Category Archives: Bitcoin
Evil ISPs could disrupt Bitcoin’s blockchain – The Register
Attacks on Bitcoin just keep coming: ETH Zurich boffins have worked with Aviv Zohar of The Hebrew University in Israel to show off how to attack the crypto-currency via the Internet's routing infrastructure.
That's problematic for Bitcoin's developers, because they don't control the attack vector, the venerable Border Gateway Protocol (BGP) that defines how packets are routed around the Internet.
BGP's problems are well-known: conceived in a simpler era, it's designed to trust the information it receives. If a careless or malicious admin in a carrier or ISP network sends incorrect BGP route information to the Internet, they can black-hole significant chunks of 'net traffic.
In this paper at arXiv, explained at this ETH Website, Zohar and his collaborators from ETH, Maria Apostolaki and Laurent Vanbever, show off two ways BGP can attack Bitcoin: a partition attack, and a delay attack.
The upside of both of these attacks is that they need an insider, because they happen at the ISP level.
They are, however, serious attacks.
In the partition attack, if an ISP is the only route between significant chunks of the Bitcoin network, a blackhole would stop the two sides communicating with each other.
Since the two islands will keep going processing transactions, and mining new Bitcoin. When the evil ISP connects the islands together again, they have no option but to discard mined Bitcoins, transactions, and mining revenue.
The delay attack is nastier, in a way, because unlike the partitioning attack, the researchers say it's undetectable.
Here's how it works:
The delay attack impacts merchants by making them susceptible to double-spending attacks; miners waste their processing power; and ordinary nodes can't propagate the latest version of the blockchain.
How did we get to this point?
Part of the problem is that Bitcoin's nodes have tended to gather together at relatively few ISPs: thirteen in all host about 30 percent of the whole Bitcoin network; and 60 percent of Bitcoin traffic is visible to just three ISPs.
The researchers say BGP hijacking (which is usually but not always inadvertent) already affects as many as 100 Bitcoin nodes a month. November 2015 saw a peak in this: around 8 percent of the whole Bitcoin network (447 nodes) suffered a traffic hijack in that month.
The work is to be presented at the IEEE Symposium on Security and Privacy 2017 in May, in San Jose. The trio also say they'll release code on GitHub offering a prototype of the delay attack.
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Evil ISPs could disrupt Bitcoin's blockchain - The Register
Is bitcoin ‘money’ or something else? Courts wade in – Buffalo News
When talking about thebizarre and sudden appeal of bitcoin, finance expert Brian Wolfe likes to compare it to a currency we all know: the U.S. dollar.
Ask anyone where a dollar comes from and they're likely to say, a bank. The more informed, Wolfe says, might answer the Federal Reserve.
Now ask those same people where bitcoin comes from; or,even better, what is bitcoin?
"People don't fully understand this," said Wolfe, an assistant professor of finance at the University at Buffalo School of Management. "To the consumer, it's a bit of novelty."
It's anoveltyhas more than doubled in value the past year and, since its arrival on the digital scene in 2009, has shaken up financial markets, spawned other so-called cryptocurrencies and remained a mind-scratching phenomenon.
Now, a federal judge in Buffalo is wading into the national debate by suggesting that bitcoin isn't money at all.
In a local money laundering case, U.S. Magistrate Judge Hugh B. Scott recently ruled that bitcoin is similar to a commodity, something akin to a collectible, not a form of currency.
While Scott's decision may not stand the district judge reviewing it may take a different position it does raise the type of legal questions that confront people and businesses eager to move away from traditional forms of money.
Wolfe says bitcoin may not be the ultimate answer, but cryptocurrencies and what they represent a rapid, decentralized, low-cost digital approach to transactions, protectedby encryption are here to stay.
"I think it's inevitable," he said. "The technology that underpins bitcoin is extremely powerful."
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A virtual currency
Which, of course, begs the question: What is bitcoin?
Described by advocates as a digital or virtual currency, bitcoin is a medium of exchange that, unlike the dollar, is completely decentralized. There is no central bank or middle man, so two parties can do business directly.
Bitcoin also allows consumers to avoid transaction or bank fees and, because of the technology used to transmit and store information, there's a sense of anonymity and security.
Experts say the anonymity is exaggerated, but law enforcement officials say it remains a popular form of exchange for criminals engaging in everything from sex trafficking and drug smuggling to identity theft and illegal weapons sales.
"It certainly has caught on among people using the dark net and among people who want to hide their tracks," said Assistant U.S. Attorney Wei Xiang.
The anonymity and absence of a middle man are at the root of bitcoin's appeal, and it's that consumer and investor demand that drives its volatile rise and fall in value. Think of it as an ever-changing stock or precious metal.
The rising value of bitcoin
Date Value in dollars Number of available bitcoins
April 6,2016 420.37 15,404,775
June 17, 2016 754.84 15,673,373
Aug. 5, 2016 580.65 15,800,600
Nov. 19, 2016 745.10 15,998,175
Jan. 4, 2017 1,069.40 16,085,050
March 4, 2017 1,274.54 16,199,125
April 6, 2017 1,166.50 16,255,275
Source: Coinbase and Bitcoincharts.com
Viewed as electronic cash, bitcoin is actually the product of a complex, encrypted computer program. New bitcoins are introduced into circulation every day by the people or "miners," as they're known who use their computers to process bitcoin transactions.
To record a transaction, a miner must find the online equivalent of a new ledger page in bitcoin's ever-growing database of transactions, and that means winning a computational contest with other miners. The winner is rewarded with new bitcoins.
From that point on, those bitcoins become part of the more than 16 million bitcoins in circulation and available for use by consumers or investors, criminals and non-criminals.
There's no shortage of get-rich stories involving bitcoin. Like the Norwegian man who bought 5,000 bitcoins when they first came out in 2009 and promptly forgot about his $27 investment. Six years later, he remembered he still had the bitcoins and realized they had becomeworth $980,000.
Created in 2009 by Satoshi Nakamoto, an individual many believe is a composite, bitcoin has grown in use and value, often fluctuating wildly when compared to the dollar. In the past year, a bitcoin has increased from $420 to $1,166 in value.
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Laundering withoutmoney?
One the province of drug dealers and terrorists, bitcoin has gained some legitimacy as a form of online payment, and more and more vendors and retailers are accepting it, including Microsoft and Expedia, according to 99bitcoins.com, which tracks the use of the digital currency.There are even bitcoin ATMs in some cities, including Toronto.
Scott doesn't dispute the value of bitcoins but, in his eyes, that doesn't make them money. Scott defines currency as a financial instrument or medium of exchange that is assessed value, is regulated and is protected by a sovereign power.
Yes, bitcoins have value, but they are not regulated and there is no government or central authority backing them up. To the contrary, Scott noted, "the whole point of bitcoin is to escape the entanglement with sovereign governments."
"Money is not just any financial instrument or medium of exchange that people can devise on their own," the judge said in his ruling.
Scott said he could not rule out the possibility that bitcoin may someday become a widespread and routine form of exchange but, until then, it remains a commodity compared to collectibles like "marbles, Beanie Babies or Pokemon trading cards."
While Scott's decision, a recommendation to U.S. District Judge Charles J. Siragusa, raises interesting legal questions about bitcoin, it is unlikely to move forward in the courts. Defense lawyers in the money laundering case that gave rise to the decision are withdrawing their motion to dismiss the charge, in part because Siragusa has indicated he might reject Scott's recommendation.
Early on, it was Siragusa who noted the potential "far-reaching" consequences of Scott's decision, and they were obvious in the money laundering case against Richard Petix, a 31-year-old Rochester man.
Petix, who has a previous child pornography conviction, is accused of selling $13,000 in bitcoins to an undercover federal agent as part of a drug distribution and money laundering scheme. Scott recommended the money laundering charge be dropped because bitcoin isn't money.
Despite Scott's recommendation, Petix's defense lawyers arewithdrawing their motion to dismiss and are now planning to take his case to trial, in part because of Siragusa's expected decision and because they want to get the matter resolved quickly.They also claim their client is far removed from the dark net and criminal element that uses bitcoin to hide its identity and location.
"This kid traded bitcoin like other people trade baseball cards, stamps or coins," said defense lawyer Matthew R. Lembke of Rochester.
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Feds split on bitcoin
By it's very nature, bitcoin is difficult to understand. The notion that a computer program can produce a currency or fund that increases and decreases in value strikes many as far-fetched, even in this age of digital innovation.
While lawyers can argue over Scott's decision and whether it adds to the confusion or helps clarify it, the judge is not alone in suggesting bitcoin is not money.
The Internal Revenue Service defines it as "property," not currency, for tax purposes and opened the door to bitcoin owners paying for capital gains. In contrast, the U.S. Treasury classifies it as a decentralized virtual currency.
Until the government can agree on what bitcoin is, experts say it will struggle to reach the same level of legitimacy as more traditional forms of money.
"It has some mainstream appeal," said Xiang, the federal prosecutor. "And if enough people get comfortable with bitcoin, maybe it doesn't go away. Maybe it has staying power."
Wolfe thinks bitcoin may be around awhile, and the biggest reason why is the"blockchain" technology behind it.
That technology allows for the creation of permanent and uncorruptible blocks of information, a sort of digital ledger or spreadsheet, and that kind of credible and transparent record could prove invaluable asconsumers, investors and businesses look for alternatives to traditional money.
Blockchain technology also eliminates the middle man in business transactions, a role traditionally carried out by a financial services company, and that is why so many banks and exchanges are researching and investing in the technology.
There have been setbacks for the virtual currency, most notably the disappearance of $450 million in bitcoins from Mt. Gox, a large, Tokyo-based exchange, in 2014. The exchange shut down and later revealed the bitcoins were likely stolen.
"It survived that," Wolfe said. "It was interesting enough and valued enough to survive even Mt. Gox."
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Is bitcoin 'money' or something else? Courts wade in - Buffalo News
Russia Caves In on Bitcoin to Open New Front on Money Laundering – Bloomberg
A collection of bitcoin tokens stand an arranged photograph.
Only a year ago Russias Finance Ministry was threatening jail time to anyone using digital currencies.
In a major U-turn, its now edging closer to their acceptance as a legitimate financial instrumentto open a new line of attack on money laundering.
The authorities hope to recognize bitcoin and other cryptocurrencies in 2018 as they seek to enforce rules against illegal transfers, Deputy Finance Minister Alexey Moiseev said in an interview. The central bank is developing a joint position together with the government on digital currencies, according toits press service.
The state needs to know who at every moment of time stands on both sides of the financial chain, Moiseev said. If theres a transaction, the people who facilitate it should understand from whom they bought and to whom they were selling, just like with bank operations.
While bitcoin isnt regulated by any government, it has come under increasing scrutiny in some countries as a way to shelter assets from the authorities or launder ill-gotten gains. In China, which has occupied a central role in trading and mining bitcoin in recent years,the three largest exchanges imposed a moratorium on all coin withdrawals in March as the central bank issued new guidelines on their use.
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Tracking cryptocurrencies could become the latest tool enlisted in the Bank of Russias battle against money laundering, which has seen hundreds of lenders lose their licenses over the last three years. The plan to legalize and monitor bitcoin is taking shape as traditional schemes are drying up, with dubious operations such as fake trades and loans used to move money abroad dropping by half to $771 million last year, according to central bank data.
Bank of Russia Deputy Governor Olga Skorobogatova said in February that the authorities would decide if digital currencies can be considered as asset, cash or security by mid-2017.
Foreign banks have sometimes been swept up in investigations of Russian schemes. Royal Bank of Scotland Group Plc received information requests from the U.K. in March in relation to an alleged money laundering ring that moved money through Moldova and Latvia between 2010 and 2014.
Deutsche Bank AG in January was fined $629 million by U.K. and U.S. authorities for compliance failures that saw the bank help wealthy Russians move about $10 billion abroad using transactions that may have covered up financial crime.
Crime, corruption, and tax evasion spawned at least $211.5 billion in illicit Russian outflows between 1994 and 2011, with illegaltransfers reaching $552.9 billion, according to Washington-based Global Financial Integrity. Bitcoin was the first digital currency to achieve a measure of popularity, thanks to its use of blockchain, an online ledger that tracks and verifies every time the virtual money is used. Its faced some criticism from those who say the software itrelies on is too rigid to gain widespread acceptance, with hipper investors moving on to the more sophisticated record book used by Ethereum.
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Russia Caves In on Bitcoin to Open New Front on Money Laundering - Bloomberg
Meet the millennials making big money riding China’s bitcoin wave – The Guardian
On a sunny afternoon in west Beijing, on the auspicious eighth floor of a nondescript concrete high-rise, Huai Yang sits with the curtains drawn in his apartment, making his own luck.
For the past six months, 27-year-old Yang has worked mainly from home, mainly from his sofa, tracking and trading bitcoin, and watching the money roll in. The flat itself is modestly sized; Yang moved in in his pre-bitcoin days when he worked variously for a crowdfunder start-up, a branding consultancy and dabbled in hedge-fund management, all of which he describes as creative financial work. Now, though, his main focus is bitcoin, which is much younger, more fun, and much more money. Yang claims to make up to 1m yuan (116,000) a month, under the radar of the taxman, purely from trading the online cryptocurrency.
Bitcoin has no physical form but the rewards are very tangible; Yangs home is packed full of expensive gadgetry, most prominently a mega-sized flat screen smart board, over a metre wide, which Yang uses to chart bitcoins rise and fall in HD.
Normally, the graphs on Yangs screen show bitcoins and his own fortunes going up and up. At the time of writing, one bitcoin is worth 6,600 yuan (768) recent months have seen the value hover well above 8,000 yuan. The global worth of bitcoin is over $14bn USD (11.3bn), of which over 90% is in yuan, and Yang and his peers are cashing in. I want a more splendid life, he says.
Theres certainly big money to be made in bitcoin, but it comes at a high risk. Bitcoin was designed to be a peer-to-peer currency, free from interference from government and central banks. Since the currency was launched in 2009, however, the Chinese market, where government interventions are common, has come to dwarf all others.
One such intervention took place in February this year, when the government warned that there would be serious violations for trading platforms that failed to abide by strict money-laundering regulations. In line with this, OKCoin and Huobi.com, the two biggest exchanges in China, announced that they would be suspending bitcoin withdrawals for one month.
Incidents like these, which Yang sees as not convenient, but not [a] problem, give Chenxing (who asked that I only use his first name) pause for thought. Chenxing, a boyish, skittish 35, has been trading bitcoin for the past four months, after giving up his too comfortable job as a geo-information engineer for the government. The governments pressure on bitcoin platforms is not so easy to understand, he tells me. Im not sure its really about money laundering they try to control [bitcoin], but they cannot.
For Chenxing, its the system itself that is vulnerable: Technology changes every day, he explains. Maybe tomorrow a hacker can find a way to crack bitcoin the security is from mathematics. If you can crack the mathematics, bitcoin is nothing. Thats why, even though Chenxing describes himself as a believer in bitcoin, he doesnt plan to stay involved for the long term.
Its really not a stable thing, he says, both in terms of fluctuating prices and the uncertain technological future of the cryptocurrency. That said, hes still making more money than in his previous government job. In a good month, Chenxing will pocket the cash value of around five bitcoin, which is close to 40,000 yuan, and which Chenxing prefers to have in cold, hard cash.
Chenxing is something of an anomaly in Chinese bitcoin circles, where the general mood is one of evangelical faith in the currencys potential, especially in an economy where the government often devalues the national currency.
Brendan Gibson, 32, is a United States national who has been in China for six years, trading bitcoin for three. Weve barely sat down to talk when Gibson takes my phone and downloads the BTC Wallet app onto it, before transferring me the seeds of my cryptocurrency fortune: 0.0027 bitcoin, worth 2.50, which is the amount that everyone in the world would have if the 21m bitcoin in existence were equally divided up between all 7.8 billion of us. He believes that everybodys aunt or grandma should be using bitcoin.
For Gibson, bitcoin is a way of life. He hopes to be completely bank free in the near future. Hailing from the shady mortgage industry of corporate America, Gibson shares Chenxings distrustful attitude, but is more concerned about private banks than bitcoins technological vulnerability. Im just kind of fed up with the system, he tells me over coffee in a slick caf and co-working space from where Gibson does most of his work remotely.
I dont think economies should be built on inflated numbers, and I think its kind of ridiculous that everybody relies on this inflated number in their bank account when its definitely not there bitcoin and other cryptocurrencies are making it so that we are our own banks, and thats one less things we have to worry about. Gibson owns two companies in China, and as far as possible uses bitcoin for all his daily expenses, converting the personal profits he makes into bitcoin to avoid using banks.
One of the commonly cited weaknesses in the bitcoin system is that if you lose your private key to access your bitcoin wallet, the bitcoin within are lost forever. In 2015, it was estimated that up to 30% of all mined bitcoins had been lost, with a value of 625m. Unsurprisingly, plenty of people see this as an opportunity to make some money.
Sun Zeyu, 27, works at a tech start-up based near Beijings university district that specialises in bitcoin. His latest project is Coldlar, an offline, physical wallet that stores users bitcoin and can be accessed by scanning a QR code. Bitcoin security is a tough question, Sun tells me, which is why he and his colleagues designed a product that allows people to circumvent bitcoin platforms and have even greater control over their bitcoin. Now that the value [of bitcoin] is going up, he explains, people really realise the importance of security.
Before, when we just traded one or two coins, people didnt mind, [but] now the value of bitcoin is much bigger. Sun got involved with bitcoin while at university after attending a seminar run by Huobi, one of the biggest trading platforms in China. Like his flashier friend Yang, Sun wanted money, and lots of it. He wont tell me exactly how much he earns, but assures me that its hundreds or thousands times more than the 10,000 yuan per month he was earning when he first dabbled in bitcoin three years ago.
His money comes from both his trading activity and his company salary. With the growth of bitcoin and related products like his Coldlar wallet, Sun believes that in 10 years time, the value of the cryptocurrency will be one bitcoin, one house in Beijing. Minor shocks to the system, like the recent suspension of bitcoin withdrawals in China, are just like breathing, he insists, and the inhalations of profit dwarf any other bumps in the road.
Despite the solitary nature of their work, Yang, Sun, Gibson and Chenxing are all sociable creatures. Gibson is connected to hundreds of bitcoin aficionados in China, and has introduced close to 1,000 new people to the technology (although how many are like me, with 2.50 lying dormant in an unused wallet, is unknown), such is his enthusiasm for the cryptocurrency. Chenxing cites the social side of the bitcoin scene in Beijing as one of the main attractions of staying in the industry and the city.
I can meet some fun people who really love bitcoin I think most of the people who like bitcoin are people who like freedom he says. Yang, however, takes a slightly harder-edged approach. He has little patience for sceptics: Yes, bitcoin is a risk. Why should I have to discuss these things with [people concerned about the security]? I earn my money, thats enough. I dont waste my time explaining bitcoin [if] youre not my client. In some ways, Yang concedes, the less people understand bitcoin, the better it is for him. At the moment, the industry is like an ATM for him and his peers, and hes perfectly happy for things to stay that way.
In the fast-changing world of the crypto-currency, nothing seems to stay the same for long. Whether its unpredictable government interventions, or debates within the community about how the industry can and should be scaled, general growth in value thus fair doesnt necessarily suggest anything about the future of bitcoin, despite the faith of its adherents. Gibson makes the point that bitcoin has only been around for nine years; it took PayPal at least 10 to properly catch on.
In Japan it has recently been recognised as legal tender. Its unlikely that the same could ever happen in China, no matter how much its popularity continues to balloon. Chenxing, who has years of insider experience, is sure that [the government] will never accept a thing thats not built by themselves. Many bitcoin traders in China are in it for the long haul, confident that they can ride out any governmental interferences, as long as they have access to the internet. Chenxing, however, is more paranoid. His final thoughts on bitcoin are: I never feel secure.
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Meet the millennials making big money riding China's bitcoin wave - The Guardian
Op Ed: Bitcoin Miners Consume A Reasonable Amount of Energy – Bitcoin Magazine
We have all seen photos of large data centers hosting mining hardware built from specialized ASICs designed to solve the Bitcoin proof-of-work (a double SHA256 hash.) These data centers tend to be located in places with inexpensive electricity, often where hydroelectricity is plentiful, like Washington State in the U.S. But how much electricity is consumed by these miners? Knowing this helps us to better understand the economics and financial opportunities of Bitcoin mining. Previous estimates have not been very accurate, often making simplistic assumptions. So I decided to conduct the most exhaustive research on this topic that I could. All sources used in this research are listed in my original blog post.
I started by drawing a chart juxtaposing the Bitcoin hash rate with the market availability of mining ASICs and their energy efficiency. This allows calculating with certainty the lower and upper bounds for the global electricity consumption of miners (which is not wasteful in my opinion.)
I split the timeline in 10 phases representing the releases and discontinuances of mining ASICs.
I reached out to some Bitcoin ASIC manufacturers when doing this market research. Canaan was very open and transparent (thank you!) and gave me one additional extremely useful data point: They manufactured a total of 191 PH/s of A3218 ASICs.
Determining the upper bound for the electricity consumption is then easily done by making two worst-case assumptions. Firstly we assume that 100% of the mining power added during each phase came from the least efficient hardware available at that time that is still mining profitably. Secondly we assume none of this mining power, some of it being barely profitable, was ever upgraded to more efficient hardware.
Hardware that is no longer profitable has obviously been retired. As of February 26, 2017 (difficulty = 441e9, 1 BTC = 1180 USD, and assuming $0.05/kWh half the worldwide average electricity cost) an ASIC is profitable if its efficiency is better than 0.56 J/GH:
1e9*3600 (hashes per hour of 1 GH/s) / (2^32 * 441e9 (difficulty)) * 12.5 (BTC reward per block) * 1180 (USD per BTC) / 0.05 ($/kWh) * 1000 (Wh/kWh) = 0.56 J/GH
So 3 ASICs in the chart are no longer profitable: Neptune, RockerBox, and A3222.
Also, most of the hardware deployed during phase 0CPUs, GPUs, FPGAs, first-generation ASICshas not been profitable for a long time, so we make the assumption these miners who deployed during this phase have since then upgraded to the least efficient ASIC available at the end of phase 0 that is still profitable: BM1384.
Furthermore, despite A3218 being the least efficient in phases 5-8 we can only assume 191 PH/s of it were deployed, and the rest of the hash rate came from the second least efficient ASIC: BM1385 (phase 6), Bitfury 28nm (phase 7), or BF8162C16 (phase 8).
To summarize all this, the upper bound estimate leads to the following breakdown of hardware deployments:
Phase 0: 290 PH/s @ 0.51 J/GH (BM1384)3
Phases 1-3: 150 PH/s @ 0.51 J/GH (BM1384)
Phase 4: 40 PH/s @ 0.25 J/GH (BM1385)
Phase 5: 191 PH/s @ 0.29 J/GH (A3218) + 159 PH/s @ 0.25 J/GH (BM1385)
Phase 6: 670 PH/s @ 0.25 J/GH (BM1385)
Phase 7: 350 PH/s @ 0.20 J/GH (Bitfury 28nm)
Phase 8: 150 PH/s @ 0.13 J/GH (BF8162C16)
Phase 9: 1250 PH/s @ 0.15 J/GH (A3212)
Average weighted by PH/s: 0.238 J/GH
Therefore the upper bound electricity consumption of the network at 3250 PH/s assuming the worst-case scenario of miners deploying the least efficient hardware of their time (0.238 J/GH in average) is 774 MW or 6.78 TWh/year.
Now, what about a lower bound estimate? We start with a few observations about the latest 4 most efficient ASICs:
Bitfury BF8162C16s efficiency can be as low as 0.06 J/GH. But the clock and voltage configuration can be set to favor speed over energy efficiency. All known third party BF8162C16-based miner designs favor speed at 0.13 J/GH (1, 2). Bitfurys own private data centers also favor speed with their immersion cooling technology (1, 2, 3). The company once advertised the BlockBox container achieved 0.13 J/GH (2 MW for 16 PH/s), presumably close to the efficiency achieved by their data centers. But we want to calculate a lower bound, so lets assume the average BF8162C16 deployed in the wild operates at 0.10 J/GH.
KnCMiner Solar is exclusively deployed in their private data centers and achieves an efficiency of 0.07 J/GH.
Bitmain BM1387s efficiency is 0.10 J/GH.
Canaan A3212s efficiency is 0.15 J/GH.
As to market share, we know KnCMiner declared bankruptcy and was later acquired by GoGreenLight. They currently account for 0.3% of the global hash rate a rounding error we can ignore.
Therefore the lower bound electricity consumption of the network at 3250 PH/s assuming the best-case scenario of 100% of miners currently running one of the latest 3 most efficient ASICs (at best 0.10 J/GH) is 325 MW or 2.85 TWh/year.
Can we do better than merely calculating lower and upper bounds? I think so, but with the exception of Canaan, other mining hardware manufacturers tend to be secretive about their market share, so anything below are just educated guesses.
Virtually all of the 1750 PH/s added after June 2016 came from BF8162C16, BM1387, and A3212, with the latter having the smallest market share. So the average efficiency of this added hash rate is likely around 0.11-0.13 J/GH. This represents 190-230 MW.
I would further venture that out of the 1500 PH/s existing as of June 2016, perhaps half was upgraded to BF8162C16/BM1387/A3212, while the other half remains a mixture of BM1385 and A3218. This represent 750 PH/s at 0.11-0.13 J/GH, and 750 PH/s at 0.26-0.28 J/GH, or a total of 280-310 MW.
I believe an insignificant proportion of the hash rate (less than 5%?) comes from all other generations of ASICs. Bitfury BF864C55 and 28nm deployments were upgraded to BF8162C16. KnCMiner/GoGreenLight represents 0.3%. BM1384 is close to being unprofitable. RockerBox, A3222, Neptune have long been unprofitable.
Therefore my best educated guess for the electricity consumption of the network at 3250 PH/s adds up to 470-540 MW or 4.12-4.73 TWh/year.
Economics of Mining
Given the apparent high energy-efficiency, hence relatively small percentage of mining income that one needs to spend on electricity to cover the operating costs of an ASIC miner, it may seem that mining is an extremely profitable risk-free venture, right?
Not necessarily. Though mining can be quite profitable, in reality it depends mostly on (1) luck about when BTC gains in value and (2) timing of how early a given model of mining machine is put online (compared to other competing miners deploying the same machines.) I say this as founder of mining ASIC integrator TAV, as an investor who deployed over time $250k+ of GPUs, FPGAs, and ASICs, and as someone who once drove 2000+ miles to transport his GPU farm to East Wenatchee, Washington State in 2011 in order to exploit the nations cheapest electricity at $0.021/kWh Yes, it was worth it!
To demonstrate the real-world profitability of a miner, I modeled the income and costs generated by an Antminer S5 batch #1 ($418, 590 W, 1155 GH/s) starting from its release date on 27 December 2014, assuming mined bitcoins are sold on a daily basis at the Coindesk BPI, and assuming $0.05/kWh. See income-antminer-s5.csv
The CSV file shows that on its first day an S5 mined 0.01472124 BTC = $4.64, cost $0.71 in electricity, therefore generated $3.93 of income (15% of mining income is spent on electricity.)
The income decreased over time. 1 year and 9 months later, on October 8 2016, electricity costs surpassed income for the first time. By that date the total income was $1021. So a miner who had invested $418 into an S5 would have turned it into $1021, a 2.4 gain. So yes, mining was quite profitable. (However another investor who on 27 December 2014 bought $418 worth of bitcoins would be worth $818 on 8 October 2016, a 2.0 gain. It could be argued that a large reason why mining was profitable came simply from BTC gaining value.)
Some interesting observations:
By 15 January 2016 84% of the lifetime income of the S5 had been generated; at this point 39% of the daily income ($0.71 out of $1.84) was being spent on electricity.
By 15 July 2016 99% of the lifetime income of the S5 had been generated; at this point 78% of the daily income ($0.71 out of $0.90) was being spent on electricity, and in total $403 has been spent on electricity which is still slightly less than the cost of the hardware at $418.
The S5 started with electricity costs at 15%, generated a good chunk of its income by 39%, and essentially became worthless beyond 78%.
Summary
We can calculate the upper bound for the global electricity consumption of Bitcoin miners by assuming they deploy the least efficient hardware of their time and never upgrade it. As to the lower bound it can be calculated by assuming everyone has upgraded to the most efficient hardware. The table below summarizes the electricity consumption of miners, their energy efficiency, annual electrical costs (assuming $0.05/kWh), and percentage of the worlds energy consumption (9 425 Mtoe, or 109 613 TWh, or 12.51 TW, according to IEA statistics for year 2014,) with all numbers calculated as of February 26, 2017:
This may sound like a lot of electricity but when we considering the big picture, I believe Bitcoin mining is not wasteful. Also an interesting comparison to make is that according to a 2008 study from the United States Energy Departments Energy Information Administration (EIA) these figures are comparable to or less than the annual electricity consumption of decorative Christmas lights in the country (6.63 TWh/year.)
Lastly, when modeling the costs and revenues of a miner over its entire life such as the Antminer S5, we find out that the hardware cost is as high as, if not higher than, its lifetime electricity cost. Therefore a miners business plan should not look at the electricity costs alone, and cannot trivialize hardware costs when calculating expected profitability.
This is a guest post by Marc Bevand. The opinions expressed are his own and do not necessarily reflect those of Bitcoin Magazine.
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Op Ed: Bitcoin Miners Consume A Reasonable Amount of Energy - Bitcoin Magazine
Bitcoin in Gambling Business, What You Need to Know – newsBTC
Bitcoin is everywhere! Bitcoin continues to take the world by storm. The mainstream media simply does not understand.
Now, Bitcoin is threatening to take over the online gambling business. It is not a surprise, more industries are accepting Bitcoins every week or so. Here is what you need to know about Bitcoin in the gambling business.
When you want to play Blackjack, Poker or Bingo, you put your money down on the table. With online gambling, you deposit your digital funds with the casino. Bitcoin gambling does the very same thing.
Bitcoin is a cryptocurrency. What is that? It is a long word, but all it means is that Bitcoin is a digital currency. Bitcoin is money.
Money is basically anything, which is exchanged for goods and services and fulfills the primary characteristics of money. Some of these features are Store of Value, Medium of Exchange and Fungibility. Bitcoin is money because it has each of these attributes.
Thus, when you want to gamble and need some money, you can use Bitcoin. If you made some Bitcoins, when you painted a fence, then use them to gamble. Everyone needs to vent, from time to time.
Bitcoin is also an amazing store of value. Did you hear that the value of Bitcoin just surpassed gold? Bitcoin is rising in value. How many other forms of money can say the same thing?
You can choose any number of ways to pay for your gambling opportunity credit cards, online payment systems or Bitcoin. Bitcoin has some key advantages because it is an electronic currency. In many ways, Bitcoin mirrors the versatility, speed and beauty of the World Wide Web.
Bitcoin is open. It is created by a community of Web developers who mine the Bitcoins. It has a very relaxed control structure. No nation has a monopoly over Bitcoin.
Bitcoin is rather new. It is a baby of the Internet. As such, it has only been around since 2008. Right now, it is still primarily being promoted by the first adopters. In fact, Bitcoins are still being mined.
Bitcoin is unencumbered. Do you know how many credit card laws, there are? The reason why credit cards take so long to process is because there are so many regulations and companies involved. You dont have that with Bitcoin.
Do you want to gamble quickly? Of course you do. Can you gamble quickly with Bitcoin? Yes.
You can generally deposit and withdraw your funds, faster with Bitcoin. You dont need to wait for the banks to check up on all your financial records. This is a cryptocurrency, meaning that its Blockchain is encrypted to keep you secure.
You can get Bitcoins from your friends, miners or any of the following firms: Kraken.com, BTC-E.com or Localbitcoins.com. Once you own Bitcoins, a whole new world, opens up for you.
Finally, you want to make sure that you find an authentic Bitcoin Casino. You know that there are a vast range of types of websites online. The legitimate Bitcoin Gambling website offers Provably Fair Gambling. What is that?
Provably Fair Gambling is a way to verify the websites authenticity using cryptographic hash functions. This is how the Bitcoin Gambling community is establishing its credibility. So, if you love online gambling, now you can have more fun, by using the efficient electronic currency: Bitcoin.
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Bitcoin in Gambling Business, What You Need to Know - newsBTC
Test How Much You Know About Bitcoin – WSJ – Wall Street Journal (subscription)
Wall Street Journal (subscription) | Test How Much You Know About Bitcoin - WSJ Wall Street Journal (subscription) Here's a Wall Street Journal quiz to test your knowledge of the cryptocurrency. |
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Bitcoin Exchange OKCoin Publishes Heightened AML Guidelines – CryptoCoinsNews
OKCoin, one of Chinas so-called Big Three bitcoin exchanges, has published new guidelines to adhere to AML requirements by regulators and authorities.
The announcement, published on its China-based and international websites, comes amid the ongoing withdrawal freeze of bitcoin and Litecoin enforced by Chinese exchanges due to regulatory pressure from the Peoples Bank of China, the countrys central bank.
The guidelines read nearly identical for Chinese and international users.
Roughly translated, the Chinese announcement begins:
Considering from the perspectives of national Anti-Money Laundering regulations and risk control, we have established a few suggestions and guidelines for you. These are purely for the purpose of boosting your trading experience and account security. They will not affect your funds and trades.
More specifically, the bitcoin exchange informs users that they could be subject to enhanced due diligence once they reach a certain level of account balance. For international users, this stands at $10,000 over a lifetime USD deposit while no specifications are revealed for Chinese users.
OKCoin underlines video verification as an example of enhanced due diligence methods.
Level 2 verification will require a copy of your passport, a copy of your ID /driving license, and additionally, a copy of your proof of residential address (e.g. bank statement, utility bill) issued within 3 months when needed, reads an excerpt from the new KYC procedures, asking customers to be prepared with the above-mentioned paperwork in front of a camera.
Video verification will require a device that has video recording function and access to the internet (e.g. cellphone, laptop, tablet). You will be required to show your legal documents in front of the camera, the notice added.
The other notable guideline informs users that single-signature wallet addresses created before today, starting with 1 and L for Bitcoin and Litecoin respectively, will stop functioning on April 23, 2017. Multi-signature addresses will not be affected.
Nearly 2 months ago to the day, OKCoin paused bitcoin and litecoin withdrawals to comply with relevant national AML, payment and settlement of foreign exchange management and other financial laws and regulations. The withdrawal freeze, initially estimated to last a month, sent bitcoin prices crashing. The announcement followed January reports from China that pointed to a PBOC-led investigation into bitcoin exchanges finding irregularities.
While withdrawals were expected to resume in March, Chinese exchanges confirmed their postponement, only to be resumed after regulatory approval. After todays announcement, Chinese users extended wait to retrieve their bitcoin and litecoinbalances could be nearing its end.
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Visa dodged bitcoin, embraces blockchain – San Francisco Chronicle
In 2014, a BitPay executive went on CNBC to talk about replacing Visa and MasterCard with bitcoin, a virtual currency.
But Visa was the piece of the payments puzzle that was irreplaceable.
Last spring, BitPay rolled out a Visa-branded card that lets consumers add bitcoin online and then spend it at stores or withdraw dollars from ATMs, just like a regular debit card.
Why are digital currency revolutionaries changing their tune and partnering with established payments players? It turns out that BitPay needed Visas help because most merchants still prefer Visa over a digital currency.
While were constantly working to make bitcoin every merchants favorite form of payment, sometimes our favorite stores and restaurants arent ready to accept it, Corey Glaze, a senior sales engineer for BitPay, wrote in a blog post.
Its far from alone: BitPlastic and Wirex offer MasterCard-branded bitcoin debit cards, while Shift, Xapo and CryptoPay also rely on Visa to give the digital currency real-world spending power.
Its a tacit admission that, despite bitcoins hype, Visa and its counterparts still rule the business of moving money. About 40 million outlets around the world accept Visa cards, according to RBR, a research and consulting firm. By contrast, research site Coindesk estimates that about 100,000 merchants accept bitcoin. Its not clear how many people deposit or withdraw cash at bitcoin ATMs, but on a recent Sunday, a Coinsource ATM at Mission Grocery observed by The Chronicle went unused for hours.
Bitcoin, though, is still having an enormous impact on Visa. Youd just have to dive into the guts of the business to see it. Executives at the San Francisco company see the currency not as a threat but as a wellspring of technical innovation.
Were constantly learning, constantly evaluating anything that impacts electronic payments, said Rajat Taneja, Visas executive vice president of technology.
Bart Stephens, managing partner of Blockchain Capital, stands next to a bitcoin ATM.
Bart Stephens, managing partner of Blockchain Capital, stands next...
Visa is now heavily investing in blockchain, the clever system that underpins bitcoin and similar digital currencies. Blockchain was supposed to cut out middlemen like Visa and MasterCard. But in fact, it may empower them to do business cheaper and faster.
In October, the company began testing a service called Visa B2B Connect that borrows principles from blockchain to allow businesses to more quickly process payments across borders. While consumers may look to choose between paper and plastic at the cashier, businesses are stuck with costly options like wire transfers, particularly for international transactions.
Bitcoin isnt a good option, because businesses still need to pay employees and suppliers in old-fashioned national currencies. But transferring money digitally, with something like the speed and security of bitcoins blockchain, has considerable appeal.
Companies dont want to use bitcoin as unit of value but rather as a way to understand the underlying ledger technology behind it, said Tom Brown, a partner with the banking and global payment systems practice of Paul Hastings law firm in San Francisco.
Blockchain technology relies on something called a distributed ledger, which parcels out the work of tracking and verifying transactions to a network of synchronized computers. Anyone on the network can see that an exchange occurred; that view allows for trust and prevents hackers from stealthily altering transactions.
Its a shift in mind-set from the old days when Visa was a consortium of banks that moved money on a private exchange.
When we look at blockchain, we can see a lot of interesting possibilities, Taneja said.
In some ways, its a throwback to the earliest days of Visa, which founder Dee Hock saw as a chaordic organization a synthesis of chaos and order, with peer-to-peer aspects that might one day create a universal currency. While Hock left in 1984 and Visa changed in the ensuing decades from a cooperative of competing banks to a regular, for-profit corporation, its still got glints of his vision.
The fact that Visa might one day discard the money-moving networks it helped build in favor of an upstart technology born from the Internet could only please Hock.
Only fools worship their tools, he once wrote.
Thomas Lee is a San Francisco Chronicle columnist. Email: tlee@sfchronicle.com Twitter: @ByTomLee
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Mirai, The Infamous Internet of Things Army, Can Now Mine Bitcoin – CoinDesk
Remember that Internet of Things botnet? The one known for temporarily shutting down a numberof the world's largest websites last autumn?
Well, anewer version has beendetected, but as well asbeing able to issue DDoS attacks and the like, it's equippedtominebitcoin.
In the digital age, it's possible for hackers to infect and take control of insecure Internet of Things (IoT) devices, say, toasters, cameras or other web-connected devices. They can then bundle them together into a botnet, using their combined capacity to shoot spam at websites or internet structures, slowing them down or sending them offline.
That's what happened in a series of attacks in the fall, using the malware dubbed Mirai.
The softwarewas open-sourced soon after much to the dismay of security engineers and, since then, different strains iterating on the first version of the botnet have cropped up with addedabilities.
One strain, known as ELF Linux/Mirai, has now beendetected mining bitcoin for a few days, according to research from IBM X-Force, the Big Blue's cybersecurity research wing. It seemssome unknown hacker (or hackers) is experimenting with using the power accumulated from IoTdevices to mine the digital currency and possibly make some cash.
This could be an omen for future IoT botnet use cases, argued Dave McMillen, IBM Managed Security Services senior threat researcher and author of the report.
McMillen told CoinDesk:
"This ELF/Mirai variant could be appealing to others in the future due to the potentially large volume of devices that could be involved."
The researchernoted, however, that, the botnet didn't appear to successfully mine any bitcoin. The security teamsee it more like a peek at a down-the-road possibility.
So, what happened, and how did IBM spot themining component of the botnet?
McMillen explained, saying:
"We detected a spike in command injection activity in our IBM X-Force monitored client environment data that prompted deeper investigation."
The security teamsaw traffic related to an ELF 64-bit binary file., which the reportdescribes as beginning as a "blip", which grew in volume by 50%, buthad fizzled out by day eight.
The team "dissected" the binary to discoverthat the Linux version of the malware is similar to the more typical Windows version.
"It was detected as a slave miner by multiple tools, however we are still investigating other properties of the variant," McMillen added.
Whilethere are now many variants of the botnet, ELF Linux/Miraihas extra abilities in that it can execute 'SQL injection'(a notorious way to take control of databases) and execute so called 'brute force' attacks.
But, the Linux version has an extra add-on the bitcoin miner component (which you can see online here).
IBM speculates in the report that the botnet creators may belooking for away to make bitcoin mining with compromised IoT devices a lucrative venture.
"Realizing the power of Mirai to infect thousands of machines at a time, there is a possibility that the bitcoin miners could work together in tandem as one large miner consortium. We haven't yet determined that capability, but found it to be an interesting yet concerning possibility," ablog post explains, adding:
"One scenario could be that while the Mirai bots are idle and awaiting further instructions, they could be leveraged to go into mining mode."
Although this idea is admittedly speculative, the report points to the factthat bitcoin has beenused for other cybercrimes such withransomware, which encrypts all of a user's computer data with a demand for payment because it's decentralized and isperceived as a more privacy-enhancingcurrency.
The tech can havemore beneficial uses cases, though. For example,one company recently revealed aimsto build a bitcoin botnet to helpsecure IoT devices, combining the cryptocurrency with technology also has the potential for less beneficial onlineactivities.
So, how canusers protect their internet-connected toasters from being enlisted as a bitcoin mining slave?
The Mirai malware exploits a surprisingly simple attack vector.
The problem is that many IoTdevices come with pre-installed passwords. And, since many users never change them, all an attacker needs to do is find the default password to 'hack' into the devices.
McMillens advice is for users tochange those passwords. Though, he said that he hopes that IoTcompanies are beginning to tackle the problem, too.
He concluded:
"Manufacturers could be looking for ways to manage these credentials more securely, perhaps by prompting a forced change or randomizing the default logins."
Army computer via Shutterstock
Bitcoin MiningBotnetsHackingIBMInternet of ThingsSecurity
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