Monologue by Dr. Geek

Monologue by Dr. Geek

Lonely Researcher, Prof. Dr. Geek
He has been challenging advanced technology research in academia, education for young people and technology funding by the unique IT technologies for bright future of mankind.

Miners validate new transactions and record them on the global ledger or distributed database (blockchain). 

 

On average, a block (the structure containing transations) is mined every 10 minutes. 

 

Miners compete to solve a difficult mathematical problem based on a cryptographic hash algorithm. 

 

The solution found is called the Proof-Of-Work

 

This proof proves that a miner did spend a lot of time and resources to solve the problem. 

 

When a block is 'solved', the transactions contained are considered confirmed, and the bitcoin concerned in the transactions can be spend. 

 

So, if you receive some bitcoin on your wallet, it will take approximately 10 minutes for your transaction to be confirmed.

 

Miners receive a reward when they solve the complex mathematical problem. 

 

There are two types of rewards: new bitcoins or transaction fees. 

 

The amount of bitcoins created decreases every 4 years (every 210,000 blocks to be precise). 

 

Today, a newly created block creates 12.5 bitcoins. 

 

This number will keep going down until no more bitcoin will be issued. 

 

This will happen around 2140, when around 21 million bitcoins will have been created. 

 

After this date, no more bitcoin will be issued.

 

Miners can also receive rewards in the form of transaction fees. 

 

The winning miner can 'keep the change' on the block's transactions. 

 

As the amount of bitcoin created with each block diminishes, the transactions fees received by the miner will increase. 

 

After 2140, the winning miner will only receive transaction fees as his reward.

 

                       Fig : Image Courtesy: dev.to

 

The amount of bitcoin issued with each block is divided by 2 every 210 000 blocks. 

 

So we can calculate the maximum amount of bitcoin with some code.

 

Exemplary code:

 

// First 210 000 blocks reward

const start_reward = 50

// The reward is modified every 210000 blocks

const reward_interval = 210000

const max_btc = () => {

  // 50 BTC = 5000000000 Satoshis

  // Satoshis are the smallest denomination in bitcoin

  let current_reward = 50 * 10 ** 8

  let total_btc = 0

  while (current_reward > 0) {

    total_btc += reward_interval * current_reward

    current_reward = current_reward / 2

  }

  return total_btc

}

console.log (`The maximum amount of BTC created will be ${max_btc ()} Satoshis, or ${max_btc () / 10**8} BTC`)

// The maximum amount of BTC created will be 2100000000000000 Satoshis, or 21000000 BTC

 

So, yeah, 21 million will be probably the maximum amount of bitcoin issued in the end!

 

 

 

Exchanges

 

Cryptocurrency exchanges allow customers to trade cryptocurrencies for other assets, such as conventional fiat money, or to trade between different digital currencies.

 

Atomic swaps

 

Atomic swaps are a mechanism where one cryptocurrency can be exchanged directly for another cryptocurrency, without the need for a trusted third party such as an exchange.

 

Bitcoin ATM

 

Jordan Kelley, founder of Robocoin, launched the first bitcoin ATM in the United States on 20 February 2014. 

The kiosk installed in Austin, Texas is similar to bank ATMs but has scanners to read government-issued identification such as a driver's license or a passport to confirm users' identities.

 

Initial coin offerings

 

An initial coin offering (ICO) is a controversial means of raising funds for a new cryptocurrency venture. 

An ICO may be used by startups with the intention of avoiding regulation. However, securities regulators in many jurisdictions, including in the U.S., and Canada have indicated that if a coin or token is an "investment contract" (e.g., under the Howey test, i.e., an investment of money with a reasonable expectation of profit based significantly on the entrepreneurial or managerial efforts of others), it is a security and is subject to securities regulation. 

In an ICO campaign, a percentage of the cryptocurrency (usually in the form of "tokens") is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, often bitcoin or ether.

According to PricewaterhouseCoopers, four of the 10 biggest proposed initial coin offerings have used Switzerland as a base, where they are frequently registered as non-profit foundations. 

The Swiss regulatory agency FINMA stated that it would take a "balanced approach" to ICO projects and would allow "legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with national laws protecting investors and the integrity of the financial system." 

In response to numerous requests by industry representatives, a legislative ICO working group began to issue legal guidelines in 2018, which are intended to remove uncertainty from cryptocurrency offerings and to establish sustainable business practices.

 

Legality (Legality of bitcoin by country or territory)

 

The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them. 

While some countries have explicitly allowed their use and trade, others have banned or restricted it. 

According to the Library of Congress, an "absolute ban" on trading or using cryptocurrencies applies in eight countries: Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, and the United Arab Emirates. 

An "implicit ban" applies in another 15 countries, which include Bahrain, Bangladesh, China, Colombia, the Dominican Republic, Indonesia, Iran, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar, Saudi Arabia and Taiwan. 

In the United States and Canada, state and provincial securities regulators, coordinated through the North American Securities Administrators Association, are investigating "bitcoin scams" and ICOs in 40 jurisdictions. Various government agencies, departments, and courts have classified bitcoin differently. 

China Central Bank banned the handling of bitcoins by financial institutions in China in early 2014.

In Russia, though cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other than the Russian ruble. Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.

Cryptocurrencies are a potential tool to evade economic sanctions for example against Russia, Iran, or Venezuela. In April 2018, Russian and Iranian economic representatives met to discuss how to bypass the global SWIFT system through decentralized blockchain technology. 

Russia also secretly supported Venezuela with the creation of the petro (El Petro), a national cryptocurrency initiated by the Maduro government to obtain valuable oil revenues by circumventing US sanctions. In August 2018, the Bank of Thailand announced its plans to create its own cryptocurrency, the Central Bank Digital Currency (CBDC).

 

Advertising bans

 

Bitcoin and other cryptocurrency advertisements were temporarily banned on Facebook, Google, Twitter, Bing, Snapchat, LinkedIn and MailChimp. 

Chinese internet platforms Baidu, Tencent, and Weibo have also prohibited bitcoin advertisements. 

The Japanese platform Line and the Russian platform Yandex have similar prohibitions.

 

U.S. tax status

 

On 25 March 2014, the United States Internal Revenue Service (IRS) ruled that bitcoin will be treated as property for tax purposes. 

This means bitcoin will be subject to capital gains tax. 

In a paper published by researchers from Oxford and Warwick, it was shown that bitcoin has some characteristics more like the precious metals market than traditional currencies, hence in agreement with the IRS decision even if based on different reasons.

An increase in cryptocurrency mining increased the demand of graphics cards (GPU) in 2017. 

 

Popular favorites of cryptocurrency miners such as Nvidia's GTX 1060 and GTX 1070 graphics cards, as well as AMD's RX 570 and RX 580 GPUs, doubled or tripled in price? 

or were out of stock. A GTX 1070 Ti which was released at a price of $450 sold for as much as $1100. 

 

Another popular card GTX 1060's 6 GB model was released at an MSRP of $250, sold for almost $500. RX 570 and RX 580 cards from AMD were out of stock for almost a year. 

 

Miners regularly buy up the entire stock of new GPU's as soon as they are available.

 

Nvidia has asked retailers to do what they can when it comes to selling GPUs to gamers instead of miners.

 

 "Gamers come first for Nvidia," said Boris Bohles, PR manager for Nvidia in the German region.

 

Cryptocurrency wallet

 

A cryptocurrency wallet stores the public and private "keys" or "addresses" which can be used to receive or spend the cryptocurrency. 

 

With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. 

 

With the public key, it is possible for others to send currency to the wallet.

 

Anonymity

 

Bitcoin is pseudonymous rather than anonymous in that the cryptocurrency within a wallet is not tied to people, but rather to one or more specific keys (or "addresses"). 

 

Thereby, bitcoin owners are not identifiable, but all transactions are publicly available in the blockchain. 

 

Still, cryptocurrency exchanges are often required by law to collect the personal information of their users. 

 

Additions such as Zerocoin have been suggested, which would allow for true anonymity and fungibility.

 

In recent years, anonymizing technologies like zero-knowledge proofs and ring signatures have been employed in the cryptocurrencies Zcash and Monero, respectively. 

 

Cryptocurrency anonymizing implementations such as Cloakcoin, Dash, and PIVX use built in mixing services, also known as tumblers.

 

Fungibility and Non-fungible token

 

Most cryptocurrency tokens are fungible and interchangeable. 

 

However, unique non-fungible tokens also exist. 

 

Such tokens can serve as assets in games like ryptoKitties.

 

Economics

 

Cryptocurrencies are used primarily outside existing banking and governmental institutions and are exchanged over the Internet.

 

Transaction fees

 

Transaction fees for cryptocurrency depend mainly on the supply of network capacity at the time, versus the demand from the currency holder for a faster transaction. 

 

The currency holder can choose a specific transaction fee, while network entities process transactions in order of highest offered fee to lowest. 

 

Cryptocurrency exchanges can simplify the process for currency holders by offering priority alternatives and thereby determine which fee will likely cause the transaction to be processed in the requested time.

 

For ether, transaction fees differ by computational complexity, bandwidth use, and storage needs, while bitcoin transaction fees differ by transaction size and whether the transaction uses SegWit. 

 

In September 2018, the median transaction fee for ether corresponded to $0.017, while for bitcoin it corresponded to $0.55.