Monthly Archives: December 2016

Bitcoin

BigSon and I went to recent Hackathon at the University of Bedfordshire. It was a well organised event to showcase the new IBM LinuxOne which is a blockchain computational platform. We came away from that event enthused about the idea of blockchains and the most famous application to date, Bitcoin. Below is his write up on the cryptocurrency after reading Mastering Bitcoin by .

What is Bitcoin

Bitcoin is a digital currency that is decentralised (no governing body) that is built upon the blockchain and uses a proof of work system called mining. Bitcoin can be used to buy anything from anyone that has a Bitcoin wallet and address. There is a set number of Bitcoins that will ever be in circulation (about 21 million) that is embedded in the software so it can never be exceeded.

History of Bitcoin

The idea for Bitcoin came from an unknown person by the name of Satoshi Nakamoto (not real name). He posted the idea on a popular digital currency blog. It was launched in 2009 and became very popular partly thanks to the bank crisis. The largest Bitcoin transaction ever was worth 150 million dollars.

Getting Started

To get a Bitcoin wallet you must download an application from the Bitcoin website and install it. There are different Bitcoin wallets, the main ones are phone and desktop wallet. Phone wallets are for small transactions and do not contain the full blockchain and for purchases using small amounts of money. Desktop wallets usually contain the full blockchain and can process small and large payments. They are safer to use. To get your first Bitcoin you can get some from a friend or buy some from a Bitcoin coin seller.

Bitcoin Transactions

Bitcoin transactions are made through the internet on a peer-to-peer system, which means that there are no middle men. The payment is made to the address of the receiver. After the payment is made it is put in unconfirmed transaction pool. The privacy of both participants is kept by encrypting their address and keys. The smallest possible payment is 1 Satoshi (1 millionth of a Bitcoin). It is impossible to get a smaller transaction because it is the smallest Bitcoin unit.

Bitcoin Mining

Bitcoin mining is an essential part of Bitcoin; it is a way of verifying transactions by putting them in blocks and then into the blockchain. To mine Bitcoin you need a powerful mining computing device like ASICS. The device first groups all the transactions possible into the new candidate block. The first transaction it puts in is the miner’s reward which is about 12.5 Bitcoin in 2016. It will then put in the most important transactions determined by how old and how much is the transaction. After it has made the candidate block it must find a hash that is lower than the target, the set of numbers that identifies the block. If it finds the right hash it will post the block to the network and all the nodes (wallets) will verify it and it will become a valid block. After it is verified the nodes will add it to their blockchain, if it is invalid it will be rejected and the network will wait for a valid block to arrive.

Bitcoin Blocks

Bitcoin blocks contain a list of transactions that were processed through the network. Once the transaction has been made the money is sent to the receiver but it is not confirmed. It is confirmed when the transaction is put in a block that is then verified. For large transactions, it is advised to wait for at least 6 blocks to be confirmed before considering your transaction valid. For very large transactions you should wait at least a day before considering it valid.

Blockchain

The blockchain is a public ledger in Bitcoin that keeps all the transactions ever made. The transactions are kept in blocks that are kept in chronological order. The blockchain goes back all the way to the first ever Bitcoin transaction, the Genesis block created by Satoshi Nakamoto. Inside the Genesis block there are no transactions but an encrypted message from Satoshi Nakamoto “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. Satoshi Nakamoto put this text in the place of the transactions that usually contains the miners reward. Blockchain is not unique to Bitcoin, it is used in other currencies and applications.

Bitcoin security

Security in Bitcoin is kept by encrypting the user keys and addresses. Security is also kept because there is no central bank or government at the centre keeping all the users’ money.  A government or bank is a point of failure because all the money is in one place which makes it easy to steal. With Bitcoin, the user’s Bitcoins are kept in their wallet with a public ledger of all the transactions ever made. This makes it harder for hackers to steal the money, because they would need to hack individual accounts which is not always fruitful. The way a user keeps the keys to their account is by keeping them in cold storage (see below) or online hardware wallets, data files. Hardware wallets are tamper proof and are a relatively safe way of keeping your Bitcoins and keys. Data files are not the best way to keep Bitcoin keys because they can be lost in computer crashes and full reboots and never be recovered. Cold storage is keeping your encrypted Bitcoin keys on pieces of paper in a safe or hidden place. Cold storage is one of the safest ways of keeping your Bitcoin keys.

There are two different types of Bitcoin keys: private keys and public keys. Private keys are kept in cold storage and are only kept by the wallet owner. Private keys are usually encrypted for safety and then put on cold storage. Public keys are derived from the encrypted versions of private keys. The public key is generated by encrypting the encrypted private key again. The public key is what is visible to all users of Bitcoin and is what the money is sent to.

Because we are newbies to this technologies and are willing to learn as much as we can about it, we are happy to take comments on what is written above. We welcome corrections and also questions which will guide our learning.

Thanks for reading and again, feel free to comment.

It’s been a while…

It’s been a while since the last post and the blog has been silent. We were away in France and intentionally offline. It was very exhilarating and enjoyable to recap on time together, time alone without a white noise, book time and wonderful walks along the Cote Sauvage. Or simply watching sea and boats disappearing over the horizon.

We did discover a few good things in France again. We fell in love with Sel de Guerande and rock hopping. The ferocious sea breeze can be sometimes too mind blowing.

On the return home, we embarked on the house renovations. There was an excitement followed by disruption, dust biting and some inconveniences on the top of sometimes quite stressful moments. The end result as usual was not as perfect as envisaged, but it was a learning curve for us and we are not as idealistic about all the process anymore. One more thing was discovered: builders and internet abundance are not often compatible. Their catalogue from the builders’ supply shop hardly matches Amazon even. Gratefully, we are nearly finished and getting back to so called normal family life, but what’s normal here?!

As the world goes more crazy/beautiful everyday, it has been a challenging but so far a good year. I enjoy the ride so should you.

Here’s the photo diary of what was keeping us busy. Enjoy:

Big Son about to glide

Big Son about to glide

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Mother and Children on OUR rocks!

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View for Morning Coffee

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Bird’s eye view of Batz sue Mar.

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Another glorious sunset

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Decent crop of strawberries and Alpine strawberries

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Petworth Festival Walk through cornfields

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Lavender Farm Hertfordshire

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Morning Ritual

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HDTV

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Our rock garden

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Pepe the Hermit Crab

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Down at the beach

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Every colour story

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Sun going down

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About to board