Welcome to the first article on Bitcoin Research Papers or, as we will call them here, BitPapers. As you may recall, Gavin Andresen recently resigned from the Lead Developer post, stating that: “Today, I find it harder and harder to keep up with all of…
“Today, I find it harder and harder to keep up with all of the great Computer Science or Economics papers related to bitcoin and other crypto-currencies; in just the last week Mr. Google told me about 30 new papers I might be interested in reading.”
Many of these papers, unfortunately, go unreported, despite some very interesting findings, because they are not a full article newsworthy. These series on Bitcoin Research Papers aims to fill that gap and bring to you those interesting findings.
Researchers at the National University of Ireland have calculated the cost of Bitcoin mining and, after a historical review, concluded that mining bitcoins is rarely profitable at the time the bitcoins are mined.
Unfortunately, however, although the paper is written in June 2014, the researchers do not analyse ASICs, as, for some reasons, they think ASICs are not yet available. They do nonetheless hypothesize that ASICs could be profitable, but the gap would soon be closing.
Much more interestingly, they estimate the total power consumption of the Bitcoin Network through a simple calculation of the total estimated hash rate combined with the known efficiency of each hardware type, including ASICs. Their conservative estimate for the total Bitcoin Network energy consumption is 3GW, which is comparable to the total Irish national energy consumption.
Considering that for the most efficient hardware, i.e. ASICs, the total energy consumption is 0.1 GW and for the least efficient, i.e. CPUs, it is 10 GW, perhaps 3GW is not that conservative of an estimate as it is unlikely anyone is mining with CPU or even GPU currently. Nonetheless, it illustrates just how big the Bitcoin Network is which means that not only would someone need to buy all the hardware which costs billions, but would also need to consume all the energy which costs billion, to carry out an external 51% attack.
A researcher at MIT has analyzed tweets about bitcoins and its relationship to bitcoins’ price. Unsurprisingly, a higher ratio of negative tweets to positive tweets indicates that the Bitcoin price is likely to go down. A higher ratio of positive tweets to negative tweets indicates the price will go up. When there is a balance between negative and positive tweets then, we are likely to have high volume, probably because bears and bulls are fighting with each other over where the price should be.
Unfortunately, it is not possible to ascertain whether these twitter emotions cause the price movements, whether the price movements cause the twitter emotions or as is probably more likely, whether a third factor, such as news of a collapse of a Bitcoin business, causes both. Traders however might want to experiment with analysis of twitter emotions and their relationship to price to perhaps gain an advantage over other traders.
An article in the International Journal of Economics and Law examines the validity of cryptocurrencies with a focus on bitcoin. The author helpfully reminds us of Aristotle’s first description of money as a: “common value measure of all tradable goods and services, making them commensurable, i.e., capable of being matched and equated.” The author then proceeds to name the characteristics of money as divisible, durable, easily portable, limited in supply and generally acceptable. A further well know and recognized characteristic is hard to counterfeit.
Bitcoin and many other cryptocurrencies, of course, meet all of these criteria, except for generally acceptable which is a subjective enquiry. In some regards, it does so better than any other form of money. It is impossible to counterfeit, it is highly divisible and it is more easily portable than any other form of money we have today. Against fiat, it has a further advantage as it is actually limited in supply.
More interestingly, the author argues that a new field of study has been born by the “real digital financial revolution” started in 2009. The author calls this new field e-finance. Having seen a high interest by many scholars in studying the financial characteristics of mainly bitcoin, but also other cryptocurrencies, the writer agrees that these articles differ substantially to the point where they can be considered to be a field of its own. Thus, e-financials has been born.
Finally, researchers from Trend Micro conclude that .bit addresses, the top level domain name used by Namecoin, surprisingly are not that likely to be useful to criminals to host their malware and botnets because these domains are managed by volunteers, which may mean that the server is not always active.
While researchers from Princeton University and Microsoft Research found in a study that, contrary to established knowledge, humans can actually memorise a random 56 bit cryptographic secret. You just have to write it down on average 36 times.
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Last modified: January 10, 2020 2:45 PM UTC