Bluish Coder

Programming Languages, Martials Arts and Computers. The Weblog of Chris Double.


2011-03-26

Bitcoin continues to grow

A few months ago I posted a short introduction to bitcoin. Since that post a number of new services using bitcoin have appeared and it has become a little easier to trade bitcoins for other currencies.

If you bought bitcoins around the time of my last post you would have paid about $0.06 USD per bitcoin. The current exchange rate from Mt. Gox at the time of writing this article is about $0.87 USD per bitcoin. That's a big increase if you've been sitting on bitcoins since then.

The We Use Coins website contains a great introduction to bitcoins along with an animated video about how it works:

Some high profile websites have start accepted bitcoins as donations:

  • The Electronic Frontier Foundation (EFF) allows donating by sending to a bitcoin address listed on their Ways You Can Help EFF page.
  • The Freenet Project lists a bitcoin address for donations on their donate page.
  • The Singularity Institute has a bitcoin address on their donations page.
  • The I2P Anonymous Network accepts bitcoins.

Some new services have come online providing ways of buying and seeing bitcoins:

  • CoinPal allows purchasing of bitcoins using PayPal.
  • CoinCard allows using bitcoins to buy gift cards. Currently you can buy Domino's Pizza gift cards and PayPal payments. The latter effectively allows you to trade your bitcoins for US dollars.
  • Mt. Gox is still going strong and is probably the leading bitcoin exchange.
  • BitcoinUSA is an exchange that focuses on complying with all US Government regulations regarding financial exchanges (including 'Know Your Customer' requirements).
  • bitcoin-otc is an 'over the counter' marketplace that operates from the #bitcoin-otc IRC channel on irc.freenode.net. Trades occur between parties in the channel and includes a web of trust database where you can rate people based on the trade. The web of trusts uses GPG authentication to identify users.

GPG is becoming a popular way for bitcoin traders to associate other trust data (like EBay feedback) with their registered identity in the web of trust. CoinPal also provides a way to link with the web of trust to get higher purchase limits.

Information on the bitcoin network and economy is available from sites like:

  • Bitcoin Block Explorer. This is a webview of the bitcoin block database. Each bitcoin block and transaction can be viewed. Indvidual addresses can be examined.
  • Bitcoin Charts shows detailed information on all the bitcoin markets.

Bitcoins are generated by running mining software that performs a computationally expensive task. Miners are effectively participating in a lottery and when they solve the task they 'win'. The prize is 50 bitcoins and this is known as generating a 'block'. The block is published to the P2P network and it contains the transactions that are accepted by the network.

As the network power of the bitcoin P2P network has grown so has the chance of winning the lottery decreased. CPU based miners can now take years to generate a block. GPU based miners are now the preferred way of mining. Even with GPU based miners generating blocks can take a long time (days and weeks). Mining pools have started to appear where miners group together to solve the task and share a proportion of the generated 50 bitcoins. So instead of earning 50 bitcoins a month you might earn 1.5 bitcoins a day.

Some pools that are operating are:

Some good places to keep up to date with the happenings in the bitcoin world are:

And finally, some services that use bitcoins:

  • WitCoin. A reddit-like system that uses bitcoin for voting. Note, may sometimes contain NSFW content. Submitters and commenters can earn bitcoins based on upvotes.
  • AutoVPS. Provides VPS hosting that can be paid using bitcoins.
  • YouTipIt. Give and receive tips using bitcoins for online content.
  • BiddingPond. Internet auctions using bitcoins.
  • Ubitious. File sharing site where downloaders pay bitcoins to get content and the submitter gets a portion.
  • BitcoinService. Another file sharing site.
  • Others. Many more listed on the bitcoin wiki.

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