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What Every Bitcoiner Should Know About ‘Bitcoin Cash’

In a few days the notorious August 1st is approaching, and it’s likely this day will be remembered for a long time. This week Bitcoin.com discussed the possible scenario of a user activated hard fork called “Bitcoin Cash” as much of the community doesn’t realize this fork will likely still happen despite Segwit2x’s current progress.

Also read: Bitmain’s 24 July Statement about Bitcoin Cash

What is Bitcoin Cash?

Bitcoin Cash is a token that may exist in the near future due to a user-activated hard fork (UAHF) that will bifurcate the Bitcoin blockchain into two branches. The UAHF was initially a contingency plan against the user-activated soft fork (UASF) announced by Bitmain. Since this announcement, at the “Future of Bitcoin” conference a developer named Amaury Séchet revealed the Bitcoin ABC” (Adjustable Blocksize Cap) project and told the audience about the upcoming UAHF.

Following Séchet’s announcement and after Bitcoin ABC’s first client release, the project “Bitcoin Cash” (BCC) was announced. Bitcoin Cash will be pretty much the same as BTC minus a few things, like the Segregated Witness (Segwit) implementation and the Replace-by-Fee (RBF) feature. According to BCC, a few of the biggest differences between BTC and BCC will be three new additions to the bitcoin codebase that include;

  • Block Size Limit Increase – Bitcoin Cash provides an immediate increase of the block size limit to 8MB.
  • Replay and Wipeout Protection – Should two chains persist, Bitcoin Cash minimizes user disruption, and permits safe and peaceful coexistence of the two chains, with replay and wipeout protection.
  • New Transaction Type (a new fix was added, note the “UPDATE” at the end of this post)– As part of the replay protection technology, Bitcoin Cash introduces a new transaction type with additional benefits such as input value signing for improved hardware wallet security, and elimination of the quadratic hashing problem.

Bitcoin Cash will have support from various members of the cryptocurrency industry including miners, exchanges, and clients like Bitcoin ABC, Unlimited, and Classic will also be assisting the project. In addition to this help, Bitcoin Cash developers have added a ‘slow’ mining difficulty reduction algorithm just in case there’s not enough hashrate to support the chain.

Mining and Exchange Support

“We continue to remain committed to supporting the Segwit2x proposal, which has received broad support from Bitcoin industry and community alike — However, due to significant demand from our users, the Bitcoin.com Pool will give mining customers the option of supporting the Bitcoin Cash chain (BCC) with their hashrate, but otherwise Bitcoin.com Pool will by default remain pointed at the chain supporting Segwit2x (BTC).”

Bitcoin.com previously reported on Viabtc adding a BCC futures market to their exchange’s listed coins. The token has been trading at roughly $450-550 over the past 24-hours and reached an all time high of $900 when first released. Two other exchanges, Okcoin via the ‘OKEX’ platform and Livecoin have also announced they will also be listing BCC on their trading platforms. Bitcoin Cash supporters expect more exchanges to follow shortly after the fork is complete.

What Can I do to Obtain Bitcoin Cash?

Again, regardless of Segwit2x’s progress this fork most likely will happen and bitcoiners should be prepared. There are a few days left until August 1 and those looking to acquire Bitcoin Cash should remove their coins from third parties into a wallet they control.

For more information on Bitcoin Cash check out the official announcement here, and the BCC website here.

 

UPDATE, 28 July 2017: According to bitcoincash.org, a change (fix) has been introduced to make “New Transaction Type” to “New Sighash Type”. Following is more info on this new feature:

New SigHash Type – As part of the replay protection technology, Bitcoin Cash introduces a new way of signing transactions. This also brings additional benefits such as input value signing for improved hardware wallet security, and elimination of the quadratic hashing problem.

 

 

Written by Jamie Redman for Bitcoin.com | Original article: https://news.bitcoin.com….

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Bitcoin in Japan to be a Legal Payment Method Soon

Bitcoin will soon be legally recognized as a method of payment in Japan. The bill with provisions for cryptocurrencies has recently passed through the period of public consultation and will enter into force in April.

Bitcoin.com examines what the bill means and how it could affect Bitcoin with Special Counsel at Anderson Mori & Tomotsune, Ken Kawai, who has held numerous speaking engagements on the legal issues of virtual currency regulations in Japan.

Countdown: The Long Awaited Bill

Since Bitcoin’s inception, its legal position in Japan has not been clear. The first bill containing provisions for virtual currencies including Bitcoin was submitted to the Diet last
March. It amends the existing Payment Services Act and the Act on Preventing of Transfer of Criminal Proceeds.

“The revision of the Payment Services Act, which sets out the basic framework of virtual currency regulation, was promulgated last June”, Kawai told Bitcoin.com. The drafts of detailed regulations and guidelines were published in December and the period for public consultation on the bill ended on January 27, he continued, adding that:

The new regulations will enter into force in April 2017.

New Method of Payment but Not Currency

This bill defines virtual currencies including bitcoin and imposes
certain regulations on virtual currency exchange services with the aim to prevent money laundering and terrorist financing as well as to protect users.

While the bill recognizes them as a new method of payment in Japan, virtual currencies are not classified as “currencies” however. Kawai confirmed:

“Virtual currency” is distinguished clearly from “currency” in the regulations.

Even though Bitcoin is not considered a currency, being recognized by the government as a payment method will “likely
have a positive effect on people’s mind and facilitate usage of VC’s [virtual currencies]”, he believes.

Bitcoin usage has already been growing considerably in Japan. Japanese exchange Coincheck revealed significant growth in its user base, rising from 14,000 users last April to 76,400 in January. In addition, the exchange reported gigantic growth in the number of bitcoin-accepting merchants using its service. Also, Japanese giant GMO Internet group has recently announced that it would be developing a bitcoin exchange and wallet service.

Meanwhile, Japan now has the second-largest bitcoin trading volume globally, according to Coinhills.

Bitcoin’s Other Legal Considerations in Japan

While usage as a payment method should not be affected whether bitcoin is legally considered a ‘currency’ or not, Kawai explained that, from a legal standpoint, there are some considerable differences.

“For instance, if they are defined as “currencies”, lending of VCs must comply with Money Lending Control Act (which requires lenders to register as “Moneylenders”) and VCs’ derivatives must comply with the Financial Instrument Exchange Act”, he described.

Some other countries have classified virtual currency as an asset or property for tax purposes such as the U.S. Recently, Israel has issued a draft which considers Bitcoin an asset, therefore imposing Value Added Tax (VAT) as well as capital gains tax on bitcoin transactions.

However, for Japan, this bill does not define virtual currency as “property”. Instead, virtual currencies are defined as ‘proprietary value’, Kawai contrasted, adding that “a precedent of Tokyo District Court denies the concept of having ‘property rights’ of Bitcoin”. Furthermore, “it is not uncertain what is the legal nature of proprietary value in Japanese civil laws”, he clarified, adding that “I do not expect that the government is leaning towards proactively considering it as “property”.

 

Written by Kevin Helms for Bitcoin.com | Original article: https://news.bitcoin.co…

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Stuck With an “Unconfirmed” Bitcoin Transaction? This May Help Next Time.

The number of transactions on the Bitcoin network has steadily increased over the years. This means more blocks are filling up. And as not all transactions can be included in the blockchain straight away, backlogs form in miners’ “mempools” (a sort of “transaction queue.”)

Miners typically pick the transactions that pay the most fees and include these in their blocks first. Transactions that include lower fees are “outbid” on the so called “fee market,” and remain in miners’ mempools until a new block is found. If the transaction is outbid again, it has to wait until the next block.

This can lead to a suboptimal user experience. Transactions with too low a fee can take hours or even days to confirm, and sometimes never confirm at all.

But here is what you can do today to keep your own transaction from getting stuck.

Before You Send It

For the first years of Bitcoin’s existence, most wallets added fixed fees to outgoing transactions: typically, 0.1 mBTC. Since miners had spare space in their blocks anyways, they normally included these transactions in the first block they mined. (In fact, transactions with lower fees or even no fee at all were often included as well.)

With the increased competition for block space, a fixed 0.1 mBTC fee is often insufficient to have a transaction included in the next block; it gets outbid by transactions that include higher fees. While even a low fee transaction will probably confirm eventually, it can take a while.

Try increasing the fee

If you want to have your transaction confirmed faster, the obvious solution is to include a higher fee.

If your wallet (by default) includes an insufficient fee, you may be able to adjust the fee manually, either as part of the wallet settings, or when you send a transaction. (Or both.)

Websites like 21.co monitor the network and suggest how much of a fee you should include per byte, as well as how fast you can expect your transactions to confirm at different fee levels.

If you need the payment to go through in the next block or two, you need to pay a higher fee. For less urgent payments, you can include a lower fee; it will just take a bit longer to confirm.

Check if your wallet includes dynamic fees

These days, most wallets support dynamic fees. Based on data from the Bitcoin network, these wallets automatically include a fee that is estimated to have a transaction included in the next block, or maybe in one of the first blocks after that.

Some wallets also let you choose the fee priority. Again, higher fees let your transactions confirm faster, lower fees could make it take a bit longer.

If transactions from your wallet are often delayed during peak hours, and you have no option to adjust to higher priority fees, your wallet is most likely outdated. Check if there is an update available, or switch to a new wallet.

Consider switching wallets

If you do switch to a new wallet, you of course need to transfer funds from your old wallet to your new wallet. If you’re not in a rush and don’t mind paying the fee, you can just send it from your old wallet to the new wallet through the Bitcoin network. It will probably arrive eventually — even if the fee is low.

If you are in a rush, some wallets allow you to export your private keys or the private key seed, and then import them into the new wallet. This requires no transaction on the Bitcoin network. From the new wallet, you can immediately start transacting.

After You’ve Sent It

If you’ve already sent a transaction and it gets stuck, that transaction can, in some cases, be made to “jump the queue.”

Opt-in Replace-by-fee

The easiest way to make your transaction jump the queue is using an option called Opt-In Replace-by-Fee (Opt-In RBF). This lets you re-send the same transaction, but with a higher fee.

In most cases, when the same transaction is re-sent over the network, but with a higher fee, the new transaction is rejected by the network. Bitcoin nodes typically consider this new transaction a double spend, and will therefore not accept or relay it.

But when sending a transaction using Opt-In RBF, you essentially tell the network you may re-send that same transaction later on, but with a higher fee. As a result, most Bitcoin nodes will accept the new transaction in favor of the older one; allowing the new transaction to jump the queue.

Whether your new transaction will be included in the very next block doesdepend on which miner mines that next block: not all miners support Opt-In RBF. However, enough miners support the option to, in all likelihood, have your transaction included in one of the next couple blocks.

Opt-In RBF is currently supported by two wallets: Electrum and GreenAddress. Depending on the wallet, you may need to enable Opt-In RBF in the settings menu before you send the (first) transaction.

Child Pays for Parent

If your wallet does not support Opt-In RBF, things get a bit more complex.

Child Pays for Parent (CPFP) may do the trick. Applying CPFP, miners don’t necessarily pick the transactions that include the most fees, but instead pick a set of transactions that include most combined fees.

Without getting into too many technical details, most outgoing transactions do not only send bitcoins to the receiver, but they also send “change” back to you. You can spend this change in a next transaction.

Some wallets let you spend this change even while it is still unconfirmed, so you can send this change to yourself in a new transaction. This time, make sure to include a high enough fee to compensate for the original low fee transaction. A miner should pick up the whole set of transactions and confirm them all at once.

If your wallet does not let you select which bitcoins to spend exactly — meaning you cannot specifically spend the unconfirmed change — you can try spending allfunds in the wallet to yourself; this should include the change.

Like Opt-In RBF, not all miners currently support CPFP. But enough of them do to probably have your transaction confirmed in one of the next blocks.

Or…

If neither Opt-In RBF nor CPFP are an option, you can technically still try and transmit the original transaction with a higher fee. This is typically referred to as “full replace-by-fee,” which some miners accept. However, publicly available wallets currently do not support this as an option.

Otherwise, you may just have to wait either until the transaction confirms or until the bitcoins reappear in your wallet. It’s important to note that until a transaction confirms, the bitcoins are technically still in your wallet — it’s just that it often doesn’t appear that way. The bitcoins are not literally “stuck” on the network and cannot get lost.

As the Receiver

Of course, a transaction can also get stuck if you’re on the receiving end of it.

If your wallet allows spending unconfirmed transactions, this can be solved with CPFP as well. Much like as mentioned before, you can re-spend the unconfirmed, incoming bitcoins to yourself, including a fee high enough to compensate for the initial low fee transaction. If the new fee is sufficient, the transaction should typically confirm within a couple of blocks.

The only other option is to ask the sender whether he used Opt-In RBF. If so, he can re-send the transaction with a higher fee.

Written by Aaron van Wirdum for The Bitcoin Magazine | Original article: https://bitcoinmag….

Note: BTC.COM has a real-time transaction fee tracker too. The BTC.COM wallet will soon have the RBF option too.

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The Rise of the Crypto Ponzis and How to Identify Them

Introduction

Bitcoin has often been hailed as bringing financial freedom by removing the need of governments, banks and middle men to store and remit money anywhere in the world in a matter of minutes with minimal fees. Its decentralization and the fact that Bitcoin addresses cannot be easily tied to a real life identity has stymied legislators who have sought to combat illicit use and money laundering.

Most current forms of legislation aimed at digital currency focus primarily on regulating exchanges where people convert Bitcoin or digital currencies into fiat and vice versa (such as the New York BitLicense) and taxation. One area which has seen little oversight has been the rise of Bitcoin or cryptocurrency based ‘investment’ programs where the vast majority are Ponzi, pyramid, HYIP scams. These schemes promise extremely high returns and many have gained significant traction among people who don’t completely understand how cryptocurrencies work. This is especially when regulators and the judiciary still can’t make up their minds on whether Bitcoin is a commodity or money with conflicting rulings even within the US.

Ponzi schemes, also known as pyramid schemes, have been around since the 1920s and basically work by promising big returns to ‘investors’, with a strong focus on recruitment of new ‘investors’. They generate such returns from the influx of new money coming in from the new investors rather than from profit of legitimate sources. In short, they pay your ‘returns’ by using other people’s money. when  new investors aren’t sufficient to give payments promised to previous ones, the Ponzi scheme falls apart. Not only do people not get their promised returns but they then realize the money they thought they had is no longer there because it was used to pay off earlier investors’ returns.  So the idea of Ponzis isn’t new but the use of cryptocurrency ponzis introduces new challenges.

Why Ponzis love Cryptocurrencies

Traditionally, to enable a Ponzi scheme, a normal bank account is required and a legal entity such as a limited company is formed to hold deposits from investors. However, most countries have strict controls requiring licensing from the government or the central banks to accept deposits or promote investment funds to the public. To mask the Ponzi scheme, they often use a physical product which can be anything from health supplements to mobile phone top-up vouchers or services such as educational packages to pass themselves off as legitimate businesses that use multi-level marketing.

Accepting Bitcoin effectively sidesteps these issues especially in countries where Bitcoin’s status as a currency has not been conclusively determined yet since no bank account is required, and in many cases, the product or service is delivered purely digitally. No legal entity needs to be formed when no bank account is required, adding further anonymity to the people who start the Ponzi.

Cryptocurrency ponzis also capitalize on the fact that although Bitcoin is starting to be known in the mainstream, the extent of understanding is usually limited to it being associated with overnight millionaires, it’s use in the drug trade and the MtGox hacks. It’s the promise of overnight riches that makes crypto Ponzis so alluring, much like how the huge gold price increase from 2000-2012 also birthed many gold-based Ponzi schemes.

Crypto Ponzis come in three main forms

  • Cloud Mining programs
  • Cryptocurrency investment programs’ Ponzi that accepts Bitcoins/cryptocurrencies as deposits
  • Posing as an altcoin with almost guaranteed capital appreciation

Ponzi disguised as a Cloud Mining program

For crypto ponzis, the most common ‘products’ are cloud mining programs whereby people think they’re buying hashing power or renting mining machines to get returns. Such programs often promise extremely high returns that claim to make your money back in a matter of 2-3 months or even weeks.

Legitimate cloud mining operations would generally yield a small profit if any at all in the ordinary course of mining where they leverage economies of scale and low power costs. They prefer to lock in longer term contracts and often receive funds upfront for better cash flow and certainty while giving their cloud mining customers a chance to make a small profit.

For Bitcoin even large mining farms that buy equipment in bulk are generally looking at close to a year to break even. Any ‘Bitcoin cloud mining’ scheme that claims you can break even in 2-3 months is most likely a scam. Some Ponzi operators are smarter and claim to mine a variety of altcoins instead making it harder to verify but the general rule is that if mining is extremely profitable, the cloud mining operators would be better off mining for themselves instead of renting their hash out, especially if they can break even in 2-3 months.

There are legitimate uses of cloud mining such as renting hashrate to mine a new coin but such uses are temporary in nature and involve risk as well. For example, if there’s a newly launched coin that you believe is promising and not many people have started mining it, renting hashing power to mine it while not many others are doing it can be very profitable if the coin subsequently becomes successful. But you are taking the huge risk that the coin will not take off. Once people recognize the mining opportunity and more people mine the coin, the returns will quickly decline and normalize and as such, such mining opportunities are very ‘event’ based and cannot be relied on to generate consistent returns. Such opportunities rely on the fact that they are unknown for long enough for people to successfully mine it and therefore there is little incentive for people to share this knowledge until they have already made their profits.

Cryptocurrency Investment Programs

Other crypto ponzis tell you they have a secret and proprietary trading or arbitrage arrangement and will trade/arbitrage using your money giving you a share of the returns. Again very high returns are promised such as 1% or even 3% daily interest. Some even use automatic ‘investment bots’ that claim to do all the trading on your behalf and give you a huge return.

Again, even the best traders cannot make money all the time and there is no such thing as a sure win trading strategy. Successful trading is not just about identifying opportunities and periods of volatility and making an educated guess as to what direction the market will take. It is also about managing risk by taking profits in stages and managing losses by setting stop-losses. Successful traders don’t really have any need to utilize other people’s funds to make money unless they are charging a fee for their trading services and even they will have periods of unprofitability.

Scamcoin posing as an altcoin

Many are drawn to Bitcoin purely for the allure of making instant riches only to realize that they may have missed the boat already.This is where the scamcoin comes in, claiming to be an improved version of Bitcoin or cryptocurrency where it’s full potential has yet to be realized and that this is the new Bitcoin rocket to get on while it’s still cheap and relatively unknown.

These fake altcoins often come with shoddy whitepapers that will fool those that do not understand cryptocurrencies and demonstrate a roadmap that’s more about how much the value of this coin will increase via “IPOs” and “coin splits” rather than a genuine development plan. The more professional ones will often take advantage of cryptocurrency-related publications and blogs that often do not do investigative journalism and pay for press releases in such publications to give an image of legitimacy.

The ‘developers’ of such Ponzi altcoins also tend to be unknown with no history of having been involved with cryptocurrencies and the code for such coins tend to be closed source making it impossible for outsiders to verify the veracity of their claims.

Most of these scamcoins do not have public blockchains and aren’t even genuine crypto currencies which allow the creators of such scamcoins to manipulate prices and balances at will thus creating the impression that the coin’s price is almost always rising. These coins also tend to only to be traded internally within the ponzi’s own network of sites.

How to Identify these Ponzi Schemes

Identifying these Ponzis is not easy for the lay person and this is why even highly suspicious programs can operate until they collapse and expose their Ponzi nature. These can be believable enough that even those that have a cursory understanding of how cryptocurrencies work can be fooled. However there are certain distinctive hallmarks of these types of crypto Ponzis and although such a scheme may not tick all of them, the more suspicious traits it has, the more likely it is a Ponzi scheme.

  • Huge and consistent returns If it sounds too good to be true, it probably isn’t. This is in general the biggest telltale sign of a Ponzi scheme. In general, the greater the rate of probable returns, the higher the risk. Whether cloud mining, investment programs or altcoins, no investment can consistently generate high returns with no risk or guaranteed returns. Remember all Ponzi schemes always begin with paying out or else they will not attract new recruits.
  • Returns highly dependent on referrals: If the primary way of earning is through referrals or commissions, your alarm bells should be ringing since it means that the business model on its own is unprofitable. This is one of the primary differences between genuine multi level marketing programs and Ponzi schemes.
  • Unclear Ownership: Are their founders anonymous or their company undisclosed on their webpages? Usually a quick Google search of their founders’ names can uncover any dodgy history.
  • Need to join to get more information: To go under the radar of authorities, many websites of such schemes pose as legitimate businesses such as a coin wallet service, marketplace, cloud mining but the investment and referral portions are hidden until you sign up or go to their seminars. As such the website’s material and focus appears to be different from what their main focus which is recruitment and ‘investment’.
  • Closed source and non public blockchain: For scamcoins, almost all of them are closed source meaning their code is not up for public review. Similarly their blockchain is private though more advanced ponzis have a simulation of a blockchain within their own internal websites. You can do a quick check to see if they are listed on coinmarketcap.com (although many scam coins are listed there so it’s only a very cursory check) which requires coins to be a genuine cryptocurrency, traded on a public exchange with an API available and must have a public URL that shows the coin’s total supply.
  • Only internal exchanges: One of the biggest telltale signs of a Ponzi altcoin are ones that can only be traded within exchanges that are run by the company itself which allows them to manipulate prices and put up fake bid orders. Genuine coins will tend to be traded on the more reputable altcoin exchanges such as Poloniex and Bittrex though some new coins do take some time to be added there.
  • Check if they’re listed on the BadBitcoin website: An easy rule of thumb is to check on this amazing resource at badbitcoin.org which identifies Ponzi schemes that utilize cryptocurrencies. The list is not exhaustive but the major ones are listed there.

Summary

A combination of high potential of profits, technical nature and lack of regulation make cryptocurrencies a ripe place for Ponzis to flourish until regulators catch up with tackling them. Treat crypto investments promising amazing profits for very little risk with a healthy amount of skepticism and remember that Ponzis not only hurt you but also the friends and family you recruit.

 

 

About the Author

Reuben YapReuben Yap is a strong online privacy advocate and cryptocurrency enthusiast and is the co-founder of  BolehVPN which was the first online merchant in Malaysia to accept Bitcoin. He is also a practicing corporate lawyer and the community manager of the Zcoin project, the first cryptocurrency implementing Zerocoin technology allowing users to make private transactions utilizing zero-knowledge proofs.

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Zcash, the Newly Launched Currency, and How to Get It

Zcash (ZEC), the new digital currency lauded for its privacy features, is launching today amidst some massive hype. But until enough tokens become available on exchanges, Zcash enthusiasts are poised to acquire their ZEC first-hand by mining for it, either by setting up a home rig or by signing up for a cloud mining contract.

Created from a fork of Bitcoin’s codebase, Zcash promises all the best features and stability of Bitcoin with the added bonus of total payment confidentiality. Zcash transactions can be shielded to hide the sender, recipient and value of all transactions on the blockchain. Only those with the correct view key can see the contents.

Another interesting aspect of Zcash is it uses a memory-hard proof-of-work known as Equihash. This means the best hardware for mining Zcash tokens is standard GPUs and RAM. The hope is this will lead to a more decentralized set of miners.

“We think it is unlikely that anyone will be able to build cost-effective custom hardware (ASICs) for mining in the foreseeable future,” Zcash CEO and founder, Zooko Wilcox, and software engineer, Jack Grigg, wrote in a blog post.

Since Zcash did not hold an initial crowdfund, every Zcash token issued will be as a result of mining. And it’s likely that mining, especially in the early days, will be cheaper than purchasing Zcash on an exchange.

Mining for ZEC

There are two ways to mine Zcash: you can build your own GPU rig — arguably, with good mining software, you can use a CPU as well, but more on that later — or you can mine Zcash in the cloud.

Building your own GPU is not easy. When you buy an ASIC for mining bitcoin, you simply connect it to the internet and plug in the power. But GPU mining is a custom setup, where you need to source motherboards and graphic cards.

Because of the work involved, cloud mining make might make sense for some people, though it carries more associated risk. To that end, several cloud GPU providers are open for Zcash business. Genesis Mining is offering a limited number of one-year contracts. Toomim Brothers is offering Zcash cloud mining on three, six and 12 month contracts.

If you are setting up your own CPU or GPU rigs, you will need to find an efficient mining software. Zcash recently held an open source miner challenge, and made all the submissions available to the public.

Slow Start and the Founders Reward

Mining will begin with a “slow start,” which limits the block rewards for the first 20,000 blocks (roughly 34 days). During that time, the block reward will gradually increase from 0 ZEC to 12.5 ZEC.

Typically, when a coin first launches, mining difficulty is at its lowest and rises over a few days or weeks. A slow start discourage the big outfits from dedicating all their resources to mining in the beginning.

“With the ‘slow start’ approach, we can pull the trigger to start mining, knowing that we still have a few weeks before it gets to be significantly valuable, giving us time to watch for failures, work on related operational things (updating our web site, dealing with getting hacked and defaced and all that, collaborating with wallet makers, exchange operators, and other partners, touring the world to visit stadiums of screaming fans, etc.),” Wilcox  wrote on GitHub back in March.

But some in the Zcash forum argue, in the case of Zcash, where there is so much buzz around the coin, major players may jump into the game right away, and the difficulty will soar beyond the reach of the average CPU within hours or days.

TY13R (as he is known on the Zcash Slack channel), who has worked on the Zcash GPU miner, told Bitcoin Magazine:

“When they publish the first block, a huge a amount of hashing power will move over to it. There could be hundreds of blocks mined on the first day.”

Like Bitcoin, the plan is to only produce 21M tokens with a halving every four years, where the reward is halved to control inflation. However, unlike Bitcoin, for the first four years, a full 20 percent of the Zcash mining reward will go to stakeholders in the Zcash Company. This is known as the “Founders Reward.”

Exchanges  and Wallets

If you’re not up for mining, another option is to simply buy Zcash tokens. Coins will be sparse until there is enough in the supply system. But, said TY13R, “If there is money to be made, people will sell. It all depends on whether the miners are willing to give up their ZEC.”

Several exchanges — including Poloniex, Bittrex, HitBTC, and Kraken — have already announced support for Zcash.

Shapeshift has also said that its platform will support ZEC as soon as liquidity allows. Erik Voorhees, CEO of ShapeShift, said to Bitcoin Magazine:

“Just as we should expect privacy in our emails, telephone calls and personal relationships, so too is privacy warranted in financial transactions. In our age of surveillance, the individual deserves every tool of empowerment, and Zcash has the potential to uphold this principle.”

Along with Trezor wallets by SatoshiLabs, Jaxx has revealed it will integrate Zcash a few days after the launch, making Zcash the fifth token Jaxx has added to its lineup in less than three months.

“VCs have invested in Zcash, there’s cutting edge security technology behind it and that’s resulted in quite a lot of chatter in the crypto community,” said Jaxx CEO Anthony Di Iorio. “Zcash holds an extraordinary amount of promise.”

The Case for Zcash

As of this writing, the price of Zcash futures is hovering between 1.2 and 1.4 bitcoin ($820- $950) on BitMEX. If those numbers are any indication, Zcash could well become the second highest valued digital currency on record behind Bitcoin.

Zcash represents the hope for a perfectly untraceable digital currency. Although progress is being made, at this point, Bitcoin transactions are traceable. This lack of fungibility, the idea that one bitcoin may not be as valuable as another, based on how it has been used in the past, has long been a threat to Bitcoin’s livelihood.

“You need fungibility for Bitcoin to function. If you receive coins and can’t spend them, then you start to doubt whether you can spend them,” Blockstream CEO Adam Back told the audience at the Scaling Bitcoin conference in Milan.

The hope is that Zcash finally solves that problem, using the established cryptographic protocol, zk-Snarks. The basic idea is that when you make a transaction, you give a proof that says you have access to a certain amount of funds, but that proof gives zero knowledge to other people about what those funds are. (That is the “zk” part). The “SNARK” part is that Zcash can do this fairly efficiently now, especially compared to ZeroCoin, its precursor.

But Wilcox’s own words capture the aspirations of Zcash the best. In an earlier interview with Bitcoin Magazine, he said:

“The dream is that people all around the world use Zcash and other cryptocurrencies directly, to cooperate and organize with one another in safety and privacy. This will give them freedom from corrupt regimes, banks and unstable national currencies.”

Whether or not Zcash lives up to this dream, only time will tell. As it states on its website, Zcash still considers itself “an experimental technology” and cautions, “there is risk involved.” But for many people who wish they had jumped into Bitcoin earlier, those cautions may go unheard.

 

Written by Amy Castor for Bitcoin Magazine | Original article: https://bitcoinmagazine….

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Mimblewimble: How a Stripped-Down Version of Bitcoin Could Improve Privacy, Fungibility and Scalability All at Once

All (full) Bitcoin nodes verify all transactions on the network. This allows the system to be entirely trustless and decentralized, but also presents significant drawbacks. Privacy and fungibility are at odds, because public transactions allow anyone to trace the flow of bitcoins over the blockchain. Meanwhile, verifying a growing number of transactions adds to the cost of running a node, which could be a centralizing force.

But perhaps these drawbacks can be tackled. Last week, a new white paper was somewhat mysteriously dropped on a Bitcoin research channel, written by the pseudonymous author “Tom Elvis Jedusor” (Voldemort’s real name in the French edition of the Harry Potter novels). His proposal “Mimblewimble” — a reference to a Harry Potter spell — presents a radical slimming-down of the Bitcoin protocol that could not only dramatically increase privacy and fungibility, but also present significantly more scalability than Bitcoin’s current blockchain architecture.

Mimblewimble may just hit two giant birds with one stone. Here’s how.

Hiding Amounts

Mimblewimble is based on some of Bitcoin’s familiar privacy features. One of these is Confidential Transactions, which was mostly developed by Bitcoin Core and Blockstream developer Gregory Maxwell and is currently deployed on Blockstream’s Elements Alpha sidechain.

Confidential Transactions lets senders encrypt the bitcoin amounts in transactions with random strings of numbers called “blinding factors.” This process works because transactions also include information with which (only) receivers can decrypt the amounts. And, by utilizing a cryptographic trick called the Pedersen Commitment, anyone else can still perform math on the encrypted amounts. Specifically, Bitcoin nodes can subtract the encrypted amounts on the sending side of transactions (“inputs”) from the encrypted amounts on the receiving side of transactions (“outputs”). If the two sides cancel out to zero, it means the combined inputs and the combined outputs are equal, and no bitcoins were created out of thin air.

Mimblewimble sort of turns this trick on its head as the receiver of a transaction generates the blinding factor. This is important because as one of the main deviations from the current Bitcoin protocol, this blinding factor is effectively used to prove ownership of the (blinded) bitcoins — private keys are no longer in play at all. (Nor are public keys or addresses.)

Proving ownership of the blinding factor itself revolves around a series of cryptographic tricks that are Mimblewimble’s closest equivalent to Bitcoin’s cryptographic signatures, though the full extent of these tricks is beyond the scope of this article.

It is important to note, however, that part of these mathematical maneuvers includes the introduction of a sort of “dummy output.” Where transaction outputs normally indicate under what conditions the receiver of a transaction may later spend the bitcoins, these dummy outputs are really just random numbers to ensure that only the person who generated the blinding factor can spend the bitcoins in the real outputs.

Combining Transactions

Another familiar Bitcoin trick that inspired Mimblewimble is CoinJoin, first proposed by (again) Maxwell.

CoinJoin allows users to bundle their transactions into one bigger transaction, scrambling all inputs (the “from” part of a transaction), as well as all outputs (the “to” part). This potentially obfuscates which bitcoins were sent from which address to which address, and breaks the assumption that all inputs belong to the same user.

Mimblewimble (and a fix by Blockstream mathematician Andrew Poelstra) takes this concept a bit further and completely gets rid of transactions once a new block is created. Instead of transactions, Mimblewimble blocks mainly consist of three lists: a list of new inputs (referring to old outputs), a list of new outputs and a list of cryptographic signatures created with the aforementioned dummy outputs.

Utilizing the Pedersen Commitment scheme, all nodes can use the input list and the output list, and verify that no bitcoins were created out of thin air. The dummy output signatures, meanwhile, prove that all individual transactions must have been valid. Acting rather like “stamps of approval,” these dummy output signatures only add up mathematically if the whole transaction itself does.

And since it is never revealed which inputs spent bitcoins to which outputs exactly, nor how many bitcoins were actually spent, no trace of funds can be established at all. As such, Mimblewimble presents a tremendous boon for privacy and fungibility.

Scalability

And then there’s the scalability improvement.

Currently, many transactions on the Bitcoin network are linked. Spending a bitcoin really takes an output from a previous transaction and turns it into an input of a new transaction. This means that if an older transaction is invalid, a newer transaction that relies on the older transaction is invalid, too. So to be able to validate all transactions on the Bitcoin network, nodes must know all transactions that ever took place; the entire blockchain. (That’s currently some 80 gigabytes worth.)

But with Mimblewimble there is no longer really such a thing as a transaction history per coin. Each coin does have a specific block in which it was first created. But from then on, its value simply becomes part of the combined Unspent Transaction Output (UTXO) set, which defines all outputs that store coins and could potentially be spent at any time.

This means that in order to verify new transactions, nodes no longer need to care about previous transactions. All they need to care about is that the specific outputs used are valid.

With even more clever math, nodes can establish the validity of outputs relatively easily. They just need the block headers of all blocks (a sort of index of blocks without all transaction data) and the aforementioned dummy output signatures: both relatively compact data-sets. All other transaction data — almost the entire blockchain — can be safely discarded.

The benefit compared to other anonymizing techniques is substantial. If Confidential Transactions and CoinJoin had been used in Bitcoin from day one, nodes would currently require more than a terabyte of data to operate. With Mimblewimble, they would need closer to 120 gigabytes. And perhaps even more interesting: where the blockchain necessarily has to grow over time, the required Mimblewimble dataset does not, and can actually shrink if more bitcoins are stored in fewer outputs.

Compatibility

Now for the bad news. Mimblewimble, in its current form, is not very compatible with the Bitcoin protocol. This is mainly because for Mimblewimble to work, script must be purged from transactions. As such, there would no longer be room for a whole set of Bitcoin features, like time-locked transactions (used for the Lightning Network among other things), atomic swaps (for cross-blockchain interoperability), and more.

But that doesn’t make Mimblewimble useless. Mimblewimble may, for instance, be the perfect fit for a privacy-focused sidechain. Bitcoin users could lock their bitcoins into a specific output on the Bitcoin blockchain and “move” their coins to the Mimblewimble chain. On this sidechain, users could transact freely and privately for as long as they want, until the new owner decides to “move” the funds back to the Bitcoin blockchain by unlocking the original output.

Due to the efficiency offered by Mimblewimble’s sidechain, the added burden of maintaining it would be very manageable. Moreover, it could potentially unload much data from the Bitcoin blockchain, increasing scalability even for those who don’t use Mimblewimble at all. Where sidechains are typically not considered a scaling solution, Mimblewimble offers one.

For a full technical explanation of Mimblewimble, including the mathematical details, see the white paper.

 

Written by  Aaron van Wirdum for the Bitcoin Magazine | Original article: https://bitcoinmagazine.co…

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