It is from the epithet of a parable, explaining that a fool waits for the stream to stop before crossing, while a wise man forgoes comfort and crosses anyway.
It is a frequently used motto for academic institutions.
Kant answers the question in the first sentence of the essay: “Enlightenment is man’s emergence from his self-incurred immaturity (Unmündigkeit).”
He argues that the immaturity is self-inflicted not from a lack of understanding, but from the lack of courage to use one’s reason, intellect, and wisdom without the guidance of another.
Kant argued that using one’s reason is considered dangerous by most men and all women.
He exclaims that the motto of the Enlightenment is “Sapere aude“! – Dare to be wise!
“Enlightenment is man’s release from his self-incurred tutelage.
Tutelage is man’s inability to make use of his understanding without direction from another.
Self-incurred is this tutelage when its cause lies not in lack of reason but in lack of resolution and courage to use it without direction from another.
Sapere Aude!
‘Have courage to use your own reason!’- that is the motto of enlightenment.”
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
Bitcoin’s most recent halving occurred on May 11, 2020. To explain what a Bitcoin halving is, we must first explain a bit about how the Bitcoin network operates.
Bitcoin’s underlying technology, blockchain, basically consists of a collection of computers (or nodes) that run Bitcoin’s software and contain a partial or complete history of transactions occurring on its network.
Each full node, or a node containing the entire history of transactions on Bitcoin, is responsible for approving or rejecting a transaction in Bitcoin’s network.
To do that, the node conducts a series of checks to ensure that the transaction is valid. These include ensuring that the transaction contains the correct validation parameters, such as nonces, and does not exceed the required length.
A transaction occurs only after all the parties operating in Bitcoin’s network approve it within the block on which the transaction exists. After approval, the transaction is appended to the existing blockchain and broadcast to other nodes.
The blockchain serves as a pseudonymous record of transactions (i.e., its contents are visible to everyone, but it is difficult to identify transacting parties in the network). This is because the blockchain assigns encrypted addresses to each transacting party in the network. That said, even those who do not participate in the network as a node or miner can view these transactions taking place live by looking at block explorers.
More computers (or nodes) added to the blockchain increase its stability and security.
There are currently 12,035 nodes estimated to be running Bitcoin’s code. Though anyone can participate in Bitcoin’s network as a node, as long as they have enough storage to download the entire blockchain and its history of transactions, not all of them are miners.
KEY TAKEAWAYS
A Bitcoin halving event is when the reward for mining bitcoin transactions is cut in half.
This event also cuts in half Bitcoin’s inflation rate and the rate at which new bitcoins enter circulation.
Both previous halvings have correlated with intense boom and bust cycles that have ended with higher prices than prior to the event.
Bitcoin last halved on May 11, 2020, around 3 p.m. EST, resulting in a block reward of 6.25 BTC.
Bitcoin Mining
Bitcoin mining is the process by which people use their computers to participate in Bitcoin’s blockchain network as a transaction processor and validator.
Bitcoin uses a system called proof of work (PoW). This means that miners must prove they have put forth effort in processing transactions to be rewarded. This effort includes the time and energy it takes to run the computer hardware and solve complex equations.
Faster computers with certain types of hardware yield larger block rewards and some companies have designed computer chips specifically built for mining. These computers are tasked with processing Bitcoin transactions, and they are rewarded for doing so.
The term mining is not used in a literal sense but as a reference to the way precious metals are gathered.
Bitcoin miners solve mathematical problems and confirm the legitimacy of a transaction. They then add these transactions to a block and create chains of these blocks of transactions, forming the blockchain.
When a block is filled up with transactions, the miners that processed and confirmed the transactions within the block are rewarded with bitcoins.
Transactions of greater monetary value require more confirmations to ensure security. This process is called mining because the work performed to get new bitcoins out of the code is the digital equivalent to the physical work done to pull gold out of the Earth.
El Salvador made Bitcoin legal tender on June 9, 2021. It is the first country to do so. The cryptocurrency can be used for any transaction where the business can accept it. The U.S. dollar continues to be El Salvador’s primary currency.
Bitcoin Halving
After every 210,000 blocks mined, or roughly every four years, the block reward given to Bitcoin miners for processing transactions is cut in half.
This cuts in half the rate at which new bitcoins are released into circulation. This is Bitcoin’s way of using a synthetic form of inflation that halves every four years until all bitcoins are released into circulation.
This system will continue until around the year 2140.
At that point, miners will be rewarded with fees for processing transactions, which network users will pay. These fees ensure that miners still have the incentive to mine and keep the network going. The idea is that competition for these fees will cause them to remain low after the halvings are finished.
The halving is significant because it marks another drop in the rate of new Bitcoins being produced as it approaches its finite supply: the total maximum supply of bitcoins is 21 million. As of October 2021, there are about 18.85 million bitcoins already in circulation, leaving just around 2.15 million left to be released via mining rewards.
In 2009, the reward for each block in the chain mined was 50 bitcoins. After the first halving, it was 25, and then 12.5, and then it became 6.25 bitcoins per block as of May 11, 2020.
To put this in another context, imagine if the amount of gold mined out of the Earth was cut in half every four years. If gold’s value is based on its scarcity, then a “halving” of gold output every four years would theoretically drive its price higher.
Coin Metrics logarithmic chart of Bitcoin price action following halvings.
Halving Implications
These halvings reduce the rate at which new coins are created and thus lower the available amount of new supply, even as demand might increase.
This can cause some implications for investors as other assets with low or finite supply, like gold, can have high demand and push prices higher.
In the past, these Bitcoin halvings have correlated with massive surges in Bitcoin’s price.
The first halving, which occurred on Nov. 28, 2012, saw an increase from $12 to $1,217 on Nov. 28, 2013.
The second Bitcoin halving occurred on July 9, 2016. The price at that halving was $647, and by Dec. 17, 2017, a bitcoin’s price had soared to $19,800. The price then fell over the course of a year from this peak down to $3,276 on Dec. 17, 2018, a price 506% higher than its pre-halving price.
The most recent halving occurred on May 11, 2020. On that date, a bitcoin’s price was $8,787. On April 14, 2021, a bitcoin’s price soared to $64,507 (an astonishing 634% increase from its pre-halving price). A month later, on May 11, 2021, a bitcoin’s price was $54,276, representing a 517% increase that seems more consistent with the behavior of the 2016 halving.
On May 12, 2021, Elon Musk, CEO of Tesla, announced that Tesla would no longer accept Bitcoin as payment, resulting in further price fluctuations.
In the week that followed Musk’s statements, the price of a bitcoin plunged below $40,000 after Chinese regulators announced restrictions banning financial institutions and payment companies from providing cryptocurrency-related services.
Though these two announcements may have temporarily created a price drop in Bitcoin, there is the potential that the price fluctuations are more related to the halving behavior we have observed previously.
The theory of the halving and the chain reaction that it sets off works something like this:
The reward is halved → half the inflation → lower available supply → higher demand → higher price → miners incentive still remains, regardless of smaller rewards, as the value of Bitcoin is increased in the process
In the event that a halving does not increase demand and price, then miners would have no incentive. The reward for completing transactions would be smaller, and the value of Bitcoin would not be high enough.
To prevent this, Bitcoin has a process to change the difficulty it takes to get mining rewards, or in other words, the difficulty of mining a transaction.
In the event that the reward has been halved, and the value of Bitcoin has not increased, the difficulty of mining would be reduced to keep miners incentivized.
This means that the quantity of bitcoins released as a reward is still smaller, but the difficulty of processing a transaction is reduced.
This process has proved successful twice. So far, the result of these halvings has been a ballooning in price followed by a large drop.
The crashes that have followed these gains, however, have still maintained prices higher than before these halving events.
For example, as mentioned above, the 2017 to 2018 bubble saw the value of a bitcoin rise to around $20,000, only to fall to around $3,200. This is a massive drop, but a bitcoin’s price before the halving was around $650.3
Though this system has worked so far, the halving is typically surrounded by immense speculation, hype, and volatility, and how the market will react to these events in the future is unpredictable.
The third halving occurred not only during a global pandemic, but also in an environment of heightened regulatory speculation, increased institutional interest in digital assets, and celebrity hype. Given these additional factors, where Bitcoin’s price will ultimately settle in the aftermath remains unclear.
What Happens When Bitcoin Halves?
The term “halving” as it relates to Bitcoin has to do with how many Bitcoin tokens are found in a newly created block.
Back in 2009, when Bitcoin launched, each block contained 50 BTC, but this amount was set to be reduced by 50% roughly every four years.
Today, there have been three halving events, and a block now only contains 6.25 BTC.
When the next halving occurs, a block will only contain 3.125 BTC.
When Have the Halvings Occurred?
The first bitcoin halving occurred on Nov. 28, 2012, after a total of 10,500,000 BTC had been mined. The next occurred on July 9, 2016, and the latest was on May 11, 2020. The next is expected to occur in early 2024.
Why Are the Halvings Occurring Less Than Every Four Years?
The Bitcoin mining algorithm is set with a target of finding new blocks once every 10 minutes.
However, if more miners join the network and add more hashing power, the time to find blocks will decrease.
This is remedied by resetting the mining difficulty (or how hard it is for a computer to solve the mining algorithm) once every two weeks or so to restore a 10-minute target.
As the Bitcoin network has grown exponentially over the past decade, the average time to find a block has consistently remained below 10 minutes (roughly 9.5 minutes).
Does Halving Have Any Effect on the Bitcoin Price?
The price of Bitcoin has risen steadily and significantly from its launch in 2009, when it traded for mere pennies or dollars, to April 2021 when the price of one bitcoin traded for over $63,000.3
Because halving the block reward effectively doubles the cost to miners, who are essentially the producers of bitcoins, it should have a positive impact on price because producers will need to adjust their selling price to their costs.
Empirical evidence does show that Bitcoin prices tend to rise in anticipation of a halvening, often several months prior to the actual event.
What Happens When There Are No More Bitcoins Left in a Block?
Around the year 2140, the last of the 21 million bitcoins ever to be mined will have been mined.
At this point, the halving schedule will cease because there will be no more new bitcoins to be found.
Miners, however, will still be incentivized to continue validating and confirming new transactions on the blockchain because the value of transaction fees paid to miners is expected to rise into the future, the reasons being that a greater transaction volume that has fees will be attached, plus bitcoins will have a greater nominal market value.
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
How can I calculate how many hashes I generate per second?
I have a function which generates hashes from a string:
string GenerateHash(string plainText);
I generate as many hashes as possible with 4 threads.
How do I calculate how many hashes (or megahashes) I generate per second?
Your problem breaks down nicely into 3 separate tasks
Sharing a single count variable across threads
Benchmarking thread completion time
Calculating hashes per/second
Sharing a single count variable across threads
public static class GlobalCounter { public static int Value { get; private set; } public static void Increment() { Value =GetNextValue(Value); } private static int GetNextValue(int curValue) { returnInterlocked.Increment(ref curValue); } public static void Reset() { Value = 0; } }
Before you spin off the threads call GlobalCounter.Reset and then in each thread (after each successful hash) you would call GlobalCounter.Increment – using Interlocked.X performs atomic operations of Value in a thread-safe manner, it’s also much faster than lock.
Parallel.ForEach will block until all threads have finished
Calculating hashes per second
... sw.Stop(); var hashesPerSecond = GlobalCounter.Value / sw.Elapsed.Seconds;
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How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money whenever they deemed … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to truly ensure that … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography for the People … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used because it is … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The work, which is … Continue reading The Art of War Quotes→
Finance, like most human inventions, is constantly evolving.
In the beginning it was basic: food was traded for livestock, and livestock for resources like wood, or maize. It progressed to precious metal, such as silver and gold. And now, the next step in financial evolution has come to light.
This new form of currency has been constantly evolving over the past decade, developed by an unknown person and maintained by a collective group of the brightest minds in technology.
It’s a new form of money that is created and held digitally, and the most important part, of course, is that no government owns it, or decides its value – the peer-to-peer network community does.
We call this new money, ‘Bitcoin’.
Historically, U.S. currency has been based on gold – you could give a dollar to the bank and receive a set amount back in gold. In contrast, Bitcoin isn’t based on silver or gold – it’s based on mathematical proofs validated by a public ledger called blockchain technology.
Bitcoin is generated through a complex sequence of mathematical formulas that run on computers; the network shares a public ledger using blockchain technologies that record, and validate, every transaction processed.
A single institution, such as the government, does not control the Bitcoin network.
The idea behind the technology has always been – and remains – one of decentralization – that is, remaining completely independent of a central authority, like a bank, a government, or a country.
Anyone can access the open-source software that makes Bitcoin work, and its those individuals interested that maintain it.
But, who invented Bitcoin? Is it a valid and legitimate currency like USD? And why did nobody think of this before?
But before we begin, let’s talk about the creator of Bitcoin – or rather, the anonymous pseudonym that first published a concept.
How Did Bitcoin Start?
There are many questions about Bitcoin, but the most common one to be asked is, “Who created it?”
That answer is not straightforward, because the identity of the creator remains a mystery. All we have is a pseudonym – Satoshi Nakamoto.
The accounts are no longer active; the coins in his wallet have never been spent.
Satoshi Nakamoto has disappeared from the world, or so it would seem.
Fast Company recently published an article suggesting that Satoshi Nakamoto could be a group of people, including Neal King, Vladimir Oksman, and Charles Bry. Apparently, these three people filed for a patent related to secure communication just two months prior to the purchase of the Bitcoin.org domain. Perhaps it’s a coincidence; perhaps it’s not.
What we do have, however, are facts:
On October 31st, 2008, “Bitcoin: A Peer-to-Peer Electronic Cash System” was posted to a cryptography mailing list, published under the name “Satoshi Nakamoto”. The whitepaper outlined the foundation of how Bitcoin would operate.
On August 18, 2008, an unknown person or entity registered the Bitcoin.org domain.
On January 8th, 2009, the first version of Bitcoin is announced, and shortly thereafter, Bitcoin mining begins.
The mystery that surrounds Satoshi Nakamoto is fitting; privacy was a key value for both Bitcoin, and its users.
Others have tried to claim his mantle – most recently an Australian man named Craig Wright, who has since withdrawn his claim.
While we may never know who first created Bitcoin, we do know that the technology he started has left ripples in the financial industry.
Bitcoin has risen to fame thanks to individuals such as the Winklevoss twins controlling and growing the market, and major events that have defined this new technology’s existence such as the Mt. Gox Ponzi scheme disaster.
The people involved and the events that occur are a constant reminder that this market is unregulated and seem to fall in line with Satoshi Nakamoto’s goal of creating a decentralized network.
What is Bitcoin Used For?
Currency must have value to ensure stability.
The most common way for a person to judge a currency’s value is what they can use it on; Bitcoin is no different, and a host of vendors and merchants now accept it alongside, or in place of, fiat money.
One early adopter of Bitcoin was the computer retailer Dell. In fact, when Dell started accepting Bitcoin, it became one of the largest companies to do so internationally.
While the digital currency may total for just a fraction of the retailer’s total transaction volume, there are other key reasons why the growth of Bitcoin could be aboon for the retailer.
Dell reported earnings of $59 billion during 2015. Traditional transaction fees range from 2 to 3 percent of the purchase price – with Bitcoin, it’s much, much lower, nearing non-existent – saving the retailer a lot of money in the future.
Other companies, such as Expedia and Cheapair, have also started accepting Bitcoin, along with technology conglomerate Microsoft : users can add funds to their accounts with Bitcoin to purchase apps, games, and other types of digital content.
The acceptance of Bitcoin is a strategic decision on the part of these companies, most of which are reaching out to solidify their position with tech-savvy audiences.
There’s a lot of benefit to Bitcoin, and a variety of reasons for its use, including :
Faster Payment: Accepting wire transfers and checks is time consuming, and it can take several days for payment to clear. Bitcoin is faster and can take a matter of minutes, rather than days to process payment.
Lower Transaction Fees: The cost to accept Bitcoins is lower compared to other payment methods, such as credit cards or Paypal.
Independent of Governments: Since Bitcoin is decentralized, you own it – no authority has the right to take away your Bitcoin. People with concerns about mainstream banking systems unravelling find this a major benefit.
Elimination of Chargebacks: Once Bitcoin is sent, that’s it – you can’t chargeback, like you would with a credit card payment, which eliminates ‘chargeback fraud’ often used by criminals and scammers.
Protection Against Inflation: With a fiat currency, the government can print as much money as it desires – this drastically decreases the value of currency, and may result in inflation. In contrast, Bitcoin has a fixed number – after they have all been ‘mined’, no more Bitcoins will be created. Scarcity is an important aspect of currency which protects it from inflation.
Ownership of Currency: With Bitcoin, you own your coins. With other forms of digital fiat – such as Paypal – your assets may be held, and your account eventually suspending, locking you out of your earnings. Bitcoin puts you in control.
Is Bitcoin a Commodity, or a Currency?
Bitcoin is both. While it can be used to purchase items from major retailers, it’s also treated as property by government jurisdictions, such as the IRS.
The IRS issued a guide on Bitcoin for tax purposes, stating it will treat virtual currencies as property for federal purposes. They go on to state that:
In some environments, virtual currency operates like “real” currency — i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance — but it does not have legal tender status in any jurisdiction.
The notice provides that virtual currency is treated as property for U.S. federal tax purposes.
Typically, property is almost always something tangible that can be held in the physical realm.
The IRS goes on to state that:
General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:
Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
Bitcoin has garnered a lot of attention over the past decade, despite constant declarations of its death – 99 Bitcoins keeps a running tab of ‘Bitcoin obituaries’.
Despite all of this, Bitcoin’s future has remained bright. Greater adoption rates, and an increasing number of brands accepting the currency (you can get a full list qui) means the long-term view on Bitcoin is that it will see market maturity as time progresses.
Mainstream investing vehicles, such as exchange-traded funds (ETFs) and Futures trading, including Bitcoin will be a major help to reaching that market maturity. Bitcoin Futures are already trading on the Chicago Mercantile Exchange (CME), and legislation to create a crypto ETF is in the works.
These securities will help stabilize cryptocurrency prices and mitigate volatility, which will help the public’s confidence grow in favor of Bitcoin.
It’s important to understand that, much like the early days of 1992, Bitcoin is a new technology – and new technologies can take decades to reach critical mass.
But, much like the Internet, no one wants to miss out on the ‘next big thing’ – and Bitcoin is the biggest thing yet. Constant updates are occurring to Bitcoin thanks to what is called a “hard fork”.
These constant updates ensure that digital currencies continue to experience growth through technological development.
Did you find this article helpful?
If so, please consider a donation to help the evolution and development of more helpful articles in the future, and show your support for alternative articles.
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take … Continue reading CypherPunk Movement→
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
Unlike the communities traditionally associated with the word "anarchy", in a crypto-anarchy the government is not temporarily destroyed but permanently forbidden and permanently unnecessary.
It's a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations.
Until now it's not clear, even theoretically, how such a community could operate.
A community is defined by the cooperation of its participants, and efficient cooperation requires a medium of exchange (money) and a way to enforce contracts.
Traditionally these services have been provided by the government or government sponsored institutions and only to legal entities.
In this article I describe a protocol by which these services can be provided to and by untraceable entities.
I will actually describe two protocols. The first one is impractical,because it makes heavy use of a synchronous and unjammable anonymous broadcast channel. However it will motivate the second, more practical protocol.
In both cases I will assume the existence of an untraceable network, where senders and receivers are identified only by digital pseudonyms (i.e. public keys) and every messages is signed by its sender and encrypted to its receiver.
In the first protocol, every participant maintains a (seperate) database of how much money belongs to each pseudonym. These accounts collectively define the ownership of money, and how these accounts are updated is the subject of this protocol.
1. The creation of money. Anyone can create money by broadcasting the solution to a previously unsolved computational problem. The only conditions are that it must be easy to determine how much computing effort it took to solve the problem and the solution must otherwise have no value, either practical or intellectual. The number of monetary units created is equal to the cost of the computing effort in terms of a standard basket of commodities. For example if a problem takes 100 hours to solve on the computer that solves it most economically, and it takes 3 standard baskets to purchase 100 hours of computing time on that computer on the open market, then upon the broadcast of the solution to that problem everyone credits the broadcaster's account by 3 units.
2. The transfer of money. If Alice (owner of pseudonym K_A) wishes to transfer X units of money to Bob (owner of pseudonym K_B), she broadcasts the message "I give X units of money to K_B" signed by K_A.
Upon the broadcast of this message, everyone debits K_A's account by X units and credits K_B's account by X units, unless this would create a negative balance in K_A's account in which case the message is ignored.
3. The effecting of contracts. A valid contract must include a maximum reparation in case of default for each participant party to it. It should also include a party who will perform arbitration should there be a dispute. All parties to a contract including the arbitrator must broadcast their signatures of it before it becomes effective. Upon the broadcast of the contract and all signatures, every participant debits the account of each party by the amount of his maximum reparation and credits a special account identified by a secure hash of the contract by the sum the maximum reparations. The contract becomes effective if the debits succeed for every party without producing a negative balance, otherwise the contract is ignored and the accounts are rolled back. A sample contract might look like this:
K_A agrees to send K_B the solution to problem P before 0:0:0 1/1/2000. K_B agrees to pay K_A 100 MU (monetary units) before 0:0:0 1/1/2000. K_C agrees to perform arbitration in case of dispute. K_A agrees to pay a maximum of 1000 MU in case of default. K_B agrees to pay a maximum of 200 MU in case of default. K_C agrees to pay a maximum of 500 MU in case of default.
4. The conclusion of contracts. If a contract concludes without dispute, each party broadcasts a signed message "The contract with SHA-1 hash H concludes without reparations." or possibly "The contract with SHA-1 hash H concludes with the following reparations: ..." Upon the broadcast of all signatures, every participant credits the account of each party by the amount of his maximum reparation, removes the contract account, then credits or debits the account of each party according to the reparation schedule if there is one.
5. The enforcement of contracts. If the parties to a contract cannot agree on an appropriate conclusion even with the help of the arbitrator, each party broadcasts a suggested reparation/fine schedule and any arguments or evidence in his favor. Each participant makes a determination as to the actual reparations and/or fines, and modifies his accounts accordingly.
In the second protocol, the accounts of who has how much money are kept by a subset of the participants (called servers from now on) instead of everyone. These servers are linked by a Usenet-style broadcast channel.
The format of transaction messages broadcasted on this channel remain the same as in the first protocol, but the affected participants of each transaction should verify that the message has been received and successfully processed by a randomly selected subset of the servers.
Since the servers must be trusted to a degree, some mechanism is needed to keep them honest. Each server is required to deposit a certain amount of money in a special account to be used as potential fines or rewards for proof of misconduct. Also, each server must periodically publish and commit to its current money creation and money ownership databases. Each participant should verify that his own account balances are correct and that the sum of the account balances is not greater than the total amount of money created. This prevents the servers, even in total collusion, from permanently and costlessly expanding the money supply. New servers can also use the published databases to synchronize with existing servers.
The protocol proposed in this article allows untraceable pseudonymous entities to cooperate with each other more efficiently, by providing them with a medium of exchange and a method of enforcing contracts. The protocol can probably be made more efficient and secure, but I hope this is a step toward making crypto-anarchy a practical as well as theoretical possibility.
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Appendix A: alternative b-money creation
One of the more problematic parts in the b-money protocol is money creation. This part of the protocol requires that all of the account keepers decide and agree on the cost of particular computations. Unfortunately because computing technology tends to advance rapidly and not always publicly, this information may be unavailable, inaccurate, or outdated, all of which would cause serious problems for the protocol.
So I propose an alternative money creation subprotocol, in which account keepers (everyone in the first protocol, or the servers in the second protocol) instead decide and agree on the amount of b-money to be created each period, with the cost of creating that money determined by an auction. Each money creation period is divided up into four phases, as follows:
1. Planning. The account keepers compute and negotiate with each other to determine an optimal increase in the money supply for the next period.
Whether or not the account keepers can reach a consensus, they each broadcast their money creation quota and any macroeconomic calculations done to support the figures.
2. Bidding. Anyone who wants to create b-money broadcasts a bid in the form of <x, y> where x is the amount of b-money he wants to create, and y is an unsolved problem from a predetermined problem class. Each problem in this class should have a nominal cost (in MIPS-years say) which is publicly agreed on.
3. Computation. After seeing the bids, the ones who placed bids in the bidding phase may now solve the problems in their bids and broadcast the solutions.
4. Money creation. Each account keeper accepts the highest bids (among those who actually broadcasted solutions) in terms of nominal cost per unit of b-money created and credits the bidders' accounts accordingly
Open Source JavaScript Client-Side Bitcoin Wallet Generator
A Bitcoin wallet is as simple as a single pairing of a Bitcoin address with its corresponding Bitcoin private key. Such a wallet has been generated for you in your web browser and is displayed above.
To safeguard this wallet you must print or otherwise record the Bitcoin address and private key. It is important to make a backup copy of the private key and store it in a safe location. This site does not have knowledge of your private key. If you are familiar with PGP you can download this all-in-one HTML page and check that you have an authentic version from the author of this site by matching the SHA256 hash of this HTML with the SHA256 hash available in the signed version history document linked on the footer of this site. If you leave/refresh the site or press the “Generate New Address” button then a new private key will be generated and the previously displayed private key will not be retrievable. Your Bitcoin private key should be kept a secret. Whomever you share the private key with has access to spend all the bitcoins associated with that address. If you print your wallet then store it in a zip lock bag to keep it safe from water. Treat a paper wallet like cash.
Add funds to this wallet by instructing others to send bitcoins to your Bitcoin address.
Check your balance by going to blockchain.info or blockexplorer.com and entering your Bitcoin address.
Spend your bitcoins by going to blockchain.info and sweep the full balance of your private key into your account at their website. You can also spend your funds by downloading one of the popular bitcoin p2p clients and importing your private key to the p2p client wallet. Keep in mind when you import your single key to a bitcoin p2p client and spend funds your key will be bundled with other private keys in the p2p client wallet. When you perform a transaction your change will be sent to another bitcoin address within the p2p client wallet. You must then backup the p2p client wallet and keep it safe as your remaining bitcoins will be stored there. Satoshi advised that one should never delete a wallet.
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BitHouse 