[LINK] Liquid-cooled ASIC bitcoin mining in China; bitcoin rambling . . .

[Robin Whittle]

  https://bitcointalk.org/index.php?topic=346134.0;all

Further to my previous message on bitcoin, I still have only a partial
understanding of this.  I am yet to read the paper:

  http://bitcoin.org/bitcoin.pdf
  Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System

and this:


http://bitcoinmagazine.com/7781/satoshis-genius-unexpected-ways-in-which-bitcoin-dodged-some-cryptographic-bullet/

I just discovered a site which is probably a good source of explanations:

  https://en.bitcoin.it/wiki/Protocol_specification

Like many technical fields, it can be hard to find a good explanation.
The primary documents assume a deep knowledge of the field and the
mass-market consumery level stuff has no accurate technical content,
uses false analogies, like coins and wallets, and is at times execrable
(excreable?), as I find the video at: http://bitcoin.org/en/ .  For a
spoof on this current trend in videos:

  https://www.thebouqs.com/en/content/8-how-it-works

The USD$ price of a bitcoin is close to a new high, around $955 - 10
hours ago it was USD$840.

  http://markets.blockchain.info
  http://mtgoxlive.com/orders  (I don't understand the main graph.)
  https://www.mtgox.com  (Orange chart button at top left.)

All people have to do is believe in this for it to become a substantial
currency.  I think this has already happened.  It is not backed by
anything, but it is a currency which cannot be diluted by governments or
anyone, since the total number of bitcoins has already been defined by
the algorithm at 21 million, and just over half of these have now been
"mined".

Bitcoin "mining" involves CPU power.  At first an ordinary PC was good
enough.  As the difficulty has risen over the past few years,

  https://blockchain.info/charts/difficulty    (The last year.)

as part of the algorithm, bitcoin miners adopted graphics card CPUs,
then Field Programmable Gate Arrays - see the Icarus mining rig at:


http://www.joeydevilla.com/2013/04/15/how-to-mine-bitcoins-for-fun-and-probably-very-little-profit/

and now Application Specific Integrated Circuits (ASICs).

For a serious, liquid cooled, industrial scale, ASIC bitcoin mining
farm, see:

  https://bitcointalk.org/index.php?topic=346134.0;all

As best I understand it, to "mine a block", a body of information based
on recent bitcoin transactions all over the world is processed by a
search system which tries to find a number which will hash to the same
value as the hash of the block.  The number needs to be smaller than a
certain limit, which is repeatedly adjusted downwards to make the
process more difficult.

There's no way of calculating the desired number - it just requires a
lot of searching, and for each possible number, a hash operation must be
done to see if it is the right one for this block.

When a bit coin miner (which may be a pool using thousands of
individuals' own mining hardware) finds a suitable number, they publish
this to others in the network and this is accepted as a valid new block,
which other miners begin working on in the same way.  A present, every
such block earns the miner 25 bitcoins - which can be traded at present
for about $USD22,675.

The value of currently mined bitcoins is about USD$10B:

  https://blockchain.info/charts/market-cap

You can see the real-time progress of bitcoin mining at:

  https://blockchain.info

Every 8.52 minutes, on average:

  https://blockchain.info/stats

a new block is mined.  So that's about USD$2.5k a minute.  The other
stats there I am not so sure about, such as electricity consumption of
all mining, since this would vary enormously with the technology used.

5 x 10^15 hashes per second is probably quite reliable for the total
global mining effort.  My graphics card is working at night doing about
25 million hashes a second but I think there connection problems with
the pool server.  So far my total earnings as contributor to "slush's
pool" http://mining.bitcoin.cz is still only worth 0.0000053 bitcoins.
This is about half a cent - about enough to buy 20cm of cheap but
perfectly effective Chinese dental floss ($2 for 80 metres at a $2 shop).

Bitcoins and fractions thereof (BTC) are not stored anywhere.  Each
transaction is published globally and recorded forever, with checking to
ensure there is no double-spending.

A simple and secure way to "store" bitcoins and fractions thereof is to
generate a suitable key pair with an open-source javascript program:

  https://www.bitaddress.org

This can be run on a computer which is not connected to the Net and
never will be.  The two keys are presented as alphanumeric strings and
as QR codes.  The public key is the "bitcoin address".  This can be told
to anyone.  The private key belongs with the public key and should not
be revealed to anyone.

If someone, perhaps yourself, uses their private key to sign a
transaction of some BTC to your bitcoin address, the whole bitcoin world
knows this and the transaction is effectively archived forever - without
any specific linkage between the sender's or the recipient's bitcoin
addresses and their true identity.  After this, the particular BTC of
the transaction (some small fraction of the entire number of bitcoins
"in existence" (meaning recognised by the global distributed system) can
only be transferred to another bitcoin address by a digital signature
made with the recipient's private key.

So if you run the above javascript software, print the result, close the
computer without any chance that the screen image or data within the
computer could have been seen by anyone, then you can have someone
(perhaps yourself) transfer BTC to the newly generated bitcoin address.

Since you are the only person with a record of the corresponding private
key, you own this BTC.  If you lose the piece of paper without making
any copy of the private key, that BTC value will forever remain owned
(as far as the global bitcoin network is concerned) by the bitcoin
address, since neither you nor anyone else can generate the private key
to transfer it to another address.  A solitary piece of paper, or even
the human memory of the private key, can be the sole physical means of
transferring the BTC to another bitcoin address.

I think that when bitcoins are "stolen" or "lost" in some bitcoin
exchange, it is because the attacker somehow got hold of the matching
private key.  This could be done by hacking a computer which has a fully
functional bitcoin "wallet" (software which can send BTC to other
bitcoin addresses by digital signing with the private key and publishing
the result to the bitcoin network.  Since many companies offer web-based
"wallets" which don't require the user to remember or store the private
key, these sites must store the private key of each of the one or more
bitcoin addresses of each user.  So if that site is hacked, the attacker
gets all the private keys, uses them to transfer BTC to a bitcoin
address of their choosing, and can then send the money from their to
further bitcoin addresses, perhaps many per hour or minute.  Also if a
user's computer or cell phone has been hacked to reveal their password
for the "wallet" site, then the attacker can log in as them and send the
victim's BTC to a bitcoin address the attacker controls.

A physical form of bitcoin currency can be made by generating a key
pair, transferring X BTC to the bitcoin address and then ensuring that
the only copy of the private key is contained in a single physical
object.  This could be a piece of paper, or a code or piece of printing
on a physical object with a tamperproof seal.  If you buy such an
object, and the tamperproof seal is unbroken, then you know no-one else
could have transferred the BTC from this bitcoin address.  Anyone can
look up the current BTC which the network recognises for a given bitcoin
address. (This is perhaps an oversimplification.)  For instance, the
liquid cooled miner article ends with the bitcoin address of the author
who is soliciting donations.  The transactions and a balance of that
address can be looked up:

  http://blockexplorer.com/address/1AftZ6QoWcdmaNWZsJyT9GVVdRAT5mVtTB
  https://blockchain.info/address/1AftZ6QoWcdmaNWZsJyT9GVVdRAT5mVtTB


The QR code http://en.wikipedia.org/wiki/QR_code was invented by Toyota
subsidiary Denso Wave.  It is patented in several countries but the
company does not enforce the patents.

Bitcoin was devised by an anonymous person with a Japanese pseudonym.

They both rely on complex mathematics, including asymmetrical
cryptography (Bitcoin) and the exceedingly complex Read Solomon error
correction coding (don't even think about trying to understand it unless
you fully understand the Galois field, which I don't) which was first
widely used by Sony in their work with Philips on the CD in the early
1980s.  Reed Solomon error correction is used for DVDs, digital video
transmission (I think) and certainly for all DSL services.

These technologies have profound social and economic implications and
they are all based on mathematics which is way beyond conventional
numbers, logarithms, trigonometry, set theory, calculus etc.

Bitcoin is a form of digital, or rather mathematical, rather than
physical cash.  Physical cash is easy to understand - in its actual
nature and the systems which surround it which give it value.  Bitcoin's
value system is similar to physical cash - if enough people value it, it
has value.  However, the details of how it works are really hard to
understand.  Non-mathematical people can understand how to use it via
various software and web services.

Electronic hardware and software development is known for its urgent
product development cycles, but I find it hard to imagine a
faster-moving field than that of ASIC bitcoin mining in the last month
or two.  The field was already exceedingly speedy as companies developed
and sold ASICs which vastly increased the total capacity of all miners.
 Now the value of a bitcoin has multiplied  a factor of 8 in the last month:

  https://blockchain.info/charts/market-price

this puts even greater pressure on the developers and those who would
buy and run the gear.

The danger is that by the time you get the gear, someone else will have
something even better, or will soon have something even better, that
there will be little or no window of opportunity to make money from it.
 The more ASIC mining capacity there is, the faster the difficulty will
rise:

  https://blockchain.info/charts/hash-rate
  https://blockchain.info/charts/difficulty

If the value of a bitcoin stabilises, or drops, then that will make
almost any kind of new hardware obsolete within weeks or months, even if
the technology doesn't change, since more and more of the ASICs of a
given generation will be produced and used for mining.  As long as the
value of a bitcoin keeps going up, that will provide even more impetus
to develop the next generation ASICs, figure out how to acquire and run
them - and so to get the electricity and necessary cooling arrangements.


ASIC bit coin mining hardware which can't earn the cost of the
electricity it consumes is no use for anything else.  eBay has plenty
already:

  http://www.ebay.com/sch/i.html?_sacat=0&_nkw=bitcoin+miner


  - Robin    http://www.firstpr.com.au