Category: #Crypto Anarchy

Smart Contracts by Nick Szabo-1994

Nick Szabo

A smart contract is a computerized transaction protocol that executes the terms of a contract. The general objectives of smart contract design are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement), minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitration and enforcement costs, and other transaction costs[1].

Some technologies that exist today can be considered as crude smart contracts, for example POS terminals and cards, EDI, and agoric allocation of public network bandwidth.

Digital cash protocols[2,3] are fine examples of smart contracts. They enable online payment while honoring the characteristics desired of paper cash: unforgeability, confidentiality, and divisibility.

When we take a second glance at digital cash protocols, considering them in the wider context of smart contract design, we see that these protocols can be used to implement a wide variety of electronic bearer securities, not just cash.

We also see that to implement a full customer-vendor transaction, we need more than just the digital cash protocol; we need a protocol that guarantees that product will be delivered if payment is made, and vice versa.

Current commercial systems use a wide variety of techniques to accomplish this, such as certified mail, face to face exchange, reliance on credit history and collection agencies to extend credit, etc.

Smart contracts have the potential to greatly reduce the fraud and enforcement costs of many commercial transactions. Digital cash protocols use several of the rich new building blocks coming out of the fields of cryptography and computer science.

Most of these components have not yet been widely exploited to facilitate contractual arrangements, but the potential is vast. These subprotocols include Byzantine agreement, symmetric and asymmetric encryption, digital signatures, blind signatures, cut & choose, bit commitment, multiparty secure computations, secret sharing, oblivious transfer, and multiparty secure computation. All of these except the first are described in [2,3].

The consequences of smart contract design on contract law and economics, and on strategic contract drafting, (and vice versa), have been little explored. As well, I suspect the possibilities for greatly reducing the transaction costs of executing some kinds of contracts, and the opportunities for creating new kinds of businesses and social institutions based on smart contracts, are vast but little explored.

The “cypherpunks”[4] have explored the political impact of some of the new protocol building blocks. The field of Electronic Data Interchange (EDI), in which elements of traditional business transactions (invoices, receipts, etc.) are exchanged electronically, sometimes including encryption and digital signature capabilities, can be viewed as a primitive forerunner to smart contracts. Indeed those business forms can provide good starting points and channel markers for smart contract designers.

One important task of smart contracts, that has been largely overlooked by traditional EDI, is communicating the semantics of the transaction to the parties involved.

There is ample opportunity in smart contracts for “smart fine print”: actions taken by the software hidden from a party to the transaction.

For example, grocery store POS machines don’t tell customers whether or not their names are being linked to their purchases in a database. The clerks don’t even know, and they’ve processed thousands of such transactions under their noses.

Thus, via hidden action of the software, the customer is giving away information they might consider valuable or confidential, but the contract has been drafted, and transaction has been designed, in such a way as to hide those important parts of that transaction from the customer.

To communicate transaction semantics well, we need good visual metaphors for the elements of the contract. These would hide the details of the protocol without surrendering control over the knowledge and execution of contract terms.

A primitive but good example is provided by the SecureMosiac software from CommerceNet. Encryption is shown by putting the document in an envelope, and a digital signature by affixing a seal onto the document or envelope. On the other hand, Mosaic servers log connections, and sometimes even transactions, without warning users — classic hidden actions.

Another area that might be considered in smart contract terms is synthetic assets[5]. These new securities are formed by combining securities (such as bonds) and derivatives (options and futures) in a wide variety of ways.

Very complex term structures for payments (ie, what payments get made when, the rate of interest, etc.) can now be built into standardized contracts and traded with low transaction costs, due to computerized analysis of these complex term structures.

Synthetic assets allow us to arbitrage the different term structures desired by different customers, and they allow us to construct contracts that mimic other contracts, minus certain liabilities.

As an example of the latter, synthetic assets have been constructed that mimic the returns of stocks in German companies, without requiring payment of the tax foreigners must pay to the German government for capital gains in German stocks.

It’s important to note that these synthetics do _not_ confer voting rights as do the originals. It might be possible to add smart contract protocols to transfer voting rights to the synthetic.

Of course, these protocols might have to be quite secure to withstand attacks from the third party jurisdiction, whose transaction cost (the tax) is being arbitraged away by the synthetic asset.

Finally, we can extend the concept of smart contracts to property. Smart property might be created by embedding smart contracts in physical objects. These embedded protocols would automatically give control of the keys for operating the property to the agent who rightfully owns that property, based on the terms of the contract.

For example, a car might be rendered inoperable unless the proper challenge-response protocol is completed with its rightful owner, preventing theft. If a loan was taken out to buy that car, and the owner failed to make payments, the smart contract could automatically invoke a lien, which returns control of the car keys to the bank. This smart lien might be much cheaper and more effective than a repo man.

Also needed is a protocol to provably remove the lien when the loan has been paid off, as well as hardship and operational exceptions. For example, it would be rude to revoke operation of the car while it’s doing 75 down the freeway.

Smart property may be a ways off, but digital cash and synthetic assets are here today, and more smart contract mechanisms are being designed. So far the design criteria important for automating contract execution have come from disparate fields like economics and cryptography, with little cross-communication: little awareness of the technology on the one hand, and little awareness of its best business uses other.

The idea of smart contracts is to recognize that these efforts are striving after common objectives, which converge on the concept of smart contracts.

Copyright (c) 1994 by Nick Szabo
permission to redistribute without alteration hereby granted

Redistributed with respect & admiration from:

https://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool2006/szabo.best.vwh.net/smart.contracts.html

Nick Szabo is so deeply ingrained in the modern digital currency landscape that 1/1000000000000th of an Ether is called a “szabo”.

Running bitcoin – Hal Finney

Wonder In Peace Bright Mind

Join Honorary Chair Fran Finney and the Running Bitcoin Challenge Committee as we honor legendary cypher punk, Hal Finney.

This is THE EVENT that combines Hal Finney’s love of running and Bitcoin and is raising funds and awareness to help defeat ALS, which ultimately claimed his life in 2014.

You are challenged to run (or walk, roll, or hike) the equivalent of a half marathon — cumulatively or all at once — by the end of January 10, 2023.

From wherever you are, spread the word about Bitcoin, participate in a healthy activity, feel good about doing your part to defeat ALS, and start the year off right

Hal Finney, one of the earliest bitcoin contributors, died eight years ago from complications of nervous system disease amyotrophic lateral sclerosis (ALS).

His spouse, Fran Finney, is now organizing a half marathon to raise funds for ALS research via bitcoin.

The “Running Bitcoin Challenge” is set to take place between Jan. 1 and Jan. 10. The timing of the occasion leads up to the anniversary of Hal Finney’s “Running bitcoin” tweet, in which Finney famously disclosed he was deploying a Bitcoin node.

There is no set location — participants can choose to join anywhere they wish. Players are encouraged to either run, walk, roll or hike the equivalent of a half marathon (Hal’s favorite distance) either in one go or over the entire 10-day period.

Donors contributing at least $100 will receive an official shirt with the half marathon’s logo, while the event’s top 25 fundraisers will get a Hal Finney collectible signed by his wife.

As of Wednesday morning, the event has already managed to secure nearly $10,000 in bitcoin donations.

An advocate of cryptography and digital privacy, Finney was the recipient of the first-ever bitcoin transfer from the network’s pseudonymous creator Satoshi Nakamoto.

The bitcoin community often suspected Finney was Nakamoto, a claim he consistently denied. He reportedly found out about his condition in 2009 and decided to move away from the project.

Hal’s name is high in the Bitcoin pantheon as one of the first people to voice support for Satoshi Nakamoto’s invention and for being the first person to receive a Bitcoin transaction from Satoshi.

He was, for a time, considered one of the top contenders on the list of potential Satoshis himself (many in blockchain who reject Dr. Craig Wright’s statements still falsely believe Finney to be Bitcoin’s real creator).

Hal, who referred to himself as a “cypherpunk,” was a cryptographic activist who went from developing video games to working on the Pretty Good Privacy (PGP) project in the 1990s. He described his PGP work as “dedicated to the goal of making Big Brother obsolete.”

PGP creator Phil Zimmerman hired Hal as his first employee when PGP became PGP Corporation in the early 2000s. He described Hal as a “gregarious man” who loved skiing and long-distance running.

Despite gradual paralysis that eventually forced him to stop working, Hal continued to code software and follow the Bitcoin project.

Almost as famous as his 2009 tweet is his “Bitcoin and me” post on BitcoinTalk.org in March 2013, the last he’d ever make.

It’s a long post, and Hal was “essentially paralyzed” at the time, using an eye tracker to type. Forum stats show the post has been read over 278,000 times.

“When Satoshi announced the first release of the software, I grabbed it right away,” he wrote. “I think I was the first person besides Satoshi to run bitcoin. I mined block 70-something, and I was the recipient of the first bitcoin transaction when Satoshi sent ten coins to me as a test.

I carried on an email conversation with Satoshi over the next few days, mostly me reporting bugs and him fixing them.”

Hal himself always denied being Satoshi Nakamoto, adding later that he’d sold most of the Bitcoins he mined (at pre-2014 prices) to pay for his treatments. He also mentioned putting some in a safe deposit box for his children.

“And, of course, the price gyrations of bitcoins are entertaining to me.

I have skin in the game.

But I came by my bitcoins through luck, with little credit to me.

I lived through the crash of 2011.

So I’ve seen it before.

Easy come, easy go.”

Hal Finney
www.runningbitcoin.us
Admiration and great Respect
With 🧡

Happy New Year 2023

Only One Wish for 2023

Computer Dude Inc.

So – You want to be a Computer Dude?

The word / expression “Dude” is not a reference to being male, female, or whatever, it is a designation of “Skill Level.”

When we go surfing – anyone rated “Dude” just means they have the skill to surf safely, do stunts; and did not have to be watched by
the others for group safety.. :)Todd


This is what a “Computer Dude” needs to know to work with one of my companies.in 2023.

Dude Basic Skills – 2023

  • Can you setup a Single Board Computer (SBC), such as the Raspberry Pi 4B (RPI), to boot off USB 3.1 or faster?
  • Can you setup a RPI to run in 64 Bit Mode?
  • Can you setup a RAMDISK on the RPI to run the OS?
  • Can you setup a RPI as an Apache Web Host?
  • Can you setup an MySQL or other SQL database on a RPI?
  • Can you setup a basic HTML only Website?
  • Can you convert a CSV document to an SQL Database and back again?

Computer Dude Advanced Skills:

  • Can you cluster RPI’s?
  • Can you load VMware ESXi on a RPI, AMD or INTEL chipsets?
  • Can you P2V and run Linux Virtual Machines – Workstation and Server on a RPI VMware Sphere?

Computer Dudes Jedi level skills:

  • Can you identify the chipsets and overclock an RPI or change its functions?
  • Can you run Aircrack and John the Ripper on RPI? In cluster mode with RPI? Custom rules and Dictionary?
  • Can you virtualize Droid and Mac operating systems?
  • Can you setup an RPI as a Router or Virtual Router Cluster?
  • Can you encrypt data from an HTML or other Web Form before it leaves the workstation and before it enters the database?

Computer Dudes Yoda level skills:

  • Can you build and manage a large VMware Sphere with active routing and active scanning VMware bots and servers?
  • Can your servers automatically respond to an attack?
  • Can you create or work with encryption that is non-standard and to higher quality and security than a current computer encryption no matter what the OS?
  • Can you do all of the above on an Intel Chipset using Microsoft Virtualization and HyperV?
  • Can you plan and build a small data center?
  • Can you repair and reactivate a disaster damaged data center with no power?

These are the BASIC to JEDI / Yoda skill levels of a Computer Dude in 2023.

Your Friend and Founder of The Computer Dudes, Inc.- Since 1997.
Todd W. Byars
Computer Dudes

PS All of these skills can be Self Taught, learned in certification classes and from tech schools and colleges.

Source and all credit goes to:

The Computer Dudes Inc

http://www.thecomputerdudesinc.com

Our Motto is “Nothing is Impossible.”

Just ask us, we will build you anything. – Todd W. Byars, Founder

Bitcoin WhitePaper Day

Bitcoin – A Peer-to-Peer
Electronic Cash System

It’s bitcoin White Paper Day.

The mailing list was hosted by Metzdow and run by a group of cypherpunks who shared ideas on creating a kind of digital currency and payment system. Satoshi shared the whitepaper in a message that read, “Bitcoin P2P e-cash paper,” which outlined the main properties of the system.

“Bitcoin P2P e-cash paper
Satoshi Nakamoto satoshi at vistomail.com
Fri Oct 31 14:10:00 EDT 2008
Previous message: Fw: SHA-3 lounge
Messages sorted by: [ date ] [ thread ] [ subject ] [ author ]
I’ve been working on a new electronic cash system that’s fully
peer-to-peer, with no trusted third party.

The paper is available at:
http://www.bitcoin.org/bitcoin.pdf

The main properties:
Double-spending is prevented with a peer-to-peer network.
No mint or other trusted parties.
Participants can be anonymous.
New coins are made from Hashcash style proof-of-work.
The proof-of-work for new coin generation also powers the
network to prevent double-spending.

Bitcoin: A Peer-to-Peer Electronic Cash System

Abstract. A purely peer-to-peer version of electronic cash would
allow online payments to be sent directly from one party to another
without the burdens of going through a financial institution.
Digital signatures provide part of the solution, but the main
benefits are lost if a trusted party is still required to prevent
double-spending. We propose a solution to the double-spending
problem using a peer-to-peer network. The network timestamps
transactions by hashing them into an ongoing chain of hash-based
proof-of-work, forming a record that cannot be changed without
redoing the proof-of-work. The longest chain not only serves as
proof of the sequence of events witnessed, but proof that it came
from the largest pool of CPU power. As long as honest nodes control
the most CPU power on the network, they can generate the longest
chain and outpace any attackers. The network itself requires
minimal structure. Messages are broadcasted on a best effort basis,
and nodes can leave and rejoin the network at will, accepting the
longest proof-of-work chain as proof of what happened while they
were gone.

Full paper at:
http://www.bitcoin.org/bitcoin.pdf

Satoshi Nakamoto

———————————————————————
The Cryptography Mailing List
Unsubscribe by sending “unsubscribe cryptography” to majordomo at metzdowd.com”

Source:
https://www.metzdowd.com/pipermail/cryptography/2008-October/014810.html

The pseudonymous Bitcoin creator disclosed that they had been working on a new electronic cash system that uses a Proof-of-Work (PoW) consensus algorithm that required no trusted third party. Although the document met mixed reactions, it was the beginning of what is known today as blockchain technology.

A couple of months after the release, the Bitcoin network was launched, with the first block mined on January 3, 2009. About eight days later, Hal Finney received the first transaction of 10 BTC from Nakamoto, after which he posted a legendary tweet that read:

In the 14 years since that day, bitcoin’s value rose from zero to a peak of $68,990 last November and was hovering above $20,000 on Monday, according to CoinDesk data. The cryptocurrency currently has a market capitalization of over $390 billion. It also inspired the creation of more than 20,000 different cryptocurrencies currently in circulation, while bitcoin remains the largest by market cap.

Over the years, several people have been rumored to be Nakamoto, including early bitcoin contributor Hal Finney, cryptographer Nick Szabo, physicist Dorian Nakamoto and even Tesla’s chief executive Elon Musk, who all denied the claims.

Satoshi’s identity is still a mystery, but Finney was well-known for his contribution to the creation of Bitcoin. He worked hand-in-hand with Nakamoto to find and fix bugs in Bitcoin’s underlying infrastructure. Before his death in 2014, Finney shared a detailed story about his journey with Bitcoin

About a year after the launch of Bitcoin, the cryptocurrency went on to record its first real-world commercial use case when a Florida man spent 10,000 BTC to purchase two large Papa John’s pizzas on May 22, 2010.

Although the coins were worth $41 at prices back then, at today’s price, the transaction is worth more than $200 million. To commemorate the event, the Bitcoin community celebrates Bitcoin Pizza Day every year on May 22.

Bitcoin / bitcoin / blockchain

Bitcoin’s Store of Value

To any intelligent observer, it has been apparent that bitcoin’s primary use has emerged to be store of value/investment.

Yes, bitcoin’s decentralized/permissionless solution to creating an immutable cryptographically secured database brings a vast array of different potential revolutionary applications not seen since the advent of the internet but again, the primary use has emerged to be store of value/investment.

bitcoin has been so good at this store of value thing that it has become detrimentally  successful – enter the (well-funded) hacks and puppets…attacks from the outside and from within – some of which via spread of (FUD) tangent ideas with coders, media, investors, and within bitcoin community to maybe start an idea of even ‘slight’ change.

First, please realize no other tool in modern-day finance has been so successful at being an effective savings mechanism which unlike traditional ‘savings accounts’ this bitcoin actually keeps up in value for you to be able to afford higher cost of rent, education, healthcare, vacations, etc. (due to its beautiful combination of scarcity, a ceiling of 21mill coins, immutable, permissionless->not controlled/influenced, secure, and being established/developed).

This effective savings tool of bitcoin is made accessible to the 99% of us and cuts to the core of exposing the flaw of the central bank fiat system with its funny-money creation out of thin air paper/credit-currencies benefiting the privileged institutions and then last to benefit would be the rest of us.

It can also expose flaws of fraudulent funneling of extra paper-currencies created by central banks…now think, even those privy to any fraudulent funneling of funny-money will see what’s going on and understand something like bitcoin as an alternative being effectively immune to these games that even these bad-actors themselves would buy bitcoin! Bitcoin changes the paradigm of central-bank funny-money (Bitcoin is the anti-funny-money warrior: open & mechanism)….and it has taken off….and will catch the attention of the central banks who by definition, have nearly unlimited systemic resources and influence (think governments, telecoms ISP providers, hardware/chip manufacturers, software developers, search engines, exchange conartists).

Even if a hard-fork doesn’t happen anytime in the next couple of years, it’s the threat that an attack on this pure beautiful store of value system to something even slightly different that can actually gain a noticeable percentage raises the question…is it possible that someday that the groups influencing bitcoin (those controlling mining or those involved with coding development, or the rest buy/transacting in bitcoin) would (either out of ignorance/misunderstanding or out of vested-interest to undermine bitcoin) start demanding (even slight) changes that may contradict the store-of-value that bitcoin is???

That is the big question that if the answer starts looking like yes…then value would plummet as bitcoin no longer be seen as a store of value but would eventually turn into another app coin (i.e. Ethereum) that can do many amazing things but not the one store-value amazing thing that it has done these past few years. the price would be zero-bound (compared to what we’ve been accustomed to with bitcoin today).

If the answer to that question is no (that you reading this, this community, software coders, mining operators, investors, everyday folk, work to stay educated on the above and act to keep the integrity of this bitcoin system)…then even a $50 billion market cap would still be seen as trivial in the financial assets arena where one bitcoin can easily go above $5,000 USD. But really, as the years pack on and integrity remains intact, the price would be infinity-bound. 

Beware of Scams !!!

Beware !!!

Just as the crypto industry is expanding and getting local adoption from individuals, co-operations, organisations and few countries  the same rate at which we have crypto enthusiast increasing in number which i see so worrisome and also a call for major concern.

Reason been that as more people get involved in the crypto business the more scammers are likely to increase their technique and the more scammers get recruited.

To avoid walking on scammers path, requires to be well informed of every new technique they can ever deploy against their potential victim.

To stay off scammers path users must:

  • Avoid phishing links.
  • Make sure to pay attention to the spelling of the website, as well as their URL as this can reveal whether it is a phishing site or not.
  • Never invest in a project without a well structured community
  • Pay close attention to the engagement within the community for suspicious activities
  • Ensure you assets are off CEX
  • Be more smart and less greedy
  • Don’t jump into a project/coin only based on the hype from advertisers (especially twitter)
  • Avoid any “too good to be true” investment
  • Avoid send me 1$ and I’ll send back 2$ scams, no matter how reputable is the account calling for that
  • Protect your coins (keep your coins on your wallet, use hardware wallet where possible, never give out wallet’s seed, keep backup seed offline)
  • Don’t be greedy and/or illiterate.
  • Be sure to feed yourself with necessary knowledge, if you want to invest.
  • Knowledge from experience is good but you can also take legitimate one from other people.
  • Not everything that is being offered to you is true. Do not be deceived.
  • Be careful who you are trusting.
  • Always be skeptical !!!
  • Enable Two-factor authentication for all your accounts.
  • Using of firewalls.
  • Installing an up to date anti virus software.
  • Use strong passwords and yet easily accessible ones for your convenience.
  • Stay away from malicious links or attachments you come across on the web.
  • Make sure your private keys are well stored and in hard wallet
  • Make sure your passwords are not vulnerable online to attacks i.e don’t store passwords online or any website
  • Whenever a stranger message you first for a business or an investment, it is a Red flag.
  • Someone who doesn’t know you would want you to make big money, another Red flag.
  • Whenever they introduce a” business opportunity” to you and then hasten you in order make you take a hasty decision it’s not  genuine, they are trying their best to make you take a fast decision without telling your loved ones and friends who will discourage you.
  • It is safer to  assume anyone you don’t know, communicating with you is a scammer until it is proven otherwise.
  • Read the whitepaper and research well of the company where you are going to invest because many scams are done by this method.
  • Check whether it is genuine or fake.
  • Scammers are constantly upgrading their scam methods and anyone can be the next target.
  • Loss doesn’t just happen due to an internal or intentional mistake, and when it does happen everyone has a similar sense of remorse and risks that are absolute consequences.
  • You’ll be fooled many times by those scammers that have maintained a well structured fake community.
  • They can hire those PRs and people talking inside their community to make it look like they’re a legit community.
  • As for their workers, they’ll just tell that they need engagement but the purpose of it, they’re not talking about it because that’s what the main purpose it.
  • And that’s to make it look genuine that they have real people inside the community. But in reality, it’s all fake people that they’ve hired just to make discussions all over their place.
  • It’s safe to say as well that it’s not just the crypto industry that is not safe for newbies, everything that talks about money is not safe for everyone.
  • Crypto is the latest thing and in the last 5 years it become so successful that scammers make this as their paradise as there are a lot of naive investors in the market.
  • Do your investigations, and don’t listen to influencers and believe them.
  • Think that this is your hard earn money so you need to be careful where you are going to invest it.
  • Don’t be Greedy.
  • Don’t jump on it like a hungry cow.
  • Don’t trust the sweet words they offer you. Most of them are too good to be true but they will always sound inviting to invest with.
  • Make a wall to not fully support them unless they have proven themselves worthy of that kind of respect.
  • Always be in doubt. That will be the shield that will protect you from being scammed.
  • Must simply assume that our coins are never really safe despite our best efforts, so it is important to always be on alert and protect our coins to the best of our ability.
  • Improve the security of your coins by an important margin by buying a hardware wallet, since they are very secure devices and they are relatively cheap, instead of risking storing our coins in our computers or at an exchange.
  • Always good to know how to make technical and fundamental analysis so that you can get specific information what is the situation of the projects you want to invest
  • Many projects are delivering a good testament, but they always ended into a scam , so we need to be smart enough and have a lot of preparation before investing or trading

21M or Death

21 Million or Death
Arise…

The supply of Bitcoin is fixed at 21 million BTC, and as a hard coded monetary policy of the protocol, the fixed supply of the dominant cryptocurrency cannot be altered.

Former Google Product Director Steve Lee stated that only 1 percent of the world’s population can own more than 0.28 BTC, due to the fixed supply of Bitcoin.

In late 2017, Chainalysis, a blockchain forensics company that monitors and investigates cryptocurrency transactions, revealed in a research paper that up to four million BTC are permanently lost on the blockchain as a result of theft, loss of wallets and private keys, and the dormant wallet of Bitcoin creator Satoshi Nakamoto, which experts have said is no longer accessible.

Kim Grauer, Senior Economist at Chainalysis, said at the time, that the lost supply of BTC is not taken into consideration by the market cap.That means, the real price of BTC could be substantially higher, as 4 to 6 million BTC are estimated to be lost.

Based on the estimate that the supply of Bitcoin is around 17 million, only 0.8 percent of the world population can own more than 0.28 BTC and less than 0.2 of the world population can own more than 1 BTC.

The 0.28 BTC figure introduced by Lee assumes the supply of Bitcoin to be 21 million, as it divides 21 million by 0.28 and divides the outcome of that by the world population that is 7.442 billion. If the research of Chainalysis is accurate and that 4 to 6 million BTC are lost on the blockchain, the supply of Bitcoin should be closer to around 16 to 17 million

The fact that any investor in the global market can be within the 1 percent of the world population with a $1,830 investment demonstrates that the cryptocurrency market is still at its early phase, and in terms of adoption, market development, infrastructure, and regulation, the sector can still grow significantly in the mid to long-term.

Hal Finney
There is no “Whole Coin”

First Time/Small Miner

First time/Small miner reference
for getting started.

If you want to start mining here is what you need… and what you need to know.

This is written for home miners/small farms, but can be used as a guideline for most operations. Use this as a reference for what you need to research, or what questions you need to ask before jumping in.

What you need to mine can be broken down into the following categories:

  • Hardware
  • Electricity
  • Location
  • Internet connection
  • Information

Mining BITCOIN is done exclusively with dedicated BITCOIN mining hardware based on ASICs: https://en.wikipedia.org/wiki/Application-specific_integrated_circuit .

You CAN NOT meaningfully mine bitcoin today with CPU, GPU or even FPGAs. Bitcoin difficulty adapts to match the amount of mining done on the network and has reached levels trillions of times too high to mine meaningfully with PCs, laptops, tablets, phones, webpages, javascript, GPUs, and even generalised SHA hardware.

Even if you combined all the computers in the world, including all known supercomputer, you would not even approach 0.1% of the bitcoin hashrate today.

There isn’t any point attempting to mine bitcoin with CPU or GPU even in the interests of learning as it shares almost nothing with how bitcoin is mined with ASICs and will not teach you anything.

Hardware

Asic Miner:

Here is a list of the companies currently manufacturing Miners for public purchase.

Each one has their Pro’s and Con’s it is up to you to do your research and decide what is best for you.

A few points to consider while researching are :

  • efficiency
  • reliability
  • warranty period/policy
  • power draw

Each company has a different way of handling warranty repairs, depending on your situation and the policy repairs can become cost prohibitive. I will touch more on efficiency and power draw in the electricity section.

• Current list of competitive hardware

Power supply: You will need to purchase a power supply to run your miners. You will find ATX and Server grade PSU’s, the latter being preferred for mining BTC. 

When it comes to selecting a PSU purchase something with a capacity 25% higher than your miner is rated to draw. This will have you operating within the 80% rule.(explained further in the electricity section)

EX. Miner draws 1000 PSU should be able to provide 1250W.

** Many current generation miners are now being manufactured with Integrated PSU. Again do your research to see if your unit comes with or without. Generally you will still need to source a power cable.**

Auxilliaries – Avalon miners require an external controller, 1 per 20 miners. You may have to run additional fans for intake and exhaust depending on your location.

PSU’s can be purchased large enough to run 2 Miners; or the opposite 1 Miner fed by 2 PSU’s. Ensure the PSU you have selected will have the correct amount of PCI-E connectors required to operate your miner(s)

You can also find a large supply of used miners and PSU’s. Again it’s up to you to do your research as these often are a no return transaction.

Electricity

Follow all local codes and regulations

This is the number 1 factor in whether mining is right for you. As discussed with Miners being a 24/7 machine drawing power those costs will make it cost prohibitive for some people to mine. You need to be aware of what your costs/kWh are and run the numbers.

This will be done in a profitability calculator. This is just an example of 1 there are many out there.

( Miner usage in kW ) * ( Hours run per day ) 24 * ( Cost/kWh ) = Cost per Day to Operate

( Ideally less than the FIAT value of BTC mined )

The second part to the electrical requirements of mining is the available service; written for North America.

You will need to figure out the amperage you can spare, what circuits and receptacles you have in place, are you setting up on 220V or 110V. You will need to make sure that you have the right cord end for your PSU to match the receptacle, picking the wrong one can cost you a few days of mining if it has to be shipped.

If you can try and set up on a 220V circuit for 2 reasons :

– You will pull half the amps, and it is more efficient.

– Doing so requires 2 breaker spaces in your panel. Breaker sizing will depend on how many miners you plan to run. Here is the formula for calculating amps.

Watts / Voltage = Amps

Here is where you will bring the 80% rule back into play by sizing the continuous miner load to 80% of the breaker rating. 12 Amps on a 15 Amp breaker, 16 Amps max on a 20 Amp breaker, 24 Amps on a 30 amp breaker.

If/when you increase the amount of miners you are running you may want to look into PDU’s, as opposed to more receptacles. 

Location

This is something that is often overlooked to the headache and frustration of many would be miners. These machines are loud and hot .
You essentially have an electric heater that also uses an industrial fan to keep it from melting itself. This space will need to have the electrical requirements as discussed previously.

So make sure you have a space that is well ventilated with a plan to exhaust heat, and bring in fresh dust free air. I say this as using AC to cool the room will eat into your profits and may even make mining unprofitable.

The noise issue is a consideration you can sort out depending on whats available. (garage, basement, remote building)

Both of these issues can be handled with hosting, which is further explained in the information section.

Internet connection

Some miner setups have the option to use wifi. It is advisable to use a wired connection where available. This will provide a more stable connection and ensure you are submitting the expected amount of shares which is directly related to your payouts.

Please note that mining uses a negligible amount of bandwidth, and will not affect your other internet usage.

Information

You can use this information in this post as a good baseline to get you going. In addition to this you will want to research network difficulty; this readjusts every 2016 blocks to maintain a 10 minute block time on average. While this can go down it generally increases.

Solo or Pool?

You can solo mine but this is essentially a lottery even as a large scale miner. Should you chose this you can check this out as a starting point.

solo.ckpool.org 1% fee solo mining USA/DE 250 blocks solved!

Odds are most of you will join a pool. I will only say that it is in your best interest to mine at a pool that pays transaction fees (miner rewards). Then you will want to consider the fees associated with the pool.

When it comes to these pools you want them to be large enough that they are getting at least 1 block every Difficulty adjustment period. Larger pools will offer smaller rewards paid out more frequently, and vice versa.