What are bitcoins and why should we care?

Posted: 2013/08/17 in 100% Geek
Tags: , , , , , , , , ,

Geekdom has lots and lots of facets. One of those facets is cryptography. Another is related to digital goods. Mixed together they encompass the base of an even more obscure facet: cryptocurrency.

Bitcoin coin logo courtesy of bitcoin.it/wiki

The concept has been around for quite a while: an online, encrypted currency that can be used for transaction without being part of a physical metal or paper medium.
It is not really different than most transactions in dollars, being processed only in the digital domain, instead of actual money.
Game money have been there for quite a while too, but cryptocurrency intend to be used for real-world transactions.

The concept behind Bitcoin appeared in 2008 on a paper published by (anonymous, pseudomymed) developer Satoshi Nakamoto. The paper was titled “peer-to-peer, electronic cash system.” It was somewhat adopted and there are now online and physical places accepting payments by bitcoins.

Where bitcoin became different from any other kind of currency or banking system is that the transactions aren’t held by private corporations, or even governments, but within an open-source, peer-to-peer network. That means that everyone and anyone can gain profit from performing those transactions.

Well, in theory. The point is: the cryptography is so intense and the computational power required to encode the hashcodes of each currency so high that it takes time – lots of time. So, at this point, it is more a hobbyist venue than a profitable one.

Using a computer’s processing power towards such system to gain reward is called mining. There are people doing bitcoin mining with a profitable intention, but this won’t be covered here at all. This article is mainly about what is the crypto currency, and what it does mean for geeks.

Because in reality that’s what bitcoin mining is: geekiness at its max.
Mining bitcoin in a pool is similar to using SETI@Home or folding@home. It is a decentralized computing method to achieve a goal. Here the goal isn’t to analyze scientific data, but to decode transaction hash-codes. The difference between folding and mining is: you have a theoretical reward at the end.

Theoretical because the reward is in a non-currency. Without going into profitability, Bitcoins, or BTC, can me traded online, and exchanged to USD or any other currency. The current exchange rate is about BTC1 for $109.16. That’s if bitcoin value remains stable.

Now, accumulating bitcoin can be somewhat a lenghty process. Using a normal CPU, it can take years to achieve payment of 0.1 BTC. Plus, if anyone is to leave a machine running for the sole purpose of generating bitcoins, the cost of having the machine running: failures and power costs need to be taken into consideration. It is possible to augment the file server with bitmining capability, but even then the sheer processing required for mining is rather large.  That’s where the challenge of mining comes in: optimizing a mining rig.

That’s what geeks like in mining. The challenge. Plus, potential financial benefit. If the server can return some minimal profit, who’s to refuse?

bitcoin propaganda courtesy of http://coinabul.com

Mining with CPU is slow and outdated. CPUs obtain low hashrates… Particularly when taking in considerations that the global bitcoin system tries to adjust to one block per 10 minutes by raising difficulty when network global hashrate augment – with new technology or more miners.
But there’s another source of processing power than the CPU in a computer. One that is meant to compute complex mathematical equations… the GPU! Depending on video cards, one can achieve hashrates 10 or even 20 times greater than with the CPU. There are also specialized hardware created just for the purpose of bitmining. that won’t be explored in this article.

Here’s a list of processors and their theorical hashrates. For instance, taken from that chart we read that a Athlon 64 X2 6000+ would generate about 2.81 Mh/s – Mega-Hash per seconds… 2,810,000 hash every seconds, is that good?
To put things in perspective, using average pool and running at about 330 Mhs would lead to potential return of 0.1 BTC (about USD10) every 4-6 weeks. So the 2.81Mh/s processing power would take years to bring 0.1 BTC.

If we take into consideration that the CPU runs at full capacity during that period (heat, failures) and the power of electricity – see this bitcoin mining profitability calculator – it can be figured that its 125W does cost more than its processing power can mine. And that’s even without figuring in the hardware cost. Ok if the machine is already running and only pushing its wasted CPU cycles towards mining, but not quite interesting yet.

But wait, the graphics card? GPUs recent enough to have OpenCL (not a typo – this is OpenCL, not OpenGL) and be used for non-graphical computational can give a hand! AMD/Radeon tends to give a nicer hashrate than their competitors. (note: nothing here says AMD are better video cards than their competitors… just that they process hashcodes faster.)
The Radeon 5770 for instance pulls about 108W and generated 156.83Mh/s. That’s less power for 55 times more hashes than the Athlon 64 X2 6000+!

plus, the file server is generally headless and barely use the graphics card anyway….

To answer the title question – why should we care about bitcoins? for the challenge!

Sooo… what’s your hashrate numbers?

  1. wereallgeeks says:

    Interesting article on Gizmodo about the bitcoin mining shifts from CPU to GPU to FPGA to ASIC:

  2. wereallgeeks says:

    Another cool article, on ArsTechnica this time, about how specialized hardware can mine quite fast:

    Sadly, those aren’t anything cheap, so not really for hobbyists.

  3. wereallgeeks says:

    We apparently can pay wordpress.com’s premium services with bitcoin!


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