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By Hung Shu Ning, working in the People's Bank, Nanjing Branch, Department of financial instruments as business management research and development center chief of Jiangsu Province in 2010 was awarded the Labor Medal.
Originally published in the "China card" magazine, October 2011
A bit coin Overview
1 What is a bit bit-currency coins (BitCoin, BTC) is an open source, web-based, point-of anonymous e-money, the Chinese and the Satoshi (Satoshi Nakamoto) design and development in 2008, is the world's first A distributed anonymous digital currency. Currency issuance and payment of bits without a central control center, money transfer from the collective management of network nodes, the parties can hide their true identity.
Bit by ordinary people rather than money by the central bank or government-created money, electronic money, such as ordinary different Q coins, currency system is not a simple bit-payment system, but the real currency system. It is created by people, rather than from an ordinary currency exchange.
2 How to get bit money
Bit of money through an open complex algorithms. Anyone can download the software bit-currency manufacturing, but requires high computing power. As a special algorithm currency bits, with bits of money involved in the manufacture of more and more people demand for computing power is rapidly increasing. July 2010, when the bit-currency software release V0.3 version, a report declared: energy use analysis shows that the market value of the currency bit more than they need to produce energy costs. In December 2010, for an ordinary personal computers, to create a 50-bit coin about a year. 50 bits can be exchanged for money at that time about $ 15.
Another way is to get bit by mtgox.com coins and other currency trading center bit to buy other currencies. Bit currency exchange rate is determined by the market, since 2011, the rapid appreciation of currencies bits, as in June 2011, each bit has reached $ 20 coins offer more than six months ago, added a 70-fold.
3 bits of money to consumption
Businesses currently receiving bit less money, but is rapidly growing. People can, but not limited to the following bit coins used in several ways.
⑴ buy network services. Such as VoIP Internet phone service Link2VoIP and Lightbox Technologies Inc.
⑵ game prepaid. In the massively multiplayer online role-playing game A Tale in the Desert IV, Facebook's Minesweeper Minesweeper, anonymous gaming TAABL other use.
⑶ buy physical. ranked 13th on eBay bookstore Qugelmatic Books to accept bit money.
⑷ money donated to a number of institutions receiving bits. If wikimedia.org.
Second, the basic principles of money bit
1 node lookup mechanism
Bit currency using point to point the way to communicate, there is no central server, not directly to find other nodes to communicate. Currency using the following three bits mechanism to solve the initial run-time problem of how to find other nodes.
⑴ in default, the run-bit client to join a currency IRC chat channel, and join the channel can be informed of the other client's IP address and port. The name of the channel and IRC chat server name is written on bits of currency software.
⑵ some "famous" bit node is also written in currency software, to prevent the IRC chat server for some reason can not access.
⑶ currency can manually add other bits to run the client's IP address.
Once connected to a node, it sends the message will contain the address of other nodes, so the money then you can network through the bit to find other bits of their own currency nodes, and no longer need any of these three mechanisms in a the. This mechanism ensures that the network can not be bit-currency government or other agencies isolation, destruction, protect the currency system reliability bits.
2 money supply mechanism
Bit currency is created by software, this process is known as the Mining (Mining), because the money supply mechanism and the gold and silver and other precious metals money supply mechanism is similar. Mining software by addressing "the hash to find a minimum value" of the specific math problems to create a forum (Block), the current value of a new 50-bit coin forum, and to solve this problem requires strong computing power ( repeatedly run the hash algorithm). On average, about every 10 minutes throughout the network will be a new forum. To create a bit money, we should strive to become the first to create a whole network of people new forum, and this new
Forum announced to the entire network. Everyone on the network can check and see if you really solved the problem. If the first 10 minutes by others, in front of the calculation would become void, only to re-create a new forum. Therefore, the difficulty of making money with a certain bit of time into making the whole network, the average computing power of work-related. A single individual "discovery"
The possibility of a new plate is based on his wide network of computing power and computing power of a comprehensive comparison above.
Currency network in bits, computing the difficulty is adjusted automatically. In the first four years with 10 million coins were produced bits, this value is halved every four years, and ultimately, the amount of money will be bit close to 21 million, which will occur in 2140 or so, then bit money have all been dug out, then no further increase.
3 transaction payment mechanism
Bit-currency transactions on their own machines need to open an account, the account is actually a pair of public and private keys, public key algorithms via the transaction.
For example, if A give B to a sum of money, A put the money plus the number of B's public key (ie, payment address), with their own private key signature. And B to see this sign, you can understand, is indeed shown with A bit transferred his money.
A time in initiating the transaction, the name must be signed to a bit-currency trading a single broadcast network, each node will eventually know it. B continued to receive from the network confirmation of others, when he received more than enough to confirm information, we can indeed confirm A single issue of this transaction. After that, B can be free to use this money a bit.
When B of A bit of his money transferred to the sub-C, also broadcast to enough people, let them be secured. Each Guarantor B has only convinced enough money to pay for the bit when it is done to confirm. In essence, the network did not record currency bits each bit coin belongs to whom, it is recorded in a list that contains the bit to play the current currency from the birth of every transaction. Any attempt to identify a single transaction, the bit-currency network will be confirmed by checking the list to turn out so many accounts, there is no bit-currency.
Third, the main features of currency bits
1 no central control
Different from the traditional virtual currency, virtual currency is not bit-currency issuer's control, but by all the nodes in the network bits collective money management.
Traditional institutions such as virtual currency Tencent Q coins issued by the national central banks and government policies and the virtual currency management regulations. But bit different currency, without any government money and institutions can control the distribution and use of bits. Bit-currency issuance process controlled only by the algorithm, until all bits have changed algorithm currency network node, or a predetermined bit pattern coins will continue to release.
By means of this technique, bit of money to avoid adverse decisions by the central bank affected, due to the complete elimination of the currency crisis caused by human factors.
2 completely anonymous
Bit by parties to the transaction currency freely change the payment address to hide their true identity. Rely heavily on the traditional account of the virtual currency system, parties to the transaction must collect personal information to complete the transaction, and bit by currency no longer rely on public key technology accounts system, the two companies are free to generate their own private key, and will work with its corresponding public Key told the payer can receive the funds. Next time use, you can re-generate a pair of public and private transactions. This practice of one-time pad can be done
To a completely anonymous transaction, can not be tracked.
3 low transaction costs
Bit-currency trading is free, very low transaction costs, traders just take a little computer CPU time, storage space and network bandwidth only.
Bit no middleman currency transactions, can not by any financial institution on the Internet easily transfer. And no third party can control or stop bits currency transactions.
Currency of anonymity because bits, no government currency transactions to understand bits, which bits of currency trading can not pay taxes.
4 is not inflation
Algorithm due to the restrictions, the total money supply of bits is controlled, never more than 21 million, so one can not arbitrarily create more bits currency. This restriction avoids the central bank's bad policy and inflation caused by human interference.
5 vulnerability
Bits stored in the computer currency only, with no corresponding entity. Once the computer's hard drive stores bits damaged coins without a backup, computer theft or currency of the U-disk storage bit lost, will never be able to find those bits of money.
Fourth, the currency of the currency attribute bits
Currency is a new bit of money, not only because some people accept it, in essence, the traditional bit-currency and the currency, especially gold and silver currency has exactly the same characteristics.
According to economic theory, money has five functions: measure of value, means of circulation, means of payment, storage means and the world currency. The coins also have a bit these five functions.
1 measure of value: The value of the bits in the currency it is by consuming large amount of computing power and electricity produced, consumed in the mining process into a bit of work all the coins value.
(2) means of circulation: There are already hundreds of websites to accept bits coins, currency is becoming a bit of general commodity exchange vehicle.
3 storage means: storage of the currency means that the functions of money out of circulation as a representative of the general social wealth is stored up functions. Currency as a means to self-regulate the storage amount of money in circulation. There is no doubt that bit money with this function.
4 means of payment: Due to low bit-currency payment convenience features, at present, in the programmer groups using currency exchange services has become a bit fashionable. With the growing popularity of bit money, goods and services between the ordinary transactions will increasingly use bit-currency.
5 World Currency: RMB bit exist on the Internet, its use has no borders, will not be any state and government control, is very suitable as a means of payment in international trade.
Fifth, the challenges of the financial system
There is a bit of money existing monetary and financial system subversion. Bit-currency electronic money system than other more ambitious, the founder of bits you want to create a currency is completely independent of the current monetary system of virtual currency system.
Currency in the monetary sense bit exactly the same as monetary gold, silver and other precious metals, but also with precious metals do not have the advantages: First, the bit combination of coins can be arbitrarily divided, two-bit coin is the cost of carry and storage is almost zero, three coins are bit difficult to forge, counterfeit money is almost impossible, the four are less prone to loss.
From the financial point of view, the meaning of money is absolutely extraordinary bit.
First, the bit-currency fixed amount of base money, can not happen artificial inflation. In fact money will remain tight bit, that bit will be long-term appreciation of the currency.
Second, there is no middle bit currency trading institutions to manage, and their anonymity can hardly be traced to the end user, so the currency is likely to be used for bit illegal transactions, such as reselling pirated publications, drugs, and arms.
Third, the bit-currency transactions almost in real time and without charge, from banks and other intermediaries can not get the middle income.
Fourth, as a possible challenge to the sovereignty of monetary currency, it gives people a greater variety of choice in the national government in order to stimulate the economy and junk currency, people can choose to sell the currency sovereign monetary deflation, which from the market strong feedback can be quickly communicated to the central bank, so to re-examine its monetary policy.
Six recommendations
1 Governments and central banks should face the existence of bit money, take the initiative, the use of the country's massive computing power, suppression of private mining power, the vast majority of money concentrated in the hands of the state bits.
(2) of setting up a bit coin banks, the implementation of the bit in the middle of currency trading institutions, in order to eliminate the anonymity that it can be regulated.
3 bits of currency-based international joint issue credit currency, thus contributing to the establishment of non-sovereign monetary system. With this new international settlement currency to challenge the U.S. hegemony, the international financial system more harmonious and stable.
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