Over the past period, cloud mining for cryptocurrency has brought many challenges to the legislative branch. More and more people in the entrepreneurial and academic circles have joined this technological revolution.
Bitcoin was released in January 2009. At that time, only a few people who had been concerned about cryptography for a long time knew about this emerging thing. Bitcoin originated from an individual or group who claimed to be "Satoshi Nakamoto". So far, the true identity of "Satoshi Nakamoto" has not been known to the public. Bitcoin is an electronic currency that uses encryption and decryption algorithms to maintain transfer records. It sounds like a fantasy at first glance. People can use Bitcoin anonymously. The transfer records in the Bitcoin network are stored and maintained in a decentralized manner. No group or individual controls Bitcoin. Even the government, banks, and Satoshi Nakamoto cannot do this.
Approximately 14.6 million Bitcoins are circulating in the market today. The total market value is around US$3.4 billion. Perhaps part of the Bitcoin in the circulation market and cloud mining for cryptocurrency has been used for black market transactions. Taking advantage of its anonymity, some people use Bitcoin to buy drugs and other prohibited items. On the other hand, the many characteristics of Bitcoin have also attracted the attention of financial institutions such as JPMorgan Chase. They agree that technologies like Bitcoin can realize circulation and payment functions at a lower cost. Around Bitcoin, nearly 700 electronic currencies have been created. On September 15 this year, the electronic currency community also ushered in the creation of the first academic journal.
Bitcoin can attract so much attention because of its revolutionary innovation. Using a technology called blockchain, Bitcoin keeps a record of every transaction. It is precisely by relying on the blockchain that all Bitcoin transactions and cloud mining for cryptocurrency are difficult to revoke or tamper with. Bitcoin transactions are recorded on many computers in the P2P network, and Bitcoin users do not need to trust the owners of these computers. Even in this case, the Bitcoin network is still safe and reliable.
Many people believe that blockchain can also be used in other areas, including smart contracts, voting, and crowdfunding. In July of this year, Ethereum Foundation, a non-profit organization based in Baar, Switzerland, released a blockchain-based system, Ethereum. The IC3 research team of Cornell University in the United States also decided in July to start scientific exploration based on blockchain. Nicolas Courtois, an encryption scholar at University College London, said that if Bitcoin can develop smoothly, it may become the most important invention of the 21st century.
Bitcoin still has some areas that can be improved, such as security. There have been more than 40 Bitcoin theft incidents, and many of them have lost more than 1 million U.S. dollars.
Cloud mining for cryptocurrency-related companies and scholars use game theory and advanced encryption methods to re-examine Bitcoin. Ari Juels, the co-leader of the Initiative for CryptoCurrencies and Contracts (IC3), pointed out that “cryptocurrency is not like other systems. Once a problem occurs, the consequences are unbearable. So we need to attract more Relevant experts will solve these potential problems."
The academic circle's exploration of cryptocurrency can be traced back to 20 years ago. At that time, David Chaum, an encryption and decryption expert at the National Institute of Mathematics and Computers in the Netherlands, did a lot of related work. In order to better protect the buyer's personal information, he founded the first electronic currency DigiCash in 1990.
DigiCash went bankrupt in 1998. The main reason for the failure is that DigiCash's protocol is not decentralized. The operation of its system relies on a traditional bank, but it has not been able to find its place in the traditional financial industry. After 10 years, the idea of DigiCash was re-implemented on Bitcoin by Satoshi Nakamoto. The difference is that the Bitcoin code is jointly maintained by community participants, and the Bitcoin network is based on the P2P protocol. In other words, Bitcoin is a decentralized system. Anyone can participate in the Bitcoin network, just open the wallet and connect to the Internet. Many participants build this network and jointly maintain a constantly updated blockchain.
Satoshi Nakamoto's biggest challenge is how to avoid tampering with online transactions in such an open network, and to ensure that there will be no false Bitcoin transaction records. The solution he proposed is to let everyone decide through competition who has the right to write transactions into the blockchain. This process is also known as Bitcoin mining and cloud mining for cryptocurrency.
Once a Bitcoin transaction is submitted to the network, it will be broadcast to the entire Bitcoin network. Those involved in Bitcoin mining need to collect these transaction records and then perform a series of hash calculations. Whoever finds the hash value that meets certain conditions first has the right to pack all current records into a block and add it to the blockchain. There are currently nearly 400,000 blocks on the Bitcoin blockchain.
Why does this process of competing for block production rights ensure that the blockchain is safe? Because no individual/group can easily obtain block production rights, which means that no one can rewrite data blocks that have been generated before.
While cloud mining for cryptocurrency maintains the blockchain, it also slowly increases the supply of Bitcoin. Every time someone obtains the right to produce blocks, he will receive a reward of 25 bitcoins, worth thousands of dollars. The difficulty of Bitcoin mining is automatically adjusted, and the interval between each data block is 10 minutes on average. At the same time, the number of bitcoins rewarded for block production also decreases over time, halving every 4 years. In this way, the upper limit of Bitcoin's supply is 21 million.
The Bitcoin network cannot determine how much a Bitcoin can be worth. The price depends on both buyers and sellers in the Bitcoin trading market. This has led to huge fluctuations in the price of Bitcoin. In January 2013, the transaction price of a Bitcoin was 13 US dollars, but in December it rose to 1,200 US dollars. On May 22, 2010, someone bought 2 pizzas with 10,000 Bitcoins. Calculated according to the price of Bitcoin at the highest moment, these two pizzas cost $12 million in Bitcoin.
Cloud Mining for Cryptocurrency - Dilemma
It didn't take long for Bitcoin's problems to gradually emerge. For example, due to the anonymous nature of Bitcoin, many people will use it to trade some prohibited items. Silk Road is an online black market that uses Bitcoin as a means of payment. The FBI shut down this website in 2013, and the website owner was sentenced to life imprisonment in May of this year. On the other hand, Bitcoin is also used by people to sponsor sites like WikiLeaks. A computer scientist at Princeton University, Arvind Narayanan (Arvind Narayanan), believes that it is difficult for the Bitcoin community to establish a standard to identify which Bitcoin application is good or bad. "Unless the use of related technologies is prohibited, no one can supervise the Bitcoin network."
There are also some problems in Bitcoin mining. As the price of Bitcoin rises, so does the competition for mining computing power. Faster equipment was developed for Bitcoin mining. There used to be people who could earn $200 worth of Bitcoin in a day of cloud mining for cryptocurrency. Others have built a large Bitcoin mining center in Iceland. The site was chosen in Iceland because of the cold climate there, which is conducive to the heat dissipation of the mining machines. According to an estimate in 2014, the electricity used for Bitcoin mining is equivalent to the electricity consumption of entire Iceland.
Increasing competition for Bitcoin computing power has caused individual miners to join various mining pools. Last year, the largest mining pool GHash.IO once mastered more than 50% of the computing power of the entire network. Once someone has mastered more than half of the computing power of the entire network, they can master the right to generate blocks. In this way, he can defraud the network, revoke the bitcoin transaction record, and return the paid bitcoin to the original address. This fraudulent technique is called a "51% attack." On some relatively small-scale electronic currency networks (Terracoin, Coiledcoin), someone successfully launched a 51% attack. The attack at that time even caused people to give up maintaining the Coiledcoin blockchain.
In order to reduce the risk of being attacked, someone has proposed a new mining algorithm. For example, the mining algorithm of Litecoin relies more on memory, which makes it more difficult to design specialized mining machines. The co-leader of IC3 Lab, Elaine Shi, and his colleagues have theoretically determined that pool participants can steal mining rewards. They have also developed a prototype algorithm and plan to test it on Bitcoin or other electronic money networks.
Another issue is the energy consumed by Bitcoin mining. In order to reduce waste, researchers Shi and Jules developed an electronic currency network called Permacoin. Its mining algorithm is no longer calculating meaningless hashes, but processing medical data or genetic data. This cannot reduce the energy consumption of cloud mining for cryptocurrency, but at least it allows the energy to be consumed on more useful calculations.
The security of electronic money is another big issue. Many Bitcoin thefts are not caused by the blockchain architecture, but by the digital signature technology used by Bitcoin. Bitcoin users have a public key and a private key. The public key can be sent to others for payment. The private key must be kept tight, and it can be used to initiate bitcoin transfers. Once someone's computer is compromised, and his private key is stolen, it means that his Bitcoin will be stolen.
Narayanan believes that users are so sensitive to security that Bitcoin is unlikely to become a widely used means of payment. In response to this problem, Narayanan and his team developed a technology that can store private keys separately. For example, the user can store the private key in segments on the computer and mobile phone. Even if your computer is compromised, the attacker still needs to compromise your phone to steal the complete private key.
Courtois pointed out that another security risk of the Bitcoin network and cloud mining for cryptocurrency is that the private key and a random number must be used at the same time when signing a Bitcoin transfer transaction and cloud mining for cryptocurrency. In some Bitcoin client implementations, such as Android phones, the generation of random numbers is not very reliable. If someone can use the loopholes in the system to guess what random number is used to sign the transaction, then he has the opportunity to guess what the private key is. David Schwartz, Ripple's chief cryptographer, admitted, "It's embarrassing that this industry feels like a big basket can be made at any time."