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Bitcoin: a ordinary guide to digital currency, WIRED UK

A ordinary guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our plain guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our elementary guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it began out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the activity, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but stiffer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up enormous energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s most likely best to stick to the largest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even tho’ Mt.Gox is the fattest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might funk and then convert all of their money at the next available chance, thus enlargening bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve examine found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under intense DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some utterly brainy hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be neglected of your capability to spend them.

Stiffer mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated toughly every ten minutes and collective across the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the thickest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to budge to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated insanely, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a ordinary guide to digital currency, WIRED UK

A plain guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our elementary guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it began out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the act, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but stiffer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up gigantic energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s most likely best to stick to the largest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even tho’ Mt.Gox is the largest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might fright and then convert all of their money at the next available chance, thus enhancing bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve explore found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under mighty DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some utterly clever hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be deserted of your capability to spend them.

Stiffer mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated toughly every ten minutes and collective across the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the largest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to budge to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated insanely, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a ordinary guide to digital currency, WIRED UK

A elementary guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our elementary guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it began out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the act, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but stiffer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up big energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s most likely best to stick to the fattest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even however Mt.Gox is the largest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might funk and then convert all of their money at the next available chance, thus enlargening bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve investigate found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under mighty DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some enormously clever hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be deserted of your capability to spend them.

Firmer mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated harshly every ten minutes and collective via the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the largest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to budge to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated insanely, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a plain guide to digital currency, WIRED UK

A ordinary guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our plain guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it commenced out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the activity, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but firmer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up fat energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s most likely best to stick to the largest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even however Mt.Gox is the thickest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might fright and then convert all of their money at the next available chance, thus enlargening bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve explore found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under powerful DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some enormously clever hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be abandoned of your capability to spend them.

Firmer mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated harshly every ten minutes and collective across the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the fattest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to budge to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated frantically, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a plain guide to digital currency, WIRED UK

A ordinary guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our plain guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it began out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the activity, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but tighter now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up fat energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s most likely best to stick to the fattest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even tho’ Mt.Gox is the largest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might fright and then convert all of their money at the next available chance, thus enhancing bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve examine found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under mighty DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some utterly wise hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be abandoned of your capability to spend them.

Tighter mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated harshly every ten minutes and collective via the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the fattest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to budge to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated frantically, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a plain guide to digital currency, WIRED UK

A plain guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our elementary guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our elementary guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it commenced out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the act, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but firmer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up enormous energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s very likely best to stick to the fattest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even however Mt.Gox is the fattest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might funk and then convert all of their money at the next available chance, thus enlargening bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve explore found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under powerful DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some utterly brainy hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be neglected of your capability to spend them.

Stiffer mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated harshly every ten minutes and collective via the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the largest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to stir to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated insanely, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a elementary guide to digital currency, WIRED UK

A ordinary guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our plain guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it commenced out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the activity, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but stiffer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up fat energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s very likely best to stick to the thickest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even tho’ Mt.Gox is the fattest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might scare and then convert all of their money at the next available chance, thus enlargening bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve explore found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under powerful DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some utterly clever hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be deserted of your capability to spend them.

Tighter mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated toughly every ten minutes and collective via the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the largest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to stir to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated frantically, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a plain guide to digital currency, WIRED UK

A plain guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our elementary guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our elementary guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it commenced out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the act, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but tighter now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up enormous energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s most likely best to stick to the thickest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even tho’ Mt.Gox is the fattest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might fright and then convert all of their money at the next available chance, thus enhancing bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve examine found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under powerful DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some utterly wise hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be neglected of your capability to spend them.

Firmer mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated harshly every ten minutes and collective across the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the fattest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to budge to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated insanely, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a elementary guide to digital currency, WIRED UK

A plain guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it began out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the act, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but firmer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up enormous energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s very likely best to stick to the largest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even tho’ Mt.Gox is the fattest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might fright and then convert all of their money at the next available chance, thus enlargening bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve investigate found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under mighty DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some enormously wise hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be neglected of your capability to spend them.

Tighter mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated toughly every ten minutes and collective via the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the thickest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to stir to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated frantically, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a plain guide to digital currency, WIRED UK

A ordinary guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our elementary guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it began out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the act, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but stiffer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up ample energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s most likely best to stick to the thickest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even tho’ Mt.Gox is the thickest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might scare and then convert all of their money at the next available chance, thus enhancing bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve probe found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under mighty DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some utterly clever hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be neglected of your capability to spend them.

Firmer mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated toughly every ten minutes and collective across the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the fattest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to stir to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated insanely, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a ordinary guide to digital currency, WIRED UK

A elementary guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our plain guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our plain guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it embarked out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the act, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but stiffer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up gigantic energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s most likely best to stick to the fattest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even however Mt.Gox is the largest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might funk and then convert all of their money at the next available chance, thus enhancing bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve examine found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under powerful DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some utterly clever hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be deserted of your capability to spend them.

Stiffer mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated toughly every ten minutes and collective via the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the thickest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to stir to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated frantically, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a ordinary guide to digital currency, WIRED UK

A ordinary guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our plain guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our plain guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it commenced out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the act, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but firmer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up hefty energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s very likely best to stick to the fattest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even tho’ Mt.Gox is the fattest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might scare and then convert all of their money at the next available chance, thus enhancing bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve investigate found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under strong DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some enormously clever hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be neglected of your capability to spend them.

Tighter mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated harshly every ten minutes and collective via the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the largest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to budge to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated frantically, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

Bitcoin: a elementary guide to digital currency, WIRED UK

A ordinary guide to Bitcoin

There remains a lot of confusion about what Bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin

  • 27 Mar 2017

WIRED has been reporting on digital currency Bitcoin for several years, but in the past few months, a single bitcoin’s trading value has swung significantly making it a regular fixture in headlines. Despite this, there remains a lot of confusion about what bitcoins are, how to use them and whether or not we are in a Bitcoin Bubble. Here’s our ordinary guide to Bitcoin.

ADVERTISEMENT

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system or “cryptocurrency” that doesn’t rely on trusting one central monetary authority and permits for anonymous, untrackable and untaxable transactions. The idea was very first discussed by members of the cypherpunk mailing list and then a workable system – which used a distributed database spread across the knots of a peer-to-peer network (a little like the one that underpins Bittorrent) that could keep track of transactions secured by cryptography – was outlined by a programmer called Satoshi Nakamoto in a paper in two thousand eight and built in 2009.

Is it a commodity or a currency?

It seems that Bitcoin is an awkward combination of the two. The commodity value of bitcoins is linked to their currency value, but the more they become like a commodity, the less useful they are a currency.

READ NEXT

Bitcoin has split in two – what does that mean?

How do you mine bitcoins?

Anyone can install Bitcoin’s mining software, which then uses the computer’s processing power (using the CPU or GPU) to carry out intensive calculations – you can think of it like attempting to search for prime numbers. Lots of people might be working on the same unit of work – a computationally complicated problem. The aim is to find a certain sequence of data, called a “block”, that produces a particular pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever’s computer manages to do that will win bitcoins.

When it embarked out, it was relatively effortless to mine bitcoins, but as more people are attempting to get in on the activity, it’s become computationally much more challenging — in the same way that it’s lighter to find the early prime numbers, but firmer now. The network is used to monitor and verify the creation of fresh bitcoins and all Bitcoin transactions, which are filed in a log. There is a cap on the number or bitcoins that will be produced, which is twenty one million, and a pre-defined schedule of how quickly they are released up until 2040. There are presently around eleven million in circulation.

Can I just use my laptop?

You can, but you are unlikely to mine any bitcoins. Because of how hard mining now is, it could take more than three years to generate any coins, running up massive energy and equipment costs. There are slew of opportunistic IT suppliers keen to sell you expensive equipment dedicated to mining. You are better off joining a mining pool – a Bitcoin syndicate, if you will – where you can split any wins inbetween the group based on the amount of work your computer did.

ADVERTISEMENT

READ NEXT

Is Valve about to accept bitcoin payments on Steam?

How do I buy bitcoins?

You can exchange regular currencies for bitcoins using an exchange. It’s very likely best to stick to the fattest – Mt.Gox – which treats around eighty per cent of Bitcoin trade, as around forty five percent of exchanges fail, taking their users’ money with them. Of the forty exchanges which have worked with Bitcoin, eighteen have closed. Of those, five sites were hacked and lost funds, including Bitfloor, which had more than £160,000 stolen and thirteen closed without any explanation. Even however Mt.Gox is the thickest, it’s not immune to attack, and suffered a number of outages over the last few months following denial of service attacks (hammering the exchange with traffic until it fails).

Why would people attack exchanges?

Mt.Gox believes that opportunists are attacking exchanges to destabilise the market. If bitcoin owners find that they can’t access the exchange to convert their money back into currency they might funk and then convert all of their money at the next available chance, thus enlargening bitcoin supply and reducing the price of bitcoin. This would permit the perpetrator to buy bitcoins at a cheaper price and then wait until the market stabilises again before selling, thus pocketing the difference.

Where can I spend bitcoins?

Bitcoin is very useful if you want to buy drugs and other illegal items without lightly being identified. You can spend them on online black markets such as Silk Road. A two thousand twelve explore found that around twenty percent of all bitcoins exchanged on Mt.Gox (Bitcoin’s largest exchange) each day were spent on Silk Road. However, the site has been under intense DDoS attack which has led some to report that it is collapsing, while others have said that an individual had been attempting to blackmail the organisation.

ADVERTISEMENT

READ NEXT

Technology is making it lighter to trust strangers

Beyond Silk Road, you can also spend bitcoins online at Reddit, WordPress and Mega but so far there aren’t so many places in meatspace that accept it yet, with the exception of a few bars with connections to the Bitcoin community. You can see a more comprehensive list of where to spend bitcoins here. Paypal is discussing accepting the currency, which could give it some much-needed legitimacy. The US Treasury is also keen to apply money-laundering rules to Bitcoin and other cryptocurrencies.

Are bitcoins secure?

Bitcoin maintains that because all transactions are trackable they are secure, but there have been a few cases where hackers have ransacked electronic wallets used to store secret keys that give you the right to spend your bitcoins, notably when one exchange had 25,000 stolen. Unnecessary to say, there are some enormously brainy hackers in Bitcoin. So far, none of the stolen bitcoins have been spent, because those coins can be tracked, but you can still be neglected of your capability to spend them.

Firmer mining also means that fewer people will bother dedicating the processing power to mining, which could mean that the overall number of knots decreases to the point where it could be vulnerable to a fifty one percent attack.

ADVERTISEMENT

What is a fifty one per cent attack?

Bitcoin records every single transaction on its network in a public record called the blockchain. A fresh one is generated harshly every ten minutes and collective via the network. The determining factor in whether the blockchain is the real one or should be discarded as a fake is whichever is accepted by the most number of mining knots. If someone is able to take over enough knots that they could dictate their own, fake, version of the blockchain, they could then counterfeit bitcoins or spend them numerous times. Presently the fattest Bitcoin miner only has fifteen percent of the total hashing power, but if this rose to fifty one percent it could be disastrous for the cryptocurrency. Those worried about this risk might want to stir to an alternative currency.

Why is Bitcoin so volatile?

Bitcoin prices have fluctuated insanely, rising as high as $1,100 and falling back down to around $76 within a very brief space of time before rebounding again. Because of the lack of liquidity in the market and no central authority to influence supply and request, the currency is vulnerable to speculation and manipulation.

A series of DDoS attacks against Mt.Gox was enough to send the Bitcoin value into freefall.

Should I get into Bitcoin mining now?

No. If you didn’t get into Bitcoin mining at the beginning, you are unlikely to make any money now – your energy and infrastructure costs will be too high. You can, however, still invest in Bitcoin as a speculator, with the hope of selling at a higher price. But go into it with open eyes.

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