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The Raelian Movement
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Source: http://www.newscientist.com/article/mg21628925.200-virtual-economy-looms-as-digital-cash-grows-up.html?full=true
Virtual economy looms as digital cash grows up
IF THE price of gold halved overnight while the cost of mining equipment ballooned, the global economy would be plunged into chaos. This scenario is about to play out in the online peer-to-peer currency Bitcoin, but rather than disrupting the digital money supply, it could be what Bitcoin needs to be taken seriously.
Bitcoin is maturing rapidly. Last week blog host Wordpress.com announced it will now accept Bitcoins, adding blog themes to the list of things you can use the currency to buy online, which already includes T-shirts, jewellery and illegal drugs.
Bitcoin has no central bank or authority. Instead users running the Bitcoin software form a decentralised network that processes transactions. At the same time, their computers attempt to be the first to calculate the results of a difficult and regularly changing puzzle and so receive a small amount of Bitcoins as a reward (see "How to be a Bitcoin miner"). These can then be spent or converted into cash. The process is called mining because of its similarity to striking gold.
The mining reward was initially set at 50 Bitcoins by the currency's mysterious creator, the pseudonymous Satoshi Nakamoto, but to prevent inflation it is designed to halve every four years until the total number of Bitcoins is fixed at just under 21 million, double the current number in circulation. It is impossible to predict exactly when this "halving day" will take place as it depends on the computing power of the Bitcoin network, although it is thought that the first is due on 29 November.
No one is sure what the effect of halving will be, but with 1 Bitcoin currently valued at around $11, miners look set to take a significant hit to their profits unless the exchange rate adjusts.
"Seeing what happens to the price of Bitcoin will be interesting," says Gavin Andresen, lead developer of the Bitcoin software. "Everybody knows when it's going to happen, so if we assume everybody is purely rational, economic models tell you that nothing will happen because everybody will have already anticipated that change."
Another looming shake-up complicates matters, however. Calculating the Bitcoin algorithm is like entering a lottery and the more powerful your computer, the more tickets you get. Early adopters simply used the central processing unit of an ordinary desktop computer, but mid-2010 saw a shift to using more powerful graphical processing units (GPU). The Bitcoin algorithm is designed to adjust to changes in the computing power of the Bitcoin network by altering its difficulty every two weeks, equivalent to changing the odds of the lottery, which keeps the supply of new coins roughly stable.
But these GPUs will soon be outclassed by application-specific integrated circuits (ASICs). As the name suggests, this is hardware designed to do just one thing: compute the Bitcoin mining algorithm. "They are the endpoint of Bitcoin mining," says Josh Zerlan of Butterfly Labs in Kansas City, Missouri, one of a number of firms promising to bring ASICs to market before the end of the year.
Many worry that a limited supply of ASICs will allow a cabal to take control of the Bitcoin network. But the true impact of ASICs plus the halving might be to dissuade those running Bitcoin on cobbled-together computers for spare change, making the currency a more professional endeavour, which is therefore more attractive to business. "A lot of people see Bitcoin as a get-rich-quick scheme," says Zerlan. "I see mining becoming a professional activity."
If that happens, a lot of people who bought cheap GPUs to get in on the currency's gold rush will be looking for another way to make money. CoinLab, a Seattle-based startup, wants to exploit that. The plan is to take advantage of the unused GPUs by paying their owners - in Bitcoins or other currency - for their computing power, and then sell it on to those who need cheap access to number crunching. "We are providing something good for the world to do with all these GPUs," explains Peter Vessenes, CoinLab CEO and executive director of the Bitcoin Foundation.
The fact that companies like Butterfly Labs and CoinLab want to make money from Bitcoin shows that it is becoming more stable and reliable, says Andresen. "The surrounding infrastructure is really starting to mature, and I'm seeing a lot more well-funded projects as opposed to fly-by-night outfits who maybe shouldn't be involved in the financial transaction world."
Even the European Central Bank has taken interest, last month publishing a report on virtual currencies. It says such currencies will have little impact on real-world financial stability for now, but if the popularity of Bitcoin and its ilk increase, central banks may have to start regulating them.
That is unlikely to go down well with Bitcoin's libertarian supporters, but could help wider adoption, says Elli Androulaki, a security researcher at the Swiss Federal Institute of Technology in Zurich. "For Bitcoin to be valuable, banks will have to get involved."
Widespread use could threaten another Bitcoin trait: anonymity. Although Bitcoin transaction records are public, there is nothing that links a Bitcoin address, where coins are stored, to an individual. When Androulaki's team simulated the use of Bitcoin in a real-world setting they discovered that the timings and amounts of regular purchases - a cup of coffee every morning, say - could be used to link addresses in 40 per cent of cases, thus revealing the total number of Bitcoins in a user's possession. This doesn't immediately give away their identity, but if one address has been linked to a person in a public setting, the rest can be linked to them as well.
Clearly, Bitcoin still has a long way to go before it gets anywhere near the mainstream, but it is doing well for such a young currency. "I still tell people Bitcoin is an experiment, so don't invest time or money that you can't afford to lose," says Andresen. "I'm hoping a year from now I can stop telling people that."
How to be a Bitcoin miner
The Bitcoins that make up the virtual currency are stored under a unique alphanumeric sequence called an address. To make a purchase, users transfer coins from one address to another. Details of that and other transactions are then broadcast to the Bitcoin network for inclusion in the public record, which is what makes the transaction official.New sets of transactions, known as blocks, are only added to the public record when a user's computer crunches the numbers to solve a complex puzzle, which gets easier or harder to solve depending on the computational power of the network. It is designed so new blocks are generated roughly every 10 minutes.
The person whose computer solves the puzzle receives a reward, currently 50 Bitcoins, injecting new money into the currency, which they can then spend and start the cycle again.
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"Ethics" is simply a last-gasp attempt by deist conservatives and
orthodox dogmatics to keep humanity in ignorance and obscurantism,
through the well tried fermentation of fear, the fear of science and
new technologies.
There is nothing glorious about what our ancestors call history,
it is simply a succession of mistakes, intolerances and violations.
On the contrary, let us embrace Science and the new technologies
unfettered, for it is these which will liberate mankind from the
myth of god, and free us from our age old fears, from disease,
death and the sweat of labour.
Rael
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