All things considered, things are looking quite good for the bitcoin network as a whole.

It is evident the bitcoin network hashrate continues to grow. As the mining difficulty increases, more hashpower is needed to generate new blocks. At this rate, it is only a matter of time until we surpass the 4 exahash per second threshold. The bitcoin network has come a very long way over the past few years, that much is certain.

The charts provided by BitcoinWisdom show how the hashrate has gone up steadily these past few years. Although it appears the network almost reached 4 exahash per second a while ago, things have quieted down ever since. However, it appears another mining power increase is on the horizon. Reaching 4 exahash per second signals a significant bitcoin mining milestone, to say the least. Compared to about a year ago, the hashpower has more than tripled.

One Reddit user posted an image of how the 4 exahash threshold has been reached already. The charts on both BitcoinWisdom and Blockchain.info state otherwise, though. In fact, the network sits at 3.5 exahash for the time being, which is quite a big difference. Then again, these numbers can change at any given time when someone throws a lot of hardware online. With mining hardware becoming more efficient, reaching the next threshold is only a matter of time.

Some people may wonder why people continue to invest in bitcoin mining. With the block reward halving the number of coins generated per block, there seems little incentive to do so. Then again, the bitcoin price continues to go up in the process which attracts new miners. Additionally, the high transaction fees make mining more than profitable for a lot of people under current conditions. Making money in a semi-passive way is quite appealing if people can afford the upfront investment.

When the SEC rejected the bitcoin ETF, mining support could have dwindled. Many people expected a big price crash, although most losses were recovered rather quickly. Looking at the charts now, it appears another bullish run is being prepared. This will certainly help the bitcoin network reach the 4 exahash mark in the coming months. A lot of money can be made by mining bitcoin these days, although it requires a significant upfront investment.

All things considered, things are looking quite good for the bitcoin network as a whole. The mining power increases, the price goes up, and there are more transactions than ever. While the mounting transaction fees are not fun by any means, a solution can be found to address this problem.For now, things are looking positive as bitcoin still has a lot of growth potential. These are exciting times to be part of the bitcoin ecosystem, that much is certain.

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Bitcoin Network On Target To Surpass 4 Exahash of Mining Power As BTC Price Continues To Surge - newsBTC

Bitcoin is once again trading above the price of an ounce of gold as Friday's collapse in the virtual currency - after the SEC's decision to deny an application for a Bitcoin ETF - has now been erased...

That de-escalated quickly...

Perhaps the dip-buyers know something the ETF-demand-hopers don't? The point is, as Jameson Lopp writes at CoinDeck.com, Nobody Understands Bitcoin (And That's OK)

In this guest feature, Lopp provides a deep dive into whether bitcoin can truly be understood as a technology, coming up with more questions than answers and delivering an impassioned appeal to open-mindedness and exploration.

When I first became interested in bitcoin, I found myself spending countless hours absorbing as much information about it as possible, trying to put all of the pieces together.

After years of learning, I now devote a fair amount of my time trying to help others understand bitcoin better. While many people have referred to me as a "bitcoin expert," I still consider myself a student I have yet to determine how deep the rabbit hole goes.

Andreas Antonopoulos had this to say about explaining (and thus understanding) bitcoin:

"I wrote a book that answers the question 'What is Bitcoin?' It's 300 pages long, was obsolete the moment it was printed and has to be corrected and updated every three months just to keep up with changes."

With enough studying you can teach yourself how bitcoin currently works from a technical standpoint.

I maintain a list of educational resources that is sufficient to keep anyone busy for several months in pursuit of this goal. However, this approach of information ingestion will only expose the tip of the bitcoin iceberg.

Meltem Demirors posted a chart thats spot on:

One challenge to understanding bitcoin is that it is a multifaceted cross-disciplinary system that is constantly evolving.

Ferdinando Ametrano put it well:

Ferdinando hits a key point that Ill be delving into bitcoin is not just a technology; it's a technology that represents something even less tangible.

Bitcoin is a living protocol that emerges from a melting pot of ideas, philosophies, cultures and politics after they undergo trial by fire.

You can read the "Rise of the Cypherpunks" to learn how we came to be where we are today.

"Writing a description for this thing for general audiences is bloody hard. There's nothing to relate it to." Satoshi, July 5, 2010

Even Satoshi didnt fully understand what he built with regard to bitcoins security model. He (or she) ended up fixing a multitude of bugs in the first few years of bitcoins existence.

After it was 18 months old, the rate of bug fixes had slowed down to the point that new vulnerabilities were categorized and documented. Let's cover a few of the flaws that were fixed before bitcoin gained adopters.

In the first versions of bitcoin, anyone could spend anyone elses coins:

"The opcode OP_RETURN originally just caused the script to end early instead of fail, so you could steal anyone's bitcoins by simply using the scriptSig OP_TRUE OP_RETURN. It was also possible to put a pushdata opcode right at the end of a scriptSig to turn the entire scriptPubKey into a constant (which evaluates to true). Satoshi fixed these bugs by changing the behavior of OP_RETURN to cause the transaction to immediately fail and making it so that scriptSig and scriptPubKey are evaluated in two separate steps.

Theymos

Satoshi fixed a major consensus flaw by changing the 'best chain' logic from using the longest chain to using the chain with most proof-of-work. Technically, it could be argued that this was a hard fork, though it didnt actually cause a chain fork because the longest chain at the time was also the one with the most proof-of-work.

Satoshi also set the block-size limit as protection against denial-of-service attacks. The block size was originally only implicitly limited by the network message size of 32MB.

There is also a bug in OP_CHECKMULTISIG that exists to this day. Its mentioned in BIP-011:

"(OP_0 is required because of a bug in OP_CHECKMULTISIG; it pops one too many items off the execution stack, so a dummy value must be placed on the stack)."

Gavin Andresen

And who could forget the value overflow bug that allowed someone to create 184 billion bitcoins!

In my quest to find more early Satoshi bugs that aren't well-known, Greg Maxwell recalled a juicy one:

"In the early versions of bitcoin, any user could hard fork any released versions from any other versions! This design flaw showed he didn't fully understand the required conditions for safe upgrades when it was first released, but his fix showed he did understand them later.

There was an opcode called OP_VER which pushed the verifying node's version number onto the stack. (Satoshi always believed there should only be one piece of bitcoin node software.) The apparent purpose of that opcode was so that you could add features to script and have only the newer supporting versions see those new opcodes (there also was originally 16 bits of opcode space in the codebase.) But someone could have used this maliciously like "OP_VER 1234 IF FALSE RETURN ENDIF TRUE" to make version 1,234 reject a block mined by any other version. So, any user could make the system fork any any time! When he removed OP_VER, he added the OP_NOP, which is what makes modern style script soft forks possible. This change itself was a soft fork because the original versions ignored unknown opcodes.

Researchers have also discovered some flaws in Satoshi's white paper regarding the description of the system's security.

For example, there are issues of 'miner luck' and 'selfish mining'. There is even a compilation of known problems with the white paper available here.

Bitcoin clearly didnt follow a 'code is law' view, but rather 'Satoshis vision is law' given that he made a number of tweaks in the first few years as it was discovered that the code didnt fully align with the intent of the code creator.

I think this distinction is particularly relevant given that: a) Satoshi stopped contributing to bitcoin many years ago, and b) bitcoin has no formal specification.

You can tell how little bitcoin is understood simply by the vast amount of research being done to analyze and improve upon it.

Satoshi once stated that the core design was set in stone and other implementations would be a menace to the network. People often take this quote (and others from Satoshi) and use it to fallaciously argue (via appeal to authority) that the bitcoin protocol must evolve in a specific way.

I pose to you that this was just another case where Satoshi was mistaken.

As weve seen, Satoshi actually had to make a lot of changes to bitcoin as early developers were exploring the code and discovering edge cases. There are also over half a dozen bitcoin client implementations running today that aren't disrupting the network. We have even seen that a single implementation can be a menace to the network when machine-level differences can cause consensus failure, as happened in 2013 with the Berkeley DB chain fork.

Recall my earlier description of bitcoin being the result of a melting pot of contributions. This really took hold once Satoshi released his pet project that he had been working on in secret for several years.

The very first week that bitcoin launched, it also gained its first collaborator, Hal Finney. Hal was one of the few people who believed early on that bitcoin could actually work, which is clear from Satoshi's original white paper release:

"[Hal Finney] allegedly showed a lot of flaws in the early code, which were fixed by reducing the opcodes. Hal Finney was the cypherpunks' cypherpunk. He had a rare ability to both code superlatively, see the forest and the trees and describe what he saw. We all read his posts carefully, I don't think there is anyone else who commanded such respect."

Ian Grigg

Finney released a number of his emails with Satoshi to the Wall Street Journal; theyre an interesting read. You can see Satoshi's surprise as he manages to find several bugs that Satoshi had not anticipated even though he had "tested heavily".

Unlike some systems (such as ethereum), bitcoin doesn't have a formal specification. Even if bitcoin did have one, it wouldn't be any easier or harder to make changes to the protocol from a technical standpoint, though it might from a social standpoint.

As Charlie Lee noted in response to Andresens suggested definition, its amorphous:

Nor is there an objective process by which changes are enacted:

Paul Stzorc spoke about making objective decisions with bitcoin development, but its far from being realized.

His presentation was based upon this blog post.

I pose to you that bitcoins strength comes not from being the embodiment of some dogmatic beliefs of immutability, decentralization or other buzzwords, but from collaboration. The process of taking collaboration and using it to determine human consensus can be noisy and messy, but its the governance model within which we must work.

As I see it, this system of governance, rooted in voluntaryism, is the only aspect of bitcoin that is 'set in stone'.

Sergej Kotliar penned this piece years ago describing why bitcoin has similarities to religion. As he notes, there is a bit of magic to the fact that the system works as a whole, because it relies upon non-technical components.

The well-aligned incentives of the system form an "invisible hand" that guides it.

Most bitcoin users probably don't realize it, but they are subscribing to a sophisticated subjectivist ontology by participating in this collectively reinforced belief in the system of rules that comprises bitcoin.

To put it in simpler terms:

While bitcoin can be described as trustless in the sense that a full node operator needs not trust any other participants on the network, at a meta level there is often some form of trust involved. For example, almost none of bitcoins users actually read and understand the software and the protocol itself.

They are trusting the developers to be careful not to introduce flaws.

It appears to me that the fact that few people have a deep understanding of bitcoin's technical operations results in people with lesser understanding deciding which 'experts' to trust. As such, when experts clash, the crowd divides and takes sides behind the experts whose arguments they find most compelling.

Unfortunately, this means that sometimes politics are injected into the decision making process.

As Shaolin Fry recently noted, we should strive to avoid politicization of proposed protocol improvements. To be clear, this doesn't mean 'nobody in the ecosystem is motivated by political ideals'. Rather, it means that the direction of the system is not driven by politics in which one group of people forces their beliefs upon another.

For example, the concept of 'voting' generally means that a political process is occurring. We should instead strive for a system of permissionless innovation wherein participants can signal that they want to interact in certain ways, regardless of what other participants signal.

"We already have a lot of options for currencies which are (indirectly) controlled by political whim. Bitcoin should be sounder stuff than that. I would love to be able to say that the complete consensus rules on day one were involatile ('set in stone') but engineering reality makes that unrealistic. That dream for bitcoin died the day the first unambiguous and serious consensus flaw was found. The deactivation of buggy opcodes further weakened it, requiring more changes to be fully general again. But the world is seldom so conveniently black and white. Bitcoin can still deliver on the promise of being a less political money without being totally set in stone."

Greg Maxwell

Some bitcoin users achieve such a sufficient understanding of the protocol that they begin to envision potential improvements, at which point they try to change the system to better fit their perspective.

This is a 'command and control' mindset that is human nature; I myself have been guilty of making this same mistake in the past by trying to project my perspective onto bitcoin rather than ingesting the perspectives of the community.

There are far more considerations that go into debates about bitcoin's evolution than just the technical aspects of how changes would affect the network.

Ryan X Charles covered the high-level philosophies of the two most popular viewpoints in the scaling debates. Much of the contention in these debates comes from: a) different priorities and b) different beliefs in the use cases for bitcoin.

Unfortunately, a significant portion of participants in these debates have taken their perspectives and developed them to the point of dogmatic belief, which makes it nearly impossible to engage in intellectual discourse.

One reason I believe that it is easy for people to project their perspective upon bitcoin is due to its lack of specification and thus lack of clear objectives.

For example, Satoshi described bitcoin as a 'peer-to-peer electronic cash system'. But even this simple description can easily be interpreted in many ways. 'Peer-to-peer' provides no context around how many peers there should be; 'cash' provides no context around what the speed or cost of transactions should be.

Much as you can find a variety of perspectives and interpretations of the US Constitution or the Bible or the Quran, so can the writings of Satoshi be interpreted and debated.

The projection of individual perspectives onto bitcoin has led to the same sort of fracturing we can observe in political, philosophical, and religious systems. A group starts out on mostly the same page, but then an issue arises about which the group can not form a consensus.

The individuals begin to polarize their perspectives and support actions that foster tribalism. Party lines are drawn, litmus tests are applied to newcomers, dissenting speech is suppressed, propaganda is perpetuated, communications break down, and echo chambers are formed.

As a result, today, bitcoin debates often devolve into fallacious assertions and name calling, where one party considers the other party to be either ignorant or malicious. This is unfortunate because people often end up talking past each other under the assumption that they are right and the other party is wrong.

It's troubling to see the ossification of perspectives into dogmatic beliefs that degrade the quality of discourse in the community.

I pose to you that there is no single 'correct' approach to viewing bitcoin, but rather a multitude of perspectives. The diversity of perspectives and use cases was the topic of one of the first articles I ever wrote about bitcoin.

Im not saying that you have to agree with rhetoric propagated by people with conflicting perspectives of what bitcoin should be. I will suggest, however, that you should recognize it as such not as a malicious attack that you must defend against with a direct counterattack.

If a debate is becoming too heated and discourse is breaking down, you can always disengage.

Keep in mind that all humans fall prey to biases; we can't avoid being affected by them, but we can consciously choose how we respond to other biased people. It may also help to remember that bitcoin doesn't need you to defend it you defend your own perspective of bitcoin by choosing which software to run and by choosing the system in which you store your money.

Andreas once spoke about the "noisy" scaling debate.

While it can be unpleasant, we should remember that it is the result of a feature rather than of a flaw in bitcoin.

Bitcoin ecosystem participants should be humble when discussing it rather than confident that our understanding of the system is superior to that of others participating in a discussion. I, for one, have found my conversations to be more productive after making this realization.

I've also wasted a lot less time by avoiding conversations that were clearly going to be unproductive due to the dogmatic views expressed by the other party.

You can achieve the 'Tao of Bitcoin' by accepting that bitcoin is on its own path that is outside of your control. Dont be frustrated if your vision of bitcoin does not align with that of other users. Bitcoin will naturally converge upon the least common denominator of human consensus that which is beneficial (or at least not harmful) to the greatest subset of participants.

The Tao of Bitcoin is not understanding bitcoin, it is accepting that bitcoin is what it is.

Ive attempted to present sufficient evidence that bitcoin defies conventional educational approaches and even defies self-professed authorities who claim to understand it. The result can be bewildering, but there is no need for negativity.

We should remain hopeful that bitcoin will continue to 'fail to scale' just like the internet has.

Jimmy Song also made a great case for optimism in the face of deadlock and despair.

"In short, bitcoin is maturing and the market is starting to define what bitcoin is going to be. Im sure there are people on both sides of the debate that wont like what its going to become, but thats what you get with a decentralized currency."

I will continue my quest to consume as much information as possible about this new ecosystem, but have long since given up the goal of understanding bitcoin.

The faster I run toward the finish line, the further it moves away from me. While some people in this space are more confident than others about its future direction, the truth is that we're blazing new trails and learning as we move forward.

You dont understand bitcoin, and thats OK neither does anyone else.

Jameson Lopp is a software engineer at BitGo, creator of statoshi.info and founder of bitcoinsig.com.

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Bitcoin Surges Back Above $1200, Erases ETF-Denial Losses

Bitcoin's reward mechanism is based on publishing a solution to the block chain. What if an Evil Genius reversed this, and rewarded miners for withholding their solutions?

The simple answer: a pool of miners in which an Evil Genius withheld solutions would collapse. The surprise longer answer, presented in this paper at the International Association for Cryptologic Research (IACR), is that the attacker could conceivably end up in the black.

Yaron Velner (Hebrew University of Jerusalem), Jason Teutsch (University of Alabama at Birmingham) and Loi Luu (National University of Singapore) write that the problem arises in the mining pools that now account for most Bitcoin computation (as much as 95 per cent by some estimates).

Withholding attacks have been discussed since early in the blockchain's history, but Bitcoin's pretty resilient against them because if you want to mine coins and not tell anyone, you need enough computing power to be a miner. That means a lot of outlay for a slim return.

Rewarding others to withhold, the Velner/Teutsch/Luu paper suggests, is a lot more affordable, for the following reasons:

As they say on Twitter, huge if true so let's drill down a little.

Nakamoto's original paper (PDF) mentions block withholding attacks as an attacker trying to generate an alternate chain faster than the honest chain.

Block withholding has been typically regarded as a double-spending attack. This paper, instead, is a manipulation of the value of Bitcoin held in pools.

Each time a Bitcoin is successfully mined (that is, someone's rig finds the next solution), the math gets a little bit harder, and the next solution will take longer, or it'll need more computing power to find. That's why Bitcoin mining is now conducted in data centres and dedicated servers, rather than at home on PCs.

If blocks aren't published, they're not included in the assumption that makes Bitcoin progressively more difficult, and the result is that the attacker benefits from reducing the effective hash rate of the entire network.

Only if, however, they can do it for a small outlay and that's where this attack is different. Instead of doing the mining themselves, an attacker with a modest home-scale setup can disrupt pools.

The requirement, the authors write, is merely that the the fraction of the networks hash rate controlled by the attacker is greater than a miners reward for submitting a full solution to the pool.

This mining power is currently equivalent to 4 TH/s [tera-hashes per second El Reg] mining power, which is obtainable by modern ASICs. Moreover, a miner with N ASICs could offer a reward that is N times higher and still make a profit.

Were an Evil Genius to mount the attack, they'd need their minions to prove they're holding valid blocks, and that's one reason withholding attacks don't happen: storage sufficient for the minion to submit a proof to the attacker is expensive.

Instead, the attack asks only for the minion for a proof of stale work to prove that they're performing sha256 operations over some data without an intention of submitting full solutions to the blockchain. When the withholder allocates his mining equipment for stale work, the effective hash power of the network is reduced.

Crucially, because it's an attack on the pool mining protocol, the authors note that their attack does not affect the Nakamoto consensus that protects the truth of the Bitcoin blockchain.

Go here to read the rest:
Hold 'em, don't fold 'em: how to bite Bitcoin pools - The Register

Moreover, people need to keep in mind not every altcoin is a bitcoin competitor.

No one can deny the cryptocurrency is thriving right now. Some people want to see more money flow to bitcoin and other currencies at a quicker pace, though. One interesting trend is how bitcoins percentage of the total cryptocurrency market cap is going downhill. Right now, that percentage sits close to 81%, whereas it used to be over 95% in January of 2014.

For the longest time, bitcoin has been the dominant cryptocurrency. That is only normal, as it is the only one to gain some market traction. However, several altcoins have proven to be a favorite among speculators and traders as well. Albeit very few of these currencies have use cases, they are perfect vehicles for value speculation. As a result, some money is flowing from bitcoin into the altcoin sector on a regular basis.

This trend is not alarmed by any means. In fact, diversification of a cryptocurrency portfolio is a good thing. While bitcoin still represents the vast majority of total market capitalization of all cryptocurrencies, its share is dropped. In fact, it has been dropping for quite some time now. Back in January of 2014, bitcoin represented 96% of the total cryptocurrency market cap. Fast forward that day, and that number has shrunk to just 84%. Not a big change according to some people, yet it goes to show something is changing behind the scenes.

Looking at the charts, bitcoin has gone through this cycle before. Its market cap percentage dropped below 80% in January of 2015, June of 2016 and Late 2016 as well. Bitcoin rebounds successfully every time, though, and it is expected this pattern will repeat itself once again. After all, there is no reason to ditch bitcoin holdings In favor of any altcoin right now, even though some investments may look appealing.

One contributing factor to the demise of bitcoin is the high transaction fee problem. With fees increasing rapidly, altcoins are becoming more popular due to lower costs. Then again, none of these networks have been tested to handle the transaction volume bitcoin processes every day. Until that happens, it is impossible to tell which currency can keep the costs down in the end. Reducing bitcoins fees would be a good start, though, that much is certain.

Moreover, people need to keep in mind not every altcoin is a bitcoin competitor. Ethereum, for example, is not positioned to be a currency like bitcoin. Neither is Ripple, as it is a competing technology that appeals to banks. Dash and Monero can compete with bitcoin, although the anonymity features may put off some people. Only time will tell how these percentages evolve over the next few months, though.

Header image courtesy of Shutterstock

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Bitcoin's Market Cap Percentage Continues To Shrink Due To Mounting Transaction Fees - newsBTC