A virtual currency that's made real millionaires

Bitcoin? That’s like Monopoly money for geeks, isn’t it?
Nope.
PayPal for drug dealers?
Careful.
Linden Dollars?
Closer.
Go on, then tell us.
It’s an open source peer-to-peer electronic money system. Or crypto-currency, if you prefer. It was introduced in 2009 by the mysterious ‘Satoshi Nakamoto’.
I don’t prefer. Crypto-currency?
It uses cryptography to make sure transactions are secure and to keep a record of the number of Bitcoins in circulation.
Go on then, explain how it works.
I was hoping you wouldn’t ask.
Ha.
Whenever a Bitcoin transaction occurs, a digitally signed payment message is broadcast to a decentralised network of computers. These computers then solve ‘cryptographic puzzles’ to verify the trans-
action and update the record of Bitcoins in circulation, known as the blockchain. This is called ‘mining’ because the owners of the computers, miners, are rewarded with Bitcoins for using computational power.
Business Insider described it like this: ‘Miners assemble “blocks” consisting of Bitcoin transactions, a hash record of the prior transaction block in the blockchain and an extra randomly assigned number. The miner then repeatedly hashes the block, making a small change to the extra number [each time], until the hash number satisfies a rare criterion.’

It’s thanks to the blockchain that once a Bitcoin is ‘spent’ its owner no longer controls it. You can’t spend the same one twice.

That makes sense. But to have value as a currency, there must also be a limit on the number of Bitcoins in circulation.

There is. As the number grows, the cryptographic puzzles required to mine them become more difficult, and thus require more computational power. Rewards for solving them are halved at regular intervals. And the whole system is designed to create a maximum of 21 million Bitcoins, at which point production will stop.

So the recent growth in popularity must have made mining more difficult?

Yep. According to Business Insider, the number of hashes being processed, measured in gigahashes per second, has grown exponentially since the summer of 2013. It grew 275-fold between January and the start of December, and tenfold between September and December alone. So more and more computing power is needed to mine Bitcoins, for less and less reward.

The guys who started mining in 2009 must be pleased with themselves.

Yes, perhaps with the exception of James Howells, who mistakenly threw out the hard drive that stored his Bitcoin wallet and didn’t realise his mistake for several months. There are £4m worth of Bitcoins in a landfill in Newport, Wales - at least, according to Howells’ account.

Ouch. Isn’tthere a better way to store Bitcoins than on your Mac’s hard disk?

There are other ways, but whether they’re better is moot. Apps for mobile devices can act as wallets, and you could argue that you’re less likely to throw out your smartphone than a hard drive from a deceased laptop. But phones get stolen, of course. There are also paper wallets, which have QR codes printed on them. When you want to enter a transaction, you scan the QR code with a mobile device and the wallet is updated.

Paper money, huh? Revolutionary.

Indeed.
It sounds like a minefield.
It is, and governments and economists are still trying to figure out how to deal with it. On the one hand, transaction fees are a fraction of those charged by traditional payment processors, and there are no big banks involved. On the other, Bitcoin has become notorious because it’s used on what the newspapers love to call the Dark Net. Most infamously, the FBI seized 26,000 Bitcoins when it shut down the drugs marketplace Silk Road.

In December, This Is Money reported: ‘There are concerns that the anonymity of Bitcoin will attract international money launderers, drug barons and other criminal users.’

Not so different from big banks, then. Except that it’s anonymous?

Not quite. It’s hard to associate transactions with real-life identities, but not impossible. The Washington Post reported that ‘sophisticated analysis of past Bitcoin transactions could reveal patterns that unmask users.’ It’s also likely that Bitcoin intermediaries will eventually have to comply with banking regulations in their territory, and so will have to collect customers’ personal data.
 

Any other pitfalls?

There’s no central bank, so no lender of last resort. Bitcoin isn’t legal tender, so transactions are informal agreements between parties, and only a few retailers accept it. The rapid growth in value -now north of $1,000 per Bitcoin - has led many to believe it’s a bubble. Botnets have hijacked users’ PCs for illicit mining. And at the start of December, China banned its banks from handling Bitcoin, causing a dip in the currency’s value.

Economists are split on Bitcoin’s merit. One, Paul Krugman, wrote in the New York Times that a successful monetary system incentivises transactions, but with Bitcoin ‘there has been an incentive to hoard rather than spend’.

Unloved and misunderstood, WinRT bows out

Microsoft is planning to abandon Windows RT, the cut-down version of its operating system that was used for the flopped Surface RT tablet (below), according to interpretations of a remark by a senior executive.
Speaking at a seminar, Microsoft's executive VP of devices and studios, Julie Larson-Green, said: ‘We have the Windows Phone OS, we have Windows RT and we have full Windows. We’re not going tohave three.’
Windows RT, designed to run on ARM chips, has not proved popular with Microsoft's hardware partners. In fact, none of them have licensed it. RT is used only by Microsoft and its subsidiary-to-be, Nokia. The company insists, though, that it’s fully committed to supporting ARM.

Microsoft had to write down $900m at the end of the Junequarter to account for unsold Surface RT tablets. Why the RT operating system variant in the first place? Larson-Green explained the thinking behind it. ‘The goal was to deliver two kinds of experiences into the market: the full power of your Windows PC [on the Surface Pro] and the simplicity of a tablet experience that can also be productive... I think we didn't explain that super-well.’

Perhaps -or may be users don’t see a necessary difference between a ‘full power’ tablet and a ‘simple’ one, as any iPad user could have told Microsoft. While Apple’s OS X and iOS provide a dual operating system model for Larson-Green and her colleagues to follow, it remains to be seen exactly where Redmond might draw the line between Windows offerings.

$840m win is not about the price tag, says Apple

Retrial increases previously reduced damages award against Samsung over iPhone design rip-off

Apple and Samsung faced each other in a US court in November in the latest instalment of a patent dispute in which Apple was awarded $1.05bn (about £642m) in August 2012.

That award was cut to $550m early in 2013 when Judge Lucy Koh, who had presided over the original trial, ruled that the jury had been wrong in its assessment of part of the damages award. She ordered a retrial to determine how much of the remaining $455m should be awarded.

Apple claimed it should get a further $380m, while Samsung reckoned $52m was appropriate.
The jury settled on $290m, bringing the total awarded to Apple in the case to $840m.

In a statement to tech news site AllThingsD, Apple said: ‘For [us], this case has always been about more than patents and money. It has been about innovation and the hard work that goes into inventing products that people love. While it’s impossible to put a price tag on those values, we are grateful to the jury for showing Samsung that copying has a cost.’

Jessie J had released no comment on the matter at the time of going to press.

The original trial focused on claims from both companies that each had infringed the other’s patents. The jury found Samsung had wilfully infringed Apple patents for software and hardware design, and was guilty of diluting the ‘trade dress’ of the iPhone by making its smartphones look and feel so much like Apple’s device that customers could be confused.

It also confirmed that Apple had infringed none of Samsung’s patents.

At stake was the look and feel of both the iPhone and iOS. The software patents in the case related to the user interface and the way users perform routine functions. These included the ‘bounce-back’ feature, also known as rubber-banding, which responds to the touchscreen user trying to scroll content past its end point by offering increasing resistance until the user lets go, at which point the content rebounds into place.

Samsung was also found to have infringed some of Apple’s patents relating to the design of the iPhone’s hardware, although the jury drew the line at Apple’s attempts to enforce a patent relating to the shape of the iPad, which some reports characterised as trying to claim to have invented the rounded rectangle.

Both sides can still appeal the judge’s ruling, but by early December neither had announced an intention to do so.

Apple hasn’t always been on the right side of patent infringement rulings in recent months. One dispute, with a company called VirnetX, is affecting the performance of FaceTime. At issue was the use of peer-to-peer technology for messaging applications. Accuit:.iiy t’.j Ars TeVnica. in a story sourced from a VirnetX investor, Apple originally routed almost all FaceTime calls directly between users. In other cases it used a relay server. Placing calls without a relay server was found to infringe routing all calls tnrough a relay, and this is why the maximum resolution currently transmitted is much lower than the FaceTime HD cameras in Apple products are capable of.

VirnetX claims Apple is spending $2.4m a month on this kludge - but it has a vested interest in inflating that figure, because the more it costs to use relay servers, the higher the royalty it can charge for the alternative method.