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Bitcoins 101 by Mashable

Bitcoins 101 by Mashable

By on November 8, 2012

Here’s what Mashable wrote about bitcoins [source]

Bitcoin is a peer-to-peer decentralized digital currency. It differs from traditional, government-backed currencies in that there is no central issuer, and there are no middlemen involved for various transactions.

Back in 1998, the concept of crypto-currency was described by Wei Dai on a cypherpunks mailing list. Crypto-currency is an electronic currency that relies on cryptography to regulate functions such as value and counterfeit protection. Bitcoin is the first implementation of that idea. Its protocol was published in a white paper by Satoshi Nakamoto in 2008. In 2009, Nakamoto released the first Bitcoin client and issued the first Bitcoins.

The supply of Bitcoin is regulated not by a central bank, but by software. The original rationale behind Bitcoin was to create a type of electronic currency that was anonymous, secure and independent from governments or other central authorities.

While still a nascent currency, various organizations such as WikiLeaks, the Internet Archive and the Free Software Foundation accept donations in Bitcoin. Moreover, thousands of smaller merchants accept payment using Bitcoin.

 

Bitcoin Mining: How Bitcoins Are Created

 

With a traditional fiat currency (think the U.S. dollar or the Euro), a central bank (like the Federal Reserve) issues currency. That’s not the case with Bitcoin.

 

Instead, coins are generated using a process called mining. Think of mining as a lottery. Computers connected to the network (known as miners) aim to find the solution to a certain mathematical problem. If they successfully solve the problem, a new block is created. Until December 2012, the value of each block is 50 BTC (Bitcoins). Every four years, the value of solving a block is lowered.

 

Mining was designed to be a resource-intensive process. In the early days of Bitcoin, users used traditional computers to mine for different blocks. Today, miners often use high-powered graphics cards and machines designed specifically for optimal Bitcoin mining. Moreover, there are networks of computers that work together in various pools to find blocks.

 

The more powerful your system, the greater the chance that mining will produce a new block. As a result, there are individuals and groups that invest in computer equipment designed to mine more efficiently. They are betting that the cost of the equipment (as well as the resulting electricity) will be offset by the value of the Bitcoins themselves.

 

The Bitcoin system is designed so that the difficulty of uncovering a block can be increased or decreased. This keep the output of the currency more consistent.

 

Bitcoin Exchanges: Buying and Selling Bitcoins

 

One of the basic tenets of Bitcoin — and all crypto-currency — is the absence of a central banking authority. That doesn’t mean, however, that there aren’t entities that exist in the same way.

 

In the Bitcoin world, these are known as exchanges. These exchanges allow people to buy and sell Bitcoins with one another. The major Bitcoin exchanges include Mt. Gox (the largest Bitcoin exchange), CryptoXchange and Intersango.

 

The most popular exchanges allow users to buy and sell Bitcoins using local currencies. For some, this can be a profitable source of arbitrage and big trades can impact the overall value of the larger Bitcoin economy.

 

Many of these exchanges also act as eWallet’s for users to store their Bitcoins. This is convenient because it offers an easy way to buy and sell from an exchange account, however, it can be risky because if the exchange is hacked, the eWallets can be stolen.

 

This has happened to a number of large Bitcoin exchanges in the past — with hackers absconding with thousands of Bitcoins. You can read more about eWallets and what to watch out for before using one in this Bitcoin.it Wiki article.

 

Users can also store their own wallets on a local computer, USB drive or even print out a wallet address for offline safe-keeping.

 

Using Bitcoin

 

A small number of real-world and online establishments accept Bitcoin as a form of payment. It’s important to understand that like any other currency, the value of Bitcoin fluctuates all the time. At the time of this writing, Mt. Gox values a BTC at ~$10.75 USD — however that could fluctuate up or down, depending on the Bitcoin market as a whole.

 

Some shops that accept Bitcoin may accept less than market rate (depending on current exchange values) in order to obtain more Bitcoins. Others can adjust their pricing depending on overall values.

 

Many in the Bitcoin community use the currency to trade or barter with one another. At forums such as BitcoinTalk.org, users post messages of what they are willing to buy or sell with Bitcoin.

 

Because Bitcoin is like cash, the onus is often on the buyer to trust that the seller won’t run off with Bitcoins without providing a product or service. It’s similar to the early days of eBay, where community reputation can act as a voucher for who to trust and who to ignore.

 

The anonymous nature of Bitcoin means that the currency can also be used for seedier business transactions. The online marketplace Silk Road has been described as “the Amazon.co of illegal drugs.” Silk Road sellers sell illegal drugs such as LSD, heroin and marijuana.

 

Buyers conduct all transactions using Bitcoin. The hidden nature of the marketplace (it uses the Tor network to hide traffic) coupled with the technology around Bitcoin makes it ideal for drug transactions.

 

Is This the Future?

 

Some see Bitcoin as a future type of currency. While it’s a stretch to see a decentralized currency gaining mass adoption, many of the ideas involved with Bitcoin, especially when it comes to online transactions and distributed computing for security could be used with existing fiat currencies.

 

The Royal Canadian Mint’s MintChip project carries on many of the same ideas as Bitcoin, but in a way that is backed by the mint itself. The MintChip project is still in its infancy but if it works, it could shape the future of Canadian currency.

 

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By on November 6, 2012

Eligius Mining Pool is offline

By on October 18, 2012

I did a check after lunch and I saw that the Eligius Mining Pool was offline. I thought my router had gone haywire but the stat site did not even load. Their site then came online about an hour later but my mining clients still could not connect to the mining site at mining.eligius.st

Famous People in the Bitcoins Universe

By on October 18, 2012

Andreas Schildbach (Profile) – original developer of Bitcoin Wallet for Android (Google Code Project).

Amir Taaki aka genjix- creator of the Britcoin and Intersango exchanges, libbitcoin library for Bitcoin, Spesmilo, Bitcoin Consultancy, Vibanko, GLBSE client, Bitcoin poker client, Python bindings for Bitcoin, Pastecoin and others.

Art Forz- developed the first GUI miner and at one time his GPU mining farm (the ArtFarm) was mining over a third of all blocks.

Charlie Shrem – is co-founder of BitInstant LLC and the current CEO. Known on the Bitcoin forums as ‘Yankee’, he has over 5 years experience working with start-ups and business development in the eCommerce industry.

Gary Rowe (Profile) – Contributor to the MultiBit (http://multibit.org) and BitCoinJ (http://code.google.com/p/bitcoinj/) projects. Working on various Bitcoin based businesses.

Gavin Andresen- (Profile) Satoshi client maintainer. He previously worked at Silicon Graphics and now runs his own company.

Hal Finney- one of the creators of PGP and one of the earliest contributors to the Bitcoin project. First to identify a type of double-spending attack that now bears his name — the Finney attack.

James McCarthy aka Nefario- creator of the first bitcoin stock exchange GLBSE

Jed McCaleb, original developer of MtGox. Previously created eDonkey2000.

Jeff Garzik- (Wikipedia Entry) Satoshi client core developer, GPU poold software and the founder of Bitcoin Watch. Works as a Linux kernel developer at Red Hat,

Luke Dashjr aka Luke-Jr- Eligius owner/admin, maintains BFGMiner and maintainer of bitcoind/Bitcoin-Qt stable branches.

Mark Karpeles aka MagicalTux- Owner of the largest Bitcoin exchange, MtGox, this Bitcoin Wiki, and Kalyhost

Martti Malmi aka Sirius- Operates the host for bitcoin.org and is an administrator of the Bitcoin Forum.

Matt Corallo aka BlueMatt- Satoshi client developer.

Michael Hendrix aka mndrix- creator of the now defunct CoinPal and CoinCard services

Michael Marquardt aka theymos- creator of the widely used blockexplorer.com site, and BitcoinTalk Forum

Mike Hearn (Profile)- Google engineer who works on Gmail and developed BitCoinJ (http://code.google.com/p/bitcoinj/)

Nils Schneider aka tcatm – Bitcoin developer, owner of BitcoinWatch, creator and owner of BitcoinCharts, GPU mining software and JS web interface.

Patrick McFarland aka Diablo-D3 – DiabloMiner author, and BitcoinTalk forum moderator.

Patrick Strateman aka phantomcircuit – Bitcoin developer, creator of Intersango, member of Bitcoin Consultancy and creator of Python Bitcoin implementation.

Pieter Wuille aka sipa- Satoshi client developer and maintainer of the network graphs http://bitcoin.sipa.be

Roger Ver – BitInstant LLC Director of Marketing. He is also the CEO of MemoryDealers.com

Stefan Thomas aka justmoon- creator of the WeUseCoins.com site/video and WebCoin.

Vladimir Marchenko- Profile, runs Marchenko Ltd which sells mining contracts, previously developed the figator.org search engine.

filecloud.io now accepts Bitcoin payment!

By on October 15, 2012

filecloud.io is an online cloud storage project from DF Hosting Ltd [Irish Ltd Company #443917] launched in July 2012.

Between 2006 and July 2012 the platform was known as ifile.it and operated under the ifile.it domain bringing years of stable and reliable (and more importantly hassle free) service to thousands of its users worldwide, all of the users and files from the old ifile.it platform have been migrated to this new platform where more features are offered and a nicer design.

filecloud.io now accepts Bitcoin payment! and this good news for the bitcoin economy.

 

 

New Hosting

By on October 13, 2012

We’ve just moved to a new hosting company for a very good price. Let’s hope the traffic won’t burn out the new hosting servers!

GLBSE shuts down – Global Bitcoin Stock Exchange

By on October 9, 2012

I’ve just learned that glbse.com has shut down. I am not sure why this has happened but I hope to get back some of my BTC in their pockets. Pretty sad day for the BTC economy.

This was posted on their site today:

GLBSE has been closed

I’m sorry to inform all our users that GLBSE is no longer able to continue operating, and has now closed.

Q: What does this mean if I’m an issuer?

We will do everything in our power to make the process of moving off GLBSE as smooth as possible, we are currently working on a simple, safe, and easy to use method that will allow you to continue your relationship with your asset holders

Q:I’m a GLBSE user, what about my assets and my bitcoin?

You will be able to get back your bitcoin, and if you want to reveal your username, email, and a bitcoin address to accept payments with, you can continue your relationship with the issuer of any assets you hold.

We will begin retuning bitcoin once we have recieved all coins from the GLBSE treasurer that manages the GLBSE cash reserves. BitcoinGlobal (GLBSE’s partent company) shareholders and board voted for them to be returned immediately, we are awaiting compliance with this order.
Update:we will begin processing account closures and returning bitcoin later today.