Category Archives: General

The Bitcoin Adventure part 1

The term Bitcoin has become such a big phenomenon by now, even small shops in my town (Delft) are accepting it as a payment method. Café de Waag will accept bitcoins for food and drinks. While No13 has fashion clothes to offer for bitcoins.

So what is Bitcoin?

You might already have guessed it’s a type of monetary system. It’s in fact the first decentralized digital currency. Decentralized means that there’s no bank, country, company or person that controls or owns the money. This works because the Bitcoin network uses peer-to-peer technology —like torrents— to operate, validate and secure the network. Now being decentralized also means there is no such thing as "interest", there’s no "loans" and the value of bitcoin doesn’t depend on a country’s welfare.

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The official Bitcoin logo as seen on bitcoin.org

Fiat money is money that has no entity backing it other than the issuer, usually a government. When the United States dollar finally disconnected from the gold standard in 1971 it became a fiat currency. Basically the USA declared, “The dollar has value because we are ‘Murica” and the world said, “OK”. In actuality, the US dollar has no intrinsic value other than the fact it is issued by the United States. Most modern currencies are fiat money.

Bitcoin follows the same principle, in that its value is determined by perception. Instead of the trust of some government entity being evaluated to determine the value of Bitcoin, other factors (the technology, widespread acceptance, understanding of e-money, etc.) are taken into consideration. When magazines and online entities write intriguing articles about Bitcoin, people take interest in it, the demand goes up and so does its value v. government-back currencies. Likewise when Mt. Gox is DDoSed, a Bitcoin service shutters, or $250,000 worth of bitcoins is stolen, people get nervous, demand drops, and so does Bitcoin value.

The Bitcoin network is a peer-to-peer payment network that operates on a cryptographic protocol. Users send bitcoins, the unit of currency, by broadcasting digitally signed messages to the network using Bitcoin wallet software. Transactions are recorded into a distributed public database known as the block chain, with consensus achieved by a proof-of-work system called mining. The block chain is distributed internationally using peer-to-peer file sharing technology similar to Bit Torrent. The protocol was designed in 2008 and released in 2009 as open source software by “Satoshi Nakamoto”, the pseudonym of the original developer or group of developers.

network

The current real-time estimate of the Bitcoin network using Bitnodes is 8000 to 10000 nodes that are reachable at any one time.

Why should you use Bitcoin?

There’s a lot of benefits to using bitcoin over existing currency. For starters, saving your money is safer since your bitcoins are saved on a medium of your own choice. And because the money is digital, it can be saved in a tiny container. A USB flash drive is a great solution, and if you encrypt your wallet you can even keep your money on Dropbox or a similar service for a backup.
However, your bitcoins digital wallet can be lost. Just like with real wallets, if you lose your digital wallet, you lose your money.

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My wallet is encrypted and backed up on Dropbox.

Sending and receiving money is also considered safer because transactions are semi-anonymous. All Bitcoin transactions are public information. Anyone can know the amount, the time, and the wallet numbers of the two participants. They may not necessarily know who the human owners of the digital wallets are. So you may send and receive money without ever adding your name, address or account details. That being said, it’s still a risk to send bitcoins since transactions are not reversible. Bitcoin transactions cannot be undone, except by a second voluntary transaction of the same amount in the opposite direction. (This is unlike credit cards, where the merchant can lose the received money to a “chargeback” even after they have shipped the product.)

As a buyer using Bitcoin, keep in mind that there is likely nobody to petition for help should a seller not ship you a product (as governments and their courts will likely be quite unfriendly to Bitcoin, see below). For this reason, buyers would be wise to deal only with reputable sellers, or use escrow services.

Bitcoin transactions happen virtually instantaneously, and the transaction is then verified by the peer-to-peer network of Bitcoin users. The more positive confirmations you receive from the network, the more likely the transaction is valid and final. This can take a few minutes.

For big spenders there’s a benefit of really small transaction fees and no taxes. Transaction fees are actually still non-obligatory, but to ensure fast verification of transactions, small fees help mining pools to accept your transaction faster and verify it within minutes.

The benefit of almost no fees and instantaneous transaction makes the system very viable for larger global transactions since sending money through banks to the other side of the world may be a real hassle and includes lots of fees and taxes. Even PayPal has fees of 2.9% + $0.30 per sale and usually takes a few days to process the transaction.

How does Bitcoin have value?

Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin’s value comes only and directly from people willing to accept them as payment.

bitcoin-capital

The Bitcoin Market Capitalization is shown above in a graph.
At the end of 2013, one bitcoin costed over a 1000 USD.

The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable. Because Bitcoin is still a relatively small market compared to what it could be, it doesn’t take significant amounts of money to move the market price up or down, and thus the price of a bitcoin is still very volatile.

To be continued…

As I delve into the world of Bitcoin, I’ll update my blog with new findings and experiences. So far I’ve invested €50,- in Bitcoin just as an experiment. I received 0.10421875 BTC for that amount of euros.
If you’ve got any bitcoins to spare and would like to donate me a cup of coffee, I’d very much appreciate it! My donation address is: 1BCC7Wu95u9AYo45dV33iHPyNFtDuqj5gj

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Interpretation and interpolation

I’ve always wondered why interpretation is such a big deal. Interpretation is used mostly to explain a phenomenon, story or object. Strangely it’s still a subjective way of defining something. You can use interpretation for putting things into context, but the opposite is even more important: you need context to have a correct interpretation. And yes, the context is relevant, but you won’t necessarily need it to interpret anything. You can, and, are allowed to interpret something without knowing what context it relates to.

In some degree we all pick and choose our contextual references for interpretation. And it’s most of the times even necessary to limit the scope of your context in order to gradually interpret something. But when are you taking things out of context by doing so? It’s hard to see clear boundaries, in fact, there are countless of misinterpretations throughout the history of mankind that have risen from interpreting things that have been taken out of context.
If the act of interpretation is so subjective and sensitive to errors, why is it so important for people to have their own interpretations? Does the need for people to have their own personal interpretation originate from the individualistic mindset that encourages people to not have faith or trust in other people? Individualism does heavily emphasize the worth of an individual. Are you considered a worthy individual if you do not have your own interpretation about a subject you’re asked about?
In any case, having a personal interpretation is important for both you and the outside world. It’s basically the sieve that filters everything you intercept. Your interpretations are important to yourself to get an understanding of something. And the world will want to know your interpretation about that same thing one day.

Interpolation can be seen as a mathematical method of generating new points between set known points. Ever played connect the dots? Yeah, that’s basically what interpolation is: you draw a line between the dots that have been given to you at the start [fig a.1].

fig a.1 – An example of a connect the dots game.

While this is a kid’s game, it can be made much harder by just making the final image more complex [fig a.2].

fig a.2 – A more complex connect the dots figure.

When drawing the lines, you are actually doing a lot more things than just mindlessly drawing lines. You are creating the final image in your head. You’re trying to interpret the dots to form an image. Now imagine another version where there are no numbers for guidance [fig b.1]. Where do you start? Which is the following dot, and which thereafter?

fig b.1 – An example of a connect the dots figure without numbers. There is no clear start or end point.

To successfully interpolate an image, situation or story, you will have to use known facts, which can be seen as the points. You will also need to use any insight you might have on the subject that might help you find patterns or sequences. And lastly, interpretation is also a factor of a well-rounded interpolation. For example, in the previous figure you will need to translate solid fixed points into motion in order to form an image.

Interpolation is in my opinion a more complete method of contextualization than subjective interpretation. It would mean there would be less subjective interpretation and more mathematically traceable paths to factual points that everybody could be able to see without needing to know the background of the specific person who interpolated. Compared to interpretation, you’d need to justify your interpretation by explaining personal experiences, share personal knowledge or hunches. This would be really easy to achieve if humans could be fully objective. But even the most disciplined judge will have to use subjective experience to decide a case in court.

Still, if life consists of formulas with given solid points which you could use to make an image, why not interpolate instead of interpret?

fig b.2 – The previous figure could be interpolated to this final image. There are not many logical possibilities to this figure, but it is also not sporadic and seemingly random like life tends to be.

Goodbye Winamp

Remember that player that “Whips the llama’s ass”? Well sadly, it’s going to be shut down next month, December 20th.

I’ve used Winamp for many years and it was my primary audio media player. It was a fancy little program with the ability to fully customize the look and feel of it.

Winamp was created when the trend of MP3 sharing was developing. It created a new space in the market of digital audio players, where simple and easy to use software got very popular due to the MP3 trend. A lot of other competitors joined the scene, including: Sonique and XMMS. More competitors joined the scene after AOL bought Winamp and former employees started creating their own software.

I loved the MMD3 skin and it even added new visualizations to the player.

Winamp was notorious for its awesome visualizations. With the Advanced Visualization Studio (AVS) you could even create your own visualizations with Winamp’s own visualization programming language. You could share them on Winamp’s site or put them on DeviantART. Download and paste in your visualizations folder and you’ve got new eye candy to munch on while listening to your favourite music!

Nowadays I use foobar2000 as an alternative to keep my music library clean and still have a decently customizable audio player. I do miss the “winshade” mode on Winamp though, makes your player a tiny horizontal line with all the necessary buttons and song title.

Winamp winshade functionality. Skins can change the look and feel of this too!

Winamp winshade functionality. Skins can change the look and feel of this too!

I’ve got a lot of memories of this little program. Spent hours and days fiddling around with the AVS, trying to figure out how to reproduce those awesome visualizations. Listening to music and maintaining my first music library. Showing off my collections of skins and AVS presets. Ah yes, those were the good days!

We’ll miss you Winamp!

Download Winamp here