Friday, January 17, 2014

Making money?

Whenever you ask how to make money, you tell me that literal "making money" is somehow not approved of.  But I found a method that doesn't look to be against laws of nature, and it's something I can do with computation cycles I have access to: Bitcoin.

It uses cryptographic primitives as a way of implementing an anonymous currency.  Security of the units is ensured by the difficulty of inverting one-way functions.  Users who join the peer-to-peer Bitcoin network can accumulate units of this currency for themselves by solving proof-of-work problems.
You pass on a money unit through a cryptographic protocol.  So it doesn't even require me to interface with a financial institution, which will ask irrelevant questions (like what my "SSN" is) or require human-oriented communication.
How come none of you suggested this to me before?
Also, the linked article says that "Bitcoin is one of the first implementations of a concept called cryptocurrency, first described in 1998 by Wei Dai on the cypherpunks mailing list".  Is that "Wei Dai" the same as User:Wei_Dai?

Fascinating. Nice work Wei Dai!
Can you (Clippy) or someone else give me an estimate of how much bitcoin can be generate per some standard unit of CPU time? Or a link to such?
I also assume that there is no convenient way to trade bitcoin for, well, actual mainstream money.... Can you confirm that? What resources can Clippy expect to be able to buy with bitcoins? Apart from Free Software Foundation donations that is.

Here is the real deal:

Okay guys.... here it is... the ultimate guide on how to make money with bitcoin.

I strongly believe the value of bitcoin will reach 10,000 USD. All bitcoin will be mined at some point.

That's how the experiment was set up, and it's going to hit it. Whether or not you believe me, fine.... this is how to make money with bitcoin without any risk of loss.

Are you ready for it?

First, stop trying to mine bitcoin. You are wasting your time. You will never make real money doing this. Your computer isn't powerful enough, and if it was, it would be draining electricity from your entire power grid.

Why is this? I don't want to get into the math of it... but basically, this was set up to be harder and harder to mine as more gets mined, just like gold. It's basically electronic gold.

Okay, so really, how do you make money?

Simple.

Accept payments for services through bitcoin.

Save the bitcoin in your wallet.

Sell all of it when it hits 10k USD.

This way, you're not losing money, just your time. You don't have to spend money, so it doesn't take any capital investment.

Someone pays you .5 bitcoins for a backlink blast. (about 100 bucks this morning).

Imagine if they paid you .1 bitcoins for the same service in 6 months? (pure speculation)

Imagine if they paid you 10 bitcoins 6 months ago.

Get it?

You can't chargeback a bitcoin.

If you tumble it correctly, no one will ever know where it went.


If I'm wrong, sell it when the price starts to go down. A savvy investor will ride out the waves.

If you have the bank roll to invest in bitcoin, go for it. But expect a very rocky road to 10,000 USD per bitcoin

Thursday, January 16, 2014

How to get started with your bitcoins

Step 1 - Get a wallet

There are many wallets to choose from and here is my recommendation:


Web Wallets - Web wallets are the easiest & most convenient to use, but are potentially less secure than wallet software run on your own computer.
Software Wallets - Software wallets are downloaded and run from your computer. They're considered more secure because the user has more control and doesn't depend on a 3rd party service. Most software wallets require nearly a full day constructing a local copy of the blockchain before use.
  • BitcoinQT - The original Satoshi wallet from bitcoin.org
  • Armory - (Recommended) Armory is the most mature full featured wallet. It rocks!
  • Multibit - This is the easiest to use because it doesn't require a full download of the blockchain.
Mobile Phone Wallets - iphone & Android apps are available.
Hardware Wallets - Hardware wallets are the most secure because they don't expose your private keys to the network.
  • Trezor - (not yet available, coming soon)
  • BitSafe - (not yet available, coming soon)

Step 2 - Get Bitcoins

Purchasing Bitcoins - Although it's not yet easy to buy bitcoins, it's getting simpler every day. Here are our recommendations:
  • LocalBitcoins.com - This fantastic service allows you to search for people in your community willing to sell bitcoins to you directly.
  • How To Buy Bitcoins - An international directory of bitcoin exchanges.
  • Cash Into Coins - Recommended for fast, simple service.
  • Coinbase - Bitcoin exchange based in the United States. (Highly rated).
  • BitStamp - A multi currency bitcoin exchange based in Slovenia. (Highly rated).
  • MtGox - A multi currency bitcoin exchange based in Japan
  • CoinJar - CoinJar allows direct bitcoin purchases on their site. They're based in Australia but serve an international clientele.
Earn Bitcoins - Many people find that the best way to get bitcoins is to accept them as payment for the products or services they already sell. Just give your customers the option to pay in bitcoin.
To make it easy, you may want to sign up for a bitcoin merchant account which allows you to send invoices and integrate bitcoin payments into your online order pages for most of the popular shopping cart systems.
  • BitPay - (Highly Recommended) - Merchant account services
  • CoinBase - Merchant account services
  • Coinkite - Merchant Terminal / POS system
Mining Bitcoins - Mining bitcoins requires an investment in specialized bitcoin mining hardware designed to process double round sha256 hash verifications at high speed. Many excellent systems are available.
It's important to point out that bitcoin mining is highly competitive and risky for would be participants. Please see this bitcoin mining page for more detail.
The manufacturers who have successfully shipped bitcoin mining hardware in volume are:

Step 3 - What can I do with my bitcoins?

Bitcoins can be used to purchase just about anything you want. Dental services, a brand new car, travel and even luxury real estate.
We recommend searching the merchant directories below to locate the merchants you're interested in. You can buy gift cards with bitcoin and spend them in most of the stores you already use.
Merchant directories
Gift Cards - Available from Gyft.com and spendable at:
Bitcoin Store - Electronics & everything else for Bitcoin
Charity
  • Bitcoin Foundation - The Bitcoin Foundation standardizes, protects and promotes the use of Bitcoin cryptographic money for the benefit of users worldwide.
  • BitGive - BitGive is a non-profit foundation that is accepting donations from the Bitcoin community and providing charitable gifts to environmental and public health causes worldwide.
  • Bitcoin Development Fund - A charity devoted to helping further the development of bitcoin, the open source community and causes of humanity.

Step 4 - Keeping up to date with bitcoin

Here are some good places to keep up with bitcoin news and discussion:
  • r/bitcoin - Bitcoin links and discussion by the Reddit community
  • Coindesk - An excellent source of bitcoin news
  • Bitcoin Magazine - Insightful articles with deep technical credentials
  • BitcoinX - Bitcoin headlines, market rates & charting resources
  • The Video - An excellent primer for anyone curious to understand the bitcoin phenomenon

Some Disadvantages to using Bitcoins

...and the follow up post; disadvantages to using bitcoin currency.

Like any currency, there are disadvantages associated with using Bitcoin:

  • Valuation Guarantee
Since there is no central authority governing Bitcoins, no one can guarantee its minimum valuation. If a large group of merchants decide to “dump” Bitcoins and leave the system, its valuation will decrease greatly which will immensely hurt users who have a large amount of wealth invested in Bitcoins. The decentralized nature of bitcoin is both a curse and blessing.
  • Wallets Can Be Lost
If a hard drive crashes, or a virus corrupts data , and the wallet file is corrupted, Bitcoins have essentially been “lost”. There is nothing that can done to recover it. These coins will be forever orphaned in the system. This can bankrupt a wealthy Bitcoin investor within seconds with no way form of recovery. The coins the investor owned will also be permanently orphaned.
  • Bitcoins Not Widely Accepted
Bitcoins are still only accepted by a very small group of online merchants. This makes it unfeasible to completely rely on Bitcoins as a currency. There is also a possibility that governments might force merchants to not use Bitcoins to ensure that users’ transactions can be tracked.
  • Bitcoin Valuation Can Fluctuate
The value of Bitcoins is constantly fluctuating according to demand. As of June 2nd 2011, one Bitcoins was valued at $9.9 on a popular bitcoin exchange site. It was valued to be less than $1 just 6 months ago. This constant fluctuation will cause Bitcoin accepting sites to continually change prices. It will also cause a lot of confusion if a refund for a product is being made. For example, if a t shirt was initially bought for 1.5 BTC, and returned a week later, should 1.5 BTC be returned, even though the valuation has gone up, or should the new amount (calculated according to current valuation) be sent? Which currency should BTC tied to when comparing valuation? These are still important questions that the Bitcoin community still has no consensus over.
  • Risk of Unknown Technical Flaws
The Bitcoin system could contain unexploited flaws. As this is a fairly new system, if Bitcoins were adopted widely, and a flaw was found, it could give tremendous wealth to the exploiter at the expense of destroying the Bitcoin economy.
  • Has Built in Deflation
Since the total number of bitcoins is capped at 21 million, it will cause deflation. Each bitcoin will be worth more and more as the total number ofĂ‚ Bitcoins maxes out. This system is designed to reward early adopters. Since each bitcoin will be valued higher with each passing day, the question of when to spend becomes important. This might cause spending surges which will cause the Bitcoin economy to fluctuate very rapidly, and unpredictably.
  • Buyer Protection
When goods are bought using Bitcoins, and the seller doesn’t send the promised goods, nothing can be done to reverse the transaction. This problem can be solved using a third party escrow service like ClearCoin, but then, escrow services would assume the role of banks, which would cause Bitcoins to be similar to a more traditional currency.
  • Physical Form
Since Bitcoins do not have a physical form, it cannot be used in physical stores. It would always have to be converted to other currencies. Cards with Bitcoin wallet information stored in them have been proposed, but there is no consensus on a particular system. Since there would be multiple competing systems, merchants would find it unfeasible to support all Bitcoin cards, and therefore users would be forced to convert Bitcoins anyway, unless a universal system is proposed and implemented.

Advantages to using bitcoins

I spent some time thinking about it and came up with some advantages and disadvantages to using bitcoins over other versions of currency. Please comment with your thoughts, below.

Some of the following are major advantages of using Bitcoin versus other currency systems in the world:

  • Taxes
There is no way for a third party to intercept transactions of Bitcoins, and therefore there is no viable way to implement a Bitcoin taxation system. The only way to pay a tax would be, if someone voluntarily sends a percentage of the amount being sent as tax.

  • Third-Party Seizure
Since there are multiple redundant copies of the transactions database, no one can seize bitcoins. The most someone can do is force the user, by other means, to send the the bitcoins to someone else. This means that governments can’t freeze someone’s wealth, and thus users of Bitcoins will have complete freedom to do anything they want with their money.

  • Bitcoins Cannot be Stolen
Bitcoins’ ownership address can only be changed by the owner. No one can steal Bitcoins unless they have physical access to a user’s computer, and they send the bitcoins to their account. Unlike convential currency systems, where only a few authentication details are required to gain access to finances, this system requires physical access, which makes it much harder to steal.

  • Transaction Costs
Sending and receiving Bitcoins requires users to keep the Bitcoin client running and connected to other nodes. Essentially, by using bitcoins users will be contributing to the network, and thus sharing the burden of authorizing transactions. Sharing this work greatly reduces transaction costs, and thus makes transaction costs negligible.

  • Tracking
Unless users publicize their wallet addresses publicly, no one can trace transactions back to them. No one, other than the wallet owners, will know how many Bitcoins they have. Even if the wallet address was publicized, a new wallet address can be easily generated. This greatly increases privacy when compared to traditional currency systems, where third parties potentially have access to personal financial data.

  • Risk of “Charge-backs”
Once Bitcoins are sent, the transaction cannot be reversed. Since the ownership address of Bitcoins will be changed to the new owner, once it is changed, it is impossible to revert. Since only the new owner has the associated private key, only he/she can change ownership of the coins. This ensures that there is no risk involved when receiving Bitcoins.