Dear Stevo,

What is Bitcoin mining? How do you mine Bitcoin?

-Don W., Chicago, Illinois

Bitcoin mining shouldnt really be called Bitcoin mining. Its a deceptive and confusing metaphor. It should be called something much more boring like payment processing.

Every ten minutes or so, the Bitcoin network batches transactions and processes them.

This happens around the clock. No human is involved. Machines do all the work. Your neighbor may have a computer doing exactly that at this moment. The payments that are processed during that ten-minute period, along with some other information, is called a block. All the blocks are linked to each other, all the way back to the very first block. That is why people say Bitcoin is built on the blockchain. Its an uninterrupted chain of blocks, created every ten minutes, going back 11 years.

To incentivize people to participate in this process, the Bitcoin network offers a reward for processing payments. The current reward is 12.5 Bitcoin, or roughly $125,000, using the average price of $10,000 / Bitcoin.

$125,000 is a lot to pay someone for processing ten minutes worth of payments. Everyone would want that job.

Thousands of people, and millions of computers, at any given time, want that job, in fact. To figure out who gets the job, the Bitcoin network has a rationing system.

Every ten minutes, the Bitcoin network produces a random number. The first computer to guess that random number gets to process the payments for that ten-minute period. It also gets to be the first to broadcast the results of that ten minutes to the rest of the Bitcoin network, and receives 12.5 new Bitcoin as a reward for their work.

This procedure of Bitcoin payment processing is called Bitcoin mining because, new Bitcoin are created as a reward when that payment processor successfully does its work.

There is also an additional reward paid for guessing the number. People pay fees when they send their transactions through the Bitcoin network. This is another rationing method. The more one pays, the more likely it is that their transaction will appear in the next block. If youre in a hurry, you pay more. If you can wait for the next lull in the network, you pay less. These fees paid to speed up the processing time for a transaction, often called mining fees, are an additional reward to payment processors in the network.

To answer the question - if you want to mine Bitcoin, the way to mine is to hook a computer up to the Bitcoin network, and to instruct your computer to guess at the random number every ten minutes by running mining software.

At $10,000 / Bitcoin, and 12.5 Bitcoin per reward, $17 million in block rewards are available each day. With so much money to be made in this process, many options exist for how to participate. New options are constantly being developed.

Mining, or payment processing, is a fun way to participate in the Bitcoin network. Some even do this for a fun hobby, others do it to learn a new skill, still others might do it with the intent of strengthening the network, regardless of the reward that could be involved.

Allan Stevo is a cryptocurrency industry veteran and author of The Bitcoin Manifesto.

Email him atBitMatts@protonmail.comwith your questions for the column.

Original post:
Bitcoin Mining is a Silly and Confusing Term - Anchorage Press

Dr. Craig Wright has continued to vent at some of the digital asset industrys bad actors. In his latest blog post, he trained his sights on those peddling misinformationabout Bitcoins structure and incentives, digital asset investments, and those who use their media platforms to damage his own reputation. Combating fake news, he said is one of the reasons I invented Bitcoin.

Dr. Wright named several well-known identities in the Bitcoin and digital asset space, including John McAfee, Ira Kleiman, Peter McCormack, and Greg Maxwell. These people, he said (some of whom are engaged in ongoing disputes with Wright) have used online media and their own platforms to spread false information by citing each others words and creating a self-feeding cycle of confusion for the public.

Forbes and YouTube Flim-Flam

The post begins with a look at Forbes and other famous-name online media outlets that publish unpaid contributor articles. These articles, Dr. Wright said, are not properly vetted for accuracy and exist only to drive eyeballs and clicks to site ads. Destroying the internets ad-based model, he added, is one of the reasons he invented Bitcoin.

The fact is, such burnishing of the truth does nothing to create integrity in journalism. It is merely adding a gloss to a turd that is fake news.

Access to brand-name media through contributions (sometimes unpaid) has allowed both unqualified and outright deceptive individuals to publish investment advice with a veneer of legitimacy. YouTube, he said, has also been an open platform for those promoting digital asset pump and dumpsincluding BTC. He called technical analysis trading YouTube channels unscientific flimflam that forever promise big price gains, while their hosts often make the opposite moves they advise their viewers to make.

Wright noted that, even though Google has recently taken stricter action against content it regards as misinformation, Forbes and other contributors continue their free run with digital currency investment promotion.

(We should note that Googles censorship dragnet has also ensnared several legitimately informative content producers, such as the BSV Channel.)

Some examples: misinformation about Bitcoin

Price isnt the only topic the fake news media promotes. The nature of Bitcoin itself is often misrepresented, which either demonizes truth-tellers or deflects criticism away from guilty parties.

Dr. Wright gave the example of Bitcoin transaction malleability being responsible for the loss of 850,000 BTC from the Mt. Gox exchange in the years leading up to its 2014 collapse. Even though that myth was debunked at its outset, the phrase continues to appear. Most serious investigators believe the Mt. Gox debacle was caused by embezzlement and theft by those with inside knowledge, not a technical issue with Bitcoin.

The structure of Bitcoins own network is misunderstood (accidentally or deliberately) due to phrases like mesh network and relay nodesneither of which are relevant to the way Bitcoin should function, he added. Believing they are true, or somehow important, creates incorrect impressions about what Bitcoin is for and makes networks like BTC less secure.

Misinformation about Dr. Craig Wright

Given Dr. Wrights outspoken nature, knowledge of Bitcoin and willingness to challenge some of BTCs biggest proponents, its natural they see him as a threat to their interests. Efforts to smear his character began from the instant he was outed as Satoshi Nakamoto in late 2015, but have ramped up since he took back control of the Bitcoin project with BSV.

Wright gave a few examples: Ira Kleiman and his lawsuit claiming ownership of early Bitcoins; Peter McCormacks claims that Wright is not Satoshi Nakamoto, and Greg Maxwells more technical takes against Wright and on Bitcoin history.

Easily debunked

Though Kleimans lawsuit purportedly concerns ownership of Dr. Wrights (and/or Satoshi Nakamotos) early Bitcoins and company IP, it serves also as a means to generate plenty of headlines and misleading news articles that attack Wrights reputation. Thats something Kleiman, who works in the area of search engine optimisation (SEO), would understand, he wrote.

Misleading reports about Dr. Wrights past actions resulting from the case have suggested he fled Australia for the United Kingdom, has plagiarized research, and is under investigation by the Australian Tax Offices criminal investigations unit (which does not exist).

Like the ATO claim, such myths are easily debunked, but lazy reporters dont bother to check them and neither do gullible readers. Wright said his U.K. visa showed clear intent to travel there in late 2015. Moreover, the U.K. is hardly a useful destination for anyone trying to escape the law in Australia.

Falsifying documents, he added, has been the domain of his attackers rather than himself. He claimed his own signature was forged multiple times either to make accusations and even to launch the infamous 2015 raid on his property (which coincided with his outing as Satoshi). He called the latter example a case of swatting; where bad actors make a false report with the intent to prompt law enforcement action on another individual.

Dr. Wright said Ira Kleiman was perhaps being used by other forces, and was not smart enough to know when he is being played.

Plagiarism claims show lack of academic understanding

In another example, Dr. Wright referred to BTC developer and former Blockstream employee Greg Maxwell, who he said publishes articles under his own name and several pseudonyms. Maxwell has long been a Wright adversary with antagonism between the two preceding Bitcoin by years.

Maxwell has in the past accused Wright of plagiarizing research, particularly in a recent hit piece article that referenced Wrights legal cases against both Kleiman and McCormack.

The article concerned mathematical concepts like random forests and decisions, which the article suggested Wright had plagiarized a medical paper whose data was incorporated into a training and example package that researcher John Maindonald created. Maindonald used the original paper to create a CRAN R statistical package, while Wright did not use the original paper and instead took his graph from the courseware. Wright said Maxwells lack of academic experience and training had caused him to misunderstand the nature of references in his patent applications, he said. Speaking to CoinGeek, Dr. Wright said:

John is one of the authors of the original R package and incorporated much of the original statistical work into common packages people have now. This included the particular piece of data that that image came from. Ironically, Ill probably not terribly ironically I dont think Greg Maxwell has a clue when it comes to academic work, it is referenced. When youre referencing academically, you dont actually put different papers if its not from a different paper. This particular diagram comes from statistical notes and processes and courseware developed by John Maindonald.

You see they dont care about investigating truth. The fact that Ive actually referenced a document by saying its notes from the forthcoming publication does not mean its not referenced, it is referenced as part of a statistical software package and it is the image derived from that. Then, if Mr Greg Maxwell had done any statistical training using the CRAN R package before going into calling himself paintedfrog, he would have probably recognised the source, it is a very common one that is used in many statistical programming training courses around the world. Dr Maindonald was one of the original authors of the CRAN R statistical package and I learnt from him before this was popular or well-known.

All these accusations, and misinformation about Bitcoin, echo through online media and causes both accidental confusion and deliberate damage. Dr. Wright said reporters hadnt bothered to investigate their own stories thoroughly, and his own critics chose to attack the man rather than address them as technical debates.

What they and other detractors failed to understand, he said, is that he personally has plenty of patience to wait for real facts to emergesomething he attributed to his Aspergers spectrum condition.

Other people may stop, I dig in deeper. I bide my time.

It sounds like it is going to be a rocky road on the horizon for Wrights distractors.

New to Bitcoin? Check out CoinGeeksBitcoin for Beginnerssection, the ultimate resource guide to learn more about Bitcoinas originally envisioned by Satoshi Nakamotoand blockchain.

View post:
Craig Wright: Bitcoin truth versus the 'turd that is fake news' - CoinGeek

As the Bitcoin (BTC) price abruptly dropped from $9,500 to $8,100, some traders on Binance claimed that their winning short trades were unfairly cut short.

A trader named AthenaBank wrote on May 10:

Deleverage? Binance close my short after I make 7 times my investment. What's going on? Where is my short? The BTC dropped to $8,000. Who pays the difference?

But, the closure of the shorts was systematic and the process is called auto-deleveraging.

In the futures market, traders use debt or leverage to trade with larger capital. Binance, as an example, allows a trader to use 125x of their initial capital. If a user has $1,000, the user can trade with up to $125,000.

The role of a cryptocurrency exchange is to match orders between buyers and sellers. Hence, if trader A wants to short Bitcoin at $9,500, the role of the exchange is to find trader B that wants to buy BTC at the same price.

A problem occurs when the Bitcoin price sees an abrupt increase or decrease in price. More traders rush to short BTC, and as the price declines rapidly, it creates an imbalance in the orderbook.

When there is a big orderbook disparity, it can potentially cause a cascade of liquidations and cause the price of Bitcoin to plunge to abnormal prices. Such a price trend was seen on March 12, when the price of BTC crashed to as low as $3,600 on BitMEX.

Major Bitcoin futures exchanges like BitMEX and Binance Futures use a system called auto-deleveraging to ensure their orderbook remains balanced. When the insurance fund is not enough to cover for liquidations, then other trades are cut short to cover for the remaining liquidations.

Example of an auto-deleverage Bitcoin trade. Source: AthenaBank

Binance Futures says:

When a traders account size goes below 0, the Insurance Fund is used to cover the losses. However, in some exceptionally volatile market environments, the Insurance Fund may be unable to handle the losses, and open positions have to be reduced to cover them.

In such a case, highly leveraged trades are likely to have their trades sized down first. Traders that use 75 to 125x are often in the top percentile and are first to have their trades cut in abnormally volatile market conditions.

One trader explained:

There is a light for the auto deleverage queue on the trading page when you're in a position. Deleverage is used as insurance for long liquidation in this case to help sustain cascading liquidations and resulting in mega dumps. High leveraged trades are usually first.

Auto-deleveraging happens quite frequently in the cryptocurrency market because Bitcoin is significantly more volatile than most traditional assets.

The tendency of the price of Bitcoin to sway in a direction rapidly within a short period of time makes it challenging for exchanges to maintain balance in the market.

Cointelegraph reached out to Binance for a comment but did not receive a response by press time.

Excerpt from:
Traders Say Binance Cut Their Bitcoin Shorts: Here's Why It Happened - Cointelegraph

A handful of big names in crypto want in on the privacy features offered by Zcash.

It is humbling and inspiring that such a strong group of builders is leaning in to push that mission forward and help guide the future of Zcash, privacy coin co-founder Zooko Wilcox said in a press statement.

The Electric Coin Company (ECC) announced Monday the launch of the Zcash Developers Alliance (ZDA), an invite-only working group that includes the Lightning Network startup Bolt Labs, the cross-chain technology startup Thesis, the Ethereum conglomerate ConsenSys and two leading startups working on the Cosmos project, Agoric and Iqlusion, just to name a few.

The ZDA is an attempt to introduce a way to collaborate with the ECC, and the Zcash ecosystem, which focuses around other peoples priorities, Iqlusion founder Zaki Manian said. Product-market fit is other people [beyond fans and founders] actually caring about it.

Manian said the Zcash anonymity set is a valuable public good, describing how the privacy coin allows shielded transactions and the construct that allows individual transactions to get lost in the metaphorical crowd.

It feels like its time for a Zcash-Ethereum bridge, ConsenSys CEO Joseph Lubin said in a press statement.

Basically, other blockchains can connect to the Zcash ecosystem to enable, say, Cosmos users to enter and exit the staking system without revealing personally identifying information, just like Zcash users can shield their information while making payments. The more people tapping into this shared anonymity set, the more effective it is at anonymizing data.

Zcash Foundation researcher Henry de Valence said his team is helping bring the Zcash shielded pool to Cosmos, although the nonprofit hasnt been invited to the ZDA.

If you think privacy is important in order to have fungibility, then networks should have a privacy layer. So were going to add a privacy layer to Cosmos in such a way that the anonymity set from Cosmos users is joined up with the anonymity set of all the Zcash users, de Valence said.

The Ethereum Foundation is already researching ways to use these privacy options for Eth 2.0, the networks overhaul to Proof-of-Stake (PoS). Bolt Labs founder Ayo Akinyele has been working to enable some of Zcashs privacy features on Bitcoins Lightning Network since 2019. And yet, the alliance is about more than formalizing the work startups were already doing. Its about ECC shouldering the organizational burden, Akinyele said, so that other companies can focus on building tools related to the Zcash protocol.

Its not just about having the best anonymous crypto, Manian added. You have to have enough users of the anonymous crypto so that your anonymity set is sufficiently large that it can provide meaningful privacy.

Cypherpunk model

Agoric CEO Dean Tribble, an original member of cypherpunk mailing lists and community groups in decades past, said the ZDA is more like those hacker groups than it is like the Libra Association or JavaScript Foundation, or even Microsoft industry alliances.

The ZDA is invite-only, with the requirement being that members need to actively build privacy technology. This isnt a group for promoting token adoption or formalizing standards for specific products or services. Members are building wildly different tools, hoping to use the same privacy solution. As such, Akinyele said the ZDA has bi-annual meetings and private communication channels so projects can leverage resources across the group.

Were not building different solutions. We want to build one solution that can be adapted to multiple chains, Akinyele said. His startup launched a Zcash-inspired testnet for bitcoin in April called zkChannels. It works like the Lightning Network, in that it offers an additional layer for more complex features. While Lightning channels offer speed and reduced transaction fees, the Zcash-inspired channels offer privacy.

Its a way for a customer to establish a zkChannel with a merchant or a service and the merchant wont be able to link transactions on that channel to the identity of the customer, Akinyele said. In the case of [wallets], the provider just knows that two users paid each other.

He aims to have a beta version live this year, but it wont be connected to the Lightning Network quite yet. That will come in 2021, Akinyele said, when additional work enables both layers to be used at the same time. For now, imagine that people must choose between chocolate or vanilla frozen yogurt, privacy or speed. In the future, bitcoiners will be able to choose a chocolate-vanilla swirl swirl without diluting either feature.

The anonymity set is going to be tied to the number of channels the provider youve communicated with already has, Akinyele said, offering an example of a merchant with 10,000 channels. A customer using zkChannels is anonymized because the merchant cant see which of the 10,000 customer channels is the buyer.

Akinyeles startup is working on a Lightning-inspired scaling layer for Zcash as well. But tokens require different techniques than bitcoin, especially when it comes to privacy. This is why such different crypto companies joined ZDA.

We all have independent reasons to start that interoperability, said Tribble, whose team is focused more on smart contracts than payments. Agoric also plans to eventually launch its own token.

We dont believe theres going to be one winning chain, so getting the mainstream world online with added privacy requires the cooperation of a lot of chains, Tribble said.

Privacy perks

Despite the ZDAs cypherpunk roots, this is still an industry alliance focused on business, not rebels.

Theres often an inaccurate conflation of such privacy features with criminal intent. But a Rand Corporation survey commissioned by the ECC found only 1% of illicit darknet operations accepted zcash (the publicly auditable bitcoin is still the dominant cryptocurrency on the darkweb). Someday, consumers may choose ZDA member services to shop online at regular websites, without being constantly tracked for affiliate marketing profiles they have no control over.

We have to look at technology as a neutral, that it could be used for a wide variety of applications, Rand Europe analyst Erik Silfversten told Forbes.

Likewise, the ZDA aims to identify business needs and shift resources to making the Zcash protocol useful for companies that may not transact directly with the namesake privacy coin.

Other organizations may join the alliance in the future, like the Zcash Foundation or Interchain Foundation, if they get involved in industry projects, not research.

For me, the future state is in a year or two to be able to use zcash, or wrapped zcash, on Cosmos or Ethereum, said ECC CTO Nathan Wilcox. Were certainly thinking about folks that didnt make it in the first batch.

Over at the foundation, de Valence said the nonprofits goal is less token-centric and more focused on infrastructure, a privacy layer for the entire cross-chain ecosystem.

Our goal is to leverage the unique properties of Zcash particularly the strong network effects of its anonymity set to provide privacy to all of these projects, de Valence said.

One goal the nonprofit shares with the new alliance, ZDA, is both of them see diversifying Zcash stakeholders and developers as the top priority.

The focus for this year is interoperability, Nathan Wilcox said.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Read more:
Zcash Alliance Aims to Bring Privacy Tech to Bitcoin, Cosmos and Ethereum - CoinDesk

In brief

Recent data shows that the total amount of Bitcoin in circulation on the Ethereum blockchain is currently higher than in Bitcoins very own Lightning Network (LN), its second-layer scaling protocol.

According to the decentralized finance (DeFi) metrics website DeFi Pulse, Wrapped Bitcoin (WBTC) tokens currently locked in Ethereum are worth $11.4 million in total.

As Decrypt explained previously, WBTC is an ERC20 token that represents Bitcoin. One WBTC equals one BTC. Bitcoin can be converted into Wrapped Bitcoin and vice-versa.

Being an ERC20 token makes the transfer of WBTC faster than normal Bitcoin, but the key advantage of WBTC is its integration into the world of Ethereum wallets, decentralized applications and smart contracts. Currently, there is around 1,300 WBTC in circulation.

For comparison, there is roughly 927 BTC on the Lightning Networkworth just over $8 million at press time, according to Bitcoin Visuals.

Notably, in the past couple of years, various Lightning-focused blockchain startups have attracted significantly more money for the development of the network than actually circulates on it today, as some crypto enthusiasts have pointed out.

Even a few examples such as Lightning Labs (raised $2.5 million on March 15, 2018, and $10 million on February 5, 2020), Bolt Labs ($1.5 million on April 17, 2019) and ACINQ ($8 million on October 8, 2019) amount to $22 million in totalalmost three times more funds than are currently being held on the Lightning Network itself.

At the same time, it looks like these impressive funding rounds have paid off, as the last year passed in a flash of innovation for Bitcoins scaling solution and 2020 is arguably shaping up to become the best year yet for the Lightning Network.

Read more:
There's more Bitcoin on Ethereum than in the Lightning Network - Decrypt