Crypto Blog – Bitcoins & Other Virtual Currencies

News & Opinion on Bitcoins and Alt Cryptocurrencies

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Bitcoin Difficulty Explained

Bitcoin difficulty is pretty much what is says on the tin. The higher the difficulty the harder it is to find a hash.

It is a common myth that Bitcoin difficulty rises as more blocks are found. This isn’t true. The difficulty increases if the rate that new blocks are found exceeds certain limits. If new blocks are found at a rate slower than these limits then the difficulty will go down.

Here’s a great video with a really simple explanation:

OK so we know that bitcoin difficulty will change every 2016 blocks. So how is that actual figure calculated? If you want to see the actual maths then the bitcoin wiki has a pretty good explanation.

The desired rate to find 1 block is 10 minutes. This is how the optimum time of 2 weeks to find 2016 blocks is reached. So if this were the case then the difficulty would be set at 1. The current difficulty is something like 4,250 million. Here’s a chart showing how the difficulty has progressed over time.

Bitcoin Difficulty Graph

Bitcoin difficulty versus Network Hash Rate

So what does it all mean? Well we know that if you were mining at the start of the bitcoin process then you would have collected a large amount of coins and it is possibly a weakness of the system that hashing power pretty much rules in the profitability stakes. There are proposals to improve Bitcoin – many of which have been accepted or in draft mode.

Bitcoins have a finite limit and there will only ever be 21 million in circulation. As of writing this article just over 12 million had been found, so we’re just over half way. It will be fascinating to see how the price reacts to scarcity and if alt-coins (such as Litecoin) will follow the same trend.

Getting Started With Bitcoins & Litecoins

Bitcoin Miner

There are numerous guides online about bitcoin mining, equipment, mining pools etc but a lot of the information is one way. The first question should be what do you want out of bitcoin?

We’re not all geeks, the same as we’re not all investors, so I’ve broken this guide down to cater for 3 types of potential interest in bitcoin:

1. Dabbler You are interested in mining (or accumulating) bitcoins but you don’t have the time or inclination to buy equipment, compile software or really do anything too techie!

2. Techie You are comfortable with computers and want to get your hands dirty by investing in hardware, reading tech blogs and github articles on getting maximum performance from your gear. You want to be a real bitcoin miner!

3. Investor You’re a small or large investor and you just want to trade in bitcoins like any other stocks and shares.

Hopefully you’ll fit into one of those categories. If you don’t please let me know and i’ll revise this document accordingly.

THE DABBLER

So you don’t have time or can’t be bothered with the techie stuff? No problem. Cloud mining is increasing in popularity. Cloud mining websites allow you to ‘rent’ equipment or buy hashing (mining) power.

The benefits are numerous. No expensive hardware to buy or set up, no electricity costs to worry about, the potential to mine 24/7 without the stress of keeping your gear in check and also less of a worry about interruptions to your internet connection.

Sites are available that will allow you to mine SHA-256 currencies (like Bitcoin) or Scrypt based currencies (like Litecoin). It is not within the remit of this article to advise on which currencies are the most profitable to mine, but based on the mining power you buy you can use online mining calculators like the one at Coinwarz before you start out.

Keep in mind that profitability can vary depending on the current level of difficulty and the number of coins already mined (as well as market sentiment ofcourse).

cex.io is a bitcoin commodity exchange that allows you to mine bitcoins by buying (or trading) their hashing power with other users. It can be fun and rewarding if you trade at the right times. Your dashboard will show you how many coins you have accumulated in real-time. The site automatically mines Namecoins, Devcoins and IXcoins at the same time as bitcoins and you can also use your own mining hardware at their ghash.io mining pool. Litecoin, Dogecoin and Auroracoin mining are also either already running or in development. You can also buy Future Hashing Power at reduced rates to use at time triggered intervals.

Another site Hash Profit concentrates on scrypt, scrypt-N and x11/13 based currencies. Unlike cex.io the mining pools at Hash Profit are private so you can’t use your own hardware. They claim to mine the most profitable coins to maximise your return. They allow you to trade for KHS (hashing power) or simply deposit bitcoins to fund your account.

It’s worth noting that you’ll need some Bitcoins and a digital wallet to start mining on these platforms so if you don’t want to risk sites like ebay for this you can purchase bitcoins at Coinbase (US) or Bitstamp (EU).

You’ll need to provide detailed ID information to open an account at Coinbase or Bitstamp so be prepared. If you’re still keen to get involved then everything is explained in detail on the respective sites. cex.io’s guide is particularly user friendly.

THE TECHIE

Asic Miner Block Erupters and Anker Hub

Let’s face it, Geeks are the new hipsters and having your own mining farm is more impressive than owning a vintage corvette. If you want to mine SHA-256 currencies like Bitcoin and Peercoin you are going to need some powerful gear.

At the low end, ASIC USB BLOCK ERUPTER miners running at 330-336 mh/s used to be the choice for hobbyists and bedroom miners but the increasing difficulty and newer technology has lessened their appeal. Get in at the start of a new currency and these miners could still make you money. Many farms were established on these miners and multi-slot hubs supporting 7 or more miners could generate 2.5 gh/s or more.

Antminer U1

In January (2014) Bitmain’s Antminer U1’s arrived on the market. They were similar in operation to the ASIC block eruptors but crucially each could mine at up to 2.2 gh/s (the equivalent of 6 or 7 Asics). The price of the Antminer U1 (as of going to press) was around $45 (£30) – a price comparable to the ASICS in December 13. (This shows how fast technology moves and how you need to be careful with your hardware investments).

High end gear like the Antminer S1 Blade (Speed up to 200 gh/s), Butterfly Labs Monarch (600 gh/s) and KNC Miner’s Neptune (3000 gh/s) have set the standard for advance mining farms.

If you want to get started, we’d recommend the Antminer U1. They can be picked up cheaply and you only need a suitable USB hub to attach to your computer to get started.

Next you’ll need suitable software to control the actual mining. CG Miner or BFG Miner are open source projects with versions for Mac (OSX) and Windows and Linux. It should be pointed out here that you’ll need to be comfortable in the command line or Terminal (mac) to get these compiled and/or running.

If you are on a Mac you can download and get started with CG Miner here. The same page also has a GUI version of the software called Asteroid which is super simple to setup and use.

Windows users can head over to the github repository.

Another great piece of software to enable mining of SHA-256 and Scrypt based currencies and is available in all flavours (OSX, LInux and Windows) is MultiMiner. The website and installation guide is super easy to use.

For Scrypt based currencies you will need a powerful GPU in your PC, or better still build a custom rig for mining Litecoins, Dogecoin, Feathercoins etc

You can possibly use your existing graphics card but your mining power will probably be small unless you have a high end gaming computer. Top spec GPU’s to consider are the AMD Radeon R9 290X or the 7990.

Once you’ve set up your gear you’ll need to download a wallet or use an online wallet before you can start mining. These links above have downloadable wallets for LitecoinDogecoin, and Feathercoin. For Bitcoin you can download the wallet from the official site here or use an online wallet at a site like Blockchain.

Once you have downloaded your wallet you’ll need to wait for it to sync with the network. This can sometimes take a few days so be patient. Make sure you encrypt your wallet and use strong passwords (see our security guide here).

We’re nearly ready to start mining! Solo mining is unlikely to be profitable unless you have a mining farm full of mega equipment, so the best policy is to join a mining pool. Here you’ll be mining with masses of other users and you’ll find blocks easier. You point your mining equipment to your chosen pool using information supplied by the pool.

You can input this information in the terminal/command line or create a batch file to do it for you. Each mining pool has full instructions for implementation.

There are myriad mining pools. We’ve successfully used Bitminter for Bitcoins. Dogechain pool for Dogecoins and of course CEX.IO’s ghash.io for multi mining.

There’s a full comparison list of Bitcoin mining pools here. For Litecoin pools check this list.

Happy mining!

THE INVESTOR

If you simply want to trade Bitcoins on the financial markets you can do so by creating a free account at Plus500 who have a great website and mobile app so you can trade on the move.*

Bitcoin prices are very volatile so short term gains (and losses) are very possible. Before Christmas the Bitcoin price peaked at over $1000 but it is now down to around $620. Ripe for the canny investor.

We hope you’ve found this guide useful. For a full list of Cryptocurrencies visit the Bitcoin Wiki.

Please remember that the value of investments and the income derived from them can go down as well as up. Exchange rate movements can also have a positive or negative impact on the value of Non-UK investments. Past performance is not a reliable indicator of future returns and you may not get back your original investment. Generally, investments should be considered for the medium/long term.

You should weigh up factors such as the impact of any potential penalties and charges and the loss of possible benefits in circumstances where you may be considering cashing in or transferring an investment. If in doubt seek professional Financial Advice. Your capital may be at risk.

 

HMRC rule no VAT on Bitcoin Mining

Bitcoins and VAT

The UK tax authorities have announced that there will be no VAT on Bitcoin Mining or Trading. The sensible move is based on EU rules applying to currencies.

At risk of being left behind in the new digital economy are Russia who have declared bitcoin transactions illegal and China who have banned their own banks from handling bitcoin trades.

The decision was made public on the HMRC website

CEX.io
cryptsy alt currency exchange

Dogecoin For Water Hits Target Early!

Dogecoin for water
An initiative to raise money for the area of Tana in Kenya which is plagued by poor water quality was recently launched by the Dogecoin Foundation and Doge4Water.

The target was to reach 40 million dogecoins in donations before World Water Day on March 22nd. Supporters were asked to donate dogecoins via the website.

The money raised will help build 2 drilling wells in Kenya, provide access to water and provide tools to retrieve and store water. The project is another indication of positive karma power of Dogecoins and their users.

Jamaican bobsled team - Sochi Winter Olympics 2014

The initiative follows the successful project to raise money for the Jamaican bobsled team. $30,000 USD was raised enabling the team to compete at the Winter Olympics in Sochi.

CEX.io
cryptsy alt currency exchange

Auroracoin – A new currency for Iceland with a (potential) global impact

aurlogo9
Auroracoin is one of those alt currencies that is uniquely placed to succeed. Founded on the historic issues of Iceland’s financial system, the coin offers a unique opportunity for those indigenous to the Nordic island and beyond.

So what makes Auroracoin different? The developer of Auroracoin Baldur Friggjar Óðinsson had the idea for a national cryptocurrency following the well documented problems faced by Iceland with inflation and the systematic failure of the banking system following the worldwide recession in 2008. In fact the crisis was so bad that foreign investors and companies were denied the ability to move money out of the country. This short term knee jerk response to the situation has hampered inward investment and given rise to an unrest amongst the population.

Auroracoin will be ‘Air Dropped’ to every citizen of Iceland on March 25th. What this means is that each and every registered citizen will receive 31.8 Auroracoins (AUR). At current exchange rates this equals around $500 and the price has been rising.

50% of the total supply of Auroracoins will be made available in the Airdrop. It will be the responsibilty of the recipients to ‘claim’ the coins. Coins going unclaimed will be subject to further claims from those who have already joined in. So there is a big chance that the amount for each registered civilian will be much more than the 31.8 basic level.

Not from Iceland? Don’t worry, you can still get involved. The coin is a scrypt based alt currency and 50% of the coins are available to pre-mine. So if you have a suitable graphics card you can point your equipment to a pool such as Easy Mine EU and start mining your own Auroracoins. You’ll also need a wallet so head over to the Auroracoin website for full details and to download your own wallet.

The Auroracoin is a real world example of how Cryptocurrencies can potentially change the way the financial systems of the world can be operated. Changing and challenging such institutional systems should be supported and embraced in a new digital economy. In the words of Óðinsson:

“The power must be taken away from the politicians and given back to the people. Cryptocurrencies are a very important milestone in this fight for liberty. They bring the hope of a new era of free currencies, immune to the meddling of politicians and their cronies.”

CEX.io
cryptsy alt currency exchange

Bitcoins, Security and Mt. Gox

Probably the biggest news in the bitcoin world this year has been the collapse of Mt. Gox, one of the largest Bitcoin trading platforms. Due to being hacked the company was unable to fulfil it’s obligations and had to file for bankruptcy in Tokyo and New York. There are also rumours of fraud within the company.

Collectively the collapse and media coverage contributed to a fall in the bitcoin price, not to mention investors losing valuable bitcoin holdings. Mt. Gox CEO Mark Karpeles admitted that the company lost around 750,000 of its customers’ bitcoins.

Mt. Gox CEO Mark Karpeles with commemorative bitcoin

Mt. Gox CEO Mark Karpeles

So with security uppermost in the collective conscience of the virtual currency community what can we do to secure investments and protect against hacking independently.

Firstly do some research on your chosen trading platform. Find out who owns it, where it is based and what kind of customer service is offered. Coinbase and Cryptsy are large established platforms.

Passwords

We’ve all seen the google stats on the most widely used passwords. Yes ‘password’ is still used by thousands of hapless punters!! Your password should be at least 12 characters containing a variety of upper and lower case letters and random symbols. Avoid using common dictionary words and if possible don’t write your passwords down. Also avoid using the same password for multiple logins. If you get hacked the consequences will be even more dire. Your own email password should be similarly complex.

Two-Factor Authentication (2FA)

This involves not only having a password but also mobile phone authorisation (via code) when you log in. It’s a simple process of installing the Google Authenticator app (Authy) and making sure you have your smartphone to hand when you log in.

Protect your PC or Mac

Always password protect your computer and make sure your wifi connection is secure and protected using WPA2 or stronger encryption. Never download files that you haven’t explicitly requested and avoid visiting ‘sketchy’ sites. Always use Anti-Virus software. Passive products like Malware Bytes are very good.

Coin Wallet

If you store a local version of your wallet, always encrypt it with a secure passphrase and remember to regularly back it up locally and in a secure cloud storage area. Don’t forget your passphrase or your coins will be lost for ever if you should forget it.

These are the bare minimum basics of the security measures you should take. Situations like Mt. Gox are hard to take precautions against, but a common sense approach to storing large amounts of coins should be taken. Spread your assets if possible and keep a regular eye on the blogs and news pages for any current issues.

CEX.io

cryptsy alt currency exchange

Where can you spend your Bitcoins?

The success of virtual currencies depends upon their widespread adoption. From accommodation, restaurants and attractions in the real world through to regular online transactions. The growth and use of bitcoins and other cryptocurrencies is beginning to take hold and a new website called bitcoin.travel is an online resource showing bitcoin friendly worldwide services.

bitcoin.travel homepage

 

CEX.io

Future hashing contracts introduced by cex.io

Rapid development and feature rollouts at cloud mining/hash trading company cex.io have this week included FHA (Future Hash April) and FHM (Future Hash May) markets.

The system allows users to purchase hashing power at a discount in advance of the period in which the extra hashing power can be used. The markets for April and May were trading (as of today) at around 0.008 BTC per 1GH for April and 0.004 BTC per 1GH for May. The introduction also had a slightly deflationary effect on the standard GHS/BTC market with the price dropping to 0.011 per 1GH from around 0.015 per 1GH the previous day.

FHA and FHM trading at cex.io

The new feature came out of the blue and looks good for cex.io cashflow. Cheap hashing power can be purchased for the month in question and at the end of the period it is converted back to regular strength GH. The site will be trialling the system for 2 months before deciding on making the feature permanent.

*Note – Following the cex.io offer of double reward litecoin mining which started Thursday (13th March) the site attracted nearly half the total litecoin mining power globally and had to impose restrictions to prevent it hitting the 51% vulnerability threshold. The rewards were halved to 1.25 x multiplier when the total hashing power rose to between 25-60 GHs (as of tonight) with standard returns if the hashing power goes over 60 GHs. These arbitrary figures appeared to change during the day (Friday) as concerns about the monopoly on hashing power rose.

CEX.io
cryptsy alt currency exchange

Dogecoin Removes Cap

Dogecoin developers have announced that there will no longer be a cap of 100 billion coins. The controversial announcement has led to fears in the dogecoin community that the announcement may devalue the coin and cause a price drop. The news (announced early February) has co-incided with a rise then drop in price but falls short of the crash that some predicted.

dogecoin price chart

Chart courtesy coinwarz

The developers claim that the removal of the cap will lead to sustainability of the coin as a long term solution to online trade and allow a fairer market for a wider number of users. Launched as a ‘satire’ of the bitcoin boom the coin is called a Doge – a slang term for “dog” that is primarily associated with pictures of Shiba Inus (nicknamed “Shibe”) and captions on the social networking site Tumblr. These photos are often manipulated in graphics editing software (e.g Photoshop) and subtitled or captioned using the comic sans typeface.

Shiba Inu dog Kabosu

Shiba Inu dog Kabosu

Bitcoin forum member Dogecoin launched the currency on December 13th 2013 by posting a message on the forum entitled “Dogecoin – very currency – many coin – wow – v1.1 Released.”

Dogecoin and comic sans font

Dogecoin and comic sans font

The coin brought some ‘fun’ into the cryptocurrency world and after being dismissed by many bitcoin miners the currency grew in popularity and price. Unlike bitcoin which is mined using the SHA-256 protocol, Dogecoin is a scrypt based currency meaning that anyone with a personal computer or laptop with suitable graphics card could mine the coin.

In January 2014 Dogecoin became the most traded currency on the web. Unfortunately the coin suffered from a fork in February (this has also been suggested as a reason for the slight price drop) and the dogecoin client had to be updated to version 1.5 to counter the problem.Yet another version of the client wallet 1.6 is imminent to counter the threat of optimised mining from multi-pools (more here) where coin mining is fluidly adjusted to take advantage of exchange rates and profitability. Dogecoin blocks rewards will now be constant to protect against the ‘hacking’ by multi-pools of the doge’s random block reward system.

The dogecoin developers are determined to make dogecoin a democratic and ethical currency that cannot be exploited by large hardware intensive mining farms. The goal is to create a sustainable currency that survives long term.

To get started with dogecoin on Windows, OSX or Linux and to find out more visit dogecoin.com

CEX.io

CEX.IO adds mining support for more Scrypt currencies

Cloud mining service cex.io has added further alt-coin mining support on it’s sister mining pool platform ghash.io.

Following the pool mining capability introduced for Litecoin (LTC) the site has now added support for Dogecoin (DOGE), Auroracoin (AUR) and Feathercoin (FTC). These popular alt currencies (derivatives of Bitcoin – BTC) are currently available for members with their own hardware only. Cloud support is due to be launched in the near future.

CEX.IO has become popular as it allows users to mine for bitcoins and other alt currencies whether they have their own hardware and/or simply wish to trade/buy cloud hashing capability in order to mine coins.

Once you buy hashing power it is yours to keep with an unlimited expiry. You can also mine with your own hardware at the same time as mining via the cloud. Hashing power (sold by the GH) is traded live with other users so the price fluctuates. You can even use the coins you mine to buy further hashing power.

For further information check out the cex.io website.

CEX.io
cryptsy alt currency exchange