This Page Sort of Left Blank

For this post, I wanted to follow-up Sourcing Bitcoin, and investigate the question 'How do you do proper accounting using bitcoin?'. Unfortunately I came down with a bad cold and the accounting concepts were too much for my poor brain to handle. I'll close with an appropriate image.

'If you want to use Cointelegraph.com artwork on your site...'

Sourcing Bitcoin

Let's go back a few weeks to Receiving Bitcoins, where

I located a couple of working faucets, opened their pages on my second laptop, gave both the same wallet address, and spent a few days entering captchas.

While I was doing that, and before I was done, I noted that someone had sent me some bitcoin.

'You just received 0.00048 BTC (worth €0.18 EUR) from an external bitcoin account.' [...] I had no idea where that money came from.

Is there any way to determine the source? The message linked to my Coinbase wallet, which linked to Blockr.io under Advanced Details. What is Blockr.io?

In another previous post, 'Bitcoin Buy Online Books' (November 2015), I procured the book 'Mastering Bitcoin' by Andreas Antonopoulos (O’Reilly Media, 2014). This turns out to be a good resource for understanding the mechanics of bitcoin transactions. Chapter 2, 'How Bitcoin Works; Transactions, Blocks, Mining, and the Blockchain' (p.15) calls Blockr.io a 'blockchain explorer':-

Popular blockchain explorers include:
* blockchain.info
* blockexplorer.com
* insight.bitpay.com
* blockr.io
Each of these has a search function that can take an address, transaction hash or block number and find the equivalent data on the bitcoin network and blockchain.

The Blockr.io page includes a list of transactions, where I spotted the address I had given to the faucets. This led to another page,

btc.blockr.io/address/info/1BU6zAqUFdR2gsNNx2czro4zGD7jcznLCV

which reported *three* transactions against the address. What was the third? Two faucet transactions plus a mystery transaction gives three transactions, but as I mentioned in 'Receiving Bitcoins',

I never received anything from the second faucet, the one requiring the minimum, which had told me 'Expect your payment in next 24 hours'.

The third amount was about 6% smaller than the final amount I had noted for that second faucet, but it was the right ballpark. I suppose it was so small that Coinbase didn't think it was worth sending me an email about it.

On none of the three transactions was there any hint of the source. How do you do proper accounting using bitcoin?

A Helpful Table

While I was conducting the faucet exercise described in my previous post, Receiving Bitcoins, I realized that I was having some trouble converting between bitcoins and satoshis in my head. I'm usually fairly adept at mental calculation -- although it's an ability that weakens with age -- but calculating the rate between the two basic bitcoin units and a currency left my thought processes swimming.

To fight this problem, I constructed the following conversion table. It shows the equivalence between bitcoins and satoshis, and uses a sample exchange rate of 500 currency units to a bitcoin to estimate a value (the exchange rate as I write this is about $370 to a bitcoin).

Bitcoin	Fiat (e.g. $/€)	Satoshi	NB!
1.0	e.g. 500.00	100,000,000	one bitcoin (BTC)
0.001	0.50	100,000	milli-bitcoin (mBTC)
0.00011	0.055	11000	3 x '000'
0.000 001	0.00 05	100	micro-bitcoin (bit?)
0.000 000 01	0.00 00 05	1	one satoshi

The third row was my 'Aha!' moment. When I realized that 0.00011 bitcoin is the same as 11000 satoshi. I could work out the rest mentally. Call it the rule of three zeroes?

Receiving Bitcoins

A few months after starting this blog, I developed a personal method for Buying Bitcoins (August 2015). That let me investigate Buying Stuff with Bitcoin (September 2015), which led me to conclude It's for Speculating, Not Buying Stuff (October 2015).

There was still one piece of the bitcoin puzzle that was missing : receiving bitcoins from someone else. How could I do that without going through the rigmarole of selling something? Then I remembered the concept of Bitcoin Faucet:-

Bitcoin faucets are sites to earn some bitcoins for free. They usually needs address entry and captcha filling. You can revisit faucets every given time to get more. (en.bitcoin.it/wiki)

I located a couple of working faucets, opened their pages on my second laptop, gave both the same wallet address, and spent a few days entering captchas. Both faucets required waiting an hour before repeating the action, and since the second one required accumulating a minimum amount, I continued to action both until I reached that minimum. While I was doing that I received a message from my wallet (Coinbase.com) saying,

You just received 0.00048 BTC (worth €0.18 EUR) from an external bitcoin account.

I had no idea where that money came from. Getting back to the faucets, I reached the minimum amount on the second faucet and requested from both that the funds be sent. A few days later I received another message from my wallet saying,

You just received 0.00032 BTC (worth €0.12 EUR) from an external bitcoin account.

That was the amount I had accumulated on the first faucet. I never received anything from the second faucet, the one requiring the minimum, which had told me 'Expect your payment in next 24 hours'.

The faucet exercise led me to investigate several other aspects of bitcoin. I'll save those topics for future posts.

Bitcoin in the News : 2015-12

Ring out the old and ring in the new. After catching up through Bitcoin in the News - Oct/Nov 2015, I'm going to devote the first post of each new month to a recap of news from the previous month. December 2015 saw a couple of small stories that attracted more attention than the others. The first was positive.

• SEC Approves Plan to Issue Stock Via Bitcoin's Blockchain (wired.com)
• Bitcoin tech approved as a way to issue shares (engadget.com)

The second was negative.

• Over 10,000 people were duped by Bitcoin mining startup, feds say (arstechnica.com) • 'SEC: Josh Garza and GAW Miners "robbed one investor to pay another".'
• Bitcoin scam charges made against companies in US (bbc.com)

December is the month when journalists look back at the major stories of the waning year.

• The Top 10 Global Bitcoin Regulatory Developments of 2015 (coindesk.com)
• 11 Bitcoin Startups That Went Bust in 2015 (coindesk.com)
• Should You Invest In Bitcoin? 10 Arguments Against As Of December 2015 (forbes.com) • 'second article in a three-part series on whether or not Bitcoin makes a good investment'

It's also the month when they look forward to imagine what the coming year will bring.

• Bitcoin price forecasts: Supply and predictions (businessinsider.com)
• Record highs predicted for bitcoin in 2016 as new supply halves (indiatimes.com)
• 5 Bitcoin and Blockchain Startups to Watch in 2016 (coindesk.com)

These next links aren't really 'news', but it's good to know that the long-running Popular Science thinks the subject is important enough for a feature section.

• Is Bitcoin Really The Future Of Money? (popsci.com)
• Bitcoin: What It Is And How It Works (popsci.com)
• More++

That's it for 2015! Next stop: 2016.