Foreverrising Blog

June 15, 2011

What is BitCoin and What is BitCoin Mining?

Filed under: Software — Tags: , , , , — foreverrising @ 9:38 pm

I tried to break it down to someone yesterday. It went like this: BitCoin is a digital Internet currency. Think of it as an counterfeit-proof electronic dollar which is not manipulated by a central authority such as the Federal Reserve. It’s a basis of trade for goods, just as any other currency. Value is based on scarcity, and new BitCoins are only minted at a predictable rate once a Block is solved…

The BitCoin currency is a peer-to-peer solution for the problems which are seen in any system of currency. Every BitCoin transaction is recorded in a public ledger, which is found at Block Explorer. Each transaction is hashed into a block, the specifics of which I don’t want to get into, but are explained in the original paper Bitcoin: A Peer-to-Peer Electronic Cash System by BitCoin creator Satoshi Nakamoto. After the solution to the block is found, it is replicated throughout the peer-to-peer network, and all transactions are then verified by the BitCoin client software, which I might add is open-source. Any attempts at forging a block are rejected by the network as invalid. It is by solving a block which rewards the solver with 50 BitCoins which further propagates the BitCoin economy.

Which brings me to mining. To solve the block, a value must be solved through mathematic computation of the block. I’m not a math guy, so I couldn’t functionally explain this part, except that there are more intelligent folks which set this up. So, we use our processor power to search for the solution. As the complexity of the solution has risen to adjust the fixed rate of BitCoin dispersal, a CPU is no longer sufficient to solve a block in a reasonable amount of time. At the time of this writing, the current difficulty factor is 567385. So, if your CPU could perform at a rate of 4,000,000 hashes per second, it would take you over 19 years to solve a block, not factoring in the eventual rise of the difficulty. This, we use accelerated parallel processing, which involves harnessing the computational power of a graphics processing unit, or GPU (Why?). It’s optimal to hash on AMD cards, which is explained here. So, if I use my computer to generate BitCoins (by further supporting the BitCoin economy by verifying transactions), I am Mining BitCoins.

Take a quick look a BitCoin Part 1, a brief look and its volatile history. I ran through a couple questions that typically come up in BitCoin for the Masses, cause everyone will ask how anonymous BitCoin actually is, or how exactly do bitcoins have any value.

June 14, 2011

Converting your BitCoins to US Dollars

Filed under: Software — Tags: , , , , , , — foreverrising @ 10:58 pm

So after mining for awhile and investing some money in hardware and electricity, I was eager to see the value of the BitCoin rise. After watching MtGox on BitCoin Charts for a long time, I thought it was time to see if selling BitCoins was more than smoke and mirrors.

I had signed up for a MtGox account and have been storing some BitCoins there which were set to sell at a given price. As prices kept rising in the latest rush to a high around 32 USD, I kept raising my asking price. Realizing I could sell a few BitCoins for more USD than normal, I decided to sell.

I then signed up for a Liberty Reserve account, for which I transferred the balance I had. I nervously awaited an e-mail alert for confirmation of the transfer. After about 16 hours I got the confirmation e-mail on my phone.

Still skeptical, I initiated a Western Union wire transfer at WM Center, and then logged into Liberty Reserve to transfer money to the fortify the wire transfer. An hour and a half later the wire was confirmed, and I went and picked it up at the gas station. I happily went forward with business as usual.

I think the primary thing to look at is the value of BitCoin: Does it have value in itself or does it store value to trade with? Will the value of the BitCoin elevate as the US dollar drops?

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