The Easiest Way to Buy Bitcoin Instantly Online for Investment

The Easiest Way to Buy Bitcoin Instantly Online for Investment

After all this while, Bitcoin has been one of the most amazing currencies to witness in the history of mankind. Bitcoin has outperformed the US dollar, gold, silver, and other fiat currencies. The presence of Bitcoin has also made a few millionaires along the way. It is never too late to buy Bitcoin if it is for long-term investment. If you are totally fresh to the world of Bitcoin, MYF is going to display you the easiest way to buy Bitcoin, almost instantly online.

The Easiest Way to Buy Bitcoin Instantly Online for Investment

There are many ways to buy Bitcoin such as via credit card, bank transfer, cash, and PayPal. Each of them has both their advantages and disadvantages.

#1 Speedy Transaction – Credit Card

The easiest and fastest way to buy Bitcoin instantly is with a credit card or debit card. For example, Coinbase supports credit or debit card purchases provided your card supports ‘3D Secure’. Some banks will require various security steps to authorize a purchase using 3D Secure. Some of the methods you may see will be a text message, a bank provided security code, or security questions.

Once you confirm a purchase with your card on Coinbase, you may be redirected to your bank’s website to verify the transfer. While Coinbase performs testing to ensure compatibility with major browsers, there may be situations where you are not correctly redirected to your bank’s website. If you are incapable to confirm your purchase with your bank because of this, Coinbase will not be able to finish your order.

This is also why purchasing Bitcoin via credit card is one of the safest ways as exchanges like Coinbase requires verification from both the bank and you.

However, you should be aware that buying Bitcoin instantly with a debit or credit card will usually result in higher fees because there are higher transaction and processing fees. Therefore, if you are buying just a puny amount of Bitcoin, using credit cards may be the best choice if you want it quick and effortless.

#Two Big Transaction – Bank Transfer

For buying large amounts of Bitcoin, you should choose to buy with a bank transfer on a reputable exchange such as Bitfinex, Poloniex, GDAX, GEMINI, Kraken, EXMO, YOBIT, and etc.

Fees are always lowest when you choose to transfer funds directly via SEPA (Europe), Wire (US), Rapid (Asia).

In my practice, Kraken is one of my dearest Bitcoin exchanges as it offers the best service for a bank transfer (wire SEPA) deposits. For the time being this is the only deposit method available. Deposit currencies include

Deposit currencies include Euros, US dollars, and KRW (Korean Won). It is super cheap to deposit, withdraw, and trade on Kraken. Daily volumes are always high, and an excellent fee transparency assures low commissions and that you get the cheapest coins.

My 2nd choice will still be Coinbase if you want to buy Bitcoin with a bank account in the US.

Coinbase permits you to connect your bank account via ACH bank transfer and can be connected with twenty six different banks.

Once you supply your bank credentials on Coinbase’s website you can lightly buy Bitcoins through your bank account. The fee for buying Bitcoins with your bank account is %1.49. The good thing about Coinbase is that the site has very high liquidity and won’t “run out of Bitcoins”. It’s also pretty intuitive for beginners.

I would like to emphasize here again that bank transfer is much slower than credit card purchases and it can take up to five days to ultimately see your money in the exchanges. If you’re inwards the Eurozone, Coinbase will also permit you to buy Bitcoins with a SEPA transfer. Fees are basically the same as buying within the US.

It is noted that every Bitcoin exchange is obliged by law to do utter KYC (know your customer). This is to prevent cybercrime and money laundering and some say the government worries that you might be gaining too much economic freedom.

Just realize that this is the fresh age where your ID is scattered all over the internet. For this reason, I would recommend choosing the safest sites only. If you indeed need to stay anonymous when buying, this is possible but the cost per bitcoin will be significantly higher.

#Three Reliable and Favorable Method – PayPal

Albeit buying Bitcoin via credit card is the easiest way, PayPal has also been very favorable of Bitcoin. If you are a big fan of PayPal, there are several platforms you can purchase your Bitcoin such as Virwox and AvaTrade.

VirWox is an exchange of virtual currency, you can buy there Lindens, Bitcoins, and more. It has more than 400,000 registered users and is a 2nd Life Lindens authorized reseller.

AvaTrade is a forex broker that is committed to providing a safe trading environment and is fully regulated and licensed in the EU and BVI, with extra regulation in Australia, South Africa, and Japan.

Inbetween the two, I choose AvaTrade over Virwox as it is more straightforward and it is lighter for beginners to navigate around.

The minimum initial deposit requirement of AvaTrade is $100. In addition to the possibility of instantaneous deposits through PayPal, they accept wire transfers and also facilitates funding through credit cards, NeTeller, Moneybookers, and WebMoney.

The advantages of buying or trading Bitcoin with AvaTrade is that there are attractive promotion and bonuses suggested that can reach up to $Ten,00 in some cases. On top of that, they suggest comprehensive educational resources that even beginners can learn as they go along.

One good thing about AvaTrade is that you can attempt out their free demo account so you can practice before putting your money on the line. If you are an inexperienced trader, AvaTrade provides market analysis to assist you in Bitcoin trading too.

I also would like to highlight that AvaTrade offers zero commissions on Bitcoin trading and no bank fees charged on transactions, making it far more profitable.

Conclusion

Depending on your preference, there are several “easiest” way to buy Bitcoin online and most of them can be done almost instantly. If you are not familiar with any of them, the easiest to buy Bitcoin is of course by credit card. However, please bear in mind that it has the highest transaction fee involves.

Most people that are brand-new to Bitcoin find it much safer & more familiar to buy via a Bitcoin ATM (especially if they just want to attempt out Bitcoin), rather than pouring through Reddit threads to determine which site is safest to buy from. There has been a drastic rise in the number of Bitcoin ATMs all over the world. While the normal trading process (usually through online exchanges) takes up to few days to accomplish, Bitcoin ATMs do that instantly and in a matter of seconds. However, Bitcoin atm is not available in most countries.

As you become more familiar with Bitcoin, you may opt to set up an online trading account, which generally has lower fees such as AvaTrade. If you are certain in trading, you may as well use this platform to make extra profit from it.

Related video:

The Cryptocurrency Trading Bible – Hacker Noon

The Cryptocurrency Trading Bible

So you want to trade cryptocurrency?

You’ve seen those eye-popping 3000% comebacks and you want in.

You don’t want some measly little 10% ROI after a year in the plain old stock market. That’s for grandpas and old people. You want quit-your-job with a middle finger, fuck you money! Am I right or am I right?

Or maybe your wanna be a baller, shot-caller? You want a gold-plated house, a yacht and rap movie supermodels jiggling around one of your six infinity pools in string swimsuits.

Well have no fear because the Buddha of Wall Street is here to help you with your wishes of crypto glory! Here’s my story: I was living in a one-room apartment and sleeping in my bathtub and now I fly my helicopter to work just because I hate traffic.

All of this, and MORE, can be yours!

Come closer and I’ll tell you the ultimate, super-secret ingredient to lightning swift crypto riches!

The secret ingredient is…nothing.

There is no secret ingredient to getting rich. Anyone who tells you different is selling something.

Oh yeah and I don’t truly have a helicopter…yet.

Of course, cryptocurrencies do have some of the best ROIs in history. And you do have a shot at making some good money. So let’s talk about investing in cryptos the right way.

I don’t hide the fact that I’m a long-term bull on cryptos. I believe they’re a game switching technology that will ripple across the entire world, remaking every aspect of society. Like my friend Chris Dixon, I believe Bitcoin could lightly be worth $100,000 a coin one day, albeit I’m not fairly there with perennial Dennis Hopper impersonator John McAfee’s prediction of Bitcoin going to $500K a coin, at least not in the next three years. It may take a little longer. I’ve talked about why in my articles Why Everyone Missed the Most Significant Invention in the Last five hundred Years and Reflections on the Best Blockchain Tweets Ever Written so I won’t rehash those reasons again.

Here we’re going to talk about cash money, y’all. Unlike many folks in this space, trading is not my primary interest, but like everyone I do love making money.

How do you make money with cryptocurrencies?

Questions, Questions

The very very first question you need to ask yourself is, do you have enough extra money to invest?

What does extra money mean?

Remarkably, the SEC has some good guidance here. Even tho’ they let Bernie Madoff get away with a massive pyramid scheme for a decade, despite someone telling them about it every year, they’re from time to time good for something! While, I’m not a big fan of the nanny-state accredited investor rules of the SEC that let’s only rich people invest as they see fit, nor of the “pattern day trader” rule that requires to you to have $25,000 minimum in order to day trade the traditional markets (which, by the way, does not apply to crypto markets…yet), there is some merit to the rules. Those numbers are arbitrary bullshit but I do agree with the sentiment that led to the creation of those laws.

They’re attempting to protect people from losing money they don’t have to lose.

And since the nanny-state is not here to protect you in the crypto markets you will just have to go ahead and take private responsibility and protect yourself.

While stories like I Invested All My Spending Money In Ethereum (And so Did All My Friends) are funny on some level (college kids can afford to take some risks because they have a lot of life left to recover later if they lose everything) they’re also utterly horrifying on another level. What if that damsel lost all her food money for the year? Not awesome.

I can’t find the tweet now, but just the other day I spotted a boy posting about how he mortgaged his car, lost it all trading cryptos and his wifey kicked him out. He was looking to get in on a “shit coin pump” aka where traders get together and buy like crazy to pump a penny-stock equivalent to the moon before dumping it on idiots. Not good. Do not be that fellow.

Only invest what you can afford to lose.

If you don’t have a lot of money, embark puny. Don’t go maxing out your credit cards or getting a “loan” from that dude your bother knows who sits on the corner outside the bodega on 156th and Broadway. You’ll only get burned.

The 2nd question you have to ask yourself is:

These are two very, very different things.

By a broad margin, the right strategy for most people is to just buy and hold. Get some well know cryptocurrencies like Bitcoin, Ethereum, Dash, or Litecoin, put them in cold storage, stick them in the sock drawer and leave behind about them. Don’t read the news. Don’t worry about the wild swings or the predictions of doom from the popular press. Just buy, hold and leave behind. In a year or two, dig them out and sell some of them and buy a little more with the proceeds. Wash, rinse and repeat until retirement.

If you want to trade however, that is a different animal all together. That means you’re looking to get in and out of the market. The rules of the game are plain:

Buy low, sell high.

Lighter said than done however.

There are two parts to this game:

Most people crash and burn on the 2nd part. Everyone makes money in a bull market and then most give it right back afterwards.

So does that mean you shouldn’t trade? No way. I love trading!

On the days you win, it’s the ultimate rush. You’re a Viking raider, swooping in on unsuspicious villagers and mowing them down with glee.

On bad days tho’, it’s brutal. You’ll lose sleep, hair, friends and money. You’ll be depressed, angry, and scattered brained.

So why play at all?

Because trading is the ultimate game.

You’re playing against other people, with incomplete information, on an occluded battlefield, as well as against the maniacal and sadomasochistic “mind” of the market, and against yourself. Your mental strength, emotions and belief systems are all working against you. That business school bullshit they trained you about rational actors with ideally distributed information making rational decisions in the marketplace is just that, utter and accomplish bullshit.

Anyone who spends five fucking minutes trading knows it’s crap.

The markets are not rational. Nor are people. We are fear based, emotional creatures.

Only an ivory tower academic economist would ever think something so utterly ridiculous.

Very first of all, the information is not even close to evenly distributed. We’re all playing with partial information and a fog of war. Even worse, we all have varying degrees of capability to process that information. Meaning all of us are kind of stupid. If you’re not that bright, it doesn’t matter how much info you have, you won’t be able to do shit with it. Go directly to Dunning-Kruger and do not pass go.

And most of us are not that bright.

If you ask a group of people how many of them are “above average” drivers, almost everyone will raise their mitts. This is unlikely. We can’t all be above average but we all believe we are.

Even if you’re a good trader, you’re not immune to this kind of mental insanity. If you think you are, that’s another magical belief. As I wrote this article, I made not one but two stupid BTC trades and busted out attempting to catch today’s insane $600 a coin rally late.

I knew this was a terrible idea.

I did it anyway.

I was writing this article (not focused) and I was late to the party, a dual whammy of stupid. Rule number one: If you miss a trade, stay the hell out of the market. Get ’em next time.

But did I listen? Nope. Because I am an emotional fear based creature just like everyone else. FOMO (Fear of missing out) got me. The force is strong with FOMO and not you or anyone else is immune to it. No matter how good you get, you’ll regularly and repeatedly shoot yourself in the foot.

When I used to trade the regular markets, I can’t tell you how often I witnessed good, professional traders (I’m looking at you Slope of Hope) telling “this makes no sense, the market is wrong.”

No, the market is always right.

You’re either in line with it and making money or you’re losing money and bitching about how the market should be more rational.

The problem is most of us are watching a movie in our goes about life, instead of what’s actually right in front of our noses. To the degree that reality doesn’t match up with what we want to think about it, we go with what we want to think about it. For most humans providing up their belief systems is the same thing as death. They would rather die, literally, than switch their mind.

That doesn’t work for the market. The markets are a lesson in humility. You will learn to see things as they actually are versus how you imagine them to be or you will get taken out to the woodshed and hammered with a rubber hosepipe. In other words you will lose all your money just like that idiot who sold his car to play the markets. The markets are economic Darwinism and they have no grace.

Let me give you an example of how your belief systems work against you in the game of coins.

One of the traders I go after closely is the Wolf of Poloniex. In utter disclosure, I am not a member of his “Wolf Pack” presently, which is his paid private trading signals group. I just go after the big market moves he posts about on Twitter. That’s because, in general, I choose to do my own research, trust my own eyes and live with my own calls, right or wrong.

The Wolf is a swift, aggressive trader and that matches nicely with my private style. His calls regularly make me tons of money. A question you have to ask of all traders is “are they right?” Nobody is right all the time. In fact, even the best of the best are wrong more than they’re right. The greatest traders make their money on 20% of their trades. The rest of our trades make only modest gains or loses.

So how can we know whether someone is right or wrong, objectively?

Either my bank account is going up or its going down.

It’s a ideal system. Binary. You win or lose. There is no in inbetween.

If my bank account is going up, and I’m following his calls closely, then he’s right. If I keep losing money on his calls, he’s wrong.

But most people don’t see it that way. Lots of folks think the guy’s calls are absolute shit. Why is that?

Because the Wolf has an in-your-face persona that massages many people the wrong way. He loves to stick it to people who say he’s wrong. Any time he posts a call, people are quick to pounce on him and call him an idiot, a douchebag and a shill hucking trading calls. They want him to fail.

The reason is because they’re incapable to disconnect his calls from his persona. They conflate two unrelated things. Whether he’s likable or not is utterly irrelevant. Personally I like the dude but that’s irrelevant too. Except people can’t and won’t see it that way.

People get very linked to their opinions. Burn your opinions! Your opinions mean nothing to the market.

If you thought a bull market was kicking off and it turns into a bear, your opinion was wrong. Period. Let it go! Budge on! But people love their opinions. They cling to them despairingly.

We’re just wired that way.

Our brains are littered with mental pitfalls.

Being “right” when you’re wrong is good way to lose money.

Do you know that at times as much as 38% of the population can’t tell you which party is more conservative in America. 38%! In fact, most people don’t vote based on actual politics at all. They pick who they like the most and then project their viewpoints onto that person, even if that person has diametrically opposed ideas to their own.

How fucking stupid is that?

Welcome to the human race.

We’re prone to all kinds of crazy-ass mental nonsense.

So with that kind of cracked grey matter, how the hell can we expect to get good at trading?

Is there any hope?

Getting Good at Trading

To begin with, you better commence reading.

We all have a lot to learn and the sooner we commence doing it, the better we get. Your aim is to learn something every day for the rest of your life.

My current dearest book on trading is the super plain Top ten Trading Setups: How to Find them, When to Trade Them, How to Make Money with Them. Like all trading books, I choose the paper copy, as opposed to the Kindle edition, as the chart pictures are lighter to see.

This book is brief and to the point. There are no stories of the author’s trading glory, or links to his special, ultra secret system that you can have for a mere thousand dollars more. It concentrates on plain, practical advise, for numerous market trends. Everyone makes money when it’s all going up but how do you deal with trades going sideways or down? It’s in there.

While the book is focused on traditional markets, most of the rules he puts forward can lightly be applied to the crypto markets. His reasons for why fresh traders lose money on the very very first page is worth the price of the entire book.

Fresh traders lose because they:

* Trade too big * Trade without an edge, or in other words — gamble * Over trade * Trade low price junk stocks * Use excessive leverage.

Trading with leverage in the cryptos is like bouncing Cobras. Don’t fucking do it if you’re not a professional trader. The crypto markets stir too swift and you can lightly lose someone else’s money that you don’t have to pay back. Not good.

That brings us to the one major difference inbetween the regular and the crypto markets.

Crypto markets stir at movie game speed.

When he talks about how a market might take weeks or months to play out, in the parallel universe of crypto trading, that could play out in days. We literally just witnessed the market crash out 40%, going total bear, and then recover in two days to fresh heights. That’s how prompt it moves.

This is one of the reasons the popular press does not understand cryptos. They regularly report that Bitcoin is over and dead for good. It’s hilarious. Check out this article from ninety nine Bitcoins. Someone writes Bitcoin’s obituary every day.

The problem is the pop-press is used to playing the game at slower speeds. It’s as if they were good football players in college only to go to the pros and have guys suck right past them. It’s a totally different level. This is the e-Sports universe.

Cryptos are the computer generation’s stock market.

It’s run by kids who never lived life without the Internet. To them it’s just like a tree, it was always there. The NYSE come from the days of ink and wood pulp. When Forbes or CNN or FOX reports on bear markets in the traditional stock world, they’re usually right for a reasonable period. That market will go cold for months. In crypto it could go nova hot tomorrow.

To keep up your need an edge. That brings us to book number two:

This book is a monster. It’s mighty and dense and packed with information. After reading it you’ll likely commence watching patterns everywhere, even when they don’t exist. Don’t worry. Probe them anyway. You’ll regularly see people drawing random lines on the chart on Twitter and calling it “technical analysis” but this book is much more disciplined and serious.

Technical Analysis (aka studying the chart patterns) works pretty damn well in crypto trading. My gut tells me it’s because most of the folks trading cryptos are geeks and we’re prone to liking TA because it makes sense to the engineer brain. That makes them a self-fulfilling prophesy. It also works because there’s lots of machine trading going on. You’ll be trading against bots regularly on the exchanges and they have no choice but to make decisions based on moving averages, pull backs, breakouts and all the other things that TA aficionados love.

The other reason it works is because TA is all about psychology. People want to take gains and cut losses. After a certain amount of rise, it’s going to fall. It’s just natural.

The markets are truly nothing but the collective hallucination of our collective unconscious, the projection of our hopes, desires and fears.

Recall however, TA is not a magic eight ball.

It does not work all the time. It’s often just junk voodoo. It’s hard to do right, effortless to do wrong and prone to all kinds of false signals. Still, it’s a useful device. It’s saved me a number of times and helped me avoid big crashes.

The last book on my list is one I’ve always loved: One Up on Wall Street, by legendary investor Peter Lynch. Yeah that Lynch, the one with his name on the marquee. He hammer the market for fifteen years. Statistically most traders bust out after ten years. A lot of the advice in the book, like making sure you buy a home before investing in stocks, is outdated. Homes are regularly a hefty money pit of debt for today’s youthfull people. But his investing advice is timeless and applies to any market.

How did he make his mulah? Like Warren Buffet, he focused on “value investing.” What’s that you ask? Excellent question, youthfull Padawan.

He invested in what he knew and understood. When his wifey or kids came home with a shopping bag from a fresh store, he’d research that company and buy it. He figured if people were buying from it, it was a good company.

Investing in what you know is a fine mental heuristic. Warren Buffet regularly turns down to invest in all kinds of companies, like the tech starlets everyone loves, because he doesn’t understand tech. Because he doesn’t understand it he can’t make a good call ahead of time, so he stays out. If you don’t understand the purpose of a coin, stay out. Don’t buy it because it’s going to the moon and some jackass in a Slack forum told you it’s killer.

In crypto, value investing means not buying a bunch of shit coins. ICOs happen all the time and fresh coins pop onto the market, promising excellent comebacks. Some of them will produce one day. But most of those coins will go to nothing in the next few years.

Personally, I tend to invest in “infrastructure” coins or coins that have a chance to be multifaceted and serve lots of purposes. I have a background in building systems because I was a systems administrator for more than a decade. I’m looking for the folks building the railroad tracks of tomorrow.

Ethereum, Bitcoin, QTUM, and Tezos have numerous purposes. Pot Coin does not.

Over the years, like all good traders, Peter Lynch made all his money on 20% of his “home run” trades and lost or made modest comebacks on 80% of his trades.

80/20 is the formula.

You will never do better than that, even if you manage it for a number of years. Eventually you’ll revert to the mean. That’s statistics baby. And math is God. It runs things around here and everywhere else.

And of course, even after you read all these books, attempt to reminisce:

There is no secret ingredient.

Actually, there is.

The secret ingredient is you.

It’s cheesy but it’s true.

The way to get better is to get in the game. There is no substitute for private practice. There’s an old telling in the ancient game of Go.

“To learn Go, very first lose one hundred games quick.”

This is true of everything in life.

You have to get into the arena. You’ve got to play the game. Without skin in the game you won’t learn a damn thing.

It’s one thing to read about something in a book, and another thing entirely to do it.

When the pressure is on and your emotions are against you and you’re watching thousands of dollars vaporizing in minutes and you’re fighting with your significant other and absurdly blaming her for taking you to dinner and “causing” you to lose money (magical belief) because you weren’t watching the trading screen like a hawk, then you’ll understand.

This ain’t no joke.

This is not hypothetical. This happened to me last week.

But every day I learn.

Oh and I did make money. I was just mad I didn’t make more. That’s when I knew I needed to take a break and do nothing for a day. I got up late, took a walk, ate a nice breakfast and apologized for being a jack to my beautiful lady.

You have to recharge. You don’t need to catch every damn run. Go out. See the trees, listen to the birds, play with your kids and your pets. In brief, do the things that matter in life. The markets will be waiting for you when you come back.

Here’s the deal: You’ll make mistakes. And you’ll learn. That’s the only way.

But if you let this amazing and legendary quote by the excellent Teddy Roosevelt be your guide to trading and to life and if you’re fortunate, you just might do OK in the world:

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes brief again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows superb enthusiasms, the fine devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

If you loved this article, I’d love it if you could hit the little heart to recommend it to others. After that please feel free email the article off to a friend! Thanks much.

BONUS Trading Books that I like:

If you love the crypto space as much as I do, come on over and join DecStack, the Virtual Co-Working Spot for CryptoCurrency and Decentralized App Projects, where you can paw elbows with numerous projects in the space. It’s totally free forever. Just come on in and socialize, work together, share code and ideas. Make your ideas better through feedback. Find fresh friends. Meet your fresh family.

However, please know that DecStack is NOT a trading troll box. Most forums in this space quickly degenerate into dick measuring and meme sharing contests. We DO have a trading and investing channel and we ask that talk about trading go there. Other than that, come on in and dangle out.

Also, if you’re looking for a more trading focused forum, join the Coin Sheet Discord, which is run by the awesome Coin Sheet team, the only crypto mailing list I subscribe to presently.

DISCLAIMER: Be a big boy or doll and make your own decisions about where to put your hard earned money. I am not a financial adviser and this is not financial advice and if I indeed need to tell you this then it’s best to keep your money in your pocket anyway.

Here’s the list of traders I go after on Twitter. It’s a petite list. Your list should be petite too or else you will just get lots of conflicting signals.

A bit about me: I’m an author, engineer and serial entrepreneur. During the last two decades, I’ve covered a broad range of tech from Linux to virtualization and containers.

You can check out my latest novel,an epic Chinese sci-fi civil war saga where China throws off the chains of communism and becomes the world’s very first direct democracy, running a very advanced, artificially intelligent decentralized app platform with no leaders.

Related video:

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, showcase actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains indeed are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To assure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a giant number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immobilized time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immovable despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing mechanisms that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a big amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other arm, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a immobilized amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electric current into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a brainy contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This liquidates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, very likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner denies to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Brainy contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to possessor
  • cancellation by the holder: transfer $500 from proprietor to loaner
  • end of the rental period: transfer $500 from loaner to holder
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to holder

Upload this brainy contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the proprietor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on wise contracts are called Decentralized Apps, or DApps.

Brainy contracts naturally extend to clever property, and a lot more wise things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow commence and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t swift, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, witness this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These wise people have seen a large potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and translucent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of intense disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-built network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Instruments helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a good beginning point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and titillating. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a superb way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, demonstrate actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains indeed are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent harshly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a gigantic number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a stationary time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration stationary despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing mechanisms that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a thick amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other forearm, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a motionless amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-therapy into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a clever contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This eliminates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, very likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner turns down to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Wise contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to holder
  • cancellation by the proprietor: transfer $500 from possessor to loaner
  • end of the rental period: transfer $500 from loaner to possessor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to possessor

Upload this brainy contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the possessor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to brainy property, and a lot more brainy things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow begin and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t rapid, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a meaty potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and semi-transparent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to liquidate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of mighty disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-built network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Contraptions helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a excellent embarking point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a excellent way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, display actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains truly are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should show up in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent harshly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a clever trick to order facts in a network of non-trusted peers. The idea is elementary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a yam-sized number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immobile time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration stationary despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a gigantic amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other forearm, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a petite fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a petite fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a immobile amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-stimulation into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a wise contract. A contract is a promise that signing parties agree to make legally-enforceable. A clever contract is the same, except with the word “technically-“ instead of “legally-“. This eliminates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, most likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner denies to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Clever contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to possessor
  • cancellation by the proprietor: transfer $500 from proprietor to loaner
  • end of the rental period: transfer $500 from loaner to proprietor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to proprietor

Upload this wise contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the holder can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Brainy contracts naturally extend to clever property, and a lot more brainy things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow begin and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These clever people have seen a meaty potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and semitransparent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of mighty disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-made network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Instruments helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a excellent embarking point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value budge too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a fine way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it indeed, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, demonstrate actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains truly are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should show up in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To response this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent harshly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To assure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They rival to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a phat number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user possesses more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a motionless time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immovable despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technics that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a thick amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other mitt, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a petite fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a motionless amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-therapy into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this directive is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a wise contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This eliminates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, very likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner turns down to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Brainy contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to possessor
  • cancellation by the proprietor: transfer $500 from proprietor to loaner
  • end of the rental period: transfer $500 from loaner to holder
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to possessor

Upload this wise contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the proprietor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to wise property, and a lot more brainy things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow commence and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a fat potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and semi-transparent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to liquidate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of mighty disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-built network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Contraptions helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a excellent beginning point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value budge too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a fine way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it indeed, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, display actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains truly are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is plain: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a gigantic number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immovable time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immobilized despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a thick amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other mitt, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a motionless amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-therapy into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a clever contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This liquidates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, most likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner denies to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Brainy contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to proprietor
  • cancellation by the proprietor: transfer $500 from holder to loaner
  • end of the rental period: transfer $500 from loaner to possessor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to proprietor

Upload this brainy contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the holder can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on wise contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to clever property, and a lot more brainy things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow commence and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a meaty potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and translucent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of intense disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-made network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Devices helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a good beginning point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value budge too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a excellent way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you very likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, showcase actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains indeed are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To assure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They rival to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a phat number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user possesses more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immovable time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immobile despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a gigantic amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other mitt, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a petite fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a motionless amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electrical play into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this directive is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a brainy contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This liquidates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, very likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner rejects to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Brainy contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to holder
  • cancellation by the proprietor: transfer $500 from possessor to loaner
  • end of the rental period: transfer $500 from loaner to possessor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to holder

Upload this brainy contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the proprietor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to wise property, and a lot more wise things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain eliminates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow commence and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a giant potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and see-through database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of strenuous disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-made network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Implements helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a superb commencing point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a superb way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you very likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, display actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains truly are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should show up in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To response this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is elementary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They contest to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a yam-sized number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a motionless time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immobilized despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a enormous amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other mitt, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a petite fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a petite fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a stationary amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn tens unit into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a wise contract. A contract is a promise that signing parties agree to make legally-enforceable. A wise contract is the same, except with the word “technically-“ instead of “legally-“. This eliminates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, most likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner denies to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Wise contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to proprietor
  • cancellation by the possessor: transfer $500 from possessor to loaner
  • end of the rental period: transfer $500 from loaner to possessor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to holder

Upload this clever contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the possessor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to brainy property, and a lot more wise things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain eliminates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow begin and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t rapid, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, see this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These clever people have seen a enormous potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and semitransparent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to liquidate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of mighty disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-built network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Devices helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a excellent kicking off point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and titillating. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a fine way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you very likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it indeed, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, display actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains indeed are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a clever trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a thick number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immobile time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immobile despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a giant amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other forearm, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a immobile amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-therapy into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this guideline is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a brainy contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This liquidates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, most likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner turns down to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Clever contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to proprietor
  • cancellation by the proprietor: transfer $500 from holder to loaner
  • end of the rental period: transfer $500 from loaner to holder
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to proprietor

Upload this clever contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the holder can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on brainy contracts are called Decentralized Apps, or DApps.

Brainy contracts naturally extend to brainy property, and a lot more wise things. The thing to reminisce is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain eliminates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow embark and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, witness this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a big potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and see-through database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of intense disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-made network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Devices helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a superb commencing point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a superb way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

Related video:

The six Most Significant Cryptocurrencies Other Than Bitcoin, Investopedia

The six Most Significant Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies​. The currencies inspired by Bitcoin are collectively called altcoins and have attempted to present themselves as modified or improved versions of Bitcoin. While some of these currencies are lighter to mine than Bitcoin is, there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention. We look at six cryptocurrencies, picked from over seven hundred (in no specific order). (Related reading, see: How Do Bitcoin Investors Combat Price Volatility?)

1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is based on an open source global payment network that is not managed by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. Albeit Litecoin is like Bitcoin in many ways, it has a swifter block generation rate and hence offers a swifter transaction confirmation. Other than developers, there are a growing number of merchants who accept Litecoin.

Two) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that enables Wise Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. During 2014, Ethereum had launched a pre-sale for ether which had received an terrific response. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications inwards Ethereum. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $Four.46 billion, 2nd after Bitcoin among all cryptocurrencies. (Related reading: The First-Ever Ethereum IRA is a Game-Changer)

Three) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https,” is how Zcash defines itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, Zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of ‘shielded’ transactions, which permit for content to be encrypted using advanced cryptographic technology or zero-knowledge proof construction called a zk-SNARK developed by its team. (Related reading, see: What Is Zcash?)

Four) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Dash experienced an enlargening fan following in a brief span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which stands for Digital Cash and operates under the ticker – DASH. The rebranding didn’t switch any of its technological features such as Darksend, InstantX. (Related reading, see: Top Alternative Investments for Retirement)

Five) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Ripple “enables banks to lodge cross-border payments in real time, with end-to-end transparency, and at lower costs.” Released in 2012, Ripple currency has a market capitalization of $1.26 billion. Ripple’s consensus ledger — its method of conformation — doesn’t need mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power, and minimizes network latency. Ripple believes that ‘distributing value is a powerful way to incentivize certain behaviors’ and thus presently plans to distribute XRP primarily “through business development deals, incentives to liquidity providers who suggest tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.”

6) Monero (XMR)

Monero is a secure, private and untraceable currency. This open source cryptocurrency was launched in April two thousand fourteen and soon spiked superb interest among the cryptography community and enthusiasts. The development of this cryptocurrency is entirely donation-based and community-driven. Monero has been launched with a strong concentrate on decentralization and scalability, and enables finish privacy by using a special mechanism called ‘ring signatures.’ With this mechanism, there shows up a group of cryptographic signatures including at least one real participant – but since they all show up valid, the real one cannot be isolated.

The Bottom Line

Bitcoin resumes to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be exposed with time.

The six Most Significant Cryptocurrencies Other Than Bitcoin, Investopedia

The six Most Significant Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies​. The currencies inspired by Bitcoin are collectively called altcoins and have attempted to present themselves as modified or improved versions of Bitcoin. While some of these currencies are lighter to mine than Bitcoin is, there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention. We look at six cryptocurrencies, picked from over seven hundred (in no specific order). (Related reading, see: How Do Bitcoin Investors Combat Price Volatility?)

1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is based on an open source global payment network that is not managed by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. Albeit Litecoin is like Bitcoin in many ways, it has a swifter block generation rate and hence offers a swifter transaction confirmation. Other than developers, there are a growing number of merchants who accept Litecoin.

Two) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that enables Clever Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. During 2014, Ethereum had launched a pre-sale for ether which had received an staggering response. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications inwards Ethereum. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $Four.46 billion, 2nd after Bitcoin among all cryptocurrencies. (Related reading: The First-Ever Ethereum IRA is a Game-Changer)

Three) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https,” is how Zcash defines itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, Zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of ‘shielded’ transactions, which permit for content to be encrypted using advanced cryptographic mechanism or zero-knowledge proof construction called a zk-SNARK developed by its team. (Related reading, see: What Is Zcash?)

Four) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Dash experienced an enhancing fan following in a brief span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which stands for Digital Cash and operates under the ticker – DASH. The rebranding didn’t switch any of its technological features such as Darksend, InstantX. (Related reading, see: Top Alternative Investments for Retirement)

Five) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Ripple “enables banks to lodge cross-border payments in real time, with end-to-end transparency, and at lower costs.” Released in 2012, Ripple currency has a market capitalization of $1.26 billion. Ripple’s consensus ledger — its method of conformation — doesn’t need mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power, and minimizes network latency. Ripple believes that ‘distributing value is a powerful way to incentivize certain behaviors’ and thus presently plans to distribute XRP primarily “through business development deals, incentives to liquidity providers who suggest tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.”

6) Monero (XMR)

Monero is a secure, private and untraceable currency. This open source cryptocurrency was launched in April two thousand fourteen and soon spiked good interest among the cryptography community and enthusiasts. The development of this cryptocurrency is fully donation-based and community-driven. Monero has been launched with a strong concentrate on decentralization and scalability, and enables accomplish privacy by using a special technology called ‘ring signatures.’ With this mechanism, there emerges a group of cryptographic signatures including at least one real participant – but since they all emerge valid, the real one cannot be isolated.

The Bottom Line

Bitcoin proceeds to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be exposed with time.

The six Most Significant Cryptocurrencies Other Than Bitcoin, Investopedia

The six Most Significant Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies​. The currencies inspired by Bitcoin are collectively called altcoins and have attempted to present themselves as modified or improved versions of Bitcoin. While some of these currencies are lighter to mine than Bitcoin is, there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention. We look at six cryptocurrencies, picked from over seven hundred (in no specific order). (Related reading, see: How Do Bitcoin Investors Combat Price Volatility?)

1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is based on an open source global payment network that is not managed by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. Albeit Litecoin is like Bitcoin in many ways, it has a swifter block generation rate and hence offers a swifter transaction confirmation. Other than developers, there are a growing number of merchants who accept Litecoin.

Two) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that enables Brainy Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. During 2014, Ethereum had launched a pre-sale for ether which had received an tremendous response. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications inwards Ethereum. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $Four.46 billion, 2nd after Bitcoin among all cryptocurrencies. (Related reading: The First-Ever Ethereum IRA is a Game-Changer)

Three) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https,” is how Zcash defines itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, Zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of ‘shielded’ transactions, which permit for content to be encrypted using advanced cryptographic mechanism or zero-knowledge proof construction called a zk-SNARK developed by its team. (Related reading, see: What Is Zcash?)

Four) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Dash experienced an enlargening fan following in a brief span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which stands for Digital Cash and operates under the ticker – DASH. The rebranding didn’t switch any of its technological features such as Darksend, InstantX. (Related reading, see: Top Alternative Investments for Retirement)

Five) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Ripple “enables banks to lodge cross-border payments in real time, with end-to-end transparency, and at lower costs.” Released in 2012, Ripple currency has a market capitalization of $1.26 billion. Ripple’s consensus ledger — its method of conformation — doesn’t need mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power, and minimizes network latency. Ripple believes that ‘distributing value is a powerful way to incentivize certain behaviors’ and thus presently plans to distribute XRP primarily “through business development deals, incentives to liquidity providers who suggest tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.”

6) Monero (XMR)

Monero is a secure, private and untraceable currency. This open source cryptocurrency was launched in April two thousand fourteen and soon spiked good interest among the cryptography community and enthusiasts. The development of this cryptocurrency is downright donation-based and community-driven. Monero has been launched with a strong concentrate on decentralization and scalability, and enables accomplish privacy by using a special technology called ‘ring signatures.’ With this mechanism, there shows up a group of cryptographic signatures including at least one real participant – but since they all show up valid, the real one cannot be isolated.

The Bottom Line

Bitcoin resumes to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be exposed with time.

The six Most Significant Cryptocurrencies Other Than Bitcoin, Investopedia

The six Most Significant Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies​. The currencies inspired by Bitcoin are collectively called altcoins and have attempted to present themselves as modified or improved versions of Bitcoin. While some of these currencies are lighter to mine than Bitcoin is, there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention. We look at six cryptocurrencies, picked from over seven hundred (in no specific order). (Related reading, see: How Do Bitcoin Investors Combat Price Volatility?)

1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is based on an open source global payment network that is not managed by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. Albeit Litecoin is like Bitcoin in many ways, it has a swifter block generation rate and hence offers a quicker transaction confirmation. Other than developers, there are a growing number of merchants who accept Litecoin.

Two) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that enables Clever Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. During 2014, Ethereum had launched a pre-sale for ether which had received an terrific response. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications inwards Ethereum. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $Four.46 billion, 2nd after Bitcoin among all cryptocurrencies. (Related reading: The First-Ever Ethereum IRA is a Game-Changer)

Trio) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https,” is how Zcash defines itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, Zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of ‘shielded’ transactions, which permit for content to be encrypted using advanced cryptographic technology or zero-knowledge proof construction called a zk-SNARK developed by its team. (Related reading, see: What Is Zcash?)

Four) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Dash experienced an enhancing fan following in a brief span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which stands for Digital Cash and operates under the ticker – DASH. The rebranding didn’t switch any of its technological features such as Darksend, InstantX. (Related reading, see: Top Alternative Investments for Retirement)

Five) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Ripple “enables banks to lodge cross-border payments in real time, with end-to-end transparency, and at lower costs.” Released in 2012, Ripple currency has a market capitalization of $1.26 billion. Ripple’s consensus ledger — its method of conformation — doesn’t need mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power, and minimizes network latency. Ripple believes that ‘distributing value is a powerful way to incentivize certain behaviors’ and thus presently plans to distribute XRP primarily “through business development deals, incentives to liquidity providers who suggest tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.”

6) Monero (XMR)

Monero is a secure, private and untraceable currency. This open source cryptocurrency was launched in April two thousand fourteen and soon spiked excellent interest among the cryptography community and enthusiasts. The development of this cryptocurrency is downright donation-based and community-driven. Monero has been launched with a strong concentrate on decentralization and scalability, and enables accomplish privacy by using a special technology called ‘ring signatures.’ With this technology, there emerges a group of cryptographic signatures including at least one real participant – but since they all emerge valid, the real one cannot be isolated.

The Bottom Line

Bitcoin proceeds to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be exposed with time.

The six Most Significant Cryptocurrencies Other Than Bitcoin, Investopedia

The six Most Significant Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies​. The currencies inspired by Bitcoin are collectively called altcoins and have attempted to present themselves as modified or improved versions of Bitcoin. While some of these currencies are lighter to mine than Bitcoin is, there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention. We look at six cryptocurrencies, picked from over seven hundred (in no specific order). (Related reading, see: How Do Bitcoin Investors Combat Price Volatility?)

1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is based on an open source global payment network that is not managed by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. Albeit Litecoin is like Bitcoin in many ways, it has a swifter block generation rate and hence offers a quicker transaction confirmation. Other than developers, there are a growing number of merchants who accept Litecoin.

Two) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that enables Brainy Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. During 2014, Ethereum had launched a pre-sale for ether which had received an staggering response. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications inwards Ethereum. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $Four.46 billion, 2nd after Bitcoin among all cryptocurrencies. (Related reading: The First-Ever Ethereum IRA is a Game-Changer)

Trio) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https,” is how Zcash defines itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, Zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of ‘shielded’ transactions, which permit for content to be encrypted using advanced cryptographic mechanism or zero-knowledge proof construction called a zk-SNARK developed by its team. (Related reading, see: What Is Zcash?)

Four) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Dash experienced an enhancing fan following in a brief span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which stands for Digital Cash and operates under the ticker – DASH. The rebranding didn’t switch any of its technological features such as Darksend, InstantX. (Related reading, see: Top Alternative Investments for Retirement)

Five) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Ripple “enables banks to lodge cross-border payments in real time, with end-to-end transparency, and at lower costs.” Released in 2012, Ripple currency has a market capitalization of $1.26 billion. Ripple’s consensus ledger — its method of conformation — doesn’t need mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power, and minimizes network latency. Ripple believes that ‘distributing value is a powerful way to incentivize certain behaviors’ and thus presently plans to distribute XRP primarily “through business development deals, incentives to liquidity providers who suggest tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.”

6) Monero (XMR)

Monero is a secure, private and untraceable currency. This open source cryptocurrency was launched in April two thousand fourteen and soon spiked good interest among the cryptography community and enthusiasts. The development of this cryptocurrency is totally donation-based and community-driven. Monero has been launched with a strong concentrate on decentralization and scalability, and enables finish privacy by using a special mechanism called ‘ring signatures.’ With this technology, there shows up a group of cryptographic signatures including at least one real participant – but since they all emerge valid, the real one cannot be isolated.

The Bottom Line

Bitcoin resumes to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be exposed with time.

The six Most Significant Cryptocurrencies Other Than Bitcoin, Investopedia

The six Most Significant Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies​. The currencies inspired by Bitcoin are collectively called altcoins and have attempted to present themselves as modified or improved versions of Bitcoin. While some of these currencies are lighter to mine than Bitcoin is, there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention. We look at six cryptocurrencies, picked from over seven hundred (in no specific order). (Related reading, see: How Do Bitcoin Investors Combat Price Volatility?)

1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is based on an open source global payment network that is not managed by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. Albeit Litecoin is like Bitcoin in many ways, it has a swifter block generation rate and hence offers a quicker transaction confirmation. Other than developers, there are a growing number of merchants who accept Litecoin.

Two) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that enables Wise Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. During 2014, Ethereum had launched a pre-sale for ether which had received an staggering response. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications inwards Ethereum. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $Four.46 billion, 2nd after Bitcoin among all cryptocurrencies. (Related reading: The First-Ever Ethereum IRA is a Game-Changer)

Three) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https,” is how Zcash defines itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, Zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of ‘shielded’ transactions, which permit for content to be encrypted using advanced cryptographic mechanism or zero-knowledge proof construction called a zk-SNARK developed by its team. (Related reading, see: What Is Zcash?)

Four) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Dash experienced an enlargening fan following in a brief span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which stands for Digital Cash and operates under the ticker – DASH. The rebranding didn’t switch any of its technological features such as Darksend, InstantX. (Related reading, see: Top Alternative Investments for Retirement)

Five) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Ripple “enables banks to lodge cross-border payments in real time, with end-to-end transparency, and at lower costs.” Released in 2012, Ripple currency has a market capitalization of $1.26 billion. Ripple’s consensus ledger — its method of conformation — doesn’t need mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power, and minimizes network latency. Ripple believes that ‘distributing value is a powerful way to incentivize certain behaviors’ and thus presently plans to distribute XRP primarily “through business development deals, incentives to liquidity providers who suggest tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.”

6) Monero (XMR)

Monero is a secure, private and untraceable currency. This open source cryptocurrency was launched in April two thousand fourteen and soon spiked excellent interest among the cryptography community and enthusiasts. The development of this cryptocurrency is downright donation-based and community-driven. Monero has been launched with a strong concentrate on decentralization and scalability, and enables finish privacy by using a special mechanism called ‘ring signatures.’ With this mechanism, there emerges a group of cryptographic signatures including at least one real participant – but since they all emerge valid, the real one cannot be isolated.

The Bottom Line

Bitcoin resumes to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be exposed with time.

The six Most Significant Cryptocurrencies Other Than Bitcoin, Investopedia

The six Most Significant Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies​. The currencies inspired by Bitcoin are collectively called altcoins and have attempted to present themselves as modified or improved versions of Bitcoin. While some of these currencies are lighter to mine than Bitcoin is, there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention. We look at six cryptocurrencies, picked from over seven hundred (in no specific order). (Related reading, see: How Do Bitcoin Investors Combat Price Volatility?)

1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is based on an open source global payment network that is not managed by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. Albeit Litecoin is like Bitcoin in many ways, it has a quicker block generation rate and hence offers a quicker transaction confirmation. Other than developers, there are a growing number of merchants who accept Litecoin.

Two) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that enables Clever Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. During 2014, Ethereum had launched a pre-sale for ether which had received an tremendous response. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications inwards Ethereum. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $Four.46 billion, 2nd after Bitcoin among all cryptocurrencies. (Related reading: The First-Ever Ethereum IRA is a Game-Changer)

Three) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https,” is how Zcash defines itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, Zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of ‘shielded’ transactions, which permit for content to be encrypted using advanced cryptographic technology or zero-knowledge proof construction called a zk-SNARK developed by its team. (Related reading, see: What Is Zcash?)

Four) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Dash experienced an enlargening fan following in a brief span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which stands for Digital Cash and operates under the ticker – DASH. The rebranding didn’t switch any of its technological features such as Darksend, InstantX. (Related reading, see: Top Alternative Investments for Retirement)

Five) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Ripple “enables banks to lodge cross-border payments in real time, with end-to-end transparency, and at lower costs.” Released in 2012, Ripple currency has a market capitalization of $1.26 billion. Ripple’s consensus ledger — its method of conformation — doesn’t need mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power, and minimizes network latency. Ripple believes that ‘distributing value is a powerful way to incentivize certain behaviors’ and thus presently plans to distribute XRP primarily “through business development deals, incentives to liquidity providers who suggest tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.”

6) Monero (XMR)

Monero is a secure, private and untraceable currency. This open source cryptocurrency was launched in April two thousand fourteen and soon spiked superb interest among the cryptography community and enthusiasts. The development of this cryptocurrency is downright donation-based and community-driven. Monero has been launched with a strong concentrate on decentralization and scalability, and enables finish privacy by using a special mechanism called ‘ring signatures.’ With this technology, there emerges a group of cryptographic signatures including at least one real participant – but since they all show up valid, the real one cannot be isolated.

The Bottom Line

Bitcoin resumes to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be exposed with time.

The six Most Significant Cryptocurrencies Other Than Bitcoin, Investopedia

The six Most Significant Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies​. The currencies inspired by Bitcoin are collectively called altcoins and have attempted to present themselves as modified or improved versions of Bitcoin. While some of these currencies are lighter to mine than Bitcoin is, there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention. We look at six cryptocurrencies, picked from over seven hundred (in no specific order). (Related reading, see: How Do Bitcoin Investors Combat Price Volatility?)

1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is based on an open source global payment network that is not managed by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. Albeit Litecoin is like Bitcoin in many ways, it has a quicker block generation rate and hence offers a quicker transaction confirmation. Other than developers, there are a growing number of merchants who accept Litecoin.

Two) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that enables Wise Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. During 2014, Ethereum had launched a pre-sale for ether which had received an breathtaking response. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications inwards Ethereum. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $Four.46 billion, 2nd after Bitcoin among all cryptocurrencies. (Related reading: The First-Ever Ethereum IRA is a Game-Changer)

Three) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https,” is how Zcash defines itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, Zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of ‘shielded’ transactions, which permit for content to be encrypted using advanced cryptographic mechanism or zero-knowledge proof construction called a zk-SNARK developed by its team. (Related reading, see: What Is Zcash?)

Four) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Dash experienced an enlargening fan following in a brief span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which stands for Digital Cash and operates under the ticker – DASH. The rebranding didn’t switch any of its technological features such as Darksend, InstantX. (Related reading, see: Top Alternative Investments for Retirement)

Five) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Ripple “enables banks to lodge cross-border payments in real time, with end-to-end transparency, and at lower costs.” Released in 2012, Ripple currency has a market capitalization of $1.26 billion. Ripple’s consensus ledger — its method of conformation — doesn’t need mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power, and minimizes network latency. Ripple believes that ‘distributing value is a powerful way to incentivize certain behaviors’ and thus presently plans to distribute XRP primarily “through business development deals, incentives to liquidity providers who suggest tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.”

6) Monero (XMR)

Monero is a secure, private and untraceable currency. This open source cryptocurrency was launched in April two thousand fourteen and soon spiked excellent interest among the cryptography community and enthusiasts. The development of this cryptocurrency is entirely donation-based and community-driven. Monero has been launched with a strong concentrate on decentralization and scalability, and enables accomplish privacy by using a special mechanism called ‘ring signatures.’ With this mechanism, there shows up a group of cryptographic signatures including at least one real participant – but since they all emerge valid, the real one cannot be isolated.

The Bottom Line

Bitcoin proceeds to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be exposed with time.

The six Most Significant Cryptocurrencies Other Than Bitcoin, Investopedia

The six Most Significant Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies​. The currencies inspired by Bitcoin are collectively called altcoins and have attempted to present themselves as modified or improved versions of Bitcoin. While some of these currencies are lighter to mine than Bitcoin is, there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention. We look at six cryptocurrencies, picked from over seven hundred (in no specific order). (Related reading, see: How Do Bitcoin Investors Combat Price Volatility?)

1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is based on an open source global payment network that is not managed by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. Albeit Litecoin is like Bitcoin in many ways, it has a swifter block generation rate and hence offers a swifter transaction confirmation. Other than developers, there are a growing number of merchants who accept Litecoin.

Two) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that enables Clever Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. During 2014, Ethereum had launched a pre-sale for ether which had received an tremendous response. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications inwards Ethereum. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $Four.46 billion, 2nd after Bitcoin among all cryptocurrencies. (Related reading: The First-Ever Ethereum IRA is a Game-Changer)

Three) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https,” is how Zcash defines itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, Zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of ‘shielded’ transactions, which permit for content to be encrypted using advanced cryptographic mechanism or zero-knowledge proof construction called a zk-SNARK developed by its team. (Related reading, see: What Is Zcash?)

Four) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Dash experienced an enhancing fan following in a brief span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which stands for Digital Cash and operates under the ticker – DASH. The rebranding didn’t switch any of its technological features such as Darksend, InstantX. (Related reading, see: Top Alternative Investments for Retirement)

Five) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Ripple “enables banks to lodge cross-border payments in real time, with end-to-end transparency, and at lower costs.” Released in 2012, Ripple currency has a market capitalization of $1.26 billion. Ripple’s consensus ledger — its method of conformation — doesn’t need mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power, and minimizes network latency. Ripple believes that ‘distributing value is a powerful way to incentivize certain behaviors’ and thus presently plans to distribute XRP primarily “through business development deals, incentives to liquidity providers who suggest tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.”

6) Monero (XMR)

Monero is a secure, private and untraceable currency. This open source cryptocurrency was launched in April two thousand fourteen and soon spiked fine interest among the cryptography community and enthusiasts. The development of this cryptocurrency is fully donation-based and community-driven. Monero has been launched with a strong concentrate on decentralization and scalability, and enables accomplish privacy by using a special technology called ‘ring signatures.’ With this technology, there emerges a group of cryptographic signatures including at least one real participant – but since they all show up valid, the real one cannot be isolated.

The Bottom Line

Bitcoin proceeds to lead the pack of cryptocurrencies, in terms of market capitalization, user base and popularity. Nevertheless, virtual currencies such as Ethereum and Ripple which are being used more for enterprise solutions are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis Bitcoins. Going by the current trend, cryptocurrencies are here to stay but how many of them will emerge leaders amid the growing competition within the space will only be exposed with time.

Related video:

The five Best Ways To Earn Free Bitcoins

The five Best Ways To Earn Free Bitcoins

Close up 3D illustration of paneled golden Bitcoins

Albeit many of us may aspire to have an abundance of bitcoins, the truth of the matter is that it’s lighter said than done. Besides converting standard currencies to bitcoins (which in theory isn’t earning them at all), there are many ways to acquire the very sought after crypotocurrency without a cost. There’s a broad range of available options, with some being better than others. Without further ado, here are the five best ways to earn free bitcoins.

Albeit the actual payout may differ inbetween sites, the premise for bitcoin faucets is the same. The user earns “free bitcoins” for either a petite task–such as watching an advertisement or visiting a survey–or even just visiting the website. The payout is typically betweenВ 0.000001 to 0.00001 bitcoin. The amounts are often measured in satoshi or bits, but the actual currency is still bitcoin. Many faucet suggest the capability for a large prize, such as a entire bitcoin. To avoid manhandle of the system, faucets will only permit a user to use the them once during a given amount of time. Most faucets will typically require users to wait anywhere inbetween fifteen minutes to an hour until they can use it again. A utter list of faucets can be found here. Adblock must be disabled to use the faucets, so keep that mind. Some faucets will directly insert the earned bitcoins into your bitcoin wallet, while others wait until you earn a certain amount. Nevertheless, bitcoin faucets can serve as a way to kill time and to leisurely earn lil’ amounts of bitcoin. There’s always a chance to win big, so why not! I wouldn’t recommend quitting your day-job to use faucets all day, but at the same time free money is free money (even if it is only a lil’ amount).

It may be true that the most profitable days of mining are long gone, but that doesn’t mean mining is a accomplish waste. Your best bet to make any bitcoins at all through mining would be through a mining pool. For one, this method doesn’t require the crazy overhead costs of high-powered computers and high electro-stimulation bills. A utter list of mining pools can be found here. Even then, making bitcoins is not effortless. It tends to be more of a hobby these days for the majority of miners, as profit is firmer and firmer to reach. This is due to the enlargening difficulty for the computers to actually solve the equations, as well as quicker and higher-powered computers rivaling against them. This is all very oversimplified, as the more in-depth process can be found here. Nevertheless, the option to mine bitcoins is still available for those who wish to do so.

Albeit this option may not technically be a way to earn them for “free”, as it may take time and work, it is still an increasingly lighter way to earn bitcoins. Along with the growing option for employers to pay their employees in bitcoins, there are uncountable “odd jobs” that permit a person to earn them. One of the best resources to find those jobs is on reddit’s subredditВ /r/Jobs4bitcoins. For those unfamilar with how the page works, users can either suggest puny jobs, or suggest their services. For example, someone may need help designing a brand logo. They can request someone to design it for them and compensate them with bitcoin. The actual jobs have a broad range of matters, but the concept is the same. В The actual details can be worked out inbetween those who make an an agreement, such as the amount and the details of the service. Websites such as WorkForBitcoinsВ are promising, but are often packed with tasks and jobs that lead to spam. Never click a link that seems fishy. You can always encourage your current employer to take bitcoins through services such as Bitpay, which they can in turn pay you with.

Even however it may not be the easiest thing in the world to consistently receive, getting bitcoin tips has been growing in popularity. Services such as ChangeTipВ have permitted for a very convenient way to give and receive “tips” on social media. For example, if I truly liked someone’s tweet, I can instantly peak them a certain amount via changetip. All I need to do is mention @changetip in a reply to the tweet with the amount I want to give, and ChangeTip will automatically liquidate the funds from my account and give them to the other twitter user. It is generally in lil’ amounts, with a peak almost always being under a dollar.

This option has its ups and downs, but as long as it is done decently and correctly, receiving interest В is an effortless way to earn free bitcoins for yourself. It is always significant to reminisce that once bitcoins are sent out of you wallet, there is no way to get them back without the person sending them back to you. Therefore, there is a trust and reliability factor when it comes to lending out bitcoins. Peer to Peer lending websites are typically the most reliable and safest way to earn interest on your bitcoins. With that being said, the website mustВ be a reliable one. Make sure to do background searches on any website you may use to lend money. If it seems like a scam or hasn’t been established for too long, it may be best to take your bitcoins elsewhere. The best and most reliable websites are typically BitLendingClub, Bitbond, BtcJam, and a number of others.

Related video:

The twenty one fattest bitcoin mining companies – Business Insider

The twenty one companies that control bitcoin

The race is on. Alexander Hassenstein/Getty Photos

Flashy startups like Coinbase, Circle, Blockchain, and BitPay are some of the most famous companiesВ inВ bitcoin.В

But arguably more significant are the miners — individuals and organisations who form the core backbone of bitcoin, ensuring the digital currency’s integrity.

Bitcoin runs on a blockchain, a decentralised and public ledger of every transaction made on the network.В By suggesting processing power towards this, users get a chance to win bitcoin — creating an arms race of miners scrambling to assemble ever-more sophisticated and powerful equipment to “mine” fresh bitcoin.

This decentralisation has massive benefits, but also comes with fresh risks: Right now, if just the top three organisations joined compels they would control 51% of the network — providing them the power to rewrite the blockchain as they see fit.

Some individuals go it alone; others join open “pools” where they combine their resources to improve their odds; some larger companies also have mining efforts. While the #1 spot can switch from week to week, we have ranked the fattest mining companies using data covering August five to August twelve fromВ bitcoin network analysis company Blocktrail.

View As: One Page Slips

21. Unknown Entity — 0.1%

An “unknown entity” is presently responsible for 0.1% of the hash power on the bitcoin network. It could be a private organisation calmly building a mining operation, or a public pool that is flying below the radar.

20. Unknown Entity — 0.28%

Another unknown entity.

Nineteen. P2Pool.org — 0.47%%

This relatively petite pool was created in two thousand eleven by programmer Forrest Voight. It claims to be “the most semitransparent mining pool on the planet” because it distributes all pool data for the public to view. As of September 2014, it had mined more than 78,000 bitcoin (ВЈ13.Four million or $20.9 million at current prices).

Eighteen. Solo CKPool — 0.47%

CKPool is a public pool created by an Australian anaesthetist and programmer, Con Kolivas, and bitcoinerВ “Kano.”

It was launched in September 2014, andВ for risk-takers, it also offers a separateВ “solo” pool. This means that users will pool their resources to find a bitcoin block swifter than they would alone — but only the user who detects the block gets any prize.

This entry refers to the soloВ pool specifically.

17. Unknown Entity — 0.66%

A third unknown entity, this one is responsible for a little overВ 0.5% of the total hash power.

16. Kano CKPool — 0.66%

CKPool is a public pool created by an Australian anaesthetist and programmer, Con Kolivas, and bitcoinerВ “Kano.”

It was launched in September 2014, andВ for risk-takers, it also offers a “solo” pool. This means that users will pool their resources to find a bitcoin block swifter than they would alone — but only the user who detects the block gets any prize.

This is the standard pool.

15. BitMinter — 0.76%

A veteran pool, BitMinter was created in two thousand eleven by Geir Harald Hansen. According to BitcoinWiki, a digital currency wiki, it has servers in the US and inВ Europe.

14. 8baochi — 0.85%

Bitcoin is flourishing in China, and 8baochi isВ one of the smaller China pools to make the list. It also offers litecoin mining, an alternative, less popular digital currency.

13. BitClub Network — 1.33%

Unlike some other pools, BitClub Network does not disclose its founders, telling only that it is “run by a team of programmers, digital mining experts and entrepreneurs who have come together with MLM experts from around the world.”

MLM stands for Multi-Level Marketing — a referral system whereby a user gains bonuses for each fresh user they bring in, who then gains bonuses for each fresh user they bring in, and so on. MLMs can be controversial because they resemble pyramid schemes, but BitClub Network insists that it is legitimate and not a “Ponzi Scheme.”

For some users, itВ works as a cloud mining pool: Users don’t have to own their own hardware, just pay to rent some possessed by BitClub. Miners with their own equipments can also join the network, however.

12. Unknown entity — 1.42%

This fourth, largest unknown entity is behind more than 1% of the network’s total hashing power.

11. Unknown — 1.9%

This is everything else on the network that is unknownВ andВ that managed to mine a block in the last week. (Other smaller pools and individuals that did not manage to of course also exist.)В

This could include miners attempting to go it alone, or pools andВ organisations too puny to register by themselves.

Ten. GHash.io — 1.99%

Ghash.io was launched in July two thousand thirteen and last year gained some notoriety through its success: In June 2014, it shortly gained control of 51% of the entire bitcoin network. This majority control is arguably the thickest threat to bitcoin, and demonstrates the power of miners when they get too large — it could have rewritten the blockchain however it eyed fit, potentially fatally unstabilising the network in the process.

Since then, its hash power has dropped off: It now sits just under 2%.В Londoner Jeffrey Smith, the company’s CIO, acts most frequently as its spokesperson. It also operates Cex.io, a bitcoin exchange.

9. Twenty one Inc. — Trio.79%

21 made sways in March two thousand fifteen when it announced it had raised $116 million (ВЈ74 million) — making it the best-funded bitcoin startup ever. Investors included top Silicon Valley VC fund Andreessen Horowitz, where twenty one CEO Balaji SrinivasanВ also works as a fucking partner.В

This mammoth round came despite powerful secrecy about what the company was even attempting to do. When it exited stealth mode in May, it announced what many had already suspected: That it is attempting to embed bitcoin network hardware into consumer goods.В

21 doesn’t suggest a public pool, and its chips are not yet available, but its own private hardware presently makes up a little underВ 4% of the network.

8. Slush — Four.08%

Launched in November 2010, Slush Pool is the world’s oldest public mining pool, and remains prominent today. Its formal name is Bitcoin Pooled Mining.

In real life, Slush isВ Marek Palatinus, a programmer from the Czech Republic. The pool is possessed by SatoshiLabs, which also runs a number of other digital currency projects.

7. KnCMiner — Four.27%

KnCMiner is a Swedish mining hardware company.В It hasn’t been worth mining bitcoin using standard consumer computer hardware for years because of the kind of processing power involved; the tremendous majority of ordinary members of public pools will have bought hardware from companies like KnCMiner.

It raised a $15 million (ВЈ9.6 million) Series B in February two thousand fifteen led by Accel Playmates. It boasts its green credentials on its website , and has data centres Sweden, with expansions planned forВ Iceland and Finland.

6. Eligius — Four.83%

Eligius is a North American public pool launched in April 2011. According to CryptoCoinsNews, its operator Luke Dashjr (or “Luke-Jr”) is a Catholic who has previously written religious messages onto the blockchain, the public ledger of all bitcoin transactions.

Saint Eligius, the pool’s namesake, is the patron saint of goldsmiths and coin collectors.

Five. BW Pool — 7.68%

BW Pool is another Chinese pool. It has almost no publicity in the English-speaking world, despite its size. It made a uncommon public statement in July 2015, when it co-signed a Reddit post in favour of an increase in block size — an ongoing technical question the bitcoin community is debating.

Four. BTC China Pool — 13.74%

A relative newcomer to the scene, the BTCChina Pool is one of the thickest players around despite only launching at the end of 2014. This growth is down to the fact that BTC China itself is one of China’s largest bitcoin exchanges, and also offers a number of other digital currency solutions.

It was founded in 2011, and is presently led by Bobby Lee, who became CEO after purchasing the exchange in 2013.

Trio. BitFury — 16.4%

BitFury is the best-funded mining hardware company in the business, raising $20 million (ВЈ12.8 million) in July 2015. It was, CoinDesk notes, its third round in two years, and it has now raised $60 million (38.Four million) in total.

The startup is headed up by Valery Vavilov, originally from Latvia. It does not operate a public pool, but has private mines in Finland, Iceland, and the Republic of Georgia. Despite its prominence in the mining industry, Vavilov insists that “we are not a mining company, I don’t like the word mining.”

Instead,В he told CoinDesk, “we’re a technology company, but we’re focused on bitcoin now. Our vision in the next three to five years is to stir into different areas where computing power is valuable. We plan to expand into other fields of skill where humanity needs a lot of computing power.”

Two. DiscusFish/P2Pool — 16.49%

Officially known as F2Pool, this Chinese pool is also known as DiscusFish due to its logo — a discus fish. It is operated by Wang Chun and Mao Shihang, “two Chinese technology enthusiasts,” Chun told CoinDesk in September 2014. A spokesperson told Business Insider that the pool wields no hardware itself; 100% of its hash power comes from users.

In July this year, F2Pool generated the largest bitcoin transaction ever in order to clear up a spam attack of “dust” or lil’ bitcoin transactions evidently intended to clog up the network.

1. AntPool — 17.82%

AntPool is run by Bitmain, a Chinese mining hardware company headquartered in Beijing. It boasts that its technology accounts for 56% of global bitcoin miners. It also claims to be the largest cloud miner in the world.

BitmainВ was launched in Q1 2013, and co-founder Jihan WuВ is the CEO.

Related video:

The fourteen Weirdest Things You Can Buy With Bitcoin

Без кейворда

Jun 21, two thousand fourteen at 13:29 UTC by Tom Sharkey

Bitcoin’s value as a payment protocol is hard to deny.

The digital currency offers merchants a number of benefits over traditional fiat and credit card transactions, and for consumers, making payments with bitcoin is secure and convenient.

Even with those benefits, however, there was a time when it was almost unlikely to use your bitcoins to buy anything practical. One of the very very first real-world purchases made with bitcoin was in 2010, when a computer programmer paid Ten,000 BTC (around $6m USD at today’s market price) for two pizzas from Papa John’s.

Fortunately for everybody, companies like BitPay and Coinbase have made it a breeze for businesses petite and large to integrate bitcoin as a payment option for their goods and services.

As a result, there are considerably more options today when it comes to spending your beloved bitcoins. While everyone has their own taste, some of the things that can be bought with the digital currency are just downright bizarre.

Here are the fourteen weirdest things you can buy with bitcoin:

1. A motorized unicycle

For those like myself, who never had fairly enough balance to maneuver a unicycle, this self-balancing motorized model would surely be useful.

Two. Adult Canadian Mammoth tusks

Purchasing these ivory tusks from the extinct woolly mammoth species with bitcoin would be a superb way to bring things total circle inbetween the past and the future, but only if you’ve got about two hundred ninety BTC to spare at today’s market price.

Trio. A Venus flytrap plant

Who hasn’t always wished a carnivorous plant growing in their garden? At under $Ten, these venus flytraps are a catch!

Four. Sriracha-bacon flavored lollipops

Most everybody loves sriracha and bacon, but combining the two flavors? And putting them in a lollipop? These suckers sound pretty irresistible.

Five. An interactive ferrofluid sculpture

Even after watching the informational movie, I’m still not certain I fully understand what’s going on with this ferrofluid sculpture. Regardless, I’m intrigued, and the iron-enhanced device seems joy to play with!

6. Crimson Trinidad scorpion jelly

Some people search near and far for their fix of the best chilli peppers on the Scoville scale. I’m not sure where this Trinidad Scorpion Jelly ranks according to this system, but by the sound of it I would guess pretty high.

7. The very very first Apple Macintosh model – 128k

Now that Apple is eventually coming around to the idea of digital currencies, perhaps one nostalgic bitcoiner will spring for the very very first model Macintosh that Apple released back in 1984.

8. Celtic cross tarot reading cards

We’ve all attempted our arm at predicting the price trends for bitcoin and other digital currencies. Maybe these tarot cards can suggest sage insight that us mortals are simply overlooking?

9. A Robo 3-D printer

While a 3-D printer may not be “weird” per se, this Robo3D printer could surely print out some strange objects. I’ll leave that up to the buyer’s imagination.

Ten. A doge sweatshirt

Wow. This doge sweatshirt indeed makes a statement. Many prints, all over.

11. A handmade bitcoin plush cushion

Some may want to showcase their love of digital currencies without sporting a doge sweatshirt, and for those people there is a handmade bitcoin plush cushion just waiting to be snuggled up with.

12. Spokester bicycle noisemakers

Of course, we all reminisce the old card-and-clothespin trick to make our bicycles sound intimidatingly noisy as kids. Now, someone has actually tapped into the market and made a product that eliminates the need for all of that work!

13. A profitable Yukon gold mine

There’s still a ton of speculation over which is the better investment: gold or bitcoin. This already-profitable gold mine in Canada would be the flawless investment for a super-rich bitcoiner hoping to diversify his or her portfolio.

14. Alpaca socks

Alpacas and bitcoin have a long history together. Yes, you read that right. The llama-like animal has been dubbed the unofficial mascot of bitcoin, and these alpaca socks have become one of the quintessential items that can be bought with the digital currency.

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a stringent set of editorial policies. Have cracking news or a story peak to send to our journalists? Contact us at [email protected] .

Related video:

The £625m lost forever – the phenomenon of disappearing Bitcoins

The £625m lost forever – the phenomenon of disappearing Bitcoins

By Matthew Sparkes, Deputy Head of Technology

7:00AM GMT twenty three Jan 2015

Unlike banks, Bitcoins are unregulated. If an possessor dies without passing on their password (called a private key), their Bitcoins expire with them. They’ll remain in the ether, visible but unspendable. Nobody to help.

You could imagine them eventually falling prey to brute force attacks – someone guessing key after key until they stumble upon the correct one. But that’s where Bitcoin’s formidable security becomes a problem.

Security experienced Bruce Schneier once ruled out an attempt to crack a 256-bit key, of the type used by Bitcoin, by referring to the laws of physics: such is the magnitude of the problem. Even an impracticably large computer consuming all the energy outputted by the sun couldn’t count the number of possible combinations in several decades.

His mind-bending conclusion was that such an attack “will be infeasible until computers are built from something other than matter and occupy something other than space.”

The brief version? Lost coins stay lost.

Related Articles

We know that only 21m Bitcoins will ever exist, that they will be little by little mined over many years and that 13.7m have been unlocked so far.

We also know that they can be lost through death, elementary carelessness or a hardware failure. But how many have actually been demolished?

Scour the archives of the Bitcoin forums and you’ll find references in the early days of the digital currency to sums worth pennies at the time, but which would now be puny fortunes.

Florida programmer Laszlo Hanyecz famously bought two pizzas in two thousand ten for Ten,000 Bitcoins. At Bitcoin’s peak that pizza would have cost over $10m.

Many of those early adopters gave as much thought to safe storage as a value of pennies warranted: not a lot. So tales of big losses are not uncommon.

Welsh IT worker James Howells famously lost 7,500 Bitcoins in two thousand thirteen when he accidentally threw out an old hard disk containing his private key. It is reportedly under thousands of tonnes of landfill at a waste recycling centre in Pillgwenlly, Newport. Today those coins would be worth over a million pounds.

And there are uncountable smaller, unreported losses. London-based developer David Kitchen mined around fifty coins in 2010, stopping when the noise of the fans on his mining computer in the living room began to annoy him. He stashed the coins on a USB stick and thought little more of it.

Until, that is, the price commenced to soar. Unluckily, by then the USB drive had disappeared.

“At the peak the Bitcoins would have been worth around £50k. I looked, on many occasions, but have never found it. I suspect I didn’t actually lose the USB stick but just overwrote it with a Linux installer or something: the modern equivalent of recording a TV program over a VHS of your wedding,” he told the Telegraph.

To put a figure on the scale of these losses, some clever analysis is needed. Gratefully, as all Bitcoin transactions are public, this can be done by anyone with technical skill and time on their arms.

NVIDIA engineer John Ratcliff calculated in June that “zombie coins”, defined as those which have lay dormant for at least a year and a half, accounted for thirty per cent of all Bitcoins.

Those coins were bought for just a few cents, so the lack of profit-taking despite a comeback of Four,000 per cent seems to rule out the possibility that they’re simply long-term savings.

Historical price rises tended to get some of these zombie coins moving, as media coverage raised awareness, but that pattern has slowed.

As Ratcliff says: “while there can be no way to know with absolute certainty the status of zombie coins, by looking at trends historically over time, it is very likely safe to assume that the vast majority, totalling approximately thirty per cent of all Bitcoins mined to date, are irrevocably lost forever, most having been thrown out because they were worthless at the time or the victim of a hard drive crash.”

At today’s price, and today’s total number of mined Bitcoins, that equates to $948,750,000 or £625,400,000.

The largest loss of all may have been intentional. Bitcoin was invented by a person or group going by the name Satoshi Nakamoto. The identity of Satoshi and his/her/their motive is unknown.

What we do know is that Satoshi mined lots of the early coins. Lots. Detailed analysis suggests that it was around a million. That’s one 23rd of all the Bitcoins that will ever exist.

Today they’re worth $230,000,000, but at the peak price of $1,200 Satoshi was a billionaire.

And that pile of coins accounts for a third of all zombie coins in existence: not a single penny has ever been moved or spent.

Was that an intentional part of the process of getting Bitcoin up-and-running, or is there some cunning plan for their use in the future? We can never know, but we can only assume that after years of accomplish inactivity they are lost.

Many people have inexplicably added to this figure by making “offerings” to Satoshi, sending their own Bitcoins – hundreds of thousands of dollars – to sit atop the stockpile. Take this address, for example, which received the very first fifty Bitcoins ever mined. There are now nine hundred fifty five further transactions on top of it – another 15.Four Bitcoins demolished.

So far we have several millions of Bitcoins lost – around a billion dollars. But that figures keeps creeping upwards. Start-up Counterparty intentionally “burned” Two,130 Bitcoins last year, worth over $1.7m at the time.

The company created a way to piggy-back on Bitcoin’s infrastructure to suggest other financial services, which involved creating its own digital currency called XCP. Many start-ups have done similar things in the past and they often struggled to distribute their fresh currencies fairly.

Counterparty determined to do this by exchanging Bitcoins for XCP but, because there’s no official mechanism to do this, they just passed XCP out to anyone willing to publicly demolish Bitcoin in comeback.

By setting up a wallet with no known private key they were able to “burn” any coins sent to it. The wallet can be seen online, finish with every transaction, but the funds can never be retrieved.

The company’s Ivana Zuber said: “Our primary concern at the time was to give the Counterparty project maximum legitimacy right from the embark and ensure that all fresh XCP coins are distributed fairly and proportionally. We also wished to ensure that Counterparty developers do not love any special privileges.

“Instead of selling off a pile of pre-mined XCP and creating a centralized project with a potential point of failure, we determined to distribute XCP in a public, semi-transparent and fair way and eliminate any speculation on ‘developers getting rich quick’.”

While Counterparty’s destruction at least served a purpose, there are many similar wallets which have been created to demolish Bitcoin for no logical reason at all, such as Bitcoin Eater.

What does this mean for Bitcoin?

The perilous nature of Bitcoin is due to its decentralised, libertarian nature: you’re free from inflation, quantitative easing or state seizure, but you’re also in charge of security and safekeeping.

For individuals it’s obviously bad news to lose Bitcoins, but for the rest of the crypto-currency economy it scarcely causes a ripple. In fact, due to a little drop in supply, other people’s holdings should theoretically see a petite increase in value.

Presently Bitcoin can be divided by eight decimal places, but that can be enhanced when needed by a ordinary update to the source code, so a diminishing supply of coins makes no odds: the entire network could operate by using infinitesimally puny fractions of a single Bitcoin.

As coins are far more valuable now than in the early days it seems unlikely that newly-mined Bitcoin will be treated as carelessly as the early coins, so losses should reduce in the future. But it’s a one-way process so the amount of lost coins will only increase.

The £625m lost forever – the phenomenon of disappearing Bitcoins

The £625m lost forever – the phenomenon of disappearing Bitcoins

By Matthew Sparkes, Deputy Head of Technology

7:00AM GMT twenty three Jan 2015

Unlike banks, Bitcoins are unregulated. If an proprietor dies without passing on their password (called a private key), their Bitcoins expire with them. They’ll remain in the ether, visible but unspendable. Nobody to help.

You could imagine them eventually falling prey to brute force attacks – someone guessing key after key until they stumble upon the correct one. But that’s where Bitcoin’s formidable security becomes a problem.

Security experienced Bruce Schneier once ruled out an attempt to crack a 256-bit key, of the type used by Bitcoin, by referring to the laws of physics: such is the magnitude of the problem. Even an impracticably large computer consuming all the energy outputted by the sun couldn’t count the number of possible combinations in several decades.

His mind-bending conclusion was that such an attack “will be infeasible until computers are built from something other than matter and occupy something other than space.”

The brief version? Lost coins stay lost.

Related Articles

We know that only 21m Bitcoins will ever exist, that they will be little by little mined over many years and that 13.7m have been unlocked so far.

We also know that they can be lost through death, elementary carelessness or a hardware failure. But how many have actually been demolished?

Scour the archives of the Bitcoin forums and you’ll find references in the early days of the digital currency to sums worth pennies at the time, but which would now be petite fortunes.

Florida programmer Laszlo Hanyecz famously bought two pizzas in two thousand ten for Ten,000 Bitcoins. At Bitcoin’s peak that pizza would have cost over $10m.

Many of those early adopters gave as much thought to safe storage as a value of pennies warranted: not a lot. So tales of big losses are not uncommon.

Welsh IT worker James Howells famously lost 7,500 Bitcoins in two thousand thirteen when he accidentally threw out an old hard disk containing his private key. It is reportedly under thousands of tonnes of landfill at a waste recycling centre in Pillgwenlly, Newport. Today those coins would be worth over a million pounds.

And there are uncountable smaller, unreported losses. London-based developer David Kitchen mined around fifty coins in 2010, stopping when the noise of the fans on his mining computer in the living room began to annoy him. He stashed the coins on a USB stick and thought little more of it.

Until, that is, the price commenced to soar. Unluckily, by then the USB drive had disappeared.

“At the peak the Bitcoins would have been worth around £50k. I looked, on many occasions, but have never found it. I suspect I didn’t actually lose the USB stick but just overwrote it with a Linux installer or something: the modern equivalent of recording a TV program over a VHS of your wedding,” he told the Telegraph.

To put a figure on the scale of these losses, some clever analysis is needed. Gratefully, as all Bitcoin transactions are public, this can be done by anyone with technical skill and time on their mitts.

NVIDIA engineer John Ratcliff calculated in June that “zombie coins”, defined as those which have lay dormant for at least a year and a half, accounted for thirty per cent of all Bitcoins.

Those coins were bought for just a few cents, so the lack of profit-taking despite a comeback of Four,000 per cent seems to rule out the possibility that they’re simply long-term savings.

Historical price rises tended to get some of these zombie coins moving, as media coverage raised awareness, but that pattern has slowed.

As Ratcliff says: “while there can be no way to know with absolute certainty the status of zombie coins, by looking at trends historically over time, it is most likely safe to assume that the vast majority, totalling approximately thirty per cent of all Bitcoins mined to date, are irrevocably lost forever, most having been thrown out because they were worthless at the time or the victim of a hard drive crash.”

At today’s price, and today’s total number of mined Bitcoins, that equates to $948,750,000 or £625,400,000.

The thickest loss of all may have been intentional. Bitcoin was invented by a person or group going by the name Satoshi Nakamoto. The identity of Satoshi and his/her/their motive is unknown.

What we do know is that Satoshi mined lots of the early coins. Lots. Detailed analysis suggests that it was around a million. That’s one 23rd of all the Bitcoins that will ever exist.

Today they’re worth $230,000,000, but at the peak price of $1,200 Satoshi was a billionaire.

And that pile of coins accounts for a third of all zombie coins in existence: not a single penny has ever been moved or spent.

Was that an intentional part of the process of getting Bitcoin up-and-running, or is there some cunning plan for their use in the future? We can never know, but we can only assume that after years of accomplish inactivity they are lost.

Many people have inexplicably added to this figure by making “offerings” to Satoshi, sending their own Bitcoins – hundreds of thousands of dollars – to sit atop the stockpile. Take this address, for example, which received the very first fifty Bitcoins ever mined. There are now nine hundred fifty five further transactions on top of it – another 15.Four Bitcoins demolished.

So far we have several millions of Bitcoins lost – around a billion dollars. But that figures keeps creeping upwards. Start-up Counterparty intentionally “burned” Two,130 Bitcoins last year, worth over $1.7m at the time.

The company created a way to piggy-back on Bitcoin’s infrastructure to suggest other financial services, which involved creating its own digital currency called XCP. Many start-ups have done similar things in the past and they often struggled to distribute their fresh currencies fairly.

Counterparty determined to do this by interchanging Bitcoins for XCP but, because there’s no official mechanism to do this, they just transferred XCP out to anyone willing to publicly ruin Bitcoin in come back.

By setting up a wallet with no known private key they were able to “burn” any coins sent to it. The wallet can be seen online, accomplish with every transaction, but the funds can never be retrieved.

The company’s Ivana Zuber said: “Our primary concern at the time was to give the Counterparty project maximum legitimacy right from the embark and ensure that all fresh XCP coins are distributed fairly and proportionally. We also wished to ensure that Counterparty developers do not love any special privileges.

“Instead of selling off a pile of pre-mined XCP and creating a centralized project with a potential point of failure, we determined to distribute XCP in a public, semi-transparent and fair way and eliminate any speculation on ‘developers getting rich quick’.”

While Counterparty’s destruction at least served a purpose, there are many similar wallets which have been created to ruin Bitcoin for no logical reason at all, such as Bitcoin Eater.

What does this mean for Bitcoin?

The perilous nature of Bitcoin is due to its decentralised, libertarian nature: you’re free from inflation, quantitative easing or state seizure, but you’re also in charge of security and safekeeping.

For individuals it’s obviously bad news to lose Bitcoins, but for the rest of the crypto-currency economy it scarcely causes a ripple. In fact, due to a little drop in supply, other people’s holdings should theoretically see a puny increase in value.

Presently Bitcoin can be divided by eight decimal places, but that can be enlargened when needed by a ordinary update to the source code, so a diminishing supply of coins makes no odds: the entire network could operate by using infinitesimally puny fractions of a single Bitcoin.

As coins are far more valuable now than in the early days it seems unlikely that newly-mined Bitcoin will be treated as carelessly as the early coins, so losses should reduce in the future. But it’s a one-way process so the amount of lost coins will only increase.

Related video:

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, witness this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to reaction this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just kicking off, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to stir them into your own private wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobilized amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for beginners to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free violet wand. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will very likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comebacks. They will then begin off by paying these comebacks through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is most likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test contraption. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can most likely see that the response isn’t that elementary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, embark by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to reaction this question. Recall – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very ordinary question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, witness this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to reaction this question the very first thing you need to reaction is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just commencing, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to stir them into your own individual wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a stationary amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for new-comers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electric current. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are finish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of elaborate and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comebacks. They will then begin off by paying these comes back through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test instrument. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can most likely see that the reaction isn’t that plain. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, embark by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to reaction this question. Recall – only you can reaction this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, observe this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to reaction is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just commencing, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to stir them into your own individual wallet and never leave them at the exchange. My individual recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobile amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for newcomers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free tens unit. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of elaborate and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comebacks. They will then commence off by paying these comes back through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test device. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the response isn’t that plain. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, begin by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Reminisce – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 commenced with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very elementary question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, observe this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to reaction this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just beginning, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own individual wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immovable amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for beginners to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free violet wand. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are finish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of elaborate and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comebacks. They will then embark off by paying these comes back through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is most likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test instrument. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can most likely see that the reaction isn’t that ordinary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, commence by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Reminisce – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, witness this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to reaction this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just beginning, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own private wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a motionless amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for new-comers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electrical play. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are finish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then begin off by paying these comes back through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test implement. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the response isn’t that elementary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, begin by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Recall – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, observe this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to reaction is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just commencing, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own individual wallet and never leave them at the exchange. My individual recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobile amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for newcomers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electro-therapy. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Ultimately, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of elaborate and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then embark off by paying these comebacks through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is most likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test implement. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the response isn’t that elementary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, commence by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Recall – only you can reaction this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very ordinary question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, observe this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to reaction this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just beginning, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own private wallet and never leave them at the exchange. My individual recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobilized amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for newcomers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free tens unit. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are finish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of elaborate and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then commence off by paying these comes back through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test instrument. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the reaction isn’t that ordinary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, commence by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Reminisce – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, observe this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just embarking, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own individual wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobilized amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for newcomers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free violet wand. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then embark off by paying these comes back through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test device. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can most likely see that the response isn’t that plain. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, commence by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Reminisce – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 embarked with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very elementary question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, witness this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to reaction this question the very first thing you need to reaction is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just embarking, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to stir them into your own private wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immovable amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for rookies to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free tens unit. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are finish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Ultimately, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of complicated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then commence off by paying these comebacks through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test device. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can most likely see that the reaction isn’t that elementary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, embark by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to reaction this question. Recall – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 embarked with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, observe this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to reaction is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just commencing, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to stir them into your own private wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a motionless amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for rookies to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electro-stimulation. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are finish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Ultimately, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then embark off by paying these comes back through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is most likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test implement. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the reaction isn’t that elementary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, commence by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Recall – only you can reaction this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 commenced with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, see this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to reaction is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just kicking off, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to stir them into your own individual wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobilized amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for new-comers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electrical play. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comebacks. They will then commence off by paying these comes back through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test instrument. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the response isn’t that plain. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, embark by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to reaction this question. Recall – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 commenced with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, witness this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to reaction this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just beginning, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to stir them into your own private wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobile amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for beginners to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electrical play. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Ultimately, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of complicated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then begin off by paying these comebacks through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is most likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test contraption. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the response isn’t that elementary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, commence by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Reminisce – only you can reaction this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very elementary question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, witness this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just embarking, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own private wallet and never leave them at the exchange. My individual recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobile amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for rookies to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electro-therapy. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then begin off by paying these comebacks through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test contraption. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can most likely see that the reaction isn’t that plain. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, begin by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Reminisce – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 embarked with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very ordinary question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, see this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just embarking, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own private wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immovable amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for beginners to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free violet wand. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comebacks. They will then embark off by paying these comes back through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is most likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test device. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the response isn’t that ordinary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, commence by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Reminisce – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, see this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just commencing, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to stir them into your own private wallet and never leave them at the exchange. My individual recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobilized amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for new-comers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free tens unit. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then commence off by paying these comebacks through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test implement. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the reaction isn’t that elementary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, begin by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to reaction this question. Recall – only you can reaction this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, see this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just beginning, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own private wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobile amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for rookies to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free tens unit. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are finish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of complicated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comebacks. They will then embark off by paying these comes back through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test instrument. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can most likely see that the response isn’t that elementary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, begin by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to reaction this question. Reminisce – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 commenced with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, see this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to reaction is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just kicking off, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own private wallet and never leave them at the exchange. My individual recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immovable amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for new-comers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free tens unit. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are finish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comebacks. They will then begin off by paying these comes back through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is most likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test instrument. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the reaction isn’t that ordinary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, begin by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Recall – only you can reaction this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very ordinary question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, see this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to reaction this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just kicking off, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own private wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immobile amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for new-comers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electrical play. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are finish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will very likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Ultimately, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comebacks. They will then begin off by paying these comes back through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test instrument. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can very likely see that the reaction isn’t that ordinary. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, embark by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to reaction this question. Recall – only you can reaction this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 embarked with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very elementary question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, observe this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to reaction this question the very first thing you need to reaction is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just beginning, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to stir them into your own private wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a immovable amount every month, week or even day across the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for new-comers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electro-therapy. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will very likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Ultimately, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of elaborate and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then begin off by paying these comes back through money they get from fresh sign ups and create a big whirr around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is most likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test implement. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can most likely see that the reaction isn’t that plain. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, embark by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to reaction this question. Recall – only you can response this. You can consult others and read online but never go after someone’s advice blindly.

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

Should I Invest in Bitcoin in 2017? Here are four Things You Have to Know

2017 began with a bang as Bitcoin shot through the $1000 mark with no signs of slowing down. As a result I get about two emails a day from people around the world who are asking one very plain question: “Should I invest in Bitcoin?”

Before we begin, I want to get something out of the way – Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, witness this movie. So when you want to invest in Bitcoin you are basically buying the currency. However, there are also some other forms of investing in Bitcoin.

What does it mean to invest in Bitcoin?

Table of Contents

In order to response this question the very first thing you need to response is what do you mean when you say you want to invest in Bitcoin. Do you want to buy the currency in hopes it will appreciate it value? Do you want to invest in Bitcoin related companies? Are you looking to day trade with Bitcoins?

Buying and holding

The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here). If this is the case then you need to determine for yourself if you think this is a good time to buy. Meaning, do you think the price will proceed to rise.

Don’t take anyone’s advice about what will happen with the currency, do your homework, learn about Bitcoin and come to a conclusion. Personally I believe we are just beginning, but that’s my own opinion and you shouldn’t consider that as investment advice as well.

A few pointers for buying and holding Bitcoins:

  1. Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep in that in mind at all times.
  2. After buying Bitcoins make sure to budge them into your own individual wallet and never leave them at the exchange. My private recommendation is to use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet, attempt a paper wallet.
  3. Make sure to buy Bitcoins only from exchanges that have proven their reputation.
  4. Buy Bitcoins through Dollar cost averaging – This means that you don’t buy all of your Bitcoins in one trade but instead buy a motionless amount every month, week or even day via the year. This way you average the price over the course of a entire year. Here’s a brief movie to explain this concept:

Trading in Bitcoins

Bitcoin trading is different than buying and holding. When you are trading Bitcoins it means that you are actively attempting to buy Bitcoins at a low price and sell them back at a higher price in relatively brief time interval. Trading successfully requires skill and practice. The trading market is occupied by very large players who are just waiting for newcomers to come in and throw their money away by trading aimlessly.

If you want to learn more about Bitcoin trading here are some practical tips to help you out.

Investing in Bitcoin mining

Some people would like to invest their money into mining Bitcoin. For the past few years mining Bitcoin is only profitable if done at large scales. This means you will need to get expensive mining equipment and hopefully have access to free electrical play. Also it’s usually much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment.

Some of you may have heard of all sorts of sites that permit you to mine Bitcoins through them. This is known as cloud mining and these sites fall into one out of two categories:

  1. They are accomplish scams that will run away with your money and don’t actually use it to mine Bitcoin.
  2. They are not scams, but they are bad investments since you will most likely get more Bitcoins if you just use that money to buy Bitcoins instead of paying the site.

If you want to learn more about my take on cloud mining read this post.

Invest in Bitcoin companies / grow your Bitcoins / HYIPs

Eventually, every other day I get a question about a site or company that claims to dual your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of sophisticated and obscure scheme. These sites can be categorized mostly as scams or HYIPs (high yield investment programs).

What these sites usually do is they take money from people around the web and promise to give them good comes back. They will then embark off by paying these comebacks through money they get from fresh sign ups and create a big hum around the site. Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.

I have reviewed many Bitcoin investment sites in the past three years (e.g. BTCJam, Bitcoin Trader) and I have yet to find a site that I can say is legit or safe to invest in. Any site that promises you something that is too good to be true is very likely just a facade for scammers attempting to steal your coins.

How can you find out if a site is a scam for yourself? Effortless, use our Bitcoin scam test implement. I can’t emphasis this enough – STAY AWAY FROM SITES THAT CLAIM THEY WILL Dual YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.

So should you invest in Bitcoin?

By now you can most likely see that the reaction isn’t that plain. It’s not just a matter of should you invest, but also a matter of how to invest. Like I said in the beginning, embark by educating yourself. Learn about the currency, what affects it, what are its advantages and disadvantages, etc. You can get a lot of basic education through our free Bitcoin crash course (sign up at the bottom of this post).

After you feel you’ve acquired some basic education it’s time to response this question. Reminisce – only you can reaction this. You can consult others and read online but never go after someone’s advice blindly.

Related video:

Scalability – Bitcoin Wiki

Scalability

[Note: This page is gravely outdated and largely unmaintained; due to past incidents of edit-warring it has not been subject to much peer review.]

A Bitcoin total knot could be modified to scale to much higher transaction rates than are seen today, assuming that said knot is running on a high end servers rather than a desktop. Bitcoin was designed to support lightweight clients that only process petite parts of the block chain (see simplified payment verification below for more details on this).

Please note that this page exists to give calculations about the scalability of a Bitcoin utter knot and transactions on the block chain without regards to network security and decentralization. It is not intended to discuss the scalability of alternative protocols or attempt and summarise philosophical debates. Create alternative pages if you want to do that.

Contents

Note to Readers

When techies hear about how bitcoin works they frequently stop at the word “flooding” and say “Oh-my-god! that can’t scale!”. The purpose of this article is to take an extreme example, the peak transaction rate of Visa, and demonstrate that bitcoin could technically reach that kind of rate without any kind of questionable reasoning, switches in the core design, or non-existent overlays. As such, it’s merely an extreme example— not a plan for how bitcoin will grow to address broader needs (as a decentralized system it is the bitcoin using public who will determine how bitcoin grows)— it’s just an argument that shows that bitcoin’s core design can scale much better than an intelligent person might guess at very first.

Dan rightly criticizes the analysis introduced here— pointing out that operating at this scale would significantly reduce the decentralized nature of bitcoin: If you have to have many terabytes of disk space to run a “total validating” knot then fewer people will do it, and everyone who doesn’t will have to trust the ones who do to be fair. Dan emerges (from his slips) to have gone too far with that argument: he seems to suggest that this means bitcoins will be managed by the kind of central banks that are common today. His analysis fails for two reasons (and the 2nd is the fault of this page being a bit misleading):

Very first, even at the astronomic scale introduced here the required capacity is well within the sphere of (wealthy) private individuals, and certainly would be at some future time when that kind of capacity was required. A system which puts private individuals, or at least puny groups of private parties, on equal footing with central banks could hardly be called a centralized one, tho’ it would be less decentralized than the bitcoin we have today. The system could also not get to this kind of scale without bitcoin users agreeing collectively to increase the maximum block size, so it’s not an outcome that can happen without the consent of bitcoin users.

2nd, and most importantly, the assumed scaling described here deals with Bitcoin substituting visa. This is a poor comparison because bitcoin alone is not a ideal replacement for visa for reasons downright unrelated to scaling: Bitcoin does not suggest instant transactions, credit, or various anti-fraud mechanisms (which some people want, even if not everyone does), for example. Bitcoin is a more finish replacement for checks, wire transfers, money orders, gold coins, CDs, savings accounts, etc. and if widely adopted most likely substitute the uses of credit cards which would be better served by these other things if they worked better online.

Bitcoin users sometimes gloss over this fact too quickly because people are too quick to call it a flaw but this is unfair. No one system is ideal for all usage and Bitcoin has a broader spectrum of qualities than most monetary instruments. If the bitcoin community isn’t willing to point out some things would better be done by other systems then it becomes effortless to make strawman arguments: If we admit that bitcoin could be used as a floor paraffin wax and desert topping, someone will always point out that it’s not the best floorwax or best desert topping.

It’s trivial to build payment processing and credit systems _on top_ of bitcoin, both classic ones (like Visa itself!) as well as decentralized ones like Ripple. These systems could treat higher transaction volumes with lower costs, and lodge frequently to the bitcoin that backs them. These could use other technics with different tradeoffs than bitcoin, but still be backed and denominated by bitcoin so still love its lack of central control. We see the beginnings of this today with bitcoin exchange and wallet services permitting instant payments inbetween members.

These services would build up the benefit of the stable inflation resistant bitcoin currency, users would build up the benefits of instant transactions, credit, and anti-fraud, bitcoin overall would love improved scaling from offloaded transaction volume without compromising its decentralized nature. In a world where bitcoin was widely used payment processing systems would very likely have lower prices because they would need to challenge with raw-bitcoin transactions, they also could be afford lower price because frequent bitcoin lodging (and zero trust bitcoin escrow transactions) would reduce their risk. This is doubly true because bitcoin could conceivably scale to substitute them entirely, even if that wouldn’t be the best idea due to the resulting reduction in decentralization.

Scalability targets

VISA treats on average around Two,000 transactions per 2nd (tps), so call it a daily peak rate of Four,000 tps. It has a peak capacity of around 56,000 transactions per 2nd, [1] however they never actually use more than about a third of this even during peak shopping periods. [Two]

PayPal, in contrast, treated around ten million transactions per day for an average of one hundred fifteen tps in late 2014. [Three]

Let’s take Four,000 tps as embarking objective. Obviously if we want Bitcoin to scale to all economic transactions worldwide, including cash, it’d be a lot higher than that, perhaps more in the region of a few hundred thousand tps. And the need to be able to withstand DoS attacks (which VISA does not have to deal with) implies we would want to scale far beyond the standard peak rates. Still, picking a target let us do some basic calculations even if it’s a little arbitrary.

Today the Bitcoin network is restricted to a sustained rate of seven tps due to the bitcoin protocol restricting block sizes to 1MB.

The protocol has two parts. Knots send “inv” messages to other knots telling them they have a fresh transaction. If the receiving knot doesn’t have that transaction it requests it with a getdata.

The big cost is the crypto and block chain lookups involved with verifying the transaction. Verifying a transaction means some hashing and some ECDSA signature verifications. RIPEMD-160 runs at one hundred six megabytes/sec (call it one hundred for simpleness) and SHA256 is about the same. So hashing one megabyte should take around ten milliseconds and hashing one kilobyte would take 0.01 milliseconds – swift enough that we can disregard it.

Bitcoin is presently able (with a duo of plain optimizations that are prototyped but not merged yet) to perform around eight thousand signature verifications per 2nd on an quad core Intel Core i7-2670QM Two.2Ghz processor. The average number of inputs per transaction is around Two, so we must halve the rate. This means four thousand tps is lightly achievable CPU-wise with a single fairly mainstream CPU.

As we can see, this means as long as Bitcoin knots are permitted to max out at least four cores of the machines they run on, we will not run out of CPU capacity for signature checking unless Bitcoin is treating one hundred times as much traffic as PayPal. As of late two thousand fifteen the network is treating 1.Five transactions/2nd, so even assuming enormous growth in popularity we will not reach this level for a long time.

Of course Bitcoin does other things beyond signature checking, most obviously, managing the database. We use LevelDB which does the bulk of the intense lifting on a separate thread, and is capable of very high read/write geysers. Overall Bitcoin’s CPU usage is predominated by ECDSA.

Network

Let’s assume an average rate of 2000tps, so just VISA. Transactions vary in size from about 0.Two kilobytes to over one kilobyte, but it’s averaging half a kilobyte today.

That means that you need to keep up with around eight megabits/2nd of transaction data (2000tps * five hundred twelve bytes) / one thousand twenty four bytes in a kilobyte / one thousand twenty four kilobytes in a megabyte = 0.97 megabytes per 2nd * eight = 7.8 megabits/2nd.

This sort of bandwidth is already common for even residential connections today, and is certainly at the low end of what colocation providers would expect to provide you with.

When blocks are solved, the current protocol will send the transactions again, even if a peer has already seen it at broadcast time. Fixing this to make blocks just list of hashes would resolve the issue and make the bandwidth needed for block broadcast negligable. So whilst this optimization isn’t fully implemented today, we do not consider block transmission bandwidth here.

Storage

At very high transaction rates each block can be over half a gigabyte in size.

It is not required for most fully validating knots to store the entire chain. In Satoshi’s paper he describes “pruning”, a way to delete unnecessary data about transactions that are fully spent. This reduces the amount of data that is needed for a fully validating knot to be only the size of the current unspent output size, plus some extra data that is needed to treat re-orgs. As of October two thousand twelve (block 203258) there have been 7,979,231 transactions, however the size of the unspent output set is less than 100MiB, which is puny enough to lightly fit in RAM for even fairly old computers.

Only a petite number of archival knots need to store the total chain going back to the genesis block. These knots can be used to bootstrap fresh fully validating knots from scrape but are otherwise unnecessary.

The primary limiting factor in Bitcoin’s spectacle is disk seeks once the unspent transaction output set stops fitting in memory. Once hard disks are phased out in favour of SSDs, it is fairly possible that access to the UTXO set never becomes a serious bottleneck.

Optimizations

The description above applies to the current software with only minor optimizations assumed (the type that can and have been done by one man in a few weeks).

However there is potential for even greater optimizations to be made in future, at the cost of some extra complexity.

Algorithms exist to accelerate batch verification over elliptic curve signatures. It’s possible to check their signatures at the same time for a 2x speedup. This is a somewhat more elaborate implementation.

Simplified payment verification

It’s possible to build a Bitcoin implementation that does not verify everything, but instead relies on either connecting to a trusted knot, or puts its faith in high difficulty as a proxy for proof of validity. bitcoinj is an implementation of this mode.

In Simplified Payment Verification (SPV) mode, named after the section of Satoshi’s paper that describes it, clients connect to an arbitrary total knot and download only the block headers. They verify the chain headers connect together correctly and that the difficulty is high enough. They then request transactions matching particular patterns from the remote knot (ie, payments to your addresses), which provides copies of those transactions along with a Merkle branch linking them to the block in which they appeared. This exploits the Merkle tree structure to permit proof of inclusion without needing the total contents of the block.

As a further optimization, block headers that are buried adequately deep can be thrown away after some time (eg. you only indeed need to store as low as two thousand sixteen headers).

The level of difficulty required to obtain confidence the remote knot is not feeding you fictional transactions depends on your threat model. If you are connecting to a knot that is known to be reliable, the difficulty doesn’t matter. If you want to pick a random knot, the cost for an attacker to mine a block sequence containing a bogus transaction should be higher than the value to be obtained by defrauding you. By switching how deeply buried the block must be, you can trade off confirmation time vs cost of an attack.

Programs implementing this treatment can have immobile storage/network overhead in the null case of no usage, and resource usage proportional to received/sent transactions.

Related work

There are a few proposals for optimizing Bitcoin’s scalability. Some of these require an alt-chain / hard fork.

  • Ultimate blockchain compression – the idea that the blockchain can be compressed to achieve “trust-free lite knots”
  • The Finite Blockchain paper that describes splitting the blockchain into three data structures, each better suited for its purpose. The three data structures are a finite blockchain (keep N blocks into the past), an “account tree” which keeps account balance for every address with a non-zero balance, and a “proof chain” which is an (ever growing) slimmed down version of the blockchain.
  • Lightning Network, an alternative protocol for transaction clearance in which knots set up micropayment channels inbetween each other and lodge up on the block chain sometimes. Ordinary users interact primarily or only with payment channels and only use the blockchain for large transfers and cold storage.

Scalability – Bitcoin Wiki

Scalability

[Note: This page is gravely outdated and largely unmaintained; due to past incidents of edit-warring it has not been subject to much peer review.]

A Bitcoin total knot could be modified to scale to much higher transaction rates than are seen today, assuming that said knot is running on a high end servers rather than a desktop. Bitcoin was designed to support lightweight clients that only process petite parts of the block chain (see simplified payment verification below for more details on this).

Please note that this page exists to give calculations about the scalability of a Bitcoin utter knot and transactions on the block chain without regards to network security and decentralization. It is not intended to discuss the scalability of alternative protocols or attempt and summarise philosophical debates. Create alternative pages if you want to do that.

Contents

Note to Readers

When techies hear about how bitcoin works they frequently stop at the word “flooding” and say “Oh-my-god! that can’t scale!”. The purpose of this article is to take an extreme example, the peak transaction rate of Visa, and demonstrate that bitcoin could technically reach that kind of rate without any kind of questionable reasoning, switches in the core design, or non-existent overlays. As such, it’s merely an extreme example— not a plan for how bitcoin will grow to address broader needs (as a decentralized system it is the bitcoin using public who will determine how bitcoin grows)— it’s just an argument that shows that bitcoin’s core design can scale much better than an intelligent person might guess at very first.

Dan rightly criticizes the analysis introduced here— pointing out that operating at this scale would significantly reduce the decentralized nature of bitcoin: If you have to have many terabytes of disk space to run a “utter validating” knot then fewer people will do it, and everyone who doesn’t will have to trust the ones who do to be fair. Dan emerges (from his slips) to have gone too far with that argument: he seems to suggest that this means bitcoins will be managed by the kind of central banks that are common today. His analysis fails for two reasons (and the 2nd is the fault of this page being a bit misleading):

Very first, even at the astronomic scale introduced here the required capacity is well within the field of (wealthy) private individuals, and certainly would be at some future time when that kind of capacity was required. A system which puts private individuals, or at least puny groups of private parties, on equal footing with central banks could hardly be called a centralized one, tho’ it would be less decentralized than the bitcoin we have today. The system could also not get to this kind of scale without bitcoin users agreeing collectively to increase the maximum block size, so it’s not an outcome that can happen without the consent of bitcoin users.

2nd, and most importantly, the assumed scaling described here deals with Bitcoin substituting visa. This is a poor comparison because bitcoin alone is not a flawless replacement for visa for reasons entirely unrelated to scaling: Bitcoin does not suggest instant transactions, credit, or various anti-fraud mechanisms (which some people want, even if not everyone does), for example. Bitcoin is a more finish replacement for checks, wire transfers, money orders, gold coins, CDs, savings accounts, etc. and if widely adopted most likely substitute the uses of credit cards which would be better served by these other things if they worked better online.

Bitcoin users sometimes gloss over this fact too quickly because people are too quick to call it a flaw but this is unfair. No one system is ideal for all usage and Bitcoin has a broader spectrum of qualities than most monetary instruments. If the bitcoin community isn’t willing to point out some things would better be done by other systems then it becomes effortless to make strawman arguments: If we admit that bitcoin could be used as a floor paraffin wax and desert topping, someone will always point out that it’s not the best floorwax or best desert topping.

It’s trivial to build payment processing and credit systems _on top_ of bitcoin, both classic ones (like Visa itself!) as well as decentralized ones like Ripple. These systems could treat higher transaction volumes with lower costs, and lodge frequently to the bitcoin that backs them. These could use other technics with different tradeoffs than bitcoin, but still be backed and denominated by bitcoin so still love its lack of central control. We see the beginnings of this today with bitcoin exchange and wallet services permitting instant payments inbetween members.

These services would build up the benefit of the stable inflation resistant bitcoin currency, users would build up the benefits of instant transactions, credit, and anti-fraud, bitcoin overall would love improved scaling from offloaded transaction volume without compromising its decentralized nature. In a world where bitcoin was widely used payment processing systems would most likely have lower prices because they would need to contest with raw-bitcoin transactions, they also could be afford lower price because frequent bitcoin lodging (and zero trust bitcoin escrow transactions) would reduce their risk. This is doubly true because bitcoin could conceivably scale to substitute them entirely, even if that wouldn’t be the best idea due to the resulting reduction in decentralization.

Scalability targets

VISA treats on average around Two,000 transactions per 2nd (tps), so call it a daily peak rate of Four,000 tps. It has a peak capacity of around 56,000 transactions per 2nd, [1] however they never actually use more than about a third of this even during peak shopping periods. [Two]

PayPal, in contrast, treated around ten million transactions per day for an average of one hundred fifteen tps in late 2014. [Trio]

Let’s take Four,000 tps as beginning purpose. Obviously if we want Bitcoin to scale to all economic transactions worldwide, including cash, it’d be a lot higher than that, perhaps more in the region of a few hundred thousand tps. And the need to be able to withstand DoS attacks (which VISA does not have to deal with) implies we would want to scale far beyond the standard peak rates. Still, picking a target let us do some basic calculations even if it’s a little arbitrary.

Today the Bitcoin network is restricted to a sustained rate of seven tps due to the bitcoin protocol restricting block sizes to 1MB.

The protocol has two parts. Knots send “inv” messages to other knots telling them they have a fresh transaction. If the receiving knot doesn’t have that transaction it requests it with a getdata.

The big cost is the crypto and block chain lookups involved with verifying the transaction. Verifying a transaction means some hashing and some ECDSA signature verifications. RIPEMD-160 runs at one hundred six megabytes/sec (call it one hundred for simpleness) and SHA256 is about the same. So hashing one megabyte should take around ten milliseconds and hashing one kilobyte would take 0.01 milliseconds – rapid enough that we can disregard it.

Bitcoin is presently able (with a duo of plain optimizations that are prototyped but not merged yet) to perform around eight thousand signature verifications per 2nd on an quad core Intel Core i7-2670QM Two.2Ghz processor. The average number of inputs per transaction is around Two, so we must halve the rate. This means four thousand tps is lightly achievable CPU-wise with a single fairly mainstream CPU.

As we can see, this means as long as Bitcoin knots are permitted to max out at least four cores of the machines they run on, we will not run out of CPU capacity for signature checking unless Bitcoin is treating one hundred times as much traffic as PayPal. As of late two thousand fifteen the network is treating 1.Five transactions/2nd, so even assuming enormous growth in popularity we will not reach this level for a long time.

Of course Bitcoin does other things beyond signature checking, most obviously, managing the database. We use LevelDB which does the bulk of the powerful lifting on a separate thread, and is capable of very high read/write explosions. Overall Bitcoin’s CPU usage is predominated by ECDSA.

Network

Let’s assume an average rate of 2000tps, so just VISA. Transactions vary in size from about 0.Two kilobytes to over one kilobyte, but it’s averaging half a kilobyte today.

That means that you need to keep up with around eight megabits/2nd of transaction data (2000tps * five hundred twelve bytes) / one thousand twenty four bytes in a kilobyte / one thousand twenty four kilobytes in a megabyte = 0.97 megabytes per 2nd * eight = 7.8 megabits/2nd.

This sort of bandwidth is already common for even residential connections today, and is certainly at the low end of what colocation providers would expect to provide you with.

When blocks are solved, the current protocol will send the transactions again, even if a peer has already seen it at broadcast time. Fixing this to make blocks just list of hashes would resolve the issue and make the bandwidth needed for block broadcast negligable. So whilst this optimization isn’t fully implemented today, we do not consider block transmission bandwidth here.

Storage

At very high transaction rates each block can be over half a gigabyte in size.

It is not required for most fully validating knots to store the entire chain. In Satoshi’s paper he describes “pruning”, a way to delete unnecessary data about transactions that are fully spent. This reduces the amount of data that is needed for a fully validating knot to be only the size of the current unspent output size, plus some extra data that is needed to treat re-orgs. As of October two thousand twelve (block 203258) there have been 7,979,231 transactions, however the size of the unspent output set is less than 100MiB, which is petite enough to lightly fit in RAM for even fairly old computers.

Only a petite number of archival knots need to store the utter chain going back to the genesis block. These knots can be used to bootstrap fresh fully validating knots from scrape but are otherwise unnecessary.

The primary limiting factor in Bitcoin’s spectacle is disk seeks once the unspent transaction output set stops fitting in memory. Once hard disks are phased out in favour of SSDs, it is fairly possible that access to the UTXO set never becomes a serious bottleneck.

Optimizations

The description above applies to the current software with only minor optimizations assumed (the type that can and have been done by one man in a few weeks).

However there is potential for even greater optimizations to be made in future, at the cost of some extra complexity.

Algorithms exist to accelerate batch verification over elliptic curve signatures. It’s possible to check their signatures at the same time for a 2x speedup. This is a somewhat more elaborate implementation.

Simplified payment verification

It’s possible to build a Bitcoin implementation that does not verify everything, but instead relies on either connecting to a trusted knot, or puts its faith in high difficulty as a proxy for proof of validity. bitcoinj is an implementation of this mode.

In Simplified Payment Verification (SPV) mode, named after the section of Satoshi’s paper that describes it, clients connect to an arbitrary total knot and download only the block headers. They verify the chain headers connect together correctly and that the difficulty is high enough. They then request transactions matching particular patterns from the remote knot (ie, payments to your addresses), which provides copies of those transactions along with a Merkle branch linking them to the block in which they appeared. This exploits the Merkle tree structure to permit proof of inclusion without needing the utter contents of the block.

As a further optimization, block headers that are buried reasonably deep can be thrown away after some time (eg. you only truly need to store as low as two thousand sixteen headers).

The level of difficulty required to obtain confidence the remote knot is not feeding you fictional transactions depends on your threat model. If you are connecting to a knot that is known to be reliable, the difficulty doesn’t matter. If you want to pick a random knot, the cost for an attacker to mine a block sequence containing a bogus transaction should be higher than the value to be obtained by defrauding you. By switching how deeply buried the block must be, you can trade off confirmation time vs cost of an attack.

Programs implementing this treatment can have immobile storage/network overhead in the null case of no usage, and resource usage proportional to received/sent transactions.

Related work

There are a few proposals for optimizing Bitcoin’s scalability. Some of these require an alt-chain / hard fork.

  • Ultimate blockchain compression – the idea that the blockchain can be compressed to achieve “trust-free lite knots”
  • The Finite Blockchain paper that describes splitting the blockchain into three data structures, each better suited for its purpose. The three data structures are a finite blockchain (keep N blocks into the past), an “account tree” which keeps account balance for every address with a non-zero balance, and a “proof chain” which is an (ever growing) slimmed down version of the blockchain.
  • Lightning Network, an alternative protocol for transaction clearance in which knots set up micropayment channels inbetween each other and lodge up on the block chain periodically. Ordinary users interact primarily or only with payment channels and only use the blockchain for large transfers and cold storage.

Scalability – Bitcoin Wiki

Scalability

[Note: This page is earnestly outdated and largely unmaintained; due to past incidents of edit-warring it has not been subject to much peer review.]

A Bitcoin total knot could be modified to scale to much higher transaction rates than are seen today, assuming that said knot is running on a high end servers rather than a desktop. Bitcoin was designed to support lightweight clients that only process puny parts of the block chain (see simplified payment verification below for more details on this).

Please note that this page exists to give calculations about the scalability of a Bitcoin utter knot and transactions on the block chain without regards to network security and decentralization. It is not intended to discuss the scalability of alternative protocols or attempt and summarise philosophical debates. Create alternative pages if you want to do that.

Contents

Note to Readers

When techies hear about how bitcoin works they frequently stop at the word “flooding” and say “Oh-my-god! that can’t scale!”. The purpose of this article is to take an extreme example, the peak transaction rate of Visa, and demonstrate that bitcoin could technically reach that kind of rate without any kind of questionable reasoning, switches in the core design, or non-existent overlays. As such, it’s merely an extreme example— not a plan for how bitcoin will grow to address broader needs (as a decentralized system it is the bitcoin using public who will determine how bitcoin grows)— it’s just an argument that shows that bitcoin’s core design can scale much better than an intelligent person might guess at very first.

Dan rightly criticizes the analysis introduced here— pointing out that operating at this scale would significantly reduce the decentralized nature of bitcoin: If you have to have many terabytes of disk space to run a “total validating” knot then fewer people will do it, and everyone who doesn’t will have to trust the ones who do to be fair. Dan emerges (from his glides) to have gone too far with that argument: he seems to suggest that this means bitcoins will be managed by the kind of central banks that are common today. His analysis fails for two reasons (and the 2nd is the fault of this page being a bit misleading):

Very first, even at the astronomic scale introduced here the required capacity is well within the field of (wealthy) private individuals, and certainly would be at some future time when that kind of capacity was required. A system which puts private individuals, or at least puny groups of private parties, on equal footing with central banks could hardly be called a centralized one, however it would be less decentralized than the bitcoin we have today. The system could also not get to this kind of scale without bitcoin users agreeing collectively to increase the maximum block size, so it’s not an outcome that can happen without the consent of bitcoin users.

2nd, and most importantly, the assumed scaling described here deals with Bitcoin substituting visa. This is a poor comparison because bitcoin alone is not a flawless replacement for visa for reasons entirely unrelated to scaling: Bitcoin does not suggest instant transactions, credit, or various anti-fraud mechanisms (which some people want, even if not everyone does), for example. Bitcoin is a more finish replacement for checks, wire transfers, money orders, gold coins, CDs, savings accounts, etc. and if widely adopted most likely substitute the uses of credit cards which would be better served by these other things if they worked better online.

Bitcoin users sometimes gloss over this fact too quickly because people are too quick to call it a flaw but this is unfair. No one system is ideal for all usage and Bitcoin has a broader spectrum of qualities than most monetary instruments. If the bitcoin community isn’t willing to point out some things would better be done by other systems then it becomes effortless to make strawman arguments: If we admit that bitcoin could be used as a floor paraffin wax and desert topping, someone will always point out that it’s not the best floorwax or best desert topping.

It’s trivial to build payment processing and credit systems _on top_ of bitcoin, both classic ones (like Visa itself!) as well as decentralized ones like Ripple. These systems could treat higher transaction volumes with lower costs, and lodge frequently to the bitcoin that backs them. These could use other technics with different tradeoffs than bitcoin, but still be backed and denominated by bitcoin so still love its lack of central control. We see the beginnings of this today with bitcoin exchange and wallet services permitting instant payments inbetween members.

These services would build up the benefit of the stable inflation resistant bitcoin currency, users would build up the benefits of instant transactions, credit, and anti-fraud, bitcoin overall would love improved scaling from offloaded transaction volume without compromising its decentralized nature. In a world where bitcoin was widely used payment processing systems would very likely have lower prices because they would need to challenge with raw-bitcoin transactions, they also could be afford lower price because frequent bitcoin lodging (and zero trust bitcoin escrow transactions) would reduce their risk. This is doubly true because bitcoin could conceivably scale to substitute them entirely, even if that wouldn’t be the best idea due to the resulting reduction in decentralization.

Scalability targets

VISA treats on average around Two,000 transactions per 2nd (tps), so call it a daily peak rate of Four,000 tps. It has a peak capacity of around 56,000 transactions per 2nd, [1] however they never actually use more than about a third of this even during peak shopping periods. [Two]

PayPal, in contrast, treated around ten million transactions per day for an average of one hundred fifteen tps in late 2014. [Trio]

Let’s take Four,000 tps as embarking objective. Obviously if we want Bitcoin to scale to all economic transactions worldwide, including cash, it’d be a lot higher than that, perhaps more in the region of a few hundred thousand tps. And the need to be able to withstand DoS attacks (which VISA does not have to deal with) implies we would want to scale far beyond the standard peak rates. Still, picking a target let us do some basic calculations even if it’s a little arbitrary.

Today the Bitcoin network is restricted to a sustained rate of seven tps due to the bitcoin protocol restricting block sizes to 1MB.

The protocol has two parts. Knots send “inv” messages to other knots telling them they have a fresh transaction. If the receiving knot doesn’t have that transaction it requests it with a getdata.

The big cost is the crypto and block chain lookups involved with verifying the transaction. Verifying a transaction means some hashing and some ECDSA signature verifications. RIPEMD-160 runs at one hundred six megabytes/sec (call it one hundred for simpleness) and SHA256 is about the same. So hashing one megabyte should take around ten milliseconds and hashing one kilobyte would take 0.01 milliseconds – prompt enough that we can overlook it.

Bitcoin is presently able (with a duo of elementary optimizations that are prototyped but not merged yet) to perform around eight thousand signature verifications per 2nd on an quad core Intel Core i7-2670QM Two.2Ghz processor. The average number of inputs per transaction is around Two, so we must halve the rate. This means four thousand tps is lightly achievable CPU-wise with a single fairly mainstream CPU.

As we can see, this means as long as Bitcoin knots are permitted to max out at least four cores of the machines they run on, we will not run out of CPU capacity for signature checking unless Bitcoin is treating one hundred times as much traffic as PayPal. As of late two thousand fifteen the network is treating 1.Five transactions/2nd, so even assuming enormous growth in popularity we will not reach this level for a long time.

Of course Bitcoin does other things beyond signature checking, most obviously, managing the database. We use LevelDB which does the bulk of the strenuous lifting on a separate thread, and is capable of very high read/write explosions. Overall Bitcoin’s CPU usage is predominated by ECDSA.

Network

Let’s assume an average rate of 2000tps, so just VISA. Transactions vary in size from about 0.Two kilobytes to over one kilobyte, but it’s averaging half a kilobyte today.

That means that you need to keep up with around eight megabits/2nd of transaction data (2000tps * five hundred twelve bytes) / one thousand twenty four bytes in a kilobyte / one thousand twenty four kilobytes in a megabyte = 0.97 megabytes per 2nd * eight = 7.8 megabits/2nd.

This sort of bandwidth is already common for even residential connections today, and is certainly at the low end of what colocation providers would expect to provide you with.

When blocks are solved, the current protocol will send the transactions again, even if a peer has already seen it at broadcast time. Fixing this to make blocks just list of hashes would resolve the issue and make the bandwidth needed for block broadcast negligable. So whilst this optimization isn’t fully implemented today, we do not consider block transmission bandwidth here.

Storage

At very high transaction rates each block can be over half a gigabyte in size.

It is not required for most fully validating knots to store the entire chain. In Satoshi’s paper he describes “pruning”, a way to delete unnecessary data about transactions that are fully spent. This reduces the amount of data that is needed for a fully validating knot to be only the size of the current unspent output size, plus some extra data that is needed to treat re-orgs. As of October two thousand twelve (block 203258) there have been 7,979,231 transactions, however the size of the unspent output set is less than 100MiB, which is puny enough to lightly fit in RAM for even fairly old computers.

Only a petite number of archival knots need to store the utter chain going back to the genesis block. These knots can be used to bootstrap fresh fully validating knots from scrape but are otherwise unnecessary.

The primary limiting factor in Bitcoin’s spectacle is disk seeks once the unspent transaction output set stops fitting in memory. Once hard disks are phased out in favour of SSDs, it is fairly possible that access to the UTXO set never becomes a serious bottleneck.

Optimizations

The description above applies to the current software with only minor optimizations assumed (the type that can and have been done by one man in a few weeks).

However there is potential for even greater optimizations to be made in future, at the cost of some extra complexity.

Algorithms exist to accelerate batch verification over elliptic curve signatures. It’s possible to check their signatures at the same time for a 2x speedup. This is a somewhat more complicated implementation.

Simplified payment verification

It’s possible to build a Bitcoin implementation that does not verify everything, but instead relies on either connecting to a trusted knot, or puts its faith in high difficulty as a proxy for proof of validity. bitcoinj is an implementation of this mode.

In Simplified Payment Verification (SPV) mode, named after the section of Satoshi’s paper that describes it, clients connect to an arbitrary total knot and download only the block headers. They verify the chain headers connect together correctly and that the difficulty is high enough. They then request transactions matching particular patterns from the remote knot (ie, payments to your addresses), which provides copies of those transactions along with a Merkle branch linking them to the block in which they appeared. This exploits the Merkle tree structure to permit proof of inclusion without needing the total contents of the block.

As a further optimization, block headers that are buried adequately deep can be thrown away after some time (eg. you only truly need to store as low as two thousand sixteen headers).

The level of difficulty required to obtain confidence the remote knot is not feeding you fictional transactions depends on your threat model. If you are connecting to a knot that is known to be reliable, the difficulty doesn’t matter. If you want to pick a random knot, the cost for an attacker to mine a block sequence containing a bogus transaction should be higher than the value to be obtained by defrauding you. By switching how deeply buried the block must be, you can trade off confirmation time vs cost of an attack.

Programs implementing this treatment can have immobilized storage/network overhead in the null case of no usage, and resource usage proportional to received/sent transactions.

Related work

There are a few proposals for optimizing Bitcoin’s scalability. Some of these require an alt-chain / hard fork.

  • Ultimate blockchain compression – the idea that the blockchain can be compressed to achieve “trust-free lite knots”
  • The Finite Blockchain paper that describes splitting the blockchain into three data structures, each better suited for its purpose. The three data structures are a finite blockchain (keep N blocks into the past), an “account tree” which keeps account balance for every address with a non-zero balance, and a “proof chain” which is an (ever growing) slimmed down version of the blockchain.
  • Lightning Network, an alternative protocol for transaction clearance in which knots set up micropayment channels inbetween each other and lodge up on the block chain periodically. Ordinary users interact primarily or only with payment channels and only use the blockchain for large transfers and cold storage.

Scalability – Bitcoin Wiki

Scalability

[Note: This page is gravely outdated and largely unmaintained; due to past incidents of edit-warring it has not been subject to much peer review.]

A Bitcoin total knot could be modified to scale to much higher transaction rates than are seen today, assuming that said knot is running on a high end servers rather than a desktop. Bitcoin was designed to support lightweight clients that only process puny parts of the block chain (see simplified payment verification below for more details on this).

Please note that this page exists to give calculations about the scalability of a Bitcoin utter knot and transactions on the block chain without regards to network security and decentralization. It is not intended to discuss the scalability of alternative protocols or attempt and summarise philosophical debates. Create alternative pages if you want to do that.

Contents

Note to Readers

When techies hear about how bitcoin works they frequently stop at the word “flooding” and say “Oh-my-god! that can’t scale!”. The purpose of this article is to take an extreme example, the peak transaction rate of Visa, and display that bitcoin could technically reach that kind of rate without any kind of questionable reasoning, switches in the core design, or non-existent overlays. As such, it’s merely an extreme example— not a plan for how bitcoin will grow to address broader needs (as a decentralized system it is the bitcoin using public who will determine how bitcoin grows)— it’s just an argument that shows that bitcoin’s core design can scale much better than an intelligent person might guess at very first.

Dan rightly criticizes the analysis introduced here— pointing out that operating at this scale would significantly reduce the decentralized nature of bitcoin: If you have to have many terabytes of disk space to run a “utter validating” knot then fewer people will do it, and everyone who doesn’t will have to trust the ones who do to be fair. Dan emerges (from his slips) to have gone too far with that argument: he seems to suggest that this means bitcoins will be managed by the kind of central banks that are common today. His analysis fails for two reasons (and the 2nd is the fault of this page being a bit misleading):

Very first, even at the astronomic scale introduced here the required capacity is well within the area of (wealthy) private individuals, and certainly would be at some future time when that kind of capacity was required. A system which puts private individuals, or at least petite groups of private parties, on equal footing with central banks could hardly be called a centralized one, however it would be less decentralized than the bitcoin we have today. The system could also not get to this kind of scale without bitcoin users agreeing collectively to increase the maximum block size, so it’s not an outcome that can happen without the consent of bitcoin users.

2nd, and most importantly, the assumed scaling described here deals with Bitcoin substituting visa. This is a poor comparison because bitcoin alone is not a ideal replacement for visa for reasons entirely unrelated to scaling: Bitcoin does not suggest instant transactions, credit, or various anti-fraud mechanisms (which some people want, even if not everyone does), for example. Bitcoin is a more finish replacement for checks, wire transfers, money orders, gold coins, CDs, savings accounts, etc. and if widely adopted most likely substitute the uses of credit cards which would be better served by these other things if they worked better online.

Bitcoin users sometimes gloss over this fact too quickly because people are too quick to call it a flaw but this is unfair. No one system is ideal for all usage and Bitcoin has a broader spectrum of qualities than most monetary instruments. If the bitcoin community isn’t willing to point out some things would better be done by other systems then it becomes effortless to make strawman arguments: If we admit that bitcoin could be used as a floor paraffin wax and desert topping, someone will always point out that it’s not the best floorwax or best desert topping.

It’s trivial to build payment processing and credit systems _on top_ of bitcoin, both classic ones (like Visa itself!) as well as decentralized ones like Ripple. These systems could treat higher transaction volumes with lower costs, and lodge frequently to the bitcoin that backs them. These could use other mechanisms with different tradeoffs than bitcoin, but still be backed and denominated by bitcoin so still love its lack of central control. We see the beginnings of this today with bitcoin exchange and wallet services permitting instant payments inbetween members.

These services would build up the benefit of the stable inflation resistant bitcoin currency, users would build up the benefits of instant transactions, credit, and anti-fraud, bitcoin overall would love improved scaling from offloaded transaction volume without compromising its decentralized nature. In a world where bitcoin was widely used payment processing systems would very likely have lower prices because they would need to contest with raw-bitcoin transactions, they also could be afford lower price because frequent bitcoin lodging (and zero trust bitcoin escrow transactions) would reduce their risk. This is doubly true because bitcoin could conceivably scale to substitute them entirely, even if that wouldn’t be the best idea due to the resulting reduction in decentralization.

Scalability targets

VISA treats on average around Two,000 transactions per 2nd (tps), so call it a daily peak rate of Four,000 tps. It has a peak capacity of around 56,000 transactions per 2nd, [1] however they never actually use more than about a third of this even during peak shopping periods. [Two]

PayPal, in contrast, treated around ten million transactions per day for an average of one hundred fifteen tps in late 2014. [Trio]

Let’s take Four,000 tps as commencing aim. Obviously if we want Bitcoin to scale to all economic transactions worldwide, including cash, it’d be a lot higher than that, perhaps more in the region of a few hundred thousand tps. And the need to be able to withstand DoS attacks (which VISA does not have to deal with) implies we would want to scale far beyond the standard peak rates. Still, picking a target let us do some basic calculations even if it’s a little arbitrary.

Today the Bitcoin network is restricted to a sustained rate of seven tps due to the bitcoin protocol restricting block sizes to 1MB.

The protocol has two parts. Knots send “inv” messages to other knots telling them they have a fresh transaction. If the receiving knot doesn’t have that transaction it requests it with a getdata.

The big cost is the crypto and block chain lookups involved with verifying the transaction. Verifying a transaction means some hashing and some ECDSA signature verifications. RIPEMD-160 runs at one hundred six megabytes/sec (call it one hundred for simpleness) and SHA256 is about the same. So hashing one megabyte should take around ten milliseconds and hashing one kilobyte would take 0.01 milliseconds – rapid enough that we can disregard it.

Bitcoin is presently able (with a duo of elementary optimizations that are prototyped but not merged yet) to perform around eight thousand signature verifications per 2nd on an quad core Intel Core i7-2670QM Two.2Ghz processor. The average number of inputs per transaction is around Two, so we must halve the rate. This means four thousand tps is lightly achievable CPU-wise with a single fairly mainstream CPU.

As we can see, this means as long as Bitcoin knots are permitted to max out at least four cores of the machines they run on, we will not run out of CPU capacity for signature checking unless Bitcoin is treating one hundred times as much traffic as PayPal. As of late two thousand fifteen the network is treating 1.Five transactions/2nd, so even assuming enormous growth in popularity we will not reach this level for a long time.

Of course Bitcoin does other things beyond signature checking, most obviously, managing the database. We use LevelDB which does the bulk of the powerful lifting on a separate thread, and is capable of very high read/write geysers. Overall Bitcoin’s CPU usage is predominated by ECDSA.

Network

Let’s assume an average rate of 2000tps, so just VISA. Transactions vary in size from about 0.Two kilobytes to over one kilobyte, but it’s averaging half a kilobyte today.

That means that you need to keep up with around eight megabits/2nd of transaction data (2000tps * five hundred twelve bytes) / one thousand twenty four bytes in a kilobyte / one thousand twenty four kilobytes in a megabyte = 0.97 megabytes per 2nd * eight = 7.8 megabits/2nd.

This sort of bandwidth is already common for even residential connections today, and is certainly at the low end of what colocation providers would expect to provide you with.

When blocks are solved, the current protocol will send the transactions again, even if a peer has already seen it at broadcast time. Fixing this to make blocks just list of hashes would resolve the issue and make the bandwidth needed for block broadcast negligable. So whilst this optimization isn’t fully implemented today, we do not consider block transmission bandwidth here.

Storage

At very high transaction rates each block can be over half a gigabyte in size.

It is not required for most fully validating knots to store the entire chain. In Satoshi’s paper he describes “pruning”, a way to delete unnecessary data about transactions that are fully spent. This reduces the amount of data that is needed for a fully validating knot to be only the size of the current unspent output size, plus some extra data that is needed to treat re-orgs. As of October two thousand twelve (block 203258) there have been 7,979,231 transactions, however the size of the unspent output set is less than 100MiB, which is petite enough to lightly fit in RAM for even fairly old computers.

Only a puny number of archival knots need to store the total chain going back to the genesis block. These knots can be used to bootstrap fresh fully validating knots from scrape but are otherwise unnecessary.

The primary limiting factor in Bitcoin’s spectacle is disk seeks once the unspent transaction output set stops fitting in memory. Once hard disks are phased out in favour of SSDs, it is fairly possible that access to the UTXO set never becomes a serious bottleneck.

Optimizations

The description above applies to the current software with only minor optimizations assumed (the type that can and have been done by one man in a few weeks).

However there is potential for even greater optimizations to be made in future, at the cost of some extra complexity.

Algorithms exist to accelerate batch verification over elliptic curve signatures. It’s possible to check their signatures at the same time for a 2x speedup. This is a somewhat more elaborate implementation.

Simplified payment verification

It’s possible to build a Bitcoin implementation that does not verify everything, but instead relies on either connecting to a trusted knot, or puts its faith in high difficulty as a proxy for proof of validity. bitcoinj is an implementation of this mode.

In Simplified Payment Verification (SPV) mode, named after the section of Satoshi’s paper that describes it, clients connect to an arbitrary utter knot and download only the block headers. They verify the chain headers connect together correctly and that the difficulty is high enough. They then request transactions matching particular patterns from the remote knot (ie, payments to your addresses), which provides copies of those transactions along with a Merkle branch linking them to the block in which they appeared. This exploits the Merkle tree structure to permit proof of inclusion without needing the total contents of the block.

As a further optimization, block headers that are buried adequately deep can be thrown away after some time (eg. you only indeed need to store as low as two thousand sixteen headers).

The level of difficulty required to obtain confidence the remote knot is not feeding you fictional transactions depends on your threat model. If you are connecting to a knot that is known to be reliable, the difficulty doesn’t matter. If you want to pick a random knot, the cost for an attacker to mine a block sequence containing a bogus transaction should be higher than the value to be obtained by defrauding you. By switching how deeply buried the block must be, you can trade off confirmation time vs cost of an attack.

Programs implementing this treatment can have immovable storage/network overhead in the null case of no usage, and resource usage proportional to received/sent transactions.

Related work

There are a few proposals for optimizing Bitcoin’s scalability. Some of these require an alt-chain / hard fork.

  • Ultimate blockchain compression – the idea that the blockchain can be compressed to achieve “trust-free lite knots”
  • The Finite Blockchain paper that describes splitting the blockchain into three data structures, each better suited for its purpose. The three data structures are a finite blockchain (keep N blocks into the past), an “account tree” which keeps account balance for every address with a non-zero balance, and a “proof chain” which is an (ever growing) slimmed down version of the blockchain.
  • Lightning Network, an alternative protocol for transaction clearance in which knots set up micropayment channels inbetween each other and lodge up on the block chain periodically. Ordinary users interact primarily or only with payment channels and only use the blockchain for large transfers and cold storage.

Scalability – Bitcoin Wiki

Scalability

[Note: This page is gravely outdated and largely unmaintained; due to past incidents of edit-warring it has not been subject to much peer review.]

A Bitcoin utter knot could be modified to scale to much higher transaction rates than are seen today, assuming that said knot is running on a high end servers rather than a desktop. Bitcoin was designed to support lightweight clients that only process puny parts of the block chain (see simplified payment verification below for more details on this).

Please note that this page exists to give calculations about the scalability of a Bitcoin total knot and transactions on the block chain without regards to network security and decentralization. It is not intended to discuss the scalability of alternative protocols or attempt and summarise philosophical debates. Create alternative pages if you want to do that.

Contents

Note to Readers

When techies hear about how bitcoin works they frequently stop at the word “flooding” and say “Oh-my-god! that can’t scale!”. The purpose of this article is to take an extreme example, the peak transaction rate of Visa, and display that bitcoin could technically reach that kind of rate without any kind of questionable reasoning, switches in the core design, or non-existent overlays. As such, it’s merely an extreme example— not a plan for how bitcoin will grow to address broader needs (as a decentralized system it is the bitcoin using public who will determine how bitcoin grows)— it’s just an argument that shows that bitcoin’s core design can scale much better than an intelligent person might guess at very first.

Dan rightly criticizes the analysis introduced here— pointing out that operating at this scale would significantly reduce the decentralized nature of bitcoin: If you have to have many terabytes of disk space to run a “total validating” knot then fewer people will do it, and everyone who doesn’t will have to trust the ones who do to be fair. Dan emerges (from his slips) to have gone too far with that argument: he seems to suggest that this means bitcoins will be managed by the kind of central banks that are common today. His analysis fails for two reasons (and the 2nd is the fault of this page being a bit misleading):

Very first, even at the astronomic scale introduced here the required capacity is well within the area of (wealthy) private individuals, and certainly would be at some future time when that kind of capacity was required. A system which puts private individuals, or at least puny groups of private parties, on equal footing with central banks could hardly be called a centralized one, tho’ it would be less decentralized than the bitcoin we have today. The system could also not get to this kind of scale without bitcoin users agreeing collectively to increase the maximum block size, so it’s not an outcome that can happen without the consent of bitcoin users.

2nd, and most importantly, the assumed scaling described here deals with Bitcoin substituting visa. This is a poor comparison because bitcoin alone is not a ideal replacement for visa for reasons downright unrelated to scaling: Bitcoin does not suggest instant transactions, credit, or various anti-fraud mechanisms (which some people want, even if not everyone does), for example. Bitcoin is a more accomplish replacement for checks, wire transfers, money orders, gold coins, CDs, savings accounts, etc. and if widely adopted very likely substitute the uses of credit cards which would be better served by these other things if they worked better online.

Bitcoin users sometimes gloss over this fact too quickly because people are too quick to call it a flaw but this is unfair. No one system is ideal for all usage and Bitcoin has a broader spectrum of qualities than most monetary instruments. If the bitcoin community isn’t willing to point out some things would better be done by other systems then it becomes effortless to make strawman arguments: If we admit that bitcoin could be used as a floor paraffin wax and desert topping, someone will always point out that it’s not the best floorwax or best desert topping.

It’s trivial to build payment processing and credit systems _on top_ of bitcoin, both classic ones (like Visa itself!) as well as decentralized ones like Ripple. These systems could treat higher transaction volumes with lower costs, and lodge frequently to the bitcoin that backs them. These could use other mechanisms with different tradeoffs than bitcoin, but still be backed and denominated by bitcoin so still love its lack of central control. We see the beginnings of this today with bitcoin exchange and wallet services permitting instant payments inbetween members.

These services would build up the benefit of the stable inflation resistant bitcoin currency, users would build up the benefits of instant transactions, credit, and anti-fraud, bitcoin overall would love improved scaling from offloaded transaction volume without compromising its decentralized nature. In a world where bitcoin was widely used payment processing systems would very likely have lower prices because they would need to contest with raw-bitcoin transactions, they also could be afford lower price because frequent bitcoin lodging (and zero trust bitcoin escrow transactions) would reduce their risk. This is doubly true because bitcoin could conceivably scale to substitute them entirely, even if that wouldn’t be the best idea due to the resulting reduction in decentralization.

Scalability targets

VISA treats on average around Two,000 transactions per 2nd (tps), so call it a daily peak rate of Four,000 tps. It has a peak capacity of around 56,000 transactions per 2nd, [1] however they never actually use more than about a third of this even during peak shopping periods. [Two]

PayPal, in contrast, treated around ten million transactions per day for an average of one hundred fifteen tps in late 2014. [Trio]

Let’s take Four,000 tps as embarking objective. Obviously if we want Bitcoin to scale to all economic transactions worldwide, including cash, it’d be a lot higher than that, perhaps more in the region of a few hundred thousand tps. And the need to be able to withstand DoS attacks (which VISA does not have to deal with) implies we would want to scale far beyond the standard peak rates. Still, picking a target let us do some basic calculations even if it’s a little arbitrary.

Today the Bitcoin network is restricted to a sustained rate of seven tps due to the bitcoin protocol restricting block sizes to 1MB.

The protocol has two parts. Knots send “inv” messages to other knots telling them they have a fresh transaction. If the receiving knot doesn’t have that transaction it requests it with a getdata.

The big cost is the crypto and block chain lookups involved with verifying the transaction. Verifying a transaction means some hashing and some ECDSA signature verifications. RIPEMD-160 runs at one hundred six megabytes/sec (call it one hundred for plainness) and SHA256 is about the same. So hashing one megabyte should take around ten milliseconds and hashing one kilobyte would take 0.01 milliseconds – swift enough that we can disregard it.

Bitcoin is presently able (with a duo of plain optimizations that are prototyped but not merged yet) to perform around eight thousand signature verifications per 2nd on an quad core Intel Core i7-2670QM Two.2Ghz processor. The average number of inputs per transaction is around Two, so we must halve the rate. This means four thousand tps is lightly achievable CPU-wise with a single fairly mainstream CPU.

As we can see, this means as long as Bitcoin knots are permitted to max out at least four cores of the machines they run on, we will not run out of CPU capacity for signature checking unless Bitcoin is treating one hundred times as much traffic as PayPal. As of late two thousand fifteen the network is treating 1.Five transactions/2nd, so even assuming enormous growth in popularity we will not reach this level for a long time.

Of course Bitcoin does other things beyond signature checking, most obviously, managing the database. We use LevelDB which does the bulk of the intense lifting on a separate thread, and is capable of very high read/write fountains. Overall Bitcoin’s CPU usage is predominated by ECDSA.

Network

Let’s assume an average rate of 2000tps, so just VISA. Transactions vary in size from about 0.Two kilobytes to over one kilobyte, but it’s averaging half a kilobyte today.

That means that you need to keep up with around eight megabits/2nd of transaction data (2000tps * five hundred twelve bytes) / one thousand twenty four bytes in a kilobyte / one thousand twenty four kilobytes in a megabyte = 0.97 megabytes per 2nd * eight = 7.8 megabits/2nd.

This sort of bandwidth is already common for even residential connections today, and is certainly at the low end of what colocation providers would expect to provide you with.

When blocks are solved, the current protocol will send the transactions again, even if a peer has already seen it at broadcast time. Fixing this to make blocks just list of hashes would resolve the issue and make the bandwidth needed for block broadcast negligable. So whilst this optimization isn’t fully implemented today, we do not consider block transmission bandwidth here.

Storage

At very high transaction rates each block can be over half a gigabyte in size.

It is not required for most fully validating knots to store the entire chain. In Satoshi’s paper he describes “pruning”, a way to delete unnecessary data about transactions that are fully spent. This reduces the amount of data that is needed for a fully validating knot to be only the size of the current unspent output size, plus some extra data that is needed to treat re-orgs. As of October two thousand twelve (block 203258) there have been 7,979,231 transactions, however the size of the unspent output set is less than 100MiB, which is petite enough to lightly fit in RAM for even fairly old computers.

Only a puny number of archival knots need to store the utter chain going back to the genesis block. These knots can be used to bootstrap fresh fully validating knots from scrape but are otherwise unnecessary.

The primary limiting factor in Bitcoin’s spectacle is disk seeks once the unspent transaction output set stops fitting in memory. Once hard disks are phased out in favour of SSDs, it is fairly possible that access to the UTXO set never becomes a serious bottleneck.

Optimizations

The description above applies to the current software with only minor optimizations assumed (the type that can and have been done by one man in a few weeks).

However there is potential for even greater optimizations to be made in future, at the cost of some extra complexity.

Algorithms exist to accelerate batch verification over elliptic curve signatures. It’s possible to check their signatures at the same time for a 2x speedup. This is a somewhat more elaborate implementation.

Simplified payment verification

It’s possible to build a Bitcoin implementation that does not verify everything, but instead relies on either connecting to a trusted knot, or puts its faith in high difficulty as a proxy for proof of validity. bitcoinj is an implementation of this mode.

In Simplified Payment Verification (SPV) mode, named after the section of Satoshi’s paper that describes it, clients connect to an arbitrary total knot and download only the block headers. They verify the chain headers connect together correctly and that the difficulty is high enough. They then request transactions matching particular patterns from the remote knot (ie, payments to your addresses), which provides copies of those transactions along with a Merkle branch linking them to the block in which they appeared. This exploits the Merkle tree structure to permit proof of inclusion without needing the utter contents of the block.

As a further optimization, block headers that are buried adequately deep can be thrown away after some time (eg. you only indeed need to store as low as two thousand sixteen headers).

The level of difficulty required to obtain confidence the remote knot is not feeding you fictional transactions depends on your threat model. If you are connecting to a knot that is known to be reliable, the difficulty doesn’t matter. If you want to pick a random knot, the cost for an attacker to mine a block sequence containing a bogus transaction should be higher than the value to be obtained by defrauding you. By switching how deeply buried the block must be, you can trade off confirmation time vs cost of an attack.

Programs implementing this treatment can have stationary storage/network overhead in the null case of no usage, and resource usage proportional to received/sent transactions.

Related work

There are a few proposals for optimizing Bitcoin’s scalability. Some of these require an alt-chain / hard fork.

  • Ultimate blockchain compression – the idea that the blockchain can be compressed to achieve “trust-free lite knots”
  • The Finite Blockchain paper that describes splitting the blockchain into three data structures, each better suited for its purpose. The three data structures are a finite blockchain (keep N blocks into the past), an “account tree” which keeps account balance for every address with a non-zero balance, and a “proof chain” which is an (ever growing) slimmed down version of the blockchain.
  • Lightning Network, an alternative protocol for transaction clearance in which knots set up micropayment channels inbetween each other and lodge up on the block chain from time to time. Ordinary users interact primarily or only with payment channels and only use the blockchain for large transfers and cold storage.

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