Dogecoins and litecoins and peercoins oh my what you need to know about bitcoin alternatives – the washington post electricity physics test

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By now, most people have heard of Bitcoin, the peer-to-peer currency whose value has soared over the past couple of years. But more recently there’s been growing press attention to Bitcoin alternatives with silly names like Dogecoin, sexcoin gastroenteritis and Hobo Nickels. Is this all a big joke, or should people take some of these Bitcoin competitors seriously? Read on to find out.

Conventional payment systems like PayPal and Visa are centralized. A for-profit company operates the network and ensures that it is secure and reliable. But Bitcoin operates on a different model. Instead of being run by a for-profit company, Bitcoin operates as a peer-to-peer network. Its security is guaranteed by cryptographic algorithms instead of government or corporate managers.

One consequence of this design: the Bitcoin electricity usage calculator kwh network has its own currency. The PayPal corporation guarantees that if you deposit one dollar into a PayPal account, you’ll be able to get quadcopter gas engine a dollar back later. But no one owns the Bitcoin network, so there’s no one to guarantee that one unit of Bitcoin currency will have a stable value against conventional currencies. Instead, Bitcoin’s unit of value, also called the Bitcoin, floats against conventional currencies. One bitcoin is currently worth about $800, up from less than a dollar at the start of 2011.

Because Bitcoin is an open-source project, anyone can take the source code, modify it, and then use the modified software to create their own Bitcoin-like network. The founders of Dogecoin took the source code of another Bitcoin variant called Litecoin, made some further tweaks, and rebranded it as Dogecoin. That’s a reference to the canine variant of lolcats, an Internet meme where a grammatically challenged dog makes excited statements.

The problem is that q gas station cleveland ohio thanks to Bitcoin’s decentralized design, it’s not easy to change the core Bitcoin protocol. Hence, if you have an idea for an improved version of Bitcoin, it’s easier to start your own virtual currency than to try to convince the Bitcoin community to change how Bitcoin works. So over the past three gas in babies that breastfeed years, a number of people have introduced Bitcoin alternatives that borrow some ideas from Bitcoins but also fix perceived flaws.

Most of the altcoins have focused on improving mining, the process the Bitcoin network uses to process transactions. In the Bitcoin mining process, hundreds of computers race to solve a repetitive math problem. The winner of the race gets to add a block to the Bitcoin network’s global types of electricity generation transaction register, and to award itself 25 bitcoins (roughly $20,000) for its trouble.

Critics see two big problems with this system. One problem is that the mathematical formula at the core of the Bitcoin mining process, called a hash function, can be performed much more efficiently by expensive, custom-designed computers than with an ordinary PC. As a result, mining has become an increasingly specialized activity, with people spending thousands of dollars on chips whose only function is to mine Bitcoins. This hardware is so much more efficient than ordinary PCs electricity trading that it’s no longer cost-efficient to mine Bitcoins with an ordinary PC — the electricity consumed is worth more than the bitcoins produced.

That, critics warn, risks undermining one of Bitcoin’s core virtues: its decentralization. The security of Bitcoin’s transaction-clearing process requires that no one control more than 50 percent of the network’s computing power. Bitcoin’s designer envisioned thousands of ordinary users running Bitcoin software on their PCs, ensuring that no one could gain electricity cost nyc a large market share.

But thanks to the rise of dedicated hardware, Bitcoin mining has become increasingly professionalized. Miners have organized themselves into pools, and a handful of pools control the overwhelming majority of the network’s computing power. Critics worry that these pools could eventually gain de facto control over the network, undermining one of the network’s key selling points.

The second Bitcoin flaw is the one Paul Krugman alluded gas examples matter to in a recent column: The mining process is a computational arms race. The more computing power you have, the greater your influence over the Bitcoin network and the more Bitcoins you can earn. And as miners throw more and more hardware at the problem, they consume more and more electricity.

The Bitcoin principle that miners with more computing power earn more Bitcoins is known as proof gas definition wikipedia of work. Several Bitcoin alternatives use an alternative principle called proof of stake, where miners with the most virtual cash earn the most. That approach eliminates the incentive to spend ever-larger sums of money gas up on mining hardware, which is good for the environment.

In addition to the energy savings, advocates of proof-of-stake currencies like Nextcoin and Peercoin argue that it makes the network more secure against takeover attempts. Recall that you could take control of the Bitcoin network if you obtained a majority of the network’s computing power. With a proof-of-stake currency, on the other hand, taking control requires gaining a large share of the outstanding coins. For a successful virtual currency like Bitcoin, that could cost billions of dollars. And a successful takeover would destroy confidence in the currency igas energy shares, devaluing those same shares. This, advocates argue, provides stronger security than Bitcoin’s proof-of-work scheme.

That’s probably because currencies exhibit what economists call network effects: The more people use them, the more valuable they are electricity laws uk. The fact that Bitcoin was the first currency to market gives it a huge advantage. It gets the most publicity, has the most startups supporting it, has the most merchants accepting it, and has the most users invested in it, literally and figuratively. As long as Bitcoin continues serving users’ needs adequately, it has a good shot at remaining king of the hill indefinitely. And while most of the proposed improvements to Bitcoin are theoretically interesting, none seem to be compelling enough to induce users to switch in large numbers.

But holding altcoins can also be seen as a bet on Bitcoin’s eventual failure. So far e electricity bill payment, Bitcoin has weathered all the storms it has sailed into, including a major bug in the core Bitcoin software that caused a glitch back in March. But it’s still possible that future developments will reveal fundamental flaws in the Bitcoin protocol. For example, the increasing centralization of Bitcoin mining could lead to a costly fight over control of the currency grade 6 electricity unit, or make it vulnerable to greater government regulation.

If Bitcoin stumbles, others stand ready to take its place as the leading decentralized payment network. If that happened, the value of other virtual currencies could soar as users fled Bitcoin in favor of less-known alternatives. Buying altcoins now is a way of covering your bases in case the market eventually switches to an alternative currency.