Bitcoin P2P Cryptocurrency now in public beta

Bitcoin is an idea developed by Satoshi Nakamoto for an independent, fully de-centralized P2P currency. Technical details of how it is generated are described in a White Paper titled Bitcoin: A Peer-to-Peer Electronic Cash System available here as a PDF file.

The currency is now in beta release and if you are using Windows or Linux, you can download the program that allows you to generate and to exchange (receive and pay others with) bitcoins from where you can also read up on how the currency is exchanged. Unfortunately there is no mac version of the software yet.

Bitcoins are created by users and their computers in a complicated but fully automated process.

“The total eventual circulation of Bitcoins will be 21,000,000 coins. There will never be more coins than that. The coins are entering circulation gradually, at a steady pace over many years, to nodes supporting the network in proportion to the CPU time they contribute.”

A discussion of the bitcoin proposal on the P2P Foundation’s Ning site, initiated by Satoshi a little over a year ago, can be found at this address:

Recently, Aran of the OrganicDesign Wiki has sent some more information indicating that the currency is ready for use. We would like to pass that information on to all of you. If you are interested in testing and who want to start to use that currency on your windows/linux machine, you can now do so.

Bitcoin: Open Source P2P eCash is here!

Bitcoin is an open source peer-to-peer (a.k.a “p2p”) electronic cash system that’s completely decentralised, with no central server, trusted authorities or middle men. The availability of bitcoins can’t be manipulated by governments or financial institutions. Bitcoin already has a number of exchanges for converting to and from other currencies; BitcoinFX, New Liberty Standard, Bitcoin Exchange and Bitcoin Market.

Bitcoin may last for years and become a popular global currency, or it could be just a flash in the pan, but either way I think this is an important sign of the times to come. This is one of the first truly decentralised currencies and has paved the way for hundreds more to compete together in the new arena of Cipherspace over the coming years. This is one of the key factors in the transition of global society into the post-nation-state economy talked about in The Sovereign Individual.

In a p2p computer network there are no servers, the entire network is composed of users running instances of the application on their computers. Each running instance offers a small amount of processing and storage resource to the network so that it can deliver the services it was designed for such as redundant storage, anonymity or voice-over-IP applications.

In the case of a p2p currency system, some of the services the network is designed to offer are privacy, verification, authentication, currency creation and transfer of ownership. To ensure a reliable and tamper-proof system requires a lot of resource, and that amount is proportional to the amount of coins in the network. The network is able to pay the users for the resource they offer by making the coin-creation process part of the network protocol itself instead of being handled by a central trusted authority. This creates a natural and incorruptible link between the supply of currency in the network and the demand for it.

Even aside from the ability to exchange bitcoins for other currencies, it still makes a very useful tool for independent organisations and groups because it allows them to trade and settle accounts amongst themselves independently and privately. It effectively gives them a “bank” that has a trustworthy system of accounts that can’t be tampered with and requires no corruptible central authority to operate. See the Bitcoin Whitepaper for more detail about how it works.

To try Bitcoin, download the Bitcoin software, then once it’s running, click ‘Generate Coins’ which will pay you bitcoins in exchange for your computer working to validate bitcoin transactions. Check the exchange rate to calculate how many bitcoins need to be sent. The payer can purchase additional bitcoins if needed. The payer’s previously generated bitcoins allow for a lower out of pocket payment. The payer then sends the bitcoins to the receiver using the Bitcoin software. The receiver can then sell their bitcoins for dollars. The receiver’s previously generated bitcoins allow a higher dollar payout.

1 Comment Bitcoin P2P Cryptocurrency now in public beta

  1. AvatarSepp Hasslberger

    I have argued (elsewhere) that bitcoin is a deflationary currency. As the user base increases, and the difficulty to generate bitcoins is increasing, each single coin will become more and more valuable.

    This may be a good thing for the early adopters, who are sitting on bitcoins and have not spent them. It isn’t good for the stability of a monetary system however, as there is a constant pressure for price changes, which in this case is prices for things, as expressed in bitcoin, will automatically increase.

    There is another point. According to a recent article in the trustcurrency blog, bitcoin is

    a rube-goldberg machine for buying electricity

    quote: In the end, BitCoins create a perverse incentive to consume energy to “create money.” Here is why.

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