CryptoURANUS Economics


Saturday, August 11, 2018

TRUSTED VS TRUSTLESS: Defined in CryptoCurrency

TRUSTED VS TRUSTLESS:  Defined in CryptoCurrency

Truth in the means of stock-exhange and cryptocurrency operations

It means you don’t need a trusted party to settle transactions.
When you send funds you trust the banks to send it for you.
Settling a financial agreement between two parties involves both the bank of the sender as well as the bank of the receiver.

Cryptocurrencies like Bitcoin cut out the need of this middle man role.
It has nothing to do with trusting the seller. Neither does a bank if you pay upfront and the seller refuses to send the goods. Then it’s become a civil case.
Just like with bank statements you can prove on the blockchain that you transferred funds to the address the seller gave to you.

‘Trustless’ has become a rallying cry for Bitcoin evangelists, focusing public attention on the fact that Bitcoin enables P2P transactions without the participation of a trusted third party acting as an intermediary.

Before Bitcoin, to use digital money, we needed a trusted third-party to keep a ledger of who owned how much.  Examples of this trusted third-party are MasterCard, VISA, your bank or your MNO if you use mobile money. So if Alice sent Bob $100, this trusted third-party would debit Alice's account and credit Bob's account - they would update their ledger and we all had to trust this 'trusted' third-party to do the right thing and be good stewards of our money.

Now with Bitcoin, everyone has a copy of this ledger so we mo longer need to trust a single entity/organisation/third-party because there is no need to trust when you can just verify against this ledger because you have a copy of it. This decentralised ledger is called the Blockchain BTW.

And the other thing is that everyone using is following the same rules we are so we don't even need to trust them because we know that Bitcoin was built to make it impossible to break the rules.

Bitcoin makes it possible to conduct money transfers without intermediaries. Intermediaries who could otherwise gain control over funds in a transaction, censor transactions or act as points of failure. 

Does this give grounds to assert that Bitcoin and other cryptocurrencies are a form of money that does not require trust? Is it possible to completely eliminate trust from monetary relations, and is there even a need to? This article is devoted to the study of the role of trust in monetary transactions (including cryptocurrencies), and its main conclusion is that this role is hard to overestimate.

The article is divided into four sections. First, we analyze the role of trust in monetary relations, including the role of trust in Bitcoin’s functioning, and show that trust is necessary for any money. Next, we proceed to justify the need for credit and credit money, which cannot exist without trust. 

Transaction [TX-ID]: Defined in CryptoCurrency

Transaction [TX-ID]: Defined in CryptoCurrency

A Transaction ID, or TX ID is defined as a unique string of letters and numbers used to identify an exchange of cryptocurrency between two people.

Because blockchains are public data, many websites have been built to let you explore the data. These are known as blockchain explorers. Using a blockchain explorer, you can copy/paste your transaction ID and easily find the status of your transaction.

Just make sure you’re using a blockchain explorer that has access to your blockchain. Some blockchain explorers only have access to one blockchain, like bitcoin.

Is TXID the hash of a transaction's data? Yes!

A TXID (Transaction ID) is basically an identification number for a bitcoin transaction.


f4184fc596403b9d638783cf57adfe4c75c605f6356fbc91338530e9831e9e16 - First ever Bitcoin transaction to Hal Finney in 2010.

a1075db55d416d3ca199f55b6084e2115b9345e16c5cf302fc80e9d5fbf5d48d - Pizza transaction for 10,000 BTC in 2010.

4ce18f49ba153a51bcda9bb80d7f978e3de6e81b5fc326f00465464530c052f4 - The transaction containing the first donation I received for making this website.

SO, A TXID is always 32 bytes (64 characters) and hexadecimal.

NOW, this hiw how we create a TXID below:

AND... you get a TXID by hashing transaction data via SHA256 twice.


169e1e83e930853391bc6f35f605c6754cfead57cf8387639d3b4096c54f18f4   (Note: reverse the byte order first if you want to find this transaction in the blockchain...)

What about searching for TXIDs in the blockchain?

If you have just hashed a transaction data and want to search for a TXID in the blockchain, you have to search for it in reverse byte order.

The TXID (original):  169e1e83e930853391bc6f35f605c6754cfead57cf8387639d3b4096c54f18f4

The TXID (searching): f4184fc596403b9d638783cf57adfe4c75c605f6356fbc91338530e9831e9e16

Because, this is cryptocurrency, welcome to Bitcoin.
The tx and block hashes that bitcoin core uses are byte-reversed.

Where are TXIDs used?

1. Searching the blockchain.
If you've just made a transaction, you can use the TXID to find it in the blockchain. For example:

bitcoin-cli getrawtransaction 0e3e2357e806b6cdb1f70b54c3a3a17b6714ee1f0e68bebb44a74b1efd512098

The console window in the Bitcoin Core Wallet

The console window in the Bitcoin Core Wallet

If you have been given a TXID by your bitcoin wallet, it's probably already in its "searchable" format (reverse byte order).

2. Spending outputs.
You use a TXID when you want to use an existing output as an input in a new transaction.
To refer to an existing output, you use the txid it was created in, along with the vout number for that transaction.

To refer to an existing output, you use the txid it was created in, along with the vout number for that transaction.

Because after all, a TXID is a unique identifier1 for a transaction.

Why hash twice? Why not once?

Things often get hashed twice in bitcoin for extra security.

Hash functions, like SHA256, for creating identification numbers are fast and secure.

Coinbase transactions having the same TXID.
There has been a situation where two "different" coinbase transactions had the same TXID, because the other is a backup and user-friendly.

Reason is the transaction data is the same along with the TXIDs. Here are the transactions and the blocks they were included in:

block 91,722: 00000000000271a2dc26e7667f8419f2e15416dc6955e5a6c6cdf3f2574dd08e
block 91,880: 00000000000743f190a18c5577a3c2d2a1f610ae9601ac046a38084ccb7cd721

block 91,812: 00000000000af0aed4792b1acee3d966af36cf5def14935db8de83d6f9306f2f
block 91,842: 00000000000a4d0a398161ffc163c503763b1f4360639393e0e4c8e300e0caec

The Bitcoin Administrators made a BiP-34 Fix

BIP 30 introduced a rule preventing blocks from containing a TXID that already exists. BIP 34 requires coinbase transactions to include block height  of mining into the transaction data. Hence, coinbase transactions now are different...

Transaction Fee [TX Fee]: Defined in CryptoCurrency

Transaction Fee [TX Fee]: Defined in CryptoCurrency 

A transaction fee is defined as payment made to people who do the work of keeping an accurate, up-to-date financial system when money is being sent and received.

Typically, when you send money using banks or receive money as a business, you pay the bank a fee. This fee covers their costs for hiring people to do the work involved in your transaction.

With cryptocurrencies, there are no banks. Instead, people use their computers to verify transactions are correct and then record this information in the blockchain. Because there are thousands of transactions happening every minute, fees motivate these people to do this computer work.

If you provide a larger fee, typically your transaction can jump the line and get recorded first. In other words, the larger the fee, the greater the chance of your transaction going through sooner than the rest.

Tokens-(Security and Equity)


A token is defined as something that represents value, services, or a product.

There are three main types of tokens built with blockchain technology:
Utility Token: Defined in CryptoCurrency that provides access to a product or service including software, digital content, etc. 

All three types of tokens are bought and sold with the hope of gaining a profit.
The words “crypto asset” and “digital asset” can also be used to describe tokens.
Tokens is a digital asset that lives on a cryptocurrency. The term token is often used in the meaning of user issued token, in opposition to native token that comes into existence along with the cryptocurrency itself.
See also: Cryptocurrencies supported by Trezor

Native and user tokens

All cryptocurrencies have at least one token. This is a native token which is created along with the cryptocurrency, is essential to its function and is often synonymous to it. For example Bitcoin has bitcoin (BTC) as its native token, while Ethereum has ether (ETH).
Some cryptocurrencies also support user asset issuance. Such assets are reffered to as a user tokens. For example Ethereum has a growing number of ERC20 tokens issued by individual users and companies during ICOs or crowdsales.

It is quite common, that native tokens are referred to as cryptocurrencies (or less formally as coins), while user tokens are called just tokens.
Like Trezor? Get one here!

Thursday, August 9, 2018


Defined in Cryptocurrency

A Private-Key is a randomly generated secret number that must only be known to the owner of the associated address, and no-one else.

Private-keys are contained in a wallet and are mathematically linked to the corresponding public-keys.

A Private-Key can be used to spend the funds that are associated with a specific address and should always be kept private.

Publicly sharing a Private-Key will result in a loss of funds; -i.e. most likely theft.

Private-Key are generated locally on your Trezor-device and never leave the device.

The Private-Key is defined as a string of letters and numbers known only by the owner that is used to spend cryptocurrency.

NEVER SHARE your Private-Key with anyone unless you want someone else to be able to theft, and-or own all of your money!

Your Private-Key is your most prized possession as your password is to access your cryptocurrency account(s) and must always be in private.

Compare a Private-Key with a Public-Key and address:
Your Public-Key is rarely ever used, but you can use it to receive cryptocurrency in trust.

Your address is a safer version of your Public-Key and is what you should use to receive money.

Private-Key for Trezor devices are generated based on a recovery-seed and (optional) passphrase.

In addition to creating and signing transactions, Private-Key can be used in the Trezor-Wallet to sign messages from a specific address to prove ownership of that address.

See also Account private key

Like Trezor? Get one here!

Mnemonic Phrase: Defined in CryptoCurrency

Mnemonic Phrase: Defined in CryptoCurrency

A mnemonic phrase (also mnemonic seed or seed phrase) is defined as a secret list of words used in sequence to gain access to your cryptocurrencies.


“Mnemonic” just means a memory aid such as rhymes, abbreviations and songs that help you remember something else. A mnemonic phrase is a group words, often 12 or more, created when a new wallet is made to store your cryptocurrency.

If your the computer running your wallet broke, you could use your mnemonic phrase to recover your wallet and crypto. The words must be typed in exactly in the same sequence they were created.

Most people store their phrases on a piece of paper and then keep that in a safe place. Your phrase must be kept secret, anyone who discovers it can steal your crypto.

Mnemonic is pronounced: nuh-mon-ic.

Tuesday, August 7, 2018

Mining CryptoCurrency: Defined

Mining CryptoCurrency: Defined

Mining CryptoCurrency is defined as the process of using computer power to solve a complex math problem.

A computer does this by reviewing and verifying information, and create a new block so the information can be added to the blockchain.

Imagine the blockchain as a digital book of records.

Just like paper pages, these digital pages can only store a limited amount of information.

So new pages are created regularly to store more information.

Those pages are blocks in the blockchain.

To keep the blockchain network running smoothly, only one block can be created at a time.

Proof of work is the mining process of controlling how blocks are created and how data is added to a block. Here’s how proof of work works:

  • To be eligible to participate, users are required to have a computer that can run the blockchain program. 
  • These people are known as “miners”.
    Miners compete with their computers to solve a math problem presented by the crypto system. 
  • The first miner to solve this problem creates a new block.
    Information is reviewed and verified as correct then added to the block. 
  • The block is added to the blockchain and this updated copy is distributed to other miners.

This process earns miners a reward in transaction fees paid by each user for their transactions and sometimes brand new, virgin coins.

Miners often purchase very expensive, specially designed computers to increase their chances of solving the math problem first and pay massive electricity bills to power their computers.

With over 1,500 cryptocurrencies and many more being created each month, many new interesting ways of maintaining the blockchain are regularly being explored and discovered.

Also, Bitcoin mining is the process by which transactions are verified and added to the public ledger, known as the block chain, and also the means through which new bitcoin are released.

The mining process involves compiling recent transactions into blocks and trying to solve a computationally difficult puzzle.

Bitcoin Mining:

What is 'Bitcoin Mining' Bitcoin mining is the process by which transactions are verified and added to the public ledger, known as the block chain, and also the means through which new bitcoin are released.

Anyone with access to the internet and suitable hardware can participate in mining.

The mining process involves compiling recent transactions into blocks and trying to solve a computationally difficult puzzle.

The participant who first solves the puzzle gets to place the next block on the block chain and claim the rewards.

The rewards, which gives incentive through mining, are both the transaction fees associated with the transactions compiled in the block as well as newly released bitcoin.

(Related: How Does Bitcoin Mining Work?)

BREAKING DOWN 'Bitcoin Mining':

The amount of bitcoin value released with each mined block is called the block reward.

Satoshi Nakamoto, Bitcoin’s creator, set the block reward schedule when he created Bitcoin.

It is one of Bitcoin’s central rules and cannot be changed without agreement between the entire Bitcoin network.

The block reward started at 50 BTC in block #1 and halves every 210,000 blocks.

This means every block up until block #210,000 rewards 50 BTC, while block 210,001 rewards 25.

Since blocks are mined on average every 10 minutes, 144 blocks are mined per day on average.

At 144 blocks per day, 210,000 blocks take on average four years to mine.

This diminishing block reward will result in a total release of bitcoin that approaches 21 million.

How hard are the puzzles involved in mining?

Well, that depends on how much effort is being put into mining across the network.

The difficulty of the mining can be adjusted, and is adjusted by the protocol every 2016 blocks, or roughly every 2 weeks.

The difficulty adjusts itself with the aim of keeping the rate of block discovery constant.

Thus if more computational power is employed in mining, then the difficulty will adjust upwards to make mining harder.

And if computational power is taken off of the network, the opposite happens. The difficulty adjusts downward to make mining easier.

In addition to being the means of generating new bitcoin, bitcoin mining creates the blockchain that verifies bitcoin transactions.

The block reward is gleaned by placing a new block on the blockchain, which acts as an advancing public ledger of verified transaction.

This is an essential function for bitcoin's operation as it enables the currency to be safely and predictably created without the centralized regulation in the form of a bank or federal government.

Blocks must to be a validated by a proof-of-work (Bitcoin uses Hashcash), which can only be obtained by expending a great deal of processing power.

Once a block is obtained a message is broadcast to the mining network and verified by all recipients.

In the earliest days of Bitcoin, mining was done with CPUs from normal desktop computers.

Graphics cards, or graphics processing units (GPUs), are more effective at mining than CPUs and as Bitcoin gained popularity, GPUs became dominant.

Eventually, hardware known as an ASIC, which stands for Application-Specific Integrated Circuit, was designed specifically for mining bitcoin.

The first ones were released in 2013 and have been improved upon since, with more efficient designs coming to market.

Mining is competitive and today can only be done profitably with the latest ASICs.

When using CPUs, GPUs, or even the older ASICs, the cost of energy consumption is greater than the revenue generated.

Bitcoin Mining in the beginning:

Bitcoins were launched back in 2009.

And although they didn’t quite gain ground back then, they’ve surely compensated for it in recent years.

These days, bitcoins are the most-demanded cryptocurrency in the digital space.

It is possible for people to purchase then trade them off, and it is also possible to mine these provided that specialized software and hardware are invested in.

There was a time when you could only mine bitcoins via your CPU but man’s yearning for more bitcoins for less work and heightening the security aspect led to the creation of new systems, new bitcoin mining hardware, that can deliver a job well done and operate 24/7.

Back when mining was done via CPU, it can take years before you earn a single cryptocoin. In some cases, you might not even earn a return for your efforts.

What followed was the GPU era for cryptocurrencies.

Given that CPUs weren’t exactly doing a great job in helping people mine bitcoins, graphics cards rose to fame especially when found that they are more efficient bitcoin mining hardware.

Aside from their ability to mine cryptocoins faster, GPUs also relied on less power, which means reduced electrical expenses for the user.

And then you have the FPGAs.

These are dedicated bitcoin mining hardware.

Compared to their predecessors, the GPUs, these didn’t speed up the mining process entirely but they compensated for it through ease of use not to mention boosted efficiency.

The thing about mining hardware is that the more efficient it functions, the more value the mined coins carried as costs are offset or outweighed by potential gains.

What is ASIC is bitcoin mining hardware:

It is with these dedicated bitcoin mining hardware that miners were able to operate at a significant profit level. It is because of these that an industry for cryptocurrencies came to life. Currently, the cryptocurrency market is at an era known as ASIC standing for Application-Specific Integrated Circuit. Simply put, an ASIC is bitcoin mining hardware in the form of a computer chip designed to serve a single purpose – mining coins.

Although you can’t repurpose these chips to accommodate other tasks, the benefit is in its enhanced mining speed and ultra-low power requirement. Case in point, these chips are the most efficient bitcoin mining hardware available today making them worth the expense. Right now, bitcoin experts haven’t found any other hardware that can surpass ASICs.

ASICs are known for their high hashing power. In the bitcoin world, there are transactions made on the bitcoin trading floor. These transactions are recorded and are referred to as blocks. Just like any other puzzle, a miner must overcome these blocks to get rewards – bitcoins. To overcome these blocks, you need your bitcoin mining hardware to perform quick numerical calculations – the hash. You have a target, a 256-bit figure and your hash should be lower than this to generate bitcoins.

So there you have it. If you are interested in mining bitcoins, invest in a highly-reliable and ultra-efficient ASIC. There are different types to choose from, each with its pros, cons, and price point. Multiple reviews are accessible on the Web and it would also be a good idea to check forums and communities for more information on the best bitcoin mining hardware given your expertise and budget.

Remember that efficiency is necessary as reducing your operational costs will increase your overall earnings. The less you spend on power, the more profitable your venture will be.