Buy, Sell & Trade Bitcoin - Anonymous Peer-to-Peer

Bitcoin and Concerns from US Politicians

Early in the current month, two influential United States senators, Charles Schumer from New York and Joe Manchin representing West Virginia, addressed a letter to Attorney General Eric Holder.

Their communication voiced apprehensions regarding the increasing prevalence of a novel digital currency – Bitcoin, commonly referred to as BTC.

The Rise of an Anonymous Currency

This decentralized, peer-to-peer currency has experienced significant growth in popularity over recent months.

Consequently, numerous websites have emerged online, facilitating the exchange or donation of Bitcoins using only a unique, non-identifiable public key.

Key Characteristics of Bitcoin

• Anonymity: Transactions are linked to public keys, not personal identities.
• Peer-to-Peer: Exchanges occur directly between users, without a central authority.
• Digital Nature: Bitcoin exists solely in electronic form.

The senators’ letter highlights the potential for this anonymity to be exploited for illicit activities.

They requested clarification on how the Department of Justice intends to address the challenges posed by this emerging financial technology.

Potential Implications

The increasing adoption of Bitcoin raises questions about its regulation and oversight.

Concerns center around its potential use in money laundering, tax evasion, and the financing of illegal operations.

Further investigation and policy development are anticipated as Bitcoin continues to gain traction within the financial landscape.

Understanding Bitcoin

The groundwork for Bitcoin was laid in 2007 by an individual or group operating under the alias "Satoshi Nakamoto," believed to be of Japanese origin. The technology was formally launched in 2009.

Currently, Bitcoin is achieving unprecedented milestones and is recognized as a pioneering, functional example of a cryptocurrency.

Employing cryptography – the science of secure communication – for both creation and transfer, Nakamoto envisioned a system that was inherently anonymous and independent.

The core principle involved eliminating intermediaries, thereby preventing any single entity from controlling currency issuance or monitoring transactions.

Instead, these functions are distributed across a network of interconnected users, with no personally identifiable data being stored.

Consider this scenario: you wish to send Bitcoin to a friend, Mark. Mark’s public key is associated with the Bitcoin, and your transaction is digitally signed using your unique private key.

This action transfers ownership of the Bitcoin to Mark, and the Bitcoin network prevents you from spending the same Bitcoin twice by recording and validating the transaction.

Fortunately, this entire process is automated through freely available software that manages your Bitcoin holdings.

This software is compatible with Windows, OS X, and Linux operating systems, requiring only a user’s public key to initiate a payment.

You can obtain a suitable version for your system and find information regarding secure Bitcoin storage on the official Bitcoin website.

Acquiring Bitcoins: A Comprehensive Guide

Several methods exist for obtaining Bitcoins, with the most straightforward being a direct purchase. This can be accomplished through a Bitcoin exchange, such as Mt. Gox, or via over-the-counter (OTC) trading channels like #bitcoin-otc on IRC. Alternatively, individuals can locate Bitcoin traders on platforms like TradeBitCoin.com.

Current market prices and trends can be monitored using resources like Bitcoin Charts, providing valuable insights before making a transaction.

Bitcoin Mining: Generating Your Own Currency

Beyond purchasing, it’s also possible to generate Bitcoins independently through a process called mining. Essentially, mining involves validating and recording transactions on the Bitcoin network.

This validation occurs through the creation of "blocks," which serve as permanent records of Bitcoin activity. Each block contains recent transactions, a random number, and a cryptographic hash of the preceding block.

These blocks are sequentially added to the "block chain," a chronological and tamper-resistant ledger. Once incorporated into the chain, altering a block becomes exceedingly difficult, preventing fraudulent "double-spending" of Bitcoins, as any modification would necessitate changes to all subsequent blocks.

Mining Rewards and Future Outlook

Upon successful creation of a block, a reward, currently 50 BTC, is granted to the miner responsible. This reward is halved approximately every 210,000 blocks. Estimates suggest that the maximum total supply of Bitcoins – 20,999,999.9769 BTC – will be reached around the year 2140.

Even after the maximum supply is achieved, mining can remain economically viable due to the inclusion of transaction "fees" within Bitcoin transactions.

Hardware and Software Requirements for Mining

If you intend to mine BTC, specific hardware and software are required. Mining with a computer's central processing unit (CPU) is generally inefficient and may be phased out of the Bitcoin network entirely, according to the official wiki.

Therefore, investing in a high-end graphics card with a powerful graphics processing unit (GPU) is a more effective approach.

The Bitcoin wiki explains the performance difference: A CPU core can execute a limited number of instructions per clock cycle, while a GPU, like the Radeon HD 5970, can execute significantly more. This translates to a substantial performance advantage for GPUs in Bitcoin mining.

Suitable mining software can be found on dedicated software pages. For those with limited computing power, participating in a mining pool can be a beneficial strategy.

Understanding GPU Performance

Here's a breakdown of why GPUs are superior for mining:

• CPUs can execute a limited number of instructions per clock.
• GPUs, with their numerous ALUs (shaders), can execute a far greater number of instructions simultaneously.
• Even with faster CPUs, a single GPU often outperforms multiple CPU cores in mining operations.

Silk Road, Expenditure & Security Considerations

The initial concerns regarding Bitcoin, brought to the attention of the Attorney General by two US Senators, stemmed from the growing prominence of an anonymous marketplace known as Silk Road. Due to the inherent anonymity of Bitcoins, they have become the preferred medium of exchange on Silk Road for the buying and selling of prohibited substances and other unlawful goods.

Access to the website necessitates the use of Tor, a security application designed to prevent users from being tracked and which utilizes BTC exclusively for all transactions. A significant portion of the unfavorable publicity surrounding Bitcoin is likely attributable to the activities conducted on Silk Road.

The platform incorporates both a reputation system and an internal escrow service, however, this does not guarantee security, as all purchased items are delivered via traditional postal services.

For those seeking legitimate purchases using Bitcoin, a comprehensive directory of merchants can be found on the official Bitcoin wiki [No Longer Available]. Additionally, weusecoins.com provides valuable privacy and security advice for individuals new to the world of Bitcoin.

Should you choose to dedicate resources to Bitcoin mining or trading, it's crucial to recognize the inherent risks associated with any volatile financial investment. Market downturns can result in substantial financial losses, as demonstrated by a previous instance where the value of a single BTC plummeted by over 30% within a single day, followed by a partial recovery of 15%.

Personal safety is also paramount, particularly if you plan to acquire numerous mining rigs and operate them continuously. The website Bitcoin Mining Accidents humorously documents reported injuries occurring within the mining community.

Reports indicate that one anonymous miner has sustained lasting brain damage as a result of their mining activities, serving as a cautionary tale.

Furthermore, anticipate a considerable increase in your electricity expenses!

Key Considerations for Bitcoin Users

• Anonymity & Illicit Activities: Silk Road highlighted the potential for Bitcoin to facilitate illegal transactions.
• Security Measures: Utilizing Tor is essential for maintaining privacy when accessing platforms like Silk Road.
• Financial Risks: Bitcoin's value is subject to significant fluctuations, potentially leading to financial losses.
• Physical Safety: Operating mining rigs can pose physical hazards.
• Operational Costs: Bitcoin mining consumes substantial amounts of electricity.

Final Thoughts

The ultimate success of Bitcoins is yet to be determined, however initial indications demonstrate merchant acceptance of this novel currency. The BitCoin wiki maintains a section dedicated to debunking common myths and addressing skeptical viewpoints.

It is important to acknowledge that this resource is inherently biased in favor of the currency itself. Only the passage of time will reveal whether Bitcoin can truly function as a practical, enduring, and widely adopted decentralized monetary system.

What are your perspectives on Bitcoin? What is your opinion regarding Silk Road? Have you experimented with Bitcoin mining? Do you believe it is a fleeting trend destined to fade, or does it represent the future of digital commerce?

Share your thoughts in the comments section below – your input is valued.

Image Source: Bitcoin Mining Computer