An unknown hacker has reaped an estimated 500 million dogecoins – worth nearly $200,000 at today’s prices – by hacking into a series of data storage hubs for computer networks, according to SecureWorks, an information services subsidiary of personal computing giant Dell. The SecureWorks report revealed that the hacker targeted network attached storage (NAS) boxes made by Taiwan-based Synology Inc. and used its computing power to mine dogecoin through a private pool. The action caused problems for Synology’s customers.
22 Apr
0
That’s why $440 Bitcoin price is low
Today Daniel Masters, ex trader at JP Morgan, published an interesting article about the bitcoin price on Linkedin.
In this article, Masters comments the upcoming halving of rewards for the miners and its impact on the current bitcoin price.
Back in 2012, the mining activity reached the level of 210,000 blocks mined and the first halving occured, taking rewards down from 50 to 25 BTC.
Right after that, the bitcoin price raised significantly, from $7 to $11 in nine months.
We are now at roughly 409,000 blocks, and the next halving will take place at 420,000, a level that is estimated to be reached by next july.
At that time rewards will lower again, from 25 to 12.5 BTC.
Bitcoin price will rise
According to Masters, it’s reasonable to expect another price rise following this event.
Here is his explanation:
“Prices so far in 2016 have been relatively stable. That tells me that there is enough new investment and real time demand to match the creation of $575m new coin. It seems obvious that if that dollar-sized demand persists, which I believe it will, that the price of bitcoin must rise to meet it”.
In a few words, it’s a simple matter of offer and demand, exactly the same way as it happens in the oil market, where a reduction in production determines a rise in price, given a stable demand.
That’s basically why the current level of $440 is to be considered low.
Open your free digital wallet here to store your cryptocurrencies in a safe place.
9 Feb
0
Infographic: What is Bitcoin Mining?
Open your free digital wallet here to store your cryptocurrencies in a safe place.
29 Oct
0
Infographic: Why Is Decentralized Currency Better?
Open your free digital wallet here to store your cryptocurrencies in a safe place.
5 Oct
0
Bitcoin’s Monthly Recap of September 2015
Welcome to HolyTransaction’s ninth monthly recap for the year 2015. This past month of September has been marked by some pretty developments in old cases and the long awaited release of new products; during that time, the bitcoin price rose from a low of $229.86 on September 1st to a high of $236.12 on September 30th, according to Bitcoin exchange Bitstamp.
Mike Tyson Proud to Be In Bitcoin, Opens Bitcoin ATM in Las Vegas
Weeks ago, Mike Tyson announced that he would be releasing a Tyson branded Bitcoin ATM in Las Vegas. The Lamassu Bitcoin ATM currently sits at the Linq in Vegas, is the 7th in Sin City, and has gathered a lot of attention. Tyson believes that Bitcoin will grow as education on it grows. He commented: “People don’t really understand a currency based on numerical equations. I personally still don’t … but I’m grateful to be a part of the revolution and hoping that my participation in this space will lead to more conversations and help increase knowledge and awareness.”
More Corruption in FBI Silk Road Case As Variety Johns Comes Forward
Variety Johns, the man long associated with working with Ross Ulbricht and Silk Road, has turned himself in and revealed a very convoluted tale. He claims that a corrupt federal agent is threatening the Ulbricht family and is in control of an encrypted Bitcoin wallet with Ross Ulbricht’s bitcoins. Posting to the internet, Variety Johns revealed his real name and the alias of the supposed agent hunting him: Diamond. The years old investigation into Silk Road is still ongoing.
21 Inc. Releases 21 Bitcoin Computer
21 Inc., one of the most well-funded Bitcoin companies in the world, has released its first product: the 21 Bitcoin Computer. At its core, the Bitcoin computer is just a Raspberry Pi 2 with an attached 21 Inc. Bitcoin mining chip that is rather efficient. The Bitcoin computer enables a developer to have full access to the Bitcoin network as a full node. Already, the computer has become the #1 best selling server on Amazon.
R3 Blockchain Initiative Brings 22 International Banks Together
In a sure sign of the times, many big name banks from around the world have committed to working with new Bitcoin company R3. R3 is planning a blockchain development initiative that will update the financial infrastructure that banks use to include blockchain technology, whether or not Bitcoin will be involved remains to be seen. The CEO of R3 stated: “The addition of this new group of banks demonstrates widespread support for innovative distributed ledger solutions across the global financial services community, and we’re delighted to have them on board.”
Open your free digital wallet here to store your cryptocurrencies in a safe place.
6 Aug
0
Dogecoin to allow Litecoin merge mining in network security bid
AuxPoW enables the dogecoin block chain to receive work from other scrypt-based networks. Dogecoin miners will still be able to generate blocks and receive DOGE, but now, litecoin miners will contribute hashing power to the dogecoin network.
The move, announced on the dogecoin subreddit, follows a months-long period of community debate focusing on the question of long-term viability in the dogecoin network. Litecoin creator Charlie Lee suggested the idea of merge mining in April, eliciting mixed reactions from both sides of the conversation.
According to the dogecoin development team, the AuxPoW integration will require a hard fork of the dogecoin wallet block chain. No specific integration date has been given, but the development team said that testing will begin soon.
As explained in the original announcement:
“Our topmost priority has always been to provide a stable platform for the currency and its services and of course its users. We hope that with AuxPoW we can achieve that in a better way than what it currently is like. Our hashrate has been on a decline and we hope that we can gain more of it with the acceptance of proof of work from other chains.”
As expected, community members voiced both enthusiasm and concern for the AuxPoW plan. Yet, advocates for the strategy, including Lee, say that the move will ensure the stability and security of the dogecoin network.
Plan to save dogecoin
AuxPoW is not new – several coins already enable work from other mining networks, with namecoin being the most prominent example. This long-standing reputation as a workable proofing system – and the strength of the litecoin network – has gained the idea support in recent weeks.
In a recent community post on /r/dogecoin, Dogetipbot creator Josh Mohland shared his perspective on the concept, saying that AuxPoW would help solve a key problem with dogecoin: the fact that it was never intended to function as a full-fledged transaction network.
Mohland explained:
“Dogecoin was built to die quickly – none of us expected it to grow into the absurd entity it is today. With that said, there’s absolutely an easy way to save the coin from its certain death (and by death I mean 51% attacked for the lulz), and that’s AuxPoW.”
He went on to call AuxPoW “a simple change” worth the trouble, owing to the fact that the risk of a 51% attack far outweighs perceived costs.
Other community members expressed concern over the idea, saying that the move enables large litecoin pools to crowd out smaller dogecoin miners. Questions were also raised as to whether or not AuxPoW would actually help prevent a 51% attack.
Dogecoin in ‘dire situation’, says Lee
Litecoin creator Lee hailed the announcement, telling CoinDesk that the development team made the right decision during a “dire situation”.
Lee argued that the move comes at the right time given the long-term threat to the dogecoin network – and, as some have pointed out, its falling price. He added that the move provides increased security for dogecoin without any repercussions, removing a source of concern for the network and enabling broader development in the community.
Lee told CoinDesk:
“[The community] can focus on what dogecoin does best (tipping, donations, wow) instead of worrying about defensive mining and network security.”
Open your free digital wallet here to store your cryptocurrencies in a safe place.
4 Aug
0
Network security and Proof-of-Work: do we need an alternative?
The Bitcoin protocol is designed using a proof of work mechanism, which determines who is permitted to sign the transactions that need to be verified.
A proof of work (PoW) is a piece of data which is computationally difficult to achieve, meaning that it required a lot of either time or hashing power (or both) to find the solution, but it’s easy to verify that this work was actually completed. Bitcoin uses a proof of work algorithm called hashcash, which has been around a lot longer than bitcoin itself, and was created with the purpose of being an anti denial-of-service (DOS) measure. Hashcash is fairly versatile and can be implemented with a number of functions; bitcoin uses hashcash-SHA256^2.
The proof of work consists in finding a target number that is below a certain target value, and in doing so the miner essentially “proves” that she performed a certain amount of “work” in trying various inputs. If I input a string into the SHA-256 hash function, there is no known way of determining what the output will be. Trial and error is the only way to find an input that will generate a hash that fits the desired criteria. In theory, you could nail it on the first try, but the probability of this happening is very small.
Given the current combined hashing power of the network, on average a solution is found every 10 minutes, at which point the block has been mined and the bitcoins are released as a reward. Every 2016 blocks, which ends up being approximately every two weeks, the algorithm moderates itself and either increases or decreases the difficulty of the problem. In practical terms, this means that it either increases or decreases the target value, so it’s easier or harder to find a value below it. This ensures a relatively smooth rate of release for newly mined bitcoins, and avoids flooding the market with coins at any given time.
It doesn’t matter whether I am using a supercomputer or a laptop to do the proof of work, it’s simply that with a supercomputer I can go through the attempts much faster, which means I have a higher chance of solving the problem before anyone else and therefore claiming the reward. The only thing that is important is how many hashes I can go through per unit of time, which is why the power of mining hardware is measured in MH/s, GH/s or TH/s (mega, giga and terahashes per second).
Some people in the cryptocurrency community have voiced the concern that miners may not be incentivized to continue mining if the price of bitcoin plummets, or simply because the reward for solving a given block decreases over time. Both are valid concerns but deserve to be addressed separately. In the first case, the assumption is that the reward amount would be too low for it to be worthwhile financially, and once all 21 million bitcoins have been mined this reward goes away entirely. Currently miners are primarily incentivized by the coinbase reward rather than the transaction fees, which is why many blocks end up with few transactions. Miners profit from the transaction fees, and the more transactions they include in a block, the more money they can make, but the opportunity cost of continuing to work on that block rather than go after a new one is high, as a competing block may win, rendering their work a waste of time and computing power.
Let’s assume that for whatever reason the price of bitcoin collapses, and therefore it is significantly less lucrative (net negative, once you factor in the cost of electricity) to mine. If miners are rational actors, most of them will stop mining, which is a problem for the network. The unintended consequence, however, is that mining would become dramatically less competitive, and therefore substantially more lucrative for those miners who continue to mine — at least in the short term. As I mentioned earlier, the algorithm self regulates to keep the average pace at which blocks are solved at around 10 minutes per block. As the bitcoin developer guide explains, Every 2,016 blocks, the network uses timestamps stored in each block header to calculate the number of seconds elapsed between generation of the first and last of those last 2,016 blocks. The ideal value is 1,209,600 seconds (two weeks).
Based on a comparison to the ideal value, the algorithm either increases or decreases the difficulty of the problem to solve, essentially recalibrating to try and get as close to 1,209,600 seconds as possible. To date, the difficulty has increased as more and more advanced ASIC miners continue to be developed, and more computing power is needed to have a chance at being the first to solve a block. However, the algorithm can also self-regulate in the opposite direction, making it easier to solve the problem by increasing the target value. Difficulty can be decreased by as much as 75%. This component of the protocol is particularly brilliant in design, as it basically guards itself against market shocks that could be produced by sudden swings in the mining power being inputted at any given moment.
Even if the bitcoins they are mining are worth substantially less post crash, if the miners believe that the expected future value of their bitcoins is significantly greater than it is at present, then it would make sense to continue mining. Alternatively, if a large percentage of miners quit because they didn’t anticipate the future value of bitcoin to make their present expenditure worthwhile, the new environment could still attract a new class of miners who are not currently mining because they don’t have the hashing power needed to make it lucrative, but if competition decreased dramatically, it would be. Presumably at this point other miners who had been mining previously would also see this and start getting back into the game, which would ultimately increase competition and start driving things in an upward direction again.
The likelihood that we see a huge drop in the price of bitcoin also decreases substantially over time, as it becomes less probable as the network expands. One of the main reasons bitcoin prices have been fairly volatile to date is that the network (by which I mean the number of consumers with wallets and merchants who accept bitcoin as a form of payment) is still relatively small. Bitcoin’s market cap has been hovering between 7 and 10 billion dollars, which means that any hedge fund worth its salt could take a position and dramatically swing the market. Bridgewater Associates, for instance, is the world’s largest hedge fund with $150 billion in global investments under management. In theory, they could buy ALL the bitcoins that have been mined to date 19x over, and still have enough left to throw in six Instagram acquisitions in for fun. And that’s only one of the top funds. Because the market cap is small, bitcoin to date has been subject to the whims of large actors; as the cap increases, there’s a strong chance that this will change.
There’s also the issue to consider that even in the absence of a price crash, incentives to mine naturally decrease over time as the amount of bitcoin received as a reward for mining a block is halved every 210,000 blocks, or approximately every four years. Theres is reasonable cause for concern that without the incentives provided by block rewards the network will no longer be secured, in that the transaction fees will not be sufficient to support the cost of securing the network. This is a manifestation of the game theory concept of the “Tragedy of the Commons” in which no individual actor wants to perform work or contribute to the community because he believes that she can reap the benefits regardless, but when everyone behaves this way, the system ends up collapsing and leaves everyone worse off. No one wants to pay transaction fees, but if everyone avoids paying them, the miners will have no incentive to keep security levels high, which could result in a systemic collapse.
To some extent, the point in time at which this problem becomes a reality will depend on the price of bitcoin, and no one can accurately predict when the network will reach that point, but even if prices continue to grow this is likely only a case of delaying the inevitable. If a bitcoin today is worth $600 and I receive 25 when mining a block, and in ten years I only receive 6.25 bitcoins for doing the same work, yet each one is worth $100,000, mining still makes a lot of sense. Even considering the investment in mining equipment, assuming that the amount of electricity I will have to expend will be higher, and discounting for 2-3% annual inflation, there’s still a substantial potential upside. There are a number of external factors (exact cost of electricity, price of ASICs or other mining equipment, etc) that will play into this and influence whether the network incentives to mine remain high enough, so it is worthwhile considering other mechanisms, prominent amongst which is proof of stake.
Proof of stake (PoS) is an idea that came about as an alternative solution to proof of work, primarily as a safeguard to some of the original protocol’s perceived shortcomings. Apparently it was first proposed in 2011 in the bitcoin talk forum by “QuantumMechanic”, and since then several models for implementation have been developed. A proof of stake scheme is similar to proof of work in that it is also a mechanism for determining who will sign the transactions in a given block, but instead of relying on hashing power, it uses ownership as the deciding factor. Simply put, if Alice holds 5% of all coins, she has the ability to mine 5% of the blocks. Theoretically this should increase network security by making it more difficult to mount a 51% attack. In order to do so, someone (probably a mining pool) would have to control over half of all coins in existence, which is much harder to do than controlling 51% of the hashing power. It’s worth considering that this isn’t impossible, as a large centralized pool could form and come to control over half the coins in circulation through a combination of owned coins and loans, for example. Realistically, however, in a proof of stake situation it wouldn’t make much economic sense to mount this type of attack. It would substantially reduce confidence in the network’s security, and likely cause the price to plummet. By crashing the value of a coin in which it is so heavily invested, the malicious mining pool would essentially be shooting itself in the foot. To some degree this is also true in a PoW scenario, but the disincentive is much stronger where PoS is being applied.
Although there’s no way to know exactly if and when an alternative to proof of work will become necessary due to a lack of mining incentives, a proof of stake scheme could also be a desirable solution for environmental and efficiency reasons. Since the proof of work process does not actually solve real-world problems, the energy is essentially burned without a real return, which is suboptimal. Implementing PoS, either in the form of a fork from the main proof of work blockchain or via the use of an altcoin that uses it (ie Peercoin, or something similar) could be significantly less costly than bitcoin mining as it currently stands, because the current system gobbles up a huge amount of electricity. Because PoS uses far less energy, as almost none is expended in the mining process, it would be substantially cheaper to make a profit mining than in a PoW scenario. It would also meaningfully reduce transaction fees in the long run, as miners wouldn’t have to charge high fees in order to cover their power and hardware costs.
We still lack a perfect solution to all these issues, and PoS is not a panacea either. One problem I see with implementing a PoS mechanism is that it could cause illiquidity in the market and lead to great concentrations of wealth. Miners would be incentivized to hold their bitcoin in order to be allowed to mine more, and therefore large concentrations pools of currency would accumulate. Currently, miners have an incentive to convert some of their mined bitcoins into dollars by selling them, but this is largely true because of a) price volatility – it is still risky to hold everything in bitcoin and b) there are still many assets that cannot be purchased using bitcoin. If PoS were implemented, and as both a) and b) become less relevant as the network expands, this could lead to a vast majority of coins being held by very few.
Despite the considerable improvements that proof of stake offers over proof of work in certain spheres, ultimately neither proof of work nor proof of stake offer a perfect solution to long-term network security concerns. Still, both clearly have useful characteristics which, applied in conjunction, could help overcome some of their own shortcomings. Just as I was wrapping up this writeup, Ryan Selkis passed along a fascinating paper by Bentov, Lee, Mizrahi, and Rosenfeld which proposes a third option, called Proof of Activity (PoA). PoA is predicated on the belief that neither PoS nor PoW are flawless, and seeks to pull in some of the better aspects of both. Given that this piece has already gotten quite lengthy in just looking at proof of work and proof of stake, I’ll write about the PoA paper separately sometime soon. The paper, titled “Proof of Activity: Extending Bitcoin’s Proof of Work via Proof of Stake”, is fairly technical, but it’s very thorough and for those who are so inclined I definitely recommend a read.
Open your free digital wallet here to store your cryptocurrencies in a safe place.
20 Jul
0
Under the microscope: conclusions on the costs of Bitcoin
Hass McCook is a chartered engineer and freshly minted Oxford MBA. He has been researching bitcoin over the past several months and recently joined the Lifeboat Foundation’s New Money Systems advisory board.
This, the final instalment in his five-part series, evaluates the relative sustainability of the bitcoin network against the costs of gold production, the printing and minting of physical currency and the legacy banking system.
Under the Microscope has aimed to cast a critical eye over the social, environmental and economic impacts of the way we currently transact and transfer wealth, be it through legacy systems like gold and fiat currencies, or through newer digital cryptographic ones.
The series has also endeavoured to give readers a clearer idea of the human and environmental impacts associated with both current and future monetary systems, and allow them to draw their own conclusions on the relative sustainability of the old and new systems when viewed from a holistic “triple-bottom-line” approach.
Although it is not necessarily fair to compare bitcoin to the entire legacy banking system, there was doubt in the community about the impact of the legacy banking system, and thus, it has been quantified for completeness.
It should be noted that the only thing involved in bitcoin mining is electricity use, and as the world moves towards clean and renewable energy, Bitcoin will have even less of an impact on the environment (See Koomey’s and Moore’s Laws). There is also much larger scope for energy efficiency improvements in integrated circuits and computing than there are in gold recycling.
As can be conclusively seen, the relative impact of the bitcoin network does not even register on the radar of the fiat and gold-based monetary systems, representing a very conservative relative environmental impact of just over 0.13%, and a relative economic impact of just under 0.04%. When one considers Koomey’s Law, we can expect energy/GH to continue to half every 18 months until 2048.
This means that we can expect our current industry best efficiency of 0.733 W/GH to reach 0.0000000873804 W/GH. Thus – armchair academics take note – in the event that bitcoin scales to a million times its current size and market cap over the next 30 years, it’s environmental impact will still be insignificant compared to existing systems.
When considering Moore’s Law, we can expect $/GH to continue to half every 18 months until at least 2020. When we consider the advent of decentralised emission-free renewable energy, we can expect tCO2/GH, and possibly even $/kWh, to tend towards zero.
The more agile and dynamic bitcoin companies can take advantage of these trends, but the sluggish, inert and over-encumbered incumbents simply cannot. As time goes on, bitcoin only becomes more sustainable, while legacy systems continue to bloat year-on-year.
There are no negative social externalities as a result of bitcoin proliferation, and any money laundering and shadow economy dealings that currently happen on the network will reduce drastically in proportion as adoption grows and regulations firm up on the on-and-off ramps into the bitcoin economy.
Rome wasn’t built in a day, and the crypto-currency space will take time to evolve to ensure that the issues faced and created by our legacy monetary systems do not continue to plague us for the next century and beyond.
It has been demonstrated that institutional fraud is a problem systemic to humans, and not to monetary systems. However, transactional fraud is only a problem in legacy systems due to the infallibility of the fact that 2 + 2 will always equal 4.
Although this paper has shied away from all of the ideological and philosophical debates surrounding bitcoin, what is clear is that the argument that bitcoin is superior monetary system – from the benefits and protections it provides to merchants and consumers, to the relative lack of negative impact it has on our planet and humanity in general – is a strong one.
The world is currently crippled by several issues, and the human race faces several existential threats such as climate change, the global ageing population demographic crisis and wealth and income inequality.
It is also unacceptable in 2014 to still have tens of millions of people forced into labour, and current monetary systems are somewhat responsible for several of the social ills brought about by corruption, money laundering and the black market.
For those who are willing to back their principles and morals with their money, bitcoin provides the opportunity for socially, environmentally and economically conscious global citizens to choose to no longer participate in the fragile and rotten legacy monetary system, and voluntarily participate in the open and wondrous bitcoin ecosystem.
Due to the several benefits and significantly reduced burden on our planet and society, there is a certain feeling of inevitability about digital currencies, whether it be bitcoin, or a future currency that proves to be even more sustainable and beneficial for humanity.
You can read Hass McCook’s paper ‘An Order-of-Magnitude Estimate of the Relative Sustainability of the Bitcoin Network‘ (on which this series is based) in full here.
Open your free digital wallet here to store your cryptocurrencies in a safe place.
10 Jul
0
Litecoin network hashrate tripled in two months
At the end of April, mining hardware manufacturing company started shipping a whole stack of their products. It was the same time when the Litecoin hashrate was somewhere around 173,225 MH/s. The increasing exposure of Scrypt ASICs mining machines further influences other manufactures as well. In just two months since April, the Litecoin hashrate went up to 200$, while its mining difficulty also tripled.
The next Scrypt ASICs to hit the market will have the hashing power between 200 and 400 MH/s; indicating the possible surge in Litecoin mining difficulty and network hashrate as well. Some companies are also building hardware that can sustain hashing power up to 650 MH/s. As many believes, these events will somewhat impact the Litecoin standings in the market. The question however is, in which way?
The Litecoin community seems to have divided on this question. There is a section which believes that the increasing hashrate will have a fruitful impact on Litecoin prices, citing Bitcoin as a key instance; while another section does not acknowledge any relation between the Litecoin prices and its hashrate.
Explanations are coming from both sides, each with a unique perspective. The ones that support the prediction of Litecoin’s escalation believe it to be the network’s strength that will multiply by over 1,000 times in future. It is the economics of scale in mining that will play a major role in boosting the Litecoin’s stand in the market.
On the other hand, there are those who do not support this theory even in thoughts. They outright rubbish the history that certifies increasing hashrate proportional to the coin’s market cap. Their logic dictates a scenario in which miners are faced with increased selling pressures in order to cover their investments on such expensive mining hardware. This aims at a lower demand and higher supply rate that will eventually cause a huge drop in Litecoin prices. They event say that the current imbalance of Litecoin market is caused by such selling pressures.
Considering both the sections, we believe that market conditions have changed a lot since the launch of new cryptocurrencies in the market. The reason why BTC did so well after the increased hashrate was it being used only for trading. Litecoin too cashed only because of the bubble fuelled by China. The moment these coins were introduced to the real merchant world, its basics changed completely. Seeing today’s scenario, Bitcoin is backed by multiple major organizations while Litecoin is still far away from reaching this point. In short, the continual acceptance of BTC over LTC thickens the latter chances to repeat history. Hashrate increased or decreased, it won’t hold any meaning until Litecoin grabs some major investments from big players.
Open your free digital wallet here to store your cryptocurrencies in a safe place.
8 Jul
0
“The current proof of work system that is in place incentivizes centralization,” says BlackCoin Foundation
As Bitcoin’s first-mover momentum spreads the digital currency’s adoption, the “proof of work” model it uses to confirm transactions is coming under scrutiny within the crypto-community.
The proof of work algorithm rewards the individuals, called miners, who confirm blocks of transactions in exchange for an amount of the digital currency. Individual miners join pools to mine collectively as a group, increasing the computing power available to confirm Bitcoin transactions.
This model seems to benefit by encouraging a large number of participants, but it is vulnerable to what is called a 51% attack. A miner or pool that holds 51% of the total computing power could in theory control the blockchain, which is the public ledger of Bitcoin transactions. This control could enable double-spending bitcoins as well as blacklisting certain users or computing equipment. Until recently, the 51% attack was widely considered an unrealistic threat.
“The proof of work algorithm is robust and has been resilient in the face of continuous attacks for the past five years,” says Andreas Antonopoulos, a technologist and entrepreneur who is active in the Bitcoin community. But a mining pool called Ghash.io gave the community a scare when it took over 51% of the network for 12 hours on June 13.
If a pool used its control for nefarious purposes it would only hurt Bitcoin’s use and, in turn, its price. This result would hurt any miners who become attackers, since they are rewarded for their mining efforts in Bitcoin and likely hold a generous amount of the digital currency. Since the incident, Ghash control has decreased substantially, hovering now at around 35%.
“Certainly miners didn’t sign up for unfair play and they would abandon that pool,” lowering the percentage of its control, Antonopoulos says. The 51% attack “is a theoretical attack that’s narrow in scope and goes against the incentives for the miners and owners of the pool.“
Last year, Ghash said it would try to prevent itself from capturing 51% of the network power and that it would not do any damage even if it did reach this level of control. And since the power is split over the many individuals who mine in the Ghash pool, it’s unlikely the pool could reach a consensus among its members to damage the network.
Nevertheless, some in the Bitcoin community are calling for a splintering, or “fork,” in the Bitcoin blockchain, and the forked version of Bitcoin would add features that discourage pooled mining. Others are talking about the benefits of a “proof of stake” algorithm, which secures cryptocurrency networks by asking users to show ownership of a certain amount of the currency.
BlackCoin is an alternative digital currency that uses a pure proof of stake model. It was created about five months ago and has generated enough support to be integrated into CoinKite’s merchant point of sale system.
“A user chooses to ‘stake’ his coins to generate the next block in the chain, and his chance of doing so is proportional to the weight of his own coins,” says Adam Kryskow, U.S. representative for the BlackCoin Foundation.
Proof-of-stake algorithms enable faster payments. BlackCoin transactions confirm in under a minute, whereas Bitcoin transactions usually take about 10 minutes. And proof of stake is also more eco-friendly, consuming far less energy than proof of work algorithms.
 |
| Image: Peercointalk.org |
Peercoin is one of the most recognized altcoins that uses a hybrid proof of stake/proof of work model. New coins are awarded to miners who do work to authenticate transactions, but are also given to users who hold a higher stake in the system.
“The current proof of work system that is in place incentivizes centralization,” says Kryskow. “Specifically as mining payouts decrease, small mining operations will be forced to close up shop. With little to no incentive to continue mining, network power will fall dangerously low and security will be severely threatened.“
But proof of stake has its own vulnerabilities. Kryskow admits that since proof of stake algorithms are not completely decentralized, they are susceptible to a “nothing at stake” attack, where older coins could be used to fork the blockchain to create a competing one.
The proof of stake model hasn’t been stress-tested enough over a long period of time, and it worries Antonopoulos when proponents argue that the nascent mining algorithm is better than Bitcoin’s proof of work.
Bitcoin has survived a number of attacks over the years, says Antonopoulos. “There is much better monitoring and tracking [of the network]…a lot of DDoS protections and countermeasures built into the core client because of Bitcoin‘s experience with widespread attacks over the years,” he says.
Proof of stake was created in 2011 with the launch of Peercoin. “It was attacked and beaten; bugs were found, security issues were rampant and countless vulnerabilities were exposed,” Kryskow says. That’s when Peercoin moved to the hybrid proof of stake/proof of work model.
BlackCoin‘s developer argues that, like Bitcoin’s proof of work, proof of stake will be stress-tested in real-world use. BlackCoin “is a great proof of stake experiment,” Kryskow says.
Antonopoulos agrees that the development of new proof models is advantageous. “I don’t think we’ve found the perfect solution yet,” he says. “Everything comes with compromises…so you just have to identify which ones are the good compromises to make.” Other algorithms include “proof of burn,” in which a small portion of a cryptocurrency is destroyed to create value through scarcity; and “proof of resource,” which takes a resource, such as bandwidth, and assigns it a certain value for sharing.
“The real issue, though, is until we see a problem in Bitcoin that impacts the price, knowledge of Bitcoin is so much higher than [all other altcoins] that any other solution out there will be irrelevant,” says Tim Sloane, vice president of payments innovation at Mercator Advisory Group.
Sloane doesn’t expect everyone using the Bitcoin protocol to switch over to another digital currency just because there’s a threat
of disaster. But it may happen if a disaster actually strikes.
“As Bitcoin gets bigger and bigger, the problem gets bigger and bigger,” he says.
Open your free digital wallet here to store your cryptocurrencies in a safe place.
17 Jun
0
The single most profitable illegitimate mining operation: 500 Million Dogecoins mined!
(CoinDesk) An unknown hacker has reaped an estimated 500 million dogecoins – worth nearly $200,000 at today’s prices – by hacking into a series of data storage hubs for computer networks, according to SecureWorks, an information services subsidiary of personal computing giant Dell.
The SecureWorks report revealed that the hacker targeted network attached storage (NAS) boxes made by Taiwan-based Synology Inc. and used its computing power to mine dogecoin through a private pool. The action caused problems for Synology’s customers, some of whom reported poor performance on Facebook in February.
SecureWorks called the months-long intrusion unprecedented, saying:
“To date, this incident is the single most profitable, illegitimate mining operation.”
Following reports of an issue, the investigators ultimately discovered a folder entitled ‘PWNED’ that contained the mining software CPUMiner and the capacity to conceal the program.
The address the mined dogecoins were being sent to was also identified,
revealing the accumulation of more than 400 million dogecoins. Along
with another wallet, the hacker generated roughly 500 million dogecoins
between January and April.
revealing the accumulation of more than 400 million dogecoins. Along
with another wallet, the hacker generated roughly 500 million dogecoins
between January and April.
In
addition to exploring the technical aspects of the hack attack,
SecureWorks delved into the possible identity of the assailant,
suggesting that “the findings strongly indicate that the threat actor is
of German descent”.
addition to exploring the technical aspects of the hack attack,
SecureWorks delved into the possible identity of the assailant,
suggesting that “the findings strongly indicate that the threat actor is
of German descent”.
Hacker used private pool
The
configuration file of the software that was infecting Synology’s NAS
boxes pointed to the presence of hidden mining software.
configuration file of the software that was infecting Synology’s NAS
boxes pointed to the presence of hidden mining software.
CPUMiner,
the program used, had been modified to run on the boxes and was
connecting to a dogecoin pool not associated with any public mining
group, SecureWorks said. Each NAS box acted as an individual miner,
connecting to the pool and generating dogecoins.
the program used, had been modified to run on the boxes and was
connecting to a dogecoin pool not associated with any public mining
group, SecureWorks said. Each NAS box acted as an individual miner,
connecting to the pool and generating dogecoins.
SecureWorks
accessed the data being sent to the NAS boxes, which allowed them to
ascertain the dogecoin wallet address holding the fraudulently mined
dogecoins, as well as the possible identity of the hacker.
accessed the data being sent to the NAS boxes, which allowed them to
ascertain the dogecoin wallet address holding the fraudulently mined
dogecoins, as well as the possible identity of the hacker.
Dubbed
“foilo.root3″ in the configuration file, the user appears to have a
connection with accounts on GitHub and BitBucket, although it remains
unclear whether the name is unique to a single person.
“foilo.root3″ in the configuration file, the user appears to have a
connection with accounts on GitHub and BitBucket, although it remains
unclear whether the name is unique to a single person.
Mining malware gains
The
dogecoin mining attack represents one of the more creative approaches
to generating digital currency through fraudulent means. Other recent
attempts have found wrongdoers using unique means to upload software to
mine bitcoin, but in nearly all cases, the program was designed to
conceal itself and its operations.
dogecoin mining attack represents one of the more creative approaches
to generating digital currency through fraudulent means. Other recent
attempts have found wrongdoers using unique means to upload software to
mine bitcoin, but in nearly all cases, the program was designed to
conceal itself and its operations.
Last month, unknown hackers attempted to distribute bitcoin mining malware through a modified torrent file of the video game Watch Dogs. This attack was notable as it targeted another form of online piracy.
A
more unusual concealed attempt to create mining botnets out of mobile
phones was uncovered in April. At the time, a group of wallpaper apps
listed on the Google Play app store were discovered to contain bitcoin mining programs.
more unusual concealed attempt to create mining botnets out of mobile
phones was uncovered in April. At the time, a group of wallpaper apps
listed on the Google Play app store were discovered to contain bitcoin mining programs.
Image via Dig Doge
Open your free digital wallet here to store your cryptocurrencies in a safe place.
