27 June 2010
Posted in B
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Bitcoin - Bitcoin is an online digital currency system that's genesis is based primarily on a paper written by Satoshi Nakamoto. In essence, bitcoin is a decentralized peer-to-peer currency exchange that allows anonymous digital transactions and avoids the need for a central authority and issuers. The bitcoins themselves can either be stored locally in a wallet on the users computer (using the bitcoin client which you can find here - bitcoin.org) or stored remotely by a third party website on the Internet. The bitcoin wallet shows the current bitcoin balance, a history of all transactions, and a list of addresses that may be used to either send or receive bitcoins with other bitcoin users.
All bitcoin transactions are stored in a transaction log that is referred to as the 'block chain' and which is actually a distributed database that is formed by the collection of all the participants using the bitcoin network. The 'block chain' is part of the actual bitcoin network so a member of the network can still receive a transaction even if they happen to be offline or have their client closed at the time the transaction is initiated. When the user goes back online or starts their client back up again it will read all the blocks that have been completed since the last time they were connected to the network and if there are any transactions within those blocks that include payments to their bitcoin address, they will appear in the wallet at that time.
Normally a bitcoin payment will appear to the receiver almost instantly after it has been transmitted, although initially all transactions are displayed as unconfirmed. This is because the bitcoin system has been designed to validate all transactions to insure that they are valid before they get confirmed. This validation process is a safeguard that is built into the system to prevent fraud. Anytime a transaction is initiated it must be confirmed by the rest of the bitcoin network through the use of something called a 'proof-of-work' problem. This prevents either the same bitcoin being spent more than once or the creation of blocks that bring into existence the wrong amount of bitcoins. Any node in the network that solves a transaction block is rewarded by receiving a predetermined amount of bitcoin for solving that block, this reward is created from 'thin air'.
The bitcoin algorithm is designed to have the average time to solve a block be approximately ten minutes. The difficulty of the computations required to solve blocks increases over time as more computational power enters the pool of users who are part of the bitcoin network. Because there is a reward given to the node that solves a computational block, it can become financially rewarding to someone to solve these blocks if they have enough computational power available to solve enough blocks over a given amount of time. A whole sub-culture referred to as 'bitcoin mining' has arisen due to this feature of the bitcoin network. Bitcoin mining 'pools' have also sprung up online that allow multiple users to combine or 'pool' their computational power to increase the likelihood of solving more blocks in a shorter amount of time.
Bitcoin Charts - Here you will find all of the current exchange rates for bitcoin.
Mt. Gox - This is a bitcoin currency exchange.
Tradehill - Another bitcoin currency exchange.
Deepbit - A bitcoin mining pool.
Slush - Another bitcoin mining pool.
I have created a bitcoin mining extension for Joomla websites that uses the Bitcoinplus api. You can download it here (you will find it in the download section) or just click the link: Bitcoin Miner