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What is a 51% Attack?

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51% attack

The bitcoin network is one of the most secure financial payment networks in the world. As a decentralized network, it lacks a focal point of failure and since its inception in 2009 it has never been successfully hacked, despite various attempts.

However, there exists the danger of a so-called 51% attack against the bitcoin network, which would cause massive internal disruption to bitcoin to the extent where the currency could become unusable.

A 51% attack refers to one bitcoin mining operation taking control of more than half of the bitcoin network’s hashrate.

Until very recently, most bitcoin holders believed the chances of a 51% attack ever happening to be very slim. The notion that a single entity would one day control more than half the computing power used to mine bitcoin was seen as an almost impossible task. For seasoned bitcoin users, however, the threat of a 51% attack has been an ongoing conversation in the crypto community, especially in light of large mining operations emerging in China, which would eventually collude to take over the network.

How would a 51% attack work?

For people who aren’t regular bitcoin users, the existence of such a threat is probably new. To get a better understanding of the danger this threat poses to bitcoin, here is a simple explanation on how it works.

Presently, they are close to 13 million bitcoins in existence and every 10 minutes 12.5 new coins are added through a process called mining. To mine bitcoins you need to deploy specialised bitcoin mining hardware that are specifically designed for the task. These computers will join other machines, which run the same program, in attempting to solve a complex mathematical algorithm to process transactions and, thereby, mine new blocks in the blockchain. For the new blocks mined, the miners are then rewarded in the form of new bitcoins. Currently, most miners are in mining pools with the aim of uncovering more blocks regularly and sharing the rewards.

Once a single mining operation would take control of more than half of the network’s hashrate it would have the power to reverse transactions and, therefore, engage in double spending. Once double spending occurs in the bitcoin network, no more trust will be left in it and it would most likley become unuseable as a financial payments network.

With the bitcoin network being open and accessible to anyone, nothing is really stopping a company from making a massive investment in mining hardware capable of taking over the entire bitcoin network. However, one could argue if this would be in the best interest for such a company. Even if someone were able to initiate a successful 51% attack, complete control of bitcoin would still be out of their grasp. While it would present a significant threat, controlling more than half of the hashrate is not enough to shut down bitcoin.

They may be able to reverse transactions, but only for those sent by wallets under their control. If two different users transact between each other, but neither is part of the entity holding more than half of the hashrate, their transfers cannot be reversed. However, they would have to put up with no network confirmations for some time. The perpetrators of such an attack would not remain in control for that long, making the entire undertaking quite inefficient to carry out.

In some ways, this seems as an important crossroad for bitcoin as an issue that has often been discussed in a theoretical sense is now within the realms of possibility. With mining pools in China holding large percentages of network hashrate, collusion can be a possibility.

It remains to be seen whether a 51% attack will ever happen but given the amount of vested interest in the bitcoin network staying decentralised, I would be surprised to see such as an attack taking place.

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Bitcoin Wallet Luno Adds SegWit Support to Lower Transaction Fees

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Luno Adds SegWit Support

Luno, one of the most popular bitcoin wallets in Africa, has announced full SegWit integration for bitcoin send and receive transactions. Previously, Luno customers could only receive BTC through a legacy wallet address, which was not integrated with the recent Bitcoin blockchain upgrade SegWit. Only send transactions were SegWit compatible.

With the full integration of SegWit, Luno users can now enjoy cheaper and faster bitcoin transactions.

“By implementing SegWit internally, Luno has managed to reduce the send fees paid by customers by over 25% already. As customers start switching over to new SegWit addresses, this will translate into a further reduction in sending fees in the coming weeks and months,” Werner van Rooyen, head of marketing and communications at Luno stated.

Luno currently operates in South Africa, Nigeria, Malaysia, UK, and in 35 other European countries.

What is SegWit?

Segregated Witness (SegWit) was an upgrade to the Bitcoin blockchain that is intended to address Bitcoin’s scalability challenges as well as fix the issue of transaction malleability. With SegWit, signature data is separated from transaction data in order to enable more transactions to fit into each block. The signature data is kept in an extended block called the witness. As a result, bitcoin transactions become faster and transaction fees become lower.

In theory, the Bitcoin network can handle seven transactions per second. However, in reality, it is around four transactions per second. With the number of bitcoin transactions increasing as bitcoin’s popularity grows, transactions take longer as the unconfirmed transactions pool increases. Therefore, bitcoin users who can afford it have been paying higher transaction fees to incentivise miners to prioritise their transactions and, thereby, increase the speed of their transactions. At the end of 2017, this has led to the average bitcoin transaction fee spiking to over 35 dollars.

However, when SegWit addresses are used, bitcoin transactions become faster and the required resources decrease as well. Consequently, the transaction fees reduce.

How Can You Add a SegWit Wallet Address on Luno?

To add a SegWit address on the Luno wallet you have to follow these steps:

  • Open your Luno account either on the mobile app or the web app
  • Choose “wallets” from the menu
  • Click on your “BTC wallet”
  • Choose “receive bitcoin”
  • Click “add address” and follow the prompt

To receive bitcoin, use your SegWit bitcoin receive address. Legacy bitcoin addresses begin with 1 while SegWit bitcoin addresses begin with 3. Even after adding a SegWit wallet address, bitcoins sent to your previous legacy bitcoin address will still work. In addition, you can still send bitcoin from a SegWit wallet to a legacy wallet and vice versa since the transactions are still taking place on the same blockchain. But if you are sending bitcoins to and from a SegWit wallet, you can benefit from reduced fees.

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Bitmart Opens Cryptocurrency Mining Hardware Store in South Africa

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Bitmart Opens Cryptocurrency Mining Hardware Store

Bitmart, South Africa’s leading supplier of mining hardware, has opened a cryptocurrency mining hardware store in South Africa. This makes Bitmart’s retail outlet the first cryptocurrency mining store in Africa.

Products and Services Offered by Bitmart

Bitmart was founded by CEO Jacques Serfontein in 2015 to offer cryptocurrency mining hardware to South Africans. Currently, Bitmart offers GPU rigs, ASIC miners, GPU rig mining software, graphics cards, international mining rig monitor app, cryptomatic watches, hardware wallets, and motherboards. Customers can find GPU mining rigs that mine cryptocurrencies such as zcash, monero, decred, bitcoin, and litecoin.

Additionally, Bitmart provides services such as bitcoin mining farm design and deployment, mining training, antminer repair tickets, mining farm management using Genesis Hive, and shepherd services.

Through its shepherd services, Bitmart helps owners of second-hand miners to find buyers. Therefore, both sellers and buyers are assured of safe and secure transactions through Bitmart’s SSL-secured online shop.

According to MyBroadband, Bitmart is an authorised distributor of Avalon Miners, Genesis Hive, Trezor, Ledger wallets, KeepKey, and UniSat (satellite mining solutions) in Africa.

The company also supplies mining hardware to countries such as Japan, Dubai, North America, Australia, and England.

What Does Bitmart Plan for the Future?

Bitmart will be holding seminars in Johannesburg and Mbombela. The seminars will focus on bitcoin basics and advanced cryptocurrency trading. In addition, Bitmart will be introducing a satellite mining connection in partnership with Uniwisp that will allow mining rigs to mine from any place in the world. Uniwisp is an Internet service provider based in Nelspruit, South Africa.

 

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Kenya’s BitPesa Acquires Spanish Money Transfer Platform TransferZero

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BitPesa Acquires TransferZero

On February 8, 2018, BitPesa announced that it has acquired TransferZero, a Madrid-based online money transfer platform, which operates in over 200 countries using more than 50 currencies.

Why Did BitPesa Acquire TransferZero?

BitPesa, which is already operating in Africa and Europe, will be able to “set deep roots to UK and European licensing, bank accounts, and integrations” through this acquisition, according to the company’s statement on its blog.

“Europe is a hub for global remittance and payments companies. Digital currencies and decentralized technology have hit critical mass in the financial services and payments space. It is no longer a question of whether this technology will have staying power [but] which specific technology and what product iteration will launch and scale first […],” Elizabeth Rosiello, founder and CEO BitPesa said.

“BitPesa has the support of top-tier, institutional investors and a network that will help to bring TransferZero’s technology to the next level. With this support, we will be able to provide even more efficient transfers and user experience,” Luis Cambronero, former TransferZero CEO and present Managing Director, BitPesa stated.

Setting Up Infrastructure Across Europe and Africa is a Priority

“Setting up infrastructure across Europe and Africa has always been a focus of ours. […] We’ve just doubled our bank accounts, our infrastructure, and it’s licensed by the Bank of Spain as a payment institution. So we are fully compliant with PSD2 regulations […],” Rosiello said.

“This is truly a partnership where the whole is greater than the sum of the parts, allowing BitPesa to solidify our leadership in this space. By bringing our regional and technological expertise together, we will further accelerate our month-to-month growth,” Rossiello asserted.

TransferZero will neither change its name nor its headquarters. In addition, its employees will remain with Bitpesa.

This acquisition from an Africa-based bitcoin startup of a European fintech startup shows that leading African startups can make waves beyond the borders of the continent and create a positive impact on a global scale.

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