. That limits its use. If governments crack down on its use, as I believe they will, nobody will want to hold Bitcoin or mine it anymore. In the meantime, it value could increase significantly as people want to use it for anonymous transactions, especially where there is a lot at stake, such as criminal activity.
Yeah bitcoin in its current form isn’t suitable for much real-world use, due to the excessive consumption of energy, centralization of miners, slow confirmations, lack of fungibility,
scalability issues etc. Anyone still using it for illegal purposes is a fool because its not really that anonymous. But the idea of trustless digital money is revolutionary, and many alt coin developers are working hard to solve the shortcomings and with time the technology will become refined to make it useful on daily basis. Until then its a clusters*ck of competition, scams, pump & dumps with the occasional innovation. Take ICO tokens for example, most are scams or have no real reason to use block chain tech, but financial Darwinism sort out the good from the bad. There’s a reason there’s tons of money being thrown around, there is real promise in the tech. Embrace the chaos, lol
>”People trust that the US government will back the dollar with real resources if necessary.”
If they’re naive. In reality the US government won’t, because they can’t. There’s just too much money, so in a situation where you start counting dollars per real resources, the dollar goes Zimbabwe.
The main reason why the dollar holds any value is because of a) you must pay your taxes in dollars, b) oil trade/petrodollar which ensures demand in the international market and keeps the value up relative to other currencies.
Lightning Network is being developed to improve Bitcoin transaction efficiency, and might be applicable to other blockchain systems as well.
Ripple protocol also seems promising, with a trust-based system where anyone can issue their own currency in a way similar to what you described: People you trust to pay back debt get to hold some amount of debt with you, and then this debt can get shuffled around the network to pass along a transaction between people who don’t trust each other directly or to zero itself out if it ends up in a loop.
Gold rush -> Gold.
Cryptocurrency rush -> https://www.coinwarz.com/calculators
:o)
Kodak launched a cryptocurrency today. Stock price basically doubled at the sound of the magic words. I wish I made a million bucks just by saying the word “blockchain” loudly in public, but all I got was a lousy cease and desist letter.
“All I got was a rock!”
-Charlie Brown
Just wait until some bright person starts promoting their new cryptocurrency that’s backed by arbitrage on the International Postal Coupon market!
If only I’d got on the Bitcoin Bandwagon when I first heard about it. I thought it was some in-game currency for an MMORPG and never bothered to investigate further. Then I stumbled across an article about how people used Dogecoin to send the Jamaican Bobsled team to the Winter Olympics a second time.
The nVidia 9800GT I had then would’ve been killer in the early phase of Bitcoin mining. :( Anyone wanna buy three Antminers?
From the article, it sounds like a blockchain is a public log file.
Yup, with crypto signatures all the way back to the initial empty file, so you can’t tamper with old data, and a sorta voting process to agree who’s got the longest properly-signed logfile, so it can’t fork (for very long)… And the signing is essentially a lottery where miners are creating a bajillion lottery tickets until one wins/signs… Then they deliberately vary the required complexity of those signatures such that the world can only sign approx once every 10 mins… and then anyone who wants anything signed pays people in millisignatures for their signatures.
Still all a bubble…
Cryptocurrency is joke to lure fools into leveraging investment into it. When the housing bubble collapsed some one ended owning the property lost by those who owned property they obtained via leveraged investment. When the cryptocurrency bubble collapses, only those lucky enough to convert their cryptocurrency to metals, tangible goods, or even fiat currency will have something that can purchase their next meal with. On the bright side our roadsides will be devoid of recyclable trash.