The Daily Decrypt is a daily weekday video broadcast covering a wide variety of cryptocurrency and blockchain technology topics and news stories. At CORE Media we’ve found the broadcast to be an invaluable and entertaining resource in cryptocurrency news and provide a weekly summary of The Daily Decrypt episodes. Welcome to the Weekly Decrypt!
In any cryptocurrency, the control of funds at a given address or account is held entirely by whoever has the private keys for that address or account. In most cryptocurrencies, the private keys are held within a wallet file of some sort that is stored on a computer, mobile phone, tablet or on someone else’s device if using a web wallet.
Given the importance of the private key in cryptocurrency, it would behoove anyone who owns cryptocurrency to know how to make a backup of their private keys.
Depending on the wallet being used, a backup may take form as a string of randomly-generated words (seed phrase), a .dat/.json/.bin file or as the alphanumeric private key written or copied somewhere.
In Amanda’s mobile DASH wallet, for example, she is notified that she has not yet made a backup upon launching her wallet. A backup is made by selecting a passphrase with which a wallet file is encrypted and exported as a transferable file.
While a seed phrase or a private key may be written down on paper and stored that way, a private key stored within a preferably encrypted digital file can be stored on a thumb drive or other standard external hard drive.
The most important thing, however, is that the backup is stored separately from the original. After all, the point of having a backup is to have a copy of your private keys if the the original is lost or otherwise compromised.
It’s not uncommon to hear someone proclaim that Bitcoin is anonymous. People say this generally because funds are stored in and spent from alphanumeric addresses which are not affiliated with the owner’s legal identity. However, with the right amount of time, tools and dedication, it is becoming increasingly possible to associate Bitcoin addresses and transactions with legal identities. Companies claiming to have the ability to deanonymize Bitcoin transactions for law enforcement agencies are receiving a lot of funding.
For those who do not enjoy the idea of having their finances publicly available and deanonymized on the blockchain for all to see forever, a Bitcoin mixing service or a handful of certain altcoins may be of interest.
Services that mix your Bitcoins with those of others and return them to you after deducting a small fee are quite effective in mitigating the likelihood of someone associating your Bitcoin activity with your identity. This is inherently a risky endeavor due to having to send your Bitcoins to a centralized service, however, a majority of people are reporting successful and positive experiences with several Bitcoin mixing services. One such service can be found at BitMixer.io.
You use this service by first entering the address to which you’d like your mixed coins returned. You then download and peruse a letter of guarantee cryptographically signed by BitMixer’s administrators which will contain the Bitcoin address to which you should send your Bitcoins to be mixed and the address to which your mixed coins will be sent. You then select the fee you’d like to pay for the service (a larger fee apparently achieves a more anonymous mixing) and then send your Bitcoins to the address provided. It took about 30 minutes for the Bitcoins Amanda sent to BitMixer to be mixed and returned to the address she specified.
DASH is an altcoin which contains a similar mixing protocol usable from within its wallet called DarkSend. This protocol splits up a user’s outgoing transaction into fragments and sends them off to its masternode layer where they are mixed up with fragments of coins from other DarkSend users and then sent to the recipient specified by the sender.
Monero is another altcoin that contains several privacy features at its protocol level. Monero does not allow the balances or transaction histories associated with addresses to be viewed from a block explorer. Monero payments also have multiple potential senders and recipients. Furthermore, only the owner of a specific cryptographic key, the View Key, associated with an address can view or choose to reveal to others the complete transaction history for that address.
Between a centralized Bitcoin mixing service and these particular privacy-oriented altcoins, there should be a cryptocurrency privacy option out there to meet everyone’s needs.
Most cryptocurrencies operate via a blockchain that generates its blocks via either a Proof-of-Work (POW) protocol or a Proof-of-Stake (POS) protocol. These protocols both give various network participants an incentive to generate a record of the truth with regards to the blockchain and which addresses possess which funds and an opportunity for everyone else to approve of that truth. This process is called consensus and both POW and POS are considered consensus algorithms.
The third kind of consensus algorithm, however, is being used by the BitShares network and will be used in the Lisk network which recently raised over 5 million USD in its IPO. It is called Delegated Proof -of-Stake (DPOS) and Amanda sat down for a chat with BitShares developer Fabian Schuh to learn more about DPOS.
Most of us, especially cryptocurrency fans, spend a lot of time online. One can imagine a scenario, perhaps not too far into the future, where we become so immersed in our online activities that we begin to sense and experience these activities as a separate reality unto its own. In pondering the economic consequences of this scenario, Amanda sat down for an interview with ex-Google employee turned technology blogger Maciej Olpinski who has postulated a variety of scenarios regarding virtual reality technology and cryptocurrency.
It seems a bit of magic that someone can program a computer to mine a magic internet money while asleep and even more a bit of magic that other people, mining bosses if you will, have incentivized people who can program computers to mine magic internet money while asleep to pool their resources together such that the whole group, or pool, increases its collective profitability.
To get an inside look at what it’s like to operate a mining pool, how they are made profitable and what kinds of capital requirements are required to start one, Amanda sat down for an interview with Steve Sokolowski who, with his brother, operates a mining pool called ProHashing and an associated forum.
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