Book Review: Mastering Bitcoin

Mastering Bitcoin: Unlocking Digital Cryptocurrencies

By: Andreas M. Antonopoulos

Published: O’Reilly Media Inc. ©2015

ISBN: 978-1-449-37404-4

 

Review:  Andreas Antonopoulos quickly goes through the history of cryptocurrencies before Bitcoin was created and shows how the creation of bitcoin was really, like so many other technological advances, an inevitability in the cryptology and computing world.  He then gives us six different scenarios which will be covered though out the book, such as how to buy a cup of coffee using bitcoin, or how to mine bitcoin, and what happens behind the scenes when we do these activities.

Andreas next goes over the key differences between a bitcoin address, a public key, and a private key, as well as the mathematics involved in creating them, showing how secure the private key is through this form of mathematics.  The bitcoin address is used to know where the bitcoins are going to, and the public and private keys are used to validate the transactions.

Next, Mr. Antonopoulos goes into detail about the bitcoin transaction process, starting with how the transaction is first created and then broadcast and propagated in the bitcoin network.  I was surprised to find out that “in extreme cases, a bitcoin transaction could be transmitted over packet radio, satellite relay, or short wave using burst transmissions, spread spectrum, or frequency hopping to evade detection and jamming.  A bitcoin could even be encoded as smileys (emoticons) and posted in a public forum, or sent as a text message, or skype….” (page 112)  I think this proves how versatile and unstoppable bitcoin really is.

Once the transaction makes it to a bitcoin node, (for example a bitcoin wallet) it will immediately propagate itself to all the other bitcoin nodes.  Transaction outputs are calculated first, and then Inputs.  Transaction fees are usually taken out automatically unless you are in terminal, and are given to the miners for processing the transactions.

The peer-to-peer Network Architecture which Bitcoin and other cryptocurrencies use, makes every node equal, creating a truly decentralized form of currency.  There are four different types of nodes:

• Wallet
• Miner
• Full Blockchain
• Network Routing

All nodes at the very least serve as Network Routing nodes.

Andreas now goes into more detail about the blockchain and mining.  Since I, myself am a miner, this was of particular interest to me.  Plus, since I also believe that mining promotes freedom when it comes to any kind of money, I think this section of the book is very important!

Structure of a block:  A block is composed of four things:

• Block size
• Blockheader
• Transaction Counter (how many transactions follow)
• Transactions

The block header contains the following:

• Version
• Previous Block hash
• Merkle Root (hash of the root of the Merkle tree of this block’s transactions)
• Timestamp
• Difficulty Target (Proof-of-work algorithm difficulty target for this block).
• Nonce (a counter used for the proof-of-work algorithm)

Miners are responsible for processing bitcoin transactions and protecting the system from fraudulent transactions, as well as double-spend transactions, and in return are paid bitcoin for their efforts.  A block is mined roughly every 10 minutes.  Miners earn bitcoin in 2 ways:

1. New coins created with each block
2. Transaction fees from all the transactions in the block.

Every four years the amount of bitcoin gained by a block added to the blockchain is halved.  So, in Jan. 2009 when bitcoin was first mined, you could get 50 bitcoins per block.  Now, in 2016 it is down to about 12.5 bitcoins per block.  So, by the year 2140, miners will no longer be receiving new bitcoins, but will only be rewarded by transaction fees.

With bitcoin being completely decentralized, the real question is how can the network decide the global consensus of the ledger?  There are four processes which allow it to do so, called Emergent Consensus:

• Independent verification of each transaction
• Independent aggregation of those transactions into new blocks
• Independent verification of the new blocks
• Independent selection of the chain with the most cumulative computation demonstrated through proof-of-work

Blockchain forks are often created when miners all over the world are mining for the blockchain.  These forks become “children” of the “parent” block.  Whoever builds the longer blockchain first, wins as to which block “child” is used as part of the blockchain ledger.  The other  which might have  had other transactions in it, is automatically discarded and then those extra transactions can be used potentially in the next block.

Andreas also goes through possible ways the bitcoin blockchain could be attacked through consensus attacks.  Next, he goes over a number of different altcoins (cryptocurrencies other than bitcoin).  There are over 500 different altcoins!  Some of them are listed HERE.

Bitcoin security is obviously very important, and programmers are always trying to catch up to the hackers.  Some ways you can secure your bitcoin are make a copy (or back up) of your Bitcoin Wallet, use a paper Bitcoin wallet, use a Hardware Wallet, use more than one wallet, or even different kinds of wallets so that you “don’t have all your eggs in one basket”, as they say.

Opinion: There is a lot of technical detail in this book, and since my own background is in business and accounting, not computer programming, this book did not really align with what my own interests about bitcoin are in, however for the avid computer programmer, this book would be an excellent read.  Skimming over the technical details, I did learn a lot about how bitcoin is created, how it is transferred, and even the different choices of bitcoin clients, among many other things, which will help me in the future I am sure.  Other than the fact that some of the Figures I believe were supposed to be in color and it was hard to follow them as a reference in the book because of them being in black and white, this was an excellent book which I would recommend any one who is serious about learning bitcoin to read.

KeepKey

Bitcoin and other Cryptocurrencies are generally pretty secure.  However, there has been theft of Bitcoins in the past, which is partially why other cryptocurrencies were created shortly after the first time Bitcoins were stolen, allegedly from China.  Litecoin was created, and then shortly after that a huge array of other more minor cryptocurrencies were made.

Bitcoin has been revised since then to make it more secure, however many people who enjoy hacking have learned these new changes and often times can still hack into cryptocurrencies.

Since then, those who want to keep bitcoin safe, have been trying to create a better way to keep your Bitcoin safe.  And one of those amazing ways is through hardware devices called hardware wallets.  KeepKey is one of the most secure hardware wallets.  How does it work?  It has NO operating system, so the usual method that most hackers use to crack open the bitcoin wallet do not work.

KeepKey, works on any operating system including Linux, Mac OS, and Windows.  KeepKey also works for Testnet, Litecoin, Namecoin, Dogecoin, and Dash.

The Mystery of Satoshi Nakamoto Solved, Or is it?

It appears the mystery of who Satoshi Nakamoto is has been solved!  This is incredibly exciting, and might be the reason behind the recent rise in the value of the Bitcoin.

So, who was it who created possibly the greatest form of currency ever?  It was actually a collaboration of two people, Craig Steven Wright, an Austrailian Businessman, and Dave Kleiman an American Computer forensics expert, who unfortunately died in 2013.

Dave Kleiman unfortunately died an awful death, he was a U.S. Army Veteran who was wounded in a motorcycle accident, so he was in a wheelchair and had bedsores all over.  When they found him, he had several bottles of alcohol around him and a gun.  But in e-mails to Mr. Wright, he said he “Craig, I think you’re mad and this is risky, but I believe in what we are trying to do.”

Getting back to Mr. Craig Wright, after a hacker found some information out about who it might be, they brought that information to the site, Gizmoto’s attention, where they began a month-long investigation to verify this info.  This hacker apparently also WORKED for “Satoshi Nakamoto”.  What they found was either very good information, or a highly sophisticated hoax.  Either way, it is quite interesting.

Gizmoto had been working on finding out the identity of Satoshi Nakamoto before this hacker sent this information to them, and seemed to be working along parallel lines.  However, Gizmoto workers had been looking at more personal contacts and meetings between different companies.  The e-mail which the hacker found were more internal, as well as projects which had been worked on, Linkedin posts and other similar things which put many of the pieces of the puzzle together.

If there is one thing about Mr. Craig Wright, it is that he almost practically brags about his capabilities in “solving problems”, such as this quote from his business, Panopticrypt’s website:

“I will make a solution to problems you have not even thought of and I will do it without YOUR or any state’s permission! I will create things that make your ideas fail as I will not refuse to stop producing. I will not live off or accept welfare and I will not offer you violence. You will have to use violence against me to make me stop however.”

It also mentions that Mr. Write has been involved in Bitcoin since 2009.*1  But wait!  Bitcoin was ACTUALLY invented in 2008.  It didn’t become public until 2009.  Plus, even while Bitcoin was being created, and not public yet, it was being worked on by more people than just Satoshi Nakamoto in forums and other places.

Something smells fishy here.

And, in fact it is fishy indeed.  I found some more information on this, what was supposedly real information… it appears that the e-mails found were back-dated.  Not only that, but the original PGP key was not found.  The key which Satoshi Nakamoto used is well known through out the Bitcoin community, especially among those who had direct e-mail contact with Satoshi, and can be found here:  Motherboard website.

As you can see from the Motherboard Website, the PGP encryption used by the hackers to link to Satoshi Nakamoto, is ahead of the time from when Satoshi would have actually used it.  Satoshi would have used DSA-1024 encryption in those days, and RSA-3072 encryption was used, something that back in 2008 would not have even existed yet.

Likewise, one of the e-mails supposedly used by Satoshi was hacked, and the other was a new one which appeared to be similar, but not identical to the one used on some of the forums. *2

So, now it seems we are all back to square one.  Who is(are) Satoshi Nakamoto, it seems to be the greatest mystery of our time.  But, does it really matter if we find out who he (they) really are?  Probably not, and in some ways, it might be better he is completely unknown.  If he remains unknown, well, then you can’t destroy the source so-to-speak.  However, I think Bitcoin and of course cryptocurrencies in general have taken on a life of their own sufficiently, that it really would not matter if Satoshi’s true identity is revealed or not.

What do you think?  Leave a comment if you like.

 

*1. Most of this information was found at the Gizmoto website in this article.

*2. Most of the information debunking the fact that Craig Wright is Satoshi Nakamoto was found at the Motherboard Website.

Bitcoin Faucets

On your way up to using Bitcoins, there are some free ways to earn bitcoin.  Now, these won’t make you a lot of bitcoin, but it will help, especially if you are also mining bitcoin on the side.  I only am currently using 4 different faucets, but there are many more out there.

One of the largest ones out there is called Bitvisitor.  It allows you to view ads for about 5 minutes at a time, and at the end you get bitcoins.  Once you’ve collected 60 bits worth, you can cash out.

Another one I use is Coinadder.  This one allows you to cash out once you’ve reached 7500 Satoshi.  However, expect to receive it a bit late, since they use an intermediary company for their transactions.

I really love using Satoshi City.  Although you have to wait 10 minutes for each ad, you get an automatic cash out at about 10000 Satoshi, which usually shows up in your bitcoin wallet in about 24 hours from cash out.

The forth bitcoin faucet I have just started using.  It is great because you can do much more than just bitcoin.  They have just about any crypto-currency you can imagine.  It is called CryptoSpout. If you want to collect all of these coins into one place, there is a great crypto-currency wallet out there which allows you to not only collect many different crypto-currencies, but also allows you to trade between them with ease, called coinomi. This link goes to a GitHub download.

We hope this gets you started in your Bitcoin earnings.  Remember having even a little bitcoin is better than none at all!  Sometimes it can seem like it will take forever to gather enough bitcoins to make a real difference, but remember this is an investment, and like all investments, they take time to grow.

The Culture of Bitcoins

Perhaps it might seem odd to look at the Bitcoin, or crypto-currencies in general, as having a culture, but in my looking around and learning about Bitcoins, I have found that there is one definite quality about people who love, and promote Bitcoin, and that is; freedom and free-thinking types of individuals are drawn to Bitcoins.

People who are drawn to Bitcoins, seem to love new ideas, and are not afraid of entrepreneurship.  They love new projects and feel that Bitcoins (and all crypto-currencies) are an amazing idea and tool to use as an alternative to regular currency.  What Satoshi Nakamoto created probably could not have been created any better.  Its’ brilliance was in limiting the amount of coins which can be mined (making it like mining real gold, which is also limited on this earth), as well as, forcing the program’s algorithms to increase in complexity over time (to allow for both better technology to be created, as well as more and more people who would begin mining).

Another great thing which Satoshi Nakamoto did is to allow the code for Bitcoins to be open source.  This way anyone can improve upon the code, as well as allow others to create new crypto-currencies by using the original code as a template to work off of.  This is how so many wonderful crypto-currencies have been created, and it is my hope that the crypo-currency culture will continue to expand for a very long time!

With this creative and innovative currency, came creative and innovative people.  It is very easy to see why free-thinkers would be attracted to crypto-currencies in my opinion.  Thinking outside of the box, and dreaming of a better world is where it is at for crypto-currencies.

Are you a free thinker?  Would you like to learn or participate more in Bitcoin mining?  Let us know!

Gold Pressed Latinum Versus Bitcoin

I wanted to do a fun post about Bitcoin.  Yes, this is a post purely for fun… no seriousness today.  I thought people might enjoy it.  We will be comparing Bitcoin values to other non-existent currencies mostly found in Science Fiction movies and series like Star Trek and Star Wars.

According to sources, 1 bar of gold pressed latinum = $1,000.00.  If this is true, then 1 bar of gold pressed latinum is equal to about 2.48 Bitcoins.  Gold pressed latinum of course is the Ferengi’s preferred form of monetary exchange.

One Federation Credit is assumed to be equal to 1 USD.  Therefore, one Federation Credit is equal to about 0.00236 Bitcoins.

The Klingon Darsek is equal to about 5 Federation Credits =  $5 USD.  Therefore, one Klingon Darsek is about 0.0131933 Bitcoins.

The Romulan T’chak is equal to about 17 Federation Credits = $17 USD.  Therefore, one Romulan T’chak is about 0.044656 Bitcoins.

The Bajoran Lita is equal to about 1.5 Federation Credits = $1.50 USD.  Therefore, one Bajoran Lita is about 0.003940 Bitcoins.

The Cardassian Lek is equal to about 1.7 Federation Credits = $1.70 USD.  Therefore, one Cardassian Lek is about 0.0044657 Bitcoins.

One Galactic Standard Credit from Star Wars is approximately equal to $0.50 USD.  Therefore, one Galactic Standard Credit would be equal to about 0.00122549 Bitcoins.

Cubits from Battlestar Galactica are basically worthless since Starbuck is found just tearing them up because of their extremely low value.

One Solari from the Dune series is equal to about $1.95 USD.  Therefore, one Solari is equal to about 0.0047794 Bitcoins.

So, which currency would you use?  Seems to me, the best two to use are Gold pressed Latinum and Bitcoins because they have the most value. Sorry, we couldn’t fit every single Science Fiction Currency in here, but then the list would be quite extensive.

Bitcoin Leveling out Now

It appears that while there was a huge rally in the price of Bitcoin, it appears that it is coming back down now and levelling out.

While the bitcoin went to a high of $480.00 or so, it started out at only around $380.00.  Making a $100.00 jump in only about one month’s time.  This made Bitcoin supporters very excited of course, proving that Bitcoin had some serious value to many.  Unfortunately, it seems it was only a temporary rally, and Bitcoin has now come back down to around $393.00 as I write this.

So, some may wonder what happened?  Why such a rally and then back down so rapidly?  Some had proposed that China somehow was starting to move over to Bitcoin, and that this might have been responsible for the large jump.  However, it was found out that a well-known Russian pyramid schemer named Sergey Mavrodi, who created a new site called MMM forced it’s members to buy Bitcoins and invest them into the Pyramid scheme site.

Some might say that this gives Bitcoin a bad reputation, but we say that there are dozens of more sites out there doing this in US dollars or other “legitimate” currencies, and no one is saying that those currencies have a bad reputation.

What do you think?  Leave a comment below.

Satoshi Nakamoto

I thought it would be a good idea take a moment and go back to the beginning of Bitcoin.  One of the most interesting things about the beginning of Bitcoin is its creator, Satoshi Nakamoto.

Why is he so interesting?  Primarily because no one has ever been able to figure out exactly who he is!  He is a very illusive character.  They don’t even know for sure if the name represents one person, or a group of people who created the Bitcoin.

On his profile in P2P Foundation he listed himself as a 37 year old who lived in Japan.  However, some people speculated that he probably was not Japanese due to the fact that he spoke perfect English, and none of the bitcoin software had been done in Japanese, so this led many people back to square one, trying to figure out who Satoshi Nakamoto really was.

Satoshi Nakamoto was either a group of people, or a complete genius because no one could come up with the code for the Bitcoin by themselves, many thought, and there continued to be lots of speculation as to who he really was.  Another tip, which one of the people who had spoken to Satoshi more directly, said that the person often used British phrases like “Bloody hard”, according to wikipedia.

So, could it be true?  That our beloved Bitcoin actually came from a British man, rather than a Japanese man, as previously thought?  I’m not sure it really matters, but it does seem scandalous that a currency which has no physical substance was created by a person who is completely unknown.  Then again, maybe that’s the theme for Bitcoins, or maybe a great way to advertise them.

More recently, a man in California, who’s name happens to be Satoshi Nakamoto was interviewed, being asked if he had anything to do with Bitcoin and it’s creation.  He completely denied that he had anything to do with it.  So, Bitcoin lovers worldwide, are still on the search for the original Satoshi Nakamoto.

What do you think?  Who do you think he is?  Tell us below if you have any tidbits of information.

(Much of this information was taken from wikipedia by looking up Satoshi Nakamoto)

Legitimate Uses and Places to Use Bitcoins

Over the years, Bitcoin has gotten some negative attention.  This is largely due to a few factors, one of the largest being that many governments have not allowed Bitcoins and other cryptocurrencies to be viewed as legitimate, legal forms of tender.

This is similar to what happened during prohibition, alcohol, being illegal, created around it many other illegal activities.  The same is true today with the drug war.  Many believe that if drugs were made legal, many of the illegal activities surrounding drugs would be far, far less.

Bitcoin, being a completely online currency, and having no real physical coinage, makes it easy to hide in a sense.  Add to that the fact that once a transaction happens, that particular Bitcoin erases all traces of previous transactions, you have a perfectly secure piece of money, but also very hard to trace, making it a wonderful tool for the blackmarket.

Bitcoin is well known for being used on the Silk Road, an underground internet shopping place similar to Amazon, but for blackmarket uses.  Many everyday people might get marijuana and other “street drugs”, however it can also be used for more insidious things, I am sure.

However, it is important to note, Bitcoin can just as easily be used for completely legitimate reasons, which is actually what I wanted to write about today, because Bitcoin has often gotten a bad rap, if you will.  And I believe that is completely unfair to Bitcoin and other cryptocurrencies.

While the U.S. government is trying to legalize Bitcoins, there might still be still some illegal activities going on.  I mean lets face it, even though the U.S. dollar is legal tender, it is still used in a lot of illegal activities, so it is not surprising that the Bitcoin might be used in some also.  Even now, sometimes I see Bitcoins being used in places like gambling sites.

I wanted to show people though, some places which take Bitcoins are completely legitimate.  Some are just Mom and Pop stores even, which happen to enjoy using Bitcoin for transactions because they understand, like so many people are beginning to realize, that there is real value in Bitcoins.

The following are some good places where you can use Bitcoins:

• Overstock.com
• Virgin Galactic
• WordPress
• The Pirate Bay – Has a library of movies, TV shows, software, and music started accepting Bitcoins in April 2013. The site currently lets users donate to The Pirate Bay using Bitcoins.
• Reddit – Can buy Reddit gold using Bitcoins.
• Zynga – popular game playing site.
• Tesla – well known company for its inventions and electric cars.
• OkCupid – an online dating site which started accepting bitcoin in 2013.
• 4Chan.org – a site similar to Reddit.
• Namecheap – a domain name service site.
• EZTV – a popular TV show site.
• mega.co.nz – offers 50 GB of free storage space.  Started using bitcoin in Feb. 2013 for upgrades.
• Lumfile – Free cloud-based file server.  Citcoin since Dec. 2012.
• Etsy Vendors – 93 different Etsy vendors allow you to use Bitcoin.  Most often used by their coffee vendors.
• Pizza For Coins – Dominoes Pizza service which allows you to order your pizza online using bitcoins.
• Tigerdirect – electronics and computers business which allows you to use Bitcoins to order online.

As you can see, there are a lot of businesses, some very well known businesses which take Bitcoins currently, and even more, such as Paypal, and ebay which are currently considering using Bitcoins in the future.  This does not include of course simply investing in Bitcoins as a currency as I often suggest, which is another completely legitimate way to use them.

Picking the Right Mining Pool

Choosing the proper mining pool is not easy, especially because there are so many pools out there for bitcoin.

If you look on Bitcoinwiki, you will find a list of all of the current bitcoin mining pools here.  There are pools for mining Litecoin as well, but we will get into that on another blog.

As soon as you come to see all the pools it might make your head start to spin.  I mean how do you know which ones are the best?  Truth is, it is hard to tell, but I hope we can help you figure it out.

A lot of people have simply learned through trial and error, and if you have the time, and REALLY want to learn a lot about bitcoin and the mining process, you might want to do it the same way.  All the pools have advantages and disadvantages.  Below is a pie chart of all of the mining pools.

My recommendation is to not go for the large mining pools, especially if you are just beginning and have some small mines, because the likelihood of you getting any bitcoins out of a large mining pool is very small.  It is far better to go to a medium mining pool.  I have two favorites: Slush pool, and Bitminter pool.

Now that you have all this information, you might be wondering why you need a pool at all.  Well, it is true that technically you can mine by yourself, but, it is much, much easier to mine in a pool because you can pool everyone’s resources together and complete a “blockchain” more quickly that way.  So, basically, unless you have a lot of mines and computing power behind you, you really need a mining pool to help you out.  The following video shows you more about solo mining versus pool mining:

If you need any more information, let me know in the comments below.  Hope it was helpful!  Best of luck in your mining endeavours!