PostgreSQL fe_sendauth: no password supplied
psql is using a local socket connection, rails is using localhost over TCP/IP. Local is trusted, localhost requires a password (using md5). You could setup a pgpass file for your rails user: http://www.postgresql.org/docs/current/static/libpq-pgpass.html
In C you can do it like this, I don't even know what Rails is
conninfo = "hostaddr = 127.0.0.1 dbname = bitcoin user = alan password = mypass";conn = PQconnectdb(conninfo);I had exactly the same error message.