tag:blogger.com,1999:blog-63644225338277768702024-03-13T14:16:17.898-07:00ThePiachu's Bitcoin BlogA blog about Bitcoin, Ripple, Crypto 2.0 and everything related.ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.comBlogger137125tag:blogger.com,1999:blog-6364422533827776870.post-66028076471708483612018-03-15T01:00:00.000-07:002018-03-15T01:00:37.887-07:00Fifth year of /r/Bitcoin moderation in reviewContinuing the tradition, I would like to once again look at how the last year of <a href="https://www.reddit.com/r/Bitcoin/">/r/Bitcoin</a> moderation played out.<br />
<br />
Related topics:<br />
<br />
<ul>
<li><a href="https://tpbit.blogspot.ca/2016/03/on-rbitcoin-moderation-three-years-in.html">On /r/Bitcoin moderation - three years in review</a></li>
<li><a href="https://tpbit.blogspot.ca/2017/03/fourth-year-of-rbitcoin-moderation.html">Fourth year of /r/Bitcoin moderation</a></li>
</ul>
<div>
<br /></div>
<h3>
Bitcoin Cash and SegWit forks</h3>
<div>
<br /></div>
<div>
There is no denying it - the last year was largely shaped by the two most divisive forks in Bitcoin history - the <a href="https://en.wikipedia.org/wiki/Bitcoin_Cash">Bitcoin Cash</a> hard fork and the <a href="https://en.wikipedia.org/wiki/SegWit">SegWit</a> soft fork. Both were a culmination of <a href="https://tpbit.blogspot.ca/2015/06/handling-bitcoins-during-hard-fork.html">years of the scaling debate buildup</a>. While some believed only one of those forks would survive in the long term, by now it is safe to say - BTC and BCH are both here to stay and the community will be forever divided on this matter.</div>
<div>
<br /></div>
<div>
This split runs quite deep - we have BTC vs BCH, /r/Bitcoin cs /r/BTC, Bitcoin.org vs Bitcoin.com and so on and so on. <a href="https://tpbit.blogspot.ca/2016/03/on-rbitcoin-moderation-three-years-in.html">The hard stance of /r/Bitcoin on the removal of hard fork discussion</a> is partially to blame for the divide being both so serious and so hostile. Perhaps facilitating the discussions would have eased the tensions ahead of time and make the split less of a political dichotomy. Nowadays you only see the former members of the same community hating on one another and <a href="https://np.reddit.com/r/btc/comments/841ygc/today_i_graduated_from_rbitcoin_university_with/">wearing being banned from the other camp as a badge of honour</a>.</div>
<div>
<br /></div>
<div>
That is not to say, however, that the subreddit moderators are the only ones to blame. There are a number of other key actors at play here, but who you point fingers at depends on what you want to believe. So here are some possible reasons the forks did play out the way they did.</div>
<div>
<br /></div>
<h3>
Potential reasons for the split</h3>
<div>
<br /></div>
<div>
First, there is the <a href="https://bitcoinmagazine.com/articles/breaking-down-bitcoins-asicboost-scandal-solutions/">Covert Asicboost</a>. With <a href="https://news.bitcoin.com/bitcoin-hardware-manufacturer-bitmain-made-a-profit-of-up-to-4-billion-last-year/">Bitmain earning $4B in profits last year</a>, there is clearly a lot of money on the line. If you believe <a href="https://www.bitsonline.com/maxwell-asicboost-clear-present-danger/">Bitmain might've been using Covert Asicboost</a> in their miners, it would've meant they were in danger of losing a lot of revenue in the SegWit fork, meaning they had a large incentive to create the fork that would preserve their advantage. Even a marginal increase in the amount of coins they could've generated would mean earning potentially millions more.</div>
<div>
<br /></div>
<div>
Secondly, there is SegWit and Blockstream. The company <a href="https://tpbit.blogspot.ca/2015/10/liquid-when-sidechains-say-fuck-it.html">has been working on SegWit for years now</a>, and it was pretty obvious a number of their core technology relied on that functionality being part of Bitcoin. Clearly, they would stand to benefit from Bitcoin forking into SegWit rather than increasing the block size, <a href="https://tpbit.blogspot.ca/2017/10/blockstream-vs-miners-looking-at.html">or even doing both</a>. <a href="https://web.archive.org/web/20180107004140/https://blockstream.com/team/">Employing a number of core devs</a>, they also had some means of blocking other approaches to scaling. Add to that allegations of <a href="https://np.reddit.com/r/btc/comments/47zfzt/blockstream_is_now_controlled_by_the_bilderberg/">Blockstream being in the pockets of banks</a> and <a href="https://tpbit.blogspot.ca/2017/10/blockstream-vs-miners-looking-at.html">standing to benefit from full mempool</a> and you start seeing why some people are suspicious. If this side of the story was true, SegWit fork was bound to happen, and people that wanted to preserve Bitcoin that was would either have to not follow through with the fork, or make a fork of their own.</div>
<div>
<br /></div>
<div>
Thirdly, there are always people wanting to make some money opportunistically. Just like with the Ethereum Classic fork, there is <a href="https://imgur.com/a/DHexx#4I1WrPY">some non-zero value to be extracted from the shared chain history</a>. Ramp up the hype, the FUD, roll our some celebrity voices and you will inevitably end up with more money down the line than what you started with, especially if you have a lot of BTC to begin with.</div>
<div>
<br /></div>
<div>
Lastly, there are some people in every community that either want adulation, or want to be seen as the smartest, most important people doing the right thing. They are unwilling to compromise, and if they can get their way, they might just seize the opportunity. You can see them on both sides of the forks now, often talking the loudest and making the boldest statements. Claiming they are the ones <a href="https://tpbit.blogspot.ca/2015/09/death-of-satoshi.html">chosen to fulfil the vision of Satoshi</a>, that the other side is corrupt and clearly in the wrong.</div>
<div>
<br /></div>
<div>
So what has caused and aggravated the divide? Probably everything mentioned above to one extent or another. Some aspects of the forks were motivated by devs doing their honest best job to make Bitcoin better, some were probably motivated by the money to be made from either of the two solutions. The divide was then probably widened and further aggravated by people wanting to make money on it (perhaps buying up coins from people leaving one side of the fork before promoting that coin into new heights with a new wave of vocal supporters). Then seeing that neither side of the fork will clearly kill off the other, a tribalism equilibrium would be reached:</div>
<div>
<br /></div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<iframe width="320" height="266" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/rE3j_RHkqJc/0.jpg" src="https://www.youtube.com/embed/rE3j_RHkqJc?feature=player_embedded" frameborder="0" allowfullscreen></iframe></div>
<div class="separator" style="clear: both; text-align: center;">
Two sides forever fighting and talking within their group about how much they hate the other group. Sounds familiar...</div>
<div>
<br /></div>
<div>
And thus we end up where we are today - having two groups that spend a lot of resources hating on one another, demanding clear stances from everyone on which side of the fence they reside, erecting totems of what they hate about the other group and so on and so forth. This approach is clearly more successful, as pretty much nobody is talking anymore about <a href="https://bitcoingold.org/">Bitcoin Gold</a> or <a href="http://btcd.io/#/">Bitcoin Diamond</a>, while the first divide is all the rage.</div>
<div>
<br /></div>
<h3>
The rest</h3>
<div>
<br /></div>
<div>
A lot of other things surrounding the /r/Bitcoin moderation have roots in the above story. SegWit2x discussion was similar to the other forks - mostly removed. You also see periodic waves of spam activities, as well a general increase of the baseline spam activity, all surrounding the promotion of BCH and /r/btc, complaining about the censorship, or trolling the non-Bitcoin-Cash Bitcoin as being a centralised scam or the like. There have been reports of a bot spam attack as well.</div>
<div>
<br /></div>
<div>
Then you sometimes find people that are just asking to be banned:</div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-Lrg6XfGVM4I/WqoUbk7aoXI/AAAAAAAAUik/o_1rZC02nW0nmy8oitteVEjxkWdIuJqUACLcBGAs/s1600/Spam.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="745" data-original-width="1467" height="202" src="https://1.bp.blogspot.com/-Lrg6XfGVM4I/WqoUbk7aoXI/AAAAAAAAUik/o_1rZC02nW0nmy8oitteVEjxkWdIuJqUACLcBGAs/s400/Spam.png" width="400" /></a></div>
<div>
<br /></div>
<div>
I guess the only nice thing of note for this year was <a href="https://www.reddit.com/r/Bitcoin/comments/7fkqh5/its_over_9000/">the quality of memes for when Bitcoin reached 9000 USD/BTC</a>.</div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<iframe width="320" height="266" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/pWnJChGhCn8/0.jpg" src="https://www.youtube.com/embed/pWnJChGhCn8?feature=player_embedded" frameborder="0" allowfullscreen></iframe></div>
<div>
<br /></div>
<h3>
Conclusions</h3>
<div>
<br /></div>
<div>
In the last year, the Bitcoin community has permanently split itself between BTC and BCH. This divide has grown into a very divisive rivalry between members of a number of communities, including /r/Bitcoin and /r/BTC . By now it's clear the divide will never be fully healed.</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-74101137063527872322018-02-25T21:29:00.001-08:002018-02-25T21:29:59.386-08:00Rising trends in the ICO space in 2018 - observations from the Bitcoin SuperConferenceRecently, I went down to Dallas for <a href="https://www.bitcoinsuperconference.com/">The Bitcoin, Ethereum & Blockchain SuperConference</a> to represent <a href="https://icomplyico.com/">iComplyICO</a>, along with our CEO Matthew and Product Manager Qayyum. While I didn't manage to catch too many of the talks due to having to man the booth, it was nonetheless a great opportunity to see first hand a few rising trends in the ICO industry that will no doubt shape the space in 2018 onward.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-MA7JCyI7UMY/WpH36pSOVAI/AAAAAAAAUQQ/Oq1gIikEysAntxec62tA4vOOF6aMhnOFACLcBGAs/s1600/1_VOAilB1l85QoKu9WnW07Vw.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://2.bp.blogspot.com/-MA7JCyI7UMY/WpH36pSOVAI/AAAAAAAAUQQ/Oq1gIikEysAntxec62tA4vOOF6aMhnOFACLcBGAs/s320/1_VOAilB1l85QoKu9WnW07Vw.jpeg" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
iComplyICO team!</div>
<br />
<h3>
Regulation and enforcement is stepping in</h3>
<div>
<br /></div>
<div>
One of the best talks I managed to catch during the conference came from Dave Hirsch, an attorney at the SEC. While for obvious legal reasons he was only allowed to express his own views and quote official statements, it was still an informative presentation from a very approachable speaker reiterating a few key things any ICO issuer has to keep in mind. If something looks like a security and it checks off all of <a href="http://consumer.findlaw.com/securities-law/what-is-the-howey-test.html">the Howey Test</a> checkboxes, it is probably a security and proper measures will be taken. If the ICO is offered to US individuals, it falls under the SEC jurisdiction and proper steps might be taken against it.</div>
<div>
<br /></div>
<div>
Or in other words - you shouldn't try to skirt the law or outright break it. The enforcement can take you down, and the regulators might be catching up soon with ICO-specific regulation.</div>
<div>
<br /></div>
<h3>
Compliance is ramping up</h3>
<div>
<br /></div>
<div>
Just as enforcement is ramping up, so too do we see more compliance solutions popping up. As I've said before, <a href="https://tpbit.blogspot.ca/2018/01/what-crypto-projects-im-looking-looking.html">ICO securities</a> will probably be the most important part of the space this year. Our own <a href="https://icomplyico.com/">iComplyICO</a> is obviously tackling that space, but we also saw a few others in that space - <a href="https://www.polymath.network/">Polymath</a>, <a href="https://ominex.com/">Ominex</a> and <a href="https://coincart.co/">CoinCart</a> all were present at the conference and discussing their solutions to the problem.</div>
<div>
<br /></div>
<div>
For more in-depth article on this topic, best <a href="https://twitter.com/icomplyico">follow us on Twitter</a>, or <a href="https://medium.com/icomplyico">check out our Medium page</a>.</div>
<div>
<br /></div>
<h3>
Emerging markets - medical and real estate ICOs</h3>
<div>
<br /></div>
<div>
While there were a lot of people wanting to start their own ICOs at the conference, it would appear there are two new trends rising up in the industry - medical applications and real estate. You obviously had your usual utility tokens, ICOs for investing in blockchain mining and so on, but those two markets appear to be rather new. It weren't just singular projects either, it was a noticeable trend with multiple companies each doing their own thing.</div>
<div>
<br /></div>
<div>
It seems that <a href="https://tpbit.blogspot.ca/2017/12/the-next-wave-of-icos.html">my old prediction</a> is coming true - with some ICOs being classified as securities, we are seeing some new projects in the space completely embracing being securities and wanting to use that to their advantage in the fields we haven't seen much of before.</div>
<div>
<br /></div>
<h3>
Conclusions</h3>
<div>
<br /></div>
<div>
Judging from the various conversations I had during the Bitcoin Superconference, it seems we are having a few rising trends for the ICO space in 2018 - security law enforcement, compliance solutions, and emergent of ICOs in the medical and real estate space.</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-2999735380168196742018-01-22T01:44:00.000-08:002018-01-22T01:44:19.562-08:00BitInstant - a look at an old idea from the Bitcoin spaceEvery now and then, an interesting service will appear in the Bitcoin space, then get shut down at some point and we won't see the idea behind it come back. Often that might be because the idea in itself was bad (like, lending out your BTC to strangers), but sometimes you find an old idea that could be feasible still. One such idea I would like to talk about today is <a href="https://en.wikipedia.org/wiki/BitInstant">BitInstant</a>, or at least one notable part of it.<br />
<br />
<h3>
BitInstant</h3>
<br />
BitInstant was a service started in 2011 by Gareth Nelson and Charlie Shrem aiming to help make faster fiat deposits into a few Bitcoin exchanges, such as MtGox, BitStamp or VirVox. At some point you could also convert the deposits directly into BTC. BitInstant would handle cash deposits from places like Walmart and credit you appropriately.<br />
<br />
Overall, it seemed like an approachable way to get some bitcoins back in the day when a lot of the Bitcoin exchanges were struggling with <a href="https://techcrunch.com/2013/05/16/mt-gox-dwolla-account-money-seizure/">accepting funds in the US</a>.<br />
<br />
It seems there was a lot of demand for this service in 2013, but unfortunately the site was shut down after its CEO got arrested in early 2014.<br />
<br />
Now, what I just described doesn't sound all that interesting in 2018 - we currently have a lot more payment options available now that fewer banks are afraid of Bitcoin. However, BitInstant had one more underappreciated feature I wanted to talk about...<br />
<br />
<h3>
Inter-exchange transfers</h3>
<br />
BitInstant not only did normal cash deposits, but it also allowed you to redeem coupons from MtGox, VouchX or BTC-e and use those as a deposit methods into the above mentioned exchanges. In other words, you could use it to transfer money from BTC-e into BitStamp, or from MtGox into VirVox. This would allow you to handle arbitrage between the exchanges much more easily.<br />
<br />
It seems these days there aren't as many options for that. Last time I checked I could find about three exchanges that would take BTC-e coupons as a deposit method and you can use Tether across <a href="https://coinmarketcap.com/currencies/tether/#markets">a number of exchanges</a> as a substitute for USD, but there isn't a neat way of transferring fiat between exchanges in a really fast manner.<br />
<br />
I suppose you soon won't need a service for transferring bitcoins between exchanges if the Lightning Network can deliver its <a href="https://twitter.com/JackMallers/status/953878478524477440">instant transfers</a> on mainnet. Some other alts might benefit from something like <a href="https://tpbit.blogspot.ca/2016/08/avoiding-bitfinex-scenarios-with-voting.html">voting pools</a> though.<br />
<br />
A service that would allow you to transfer fiat between any exchanges might make for a more efficient market - imagine being able to take advantage of some of the more recent <a href="http://fortune.com/2018/01/08/coinmarketcap-removes-korean-exchange-prices/">arbitrate opportunities</a>. The prices would be more uniform around the world and everyone would be getting a more fair deal.<br />
<br />
The solution wouldn't even be <a href="https://tpbit.blogspot.ca/2014/12/ripple-as-middleware_31.html">that hard to implement</a> - the major complexity would come from having to handle the large, international capital transfers to balance the books every now and then. So once again, it comes down to the inefficiencies of the traditional banking system...<br />
<br />
<h3>
Conclusions</h3>
<br />
BitInstant was an interesting "old" service in the Bitcoin space that helped people deposit their money onto a few crypto exchanges. It also provided a way to move funds between crypto exchanges, providing some way of cashing in on some arbitrage opportunities. Unfortunately, there aren't that many ways of transferring fiat efficiently between the major exchanges these days.ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-64848107418207559362018-01-15T01:40:00.001-08:002018-01-15T01:40:07.077-08:00On Bitcoin power consumptionA few weeks ago, there were some articles making the rounds claiming that "<a href="https://www.weforum.org/agenda/2017/12/bitcoin-consume-more-power-than-world-2020/">in 2020 Bitcoin will consume more power than the world does today</a>", that <a href="http://www.independent.co.uk/news/business/news/bitcoin-energy-use-coal-power-cryptocurrency-generation-server-farms-dirty-secret-china-mongolia-a8111666.html">it creates a lot of pollution</a>, <a href="http://fortune.com/2017/12/15/bitcoin-dirty-secret-energy-use-pollution/">etc</a>. It seems that Bitcoin will be blamed for cheap, dirty power plants opening up again and so on. Well, let's break it down and see where this whole situation might be really headed...<br />
<br />
<h3>
Rate of growth</h3>
<div>
<br /></div>
<div>
It seems that the origin of the claim that Bitcoin will consume all of world's electricity came from <a href="https://powercompare.co.uk/bitcoin/">this site</a>. The misconception probably stemmed from these two bullet points:</div>
<div>
<br /></div>
<div>
"</div>
<div>
<ul>
<li>In the past month alone, Bitcoin mining electricity consumption is estimated to have increased by <b>29.98%</b></li>
<li>If it keeps increasing at this rate, Bitcoin mining will <b>consume all the world’s electricity by February 2020</b>.</li>
</ul>
</div>
<div>
"</div>
<div>
<br /></div>
<div>
As usual, there is a relevant XKCD comic on this:</div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-FaCkbSg3D_c/Wlu85aHnHSI/AAAAAAAATt0/GDKxa6cjqzMtjzFIkBBJVlvQWF8Nai8tgCLcBGAs/s1600/extrapolating.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="295" data-original-width="461" height="204" src="https://1.bp.blogspot.com/-FaCkbSg3D_c/Wlu85aHnHSI/AAAAAAAATt0/GDKxa6cjqzMtjzFIkBBJVlvQWF8Nai8tgCLcBGAs/s320/extrapolating.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://xkcd.com/605/">Extrapolation</a></div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
The obvious crux here is the phrase "if it keeps increasing at this rate" - which can be very unlikely to happen. It's basically exponential growth, which can be really hard to match on scale - you would have to produce more mining hardware, which would also require you to at some point start creating more electronics factories and more chip fabrication facilities and so on. All of those can take a lot of time to get going.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
Even if you could fabricate all of those chips, at some point you will run into some limits imposed by the economics of Bitcoin mining.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<h3 style="clear: both; text-align: left;">
Economics of Bitcoin mining</h3>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
The Proof of Work algorithm Bitcoin uses is self-balancing - it doesn't really care how much or how little mining power there is in the network, it will still try to maintain the 1-block-per-10-minutes mining schedule. With the block reward being inflexible and the transaction fees being finite, the only factor that can have a large impact on the Bitcoin mining rate is the price of a single bitcoin. If the price doubles, you can expect the difficulty to double (with some time delay) due to more miners coming onto the network. If the price goes down, some miners will be priced out of the market and the difficulty will go down.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
In an ideal world, the cost of mining 1 bitcoin would be about 1 bitcoin. In real world, you have some inefficiencies and opportunity cost, so you should see some small profit margin at the least.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
To figure out how much electricity Bitcoin will consume in the future, you have to break things down into basics.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
First - what is a miner really? It's a computer that converts electricity into Bitcoin and produces some heat. In a perfect scenario, every dollar of electricity you would pump into the machine would give you about a dollar worth of coins.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
The <a href="https://en.wikipedia.org/wiki/Electricity_generation#Production">total amount of power produced in the world in 2013</a> was 23'322TWh. The average electricity price ranges <a href="https://www.ovoenergy.com/guides/energy-guides/average-electricity-prices-kwh.html">from 0.08 to 0.42 USD / kWh</a>. Taking the cheapest cost, we know that in 2013 we generated about 1.865T USD.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
Every year we have about 52'596 Bitcoin blocks generated. Assuming 12.5 BTC block reward and 2.5 BTC in transaction fees, we should expect to give the miners a net gain of 788'940 BTC in a year.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
Assuming the miners converted 100% of the value of electricity into mining BTC, we would expect 1 BTC to be worth about 2.36M USD. At the time of writing, one bitcoin is "only" worth 13.5k USD, or about 200 times less. For some perspective - 1/200 of the current price would be 67.5 USD / BTC, a price range from <a href="https://en.wikipedia.org/wiki/History_of_bitcoin#Prices_and_value_history">about early 2013</a> - 5 years ago.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
Since the Bitcoin mining rewards halve every 4 years, the price per BTC would have to increase by further factors to keep up with the global power generation revenue.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<h3 style="clear: both; text-align: left;">
Taking a more realistic look</h3>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
A lot of the numbers here assumed perfect scenarios - no money being lost while converting from electricity to bitcoins, no cost of manufacturing and maintaining the miners, etc. In reality, you can expect noticeable losses from those factors, as well as things like taxes, transfer fees, internet cost, etc.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
It's very unlikely Bitcoin will ever become a large enough factor in the global energy production to have an impact on the electricity prices. It's more likely to be used close to some renewable power plants that have <a href="https://sciencealert.com/germany-actually-paid-people-use-clean-renewable-electricity-over-holidays-christmas">excess of electricity to get rid</a> of from time to time, possibly some places that can re-use the heat generated from the miners that can't rely on more efficient <a href="https://en.wikipedia.org/wiki/Heat_pump">heat pumps</a>, or simply pooling around places that have really cheap electricity.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
At the very least, Bitcoin mining is a universal "overflow valve" - it's a simple place to push excess electricity production capacity (and to some extend - electronics production as well) and turn it into tangible money. The mining process will gladly take any amount of excess and give some returns. If the returns are better than the savings from spinning the operation down and then back up again - it's worthwhile.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<h3 style="clear: both; text-align: left;">
Conclusions</h3>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
Bitcoin is very unlikely to be a major consumer of the global energy production. On the other hand, it's a good sink for excess power generated from renewable sources, always allowing one to convert spare electricity into cash.</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-4078555372994156912018-01-08T10:54:00.005-08:002018-01-08T10:54:58.699-08:00What crypto projects I'm looking looking forward to in 2018<a href="https://tpbit.blogspot.ca/2017/12/bitcoins-second-near-death-experience.html">2017 has been an important day for both Bitcoin and cryptocurrencies in general</a>. While hopefully not as tumultuous, 2018 is looking like it will bring us a lot of interesting innovation in the space. Here are some of the things I'm personally looking forward to seeing unfold in the new year.<br />
<br />
<h3>
ICO Securities</h3>
<br />
After the <a href="https://www.sec.gov/news/press-release/2017-131">SEC's investigative report on The DAO</a>, we have seen a number of companies (<a href="https://www.icomplyico.com/">mine included</a>) start looking into ICO Securities. This might be a start of <a href="https://tpbit.blogspot.ca/2017/12/the-next-wave-of-icos.html">a new wave of ICOs</a> that will be bigger than the entirety of the current market.<br />
<br />
If a lot of sentiments I've heard so far are to be believed, we might see such ICOs replace traditional VC funding, bring in more traditional investment industry into the market, and get a number of people from various governments to watch closely where this trend will unfold. If properly harnessed, Security ICOs could also drive real-world innovation while providing more sustainable, long-term growth than the current trend of "sell vaporware with hype and turn 100x profit in a few months".<br />
<br />
I'm certainly the most excited to see where this trend will go and whether my guesses will turn out to be correct or not...<br />
<br />
<h3>
Lightning Network adoption</h3>
<br />
In 2017 we got SegWit activated on Bitcoin and a few other currencies. So far it has alleviated a bit of the transaction traffic, but it's nowhere near useful enough to solve the Bitcoin scaling problem on its own. Hence why I'm excited to see if the <a href="https://lightning.network/">Lightning Network</a> will be able to deliver on its promises and go mainstream allowing Bitcoin to once more be used for everyday purchases. Betting on <a href="https://tpbit.blogspot.ca/2017/10/blockstream-vs-miners-looking-at.html">SegWit without blocksize increase</a> has certainly been a large gamble that has allowed <a href="https://tpbit.blogspot.ca/2017/05/another-crypto-bubble-and-rise-of.html">a number of alts to grow into their own prominence</a>. Hopefully we'll see this year if this bet pays off, or Bitcoin might lose its luster...<br />
<br />
<h3>
Ethereum POS change</h3>
<br />
The anticipation of <a href="https://blockonomi.com/ethereum-casper/">Ethereum changing from POW to mostly POS</a> has been heard many times through 2017. We've seen the technology <a href="https://www.reddit.com/r/EtherMining/comments/6t56a0/important_information_from_todays_ethereum_dev/">delayed to (hopefully) later this year</a>. If successful, it would make Ethereum the most prominent POS coin out there, possibly driving some people to invest in it for the staking returns. While I'm not sharing the paranoia <a href="https://www.cnbc.com/2017/12/21/no-bitcoin-is-likely-not-going-to-consume-all-the-worlds-energy-in-2020.html">surrounding Bitcoin's POW</a> (claiming that its energy consumption will continue to grow at a massive rate eating a significant chunk of world's energy production in a few years), it's still a worthwhile experiment to see undertaken.<br />
<br />
<h3>
Interledger, Codius, etc.</h3>
<br />
Ripple is another company / crypto to look out for in 2018. While I might have <a href="https://tpbit.blogspot.ca/2017/05/counterarguments-to-xrp-value.html">my reservations about XRP the currency</a>, I have strong respect for Ripple the network and its creators.<br />
<br />
Other than the growth of the Ripple network itself, there are two interesting projects from Ripple Labs that might become more prominent in 2018. The first one is the <a href="https://interledger.org/">Interledger Protocol</a>, a protocol aiming to help facilitate payments across different ledgers / blockchains / etc. The second one I was <a href="https://www.xrpchat.com/topic/11961-codius-revival-demo-at-interledger-pictures/">surprised to see the light of day again</a> was <a href="https://tpbit.blogspot.ca/2015/04/pondering-codius-where-smart-oracles.html">Codius</a> (which <a href="https://tpbit.blogspot.ca/2015/12/some-crypto-projects-im-most-looking.html">has been shelved for some time in 2015</a>) - a universal hosting standard for smart oracles.<br />
<br />
Ripple Labs is definitely a company that will be doing interesting projects for years to come. It will be interesting to see what they will cook up for us in 2018...<br />
<br />
<h3>
Tether and other fiat IOUs</h3>
<br />
<a href="https://tpbit.blogspot.ca/2017/04/iou-price-vs-trust-look-at-tether.html">Tether</a> has been an interesting <a href="https://tpbit.blogspot.ca/2015/02/the-rise-of-fiat-denominated-cryptos.html">fiat IOU</a> these past few years. The space itself has been a bit paradoxical honestly - there have been <a href="https://xrpcharts.ripple.com/#/">a lot of fiat IOUs on Ripple</a>, but only one prominent IOU on the Omni network and so far not all that much on the Ethereum network. Tether as a currency has been rather unremarkable until it <a href="https://tpbit.blogspot.ca/2017/04/iou-price-vs-trust-look-at-tether.html">started having some banking problems</a> and despite that its market cap has increased to <a href="https://coinmarketcap.com/currencies/tether/">almost 1.5B USD at the time of writing</a>. This has sparked <a href="https://twitter.com/Bitfinexed">at least one very prominent Twitter user</a> to start calling it out on every given opportunity.<br />
<br />
There are two ways I could see this play out in 2018. On one hand, we might see fiat IOUs to appear more prominently on the Ethereum blockchain (<a href="https://tether.to/usd%E2%82%AE-and-eur%E2%82%AE-now-supported-on-ethereum/">Tether has apparently already made that leap</a>), possibly to compliment the above mentioned ICO Securities. On the other hand if some more paranoid people are to be believed, Tether might turn into another MtGox and implode with such a force as to crash the crypto prices by a lot.<br />
<br />
One way or another 2018 is looking like a year where fiat IOUs might become more important in the crypto space.<br />
<h3>
<br />Government-backed cryptos</h3>
<br />
For years a lot of Bitcoiners have been stating that some governments should adopt Bitcoin as a national currency. A few years back we saw Canada looking into doing the opposite - adopting its fiat currency into a crypto form with <a href="https://tpbit.blogspot.ca/2014/04/mintchip-what-it-couldve-been.html">MintChip</a>. Unfortunately, that project went nowhere, but it's looking like this year we might have the next serious contender - <a href="https://www.reuters.com/article/us-venezuela-economy/enter-the-petro-venezuela-to-launch-oil-backed-cryptocurrency-idUSKBN1DX0SQ">Venezuela aiming to launch its Petro</a>.<br />
<br />
Petro is designed to be "backed by oil, gas, gold and diamond reserves", making it a bit more of a commodity IOU than a fiat IOU. It might be an interesting experiment, especially if this creates an alternative to <a href="http://money.cnn.com/2017/11/22/news/economy/venezuela-currency-crash/index.html">the hyper-inflating bolivar</a> accessible to the people of Venezuela. It will remain to be seen whether the government will be able to keep the value of the new currency stable and keep it backed by the natural resources, or will we one day see the currency <a href="https://en.wikipedia.org/wiki/Nixon_shock">stop being backed by anything</a>.<br />
<br />
If successful, this might be the first time a government-created currency will have to complete on somewhat equal footing to private currencies and <a href="https://www.cryptokitties.co/">digital cats</a>.<br />
<br />
<h3>
Conclusions</h3>
<br />
2018 is looking like another exciting year in crypto space. We will see <a href="https://tpbit.blogspot.ca/2017/12/bitcoins-second-near-death-experience.html">how the echos of the prior year </a>will play out, as well as get to experience entirely new developments shape the space. There is never a dull moment in this industry...ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-8026578732943976192017-12-31T12:46:00.000-08:002017-12-31T12:46:46.892-08:00Bitcoin's second near-death experience, aftermath of the scaling debate, the SEC - Crypto year 2017 and what's to come in 20182017 has been one of the most turbulent year in crypto history to date. We have seen important changes in technology and the political climate, divides in the community, as well as wild jumps in prices of many cryptos. I would like to take a moment to talk about a few key takeaways from this year and what I think had the most impact on the future of crypto.<br />
<br />
<h3>
Bitcoin's second near-death experience</h3>
<div>
<br /></div>
<div>
Bitcoin has been declared dead so many times it has basically become a meme. As of the time of writing, there have been <a href="https://99bitcoins.com/bitcoinobituaries/">222 obituaries</a> proclaiming the death of the currency. I'm not here to talk about those, but about a feeling you could get from old-timer Bitcoiners.</div>
<div>
<br /></div>
<div>
I've been in the community since 2011, and I have experienced two moments where Bitcoin's future was uncertain. I came in right around the <a href="https://bitcoinmagazine.com/articles/anniversary-of-the-great-bubble-of-2011-1339139269/">first notable bubble</a>, when the price soared to the unthinkable... $30/BTC (or about ~$40 in the polish markets). After that bubble has popped, the price began to decline. Slowly creeping down, taking with it confidence of many bitcoiners. At the time nobody could tell for certain what was going to happen - whether the coins will become worthless, or will we see something different happen entirely.</div>
<div>
<br /></div>
<div>
People nowadays despair when Bitcoin drops 30% from all-time-high peak, but back in 2011, we saw Bitcoin go down to about $2 per coin, or a decline of about 93%. The future of the project was uncertain, everyone was depressed, and for me, that was Bitcoin's first near-death experience.</div>
<div>
<br /></div>
<div>
Of course, we recovered. After that, when the next bubble came, you had more confidence that Bitcoin will bounce back. We've seen it before. "There is no bubble like the 2011 bubble" I tend to say.</div>
<div>
<br /></div>
<div>
In 2017, we had to deal with the scaling problem that has been anticipated since <a href="https://tpbit.blogspot.ca/2015/06/handling-bitcoins-during-hard-fork.html">at least 2015</a>. We had to figure out what solution might be the best - whether to go with <a href="https://tpbit.blogspot.ca/2016/03/big-blocks-small-blocks-side-blocks-off.html">big blocks, or go off the chain</a>. At the same time, we had to anticipate that ever since <a href="https://tpbit.blogspot.ca/2016/06/perfection-or-bust-rise-and-fall-of-dao.html">The DAO and Ethereum's split</a>, any major, contentious change to the Bitcoin protocol <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">would create a similar split</a>. Piled on top of that we had <a href="https://bitcoinmagazine.com/articles/breaking-down-bitcoins-asicboost-scandal-solutions/">the covert ASICBOOST scandal</a> and over a year of the community being <a href="https://tpbit.blogspot.ca/2016/03/on-rbitcoin-moderation-three-years-in.html">forcibly divided in discussing the scaling solutions</a>.</div>
<div>
<br /></div>
<div>
In other words, the pressure was rising from all sides and something had to give. At the same time, many sides have remained rigid, not willing to make a compromise. Instead we saw warring solutions - SegWit, 2x, UASF, etc. In the end we saw a group trying to reach a solution - "SegWit now, 2x in half a year", which allowed SegWit to activate but would backfire when that second part <a href="https://tpbit.blogspot.ca/2017/10/blockstream-vs-miners-looking-at.html">was to come due</a>.</div>
<div>
<br /></div>
<div>
However, before SegWit could be activated, we had a different fork be proposed - Bitcoin Cash. Increasing the block size and changing a few other things. However, this one didn't wait to reach a majority, instead opting to declare a fork happening and going through with it.</div>
<div>
<br /></div>
<div>
The period following the announcement has been Bitcoin's second near-death experience. The future was once again uncertain - would this split in mining power mean some crazy oscillations in the difficulty? Would the currency retain its value after the split? Would one chain dominate the other and just take over? These were uncertain times <a href="https://tpbit.blogspot.ca/2017/05/another-crypto-bubble-and-rise-of.html">in which the altcoins thrived</a>.</div>
<div>
<br /></div>
<div>
The forks came and went, Bitcoin is still around, so is Bitcoin Cash. We now know how Bitcoin responds in this situation, so we will be ready in the future once more. "There is no split like the 2017 split" I suppose?</div>
<div>
<br /></div>
<div>
<h3>
The aftermath of the scaling debate</h3>
<div>
<br /></div>
<div>
Even though SegWit has been activated, we are still seeing a lot of transactions <a href="https://jochen-hoenicke.de/queue/#30d">waiting to be confirmed in the mempool</a>. With the lightning network being <a href="https://np.reddit.com/r/btc/comments/6zql16/very_awkward_moment_at_breaking_bitcoin_when/">months away from being ready</a>, it seems the <a href="https://twitter.com/charlieshrem/status/822189031954022401">transaction fees</a> will <a href="https://bitinfocharts.com/comparison/bitcoin-transactionfees.html">keep on increasing</a>. We can also see an interesting trend lately - people trying to bully companies into integrating the "optional" SegWit into their system to lower fees. It's somewhat disheartening to see. I hope that in 2018 we will see an empty mempool again...</div>
<div>
<br /></div>
<div>
Another important event that took place this year was the failed attempt to <a href="https://tpbit.blogspot.ca/2017/10/blockstream-vs-miners-looking-at.html">follow through with the SegWit2x agreement</a> and the subsequent backlash against the "transgressors". We've seen old-school bitcoiners wanting to <a href="https://cointelegraph.com/news/bitcoin-needs-new-proof-of-work-chain-after-segwit2x-says-bitcoinorg-co-owner">change Bitcoin's POW to spite the miners</a> or force various businesses to "<a href="https://github.com/bitcoin-dot-org/bitcoin.org/issues/1904">sign a very simple pledge that acknowledges that Bitcoin is not ruled by miners in order to be linked from bitcoin.org</a>". Luckily neither of those have gotten any traction and could be written off as a pendulum effect to the SegWit2x continuing up to the 11th hour before being called off.</div>
<div>
<br /></div>
<div>
The last unfortunate aftermath of the scaling debate has been the decisive split of the Bitcoin community. Up until the SegWit / Bitcoin Cash split I had hopes there could be some reconciliation (<a href="https://tpbit.blogspot.ca/2016/03/on-rbitcoin-moderation-three-years-in.html">1</a>, <a href="https://tpbit.blogspot.ca/2017/03/fourth-year-of-rbitcoin-moderation.html">2</a>). After the scaling debate would be over and the project could be back on track that we could come back together and bury the hatchet. However, once a split happens and both sides survive long enough, there is no going back - there are people financially tied to one end but not the other that understandably won't leave their side. We had some high-profile people supporting one side or the other, and what seems like layers of narrative being spun on both sides (proclaiming something is being implemented because of X, but in reality it's done because of more selfish reason Y, for example - invading Iraq because of WMDs, while in reality it might be because of oil or the like). It's unfortunate that we have failed to keep the community together in the first place and to bring it back together before the differences were irreconcilable...</div>
<div>
<br /></div>
<div>
Here's to hoping we can learn to at least respect and tolerate one another and remember what we were fighting for in the first place...</div>
</div>
<div>
<br /></div>
<h3>
Crypto securities and the SEC report</h3>
<div>
<br /></div>
<div>
<a href="https://tpbit.blogspot.ca/2016/06/perfection-or-bust-rise-and-fall-of-dao.html">The DAO</a> has been an important project that has already shaped the industry despite or perhaps precisely because its failing. It has split the Ethereum blockchain in twine, and this year it has given us something rather unexpected - <a href="https://www.sec.gov/news/press-release/2017-131">a SEC investigative report</a>. It concluded that The DAO has been a security, which has had a significant impact on <a href="https://tpbit.blogspot.ca/2017/12/the-next-wave-of-icos.html">the ICO community</a>. Now you have to seriously consider whether you're creating a security or a utility token when creating an ICO and follow with the appropriate requirements.</div>
<div>
<br /></div>
<div>
This has created a new wave of interest in the community. Some people are <a href="http://www.newswire.ca/news-releases/canadas-1st-legal-cryptocurrency-crowdsale-launched-by-impak-finance-640700373.html">embracing being a security</a> and taking a full advantage of that, while others are moving away from being a pseudo-security not to be <a href="https://techcrunch.com/2017/09/29/the-sec-has-charged-two-initial-coin-offerings-with-defrauding-investors/">found guilty of fraud</a> or other regulations.</div>
<div>
<br /></div>
<div>
<a href="https://tpbit.blogspot.ca/2017/12/the-next-wave-of-icos.html">The crypto-securities</a> have definitely been dominating my conversations over the last months and I have no doubt they will be the big news in 2018. I also heard some rumours from credible sources that at least one notable project has been declared to not be a security, but I can't disclose what it is until some official announcement unfortunately. So there is development happening on both sides of the spectrum, which is always good to hear.</div>
<div>
<br /></div>
<h3>
Conclusions</h3>
<div>
<br /></div>
<div>
The Bitcoin scaling forks and splits have been a major event in the Bitcoin's history. They have left a lasting effect on the community and technology. This year we have also seen some important report coming from the SEC that has already began to shape the ICO landscape. We are likely to see that become a major influence of what 2018 will look like.</div>
<div>
<br /></div>
<div>
Here's to 2018 and what's yet to come!</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-69350157519942166972017-12-18T10:16:00.001-08:002017-12-18T10:16:22.250-08:00The next wave of ICOsAbout half a year ago, <a href="https://www.sec.gov/news/press-release/2017-131">SEC released an investigative report</a> concluding that <a href="https://tpbit.blogspot.ca/2016/06/perfection-or-bust-rise-and-fall-of-dao.html">DAO Tokens</a> were securities. Since then there have been a number of high profile cases reinforcing this classification world-wide - <a href="https://news.bitcoin.com/four-ico-startups-refund-investors-hours-after-china-bans-token-sales/">UIP, LLToken, CCC, and HMS had to issue refunds to the ICO purchasers in China</a>, <a href="https://www.forbes.com/sites/laurashin/2017/09/01/after-contact-by-sec-protostarr-token-shuts-down-post-ico-will-refund-investors/#7f4f2a0e192e">Protostarr closed up shop</a>, <a href="https://techcrunch.com/2017/09/29/the-sec-has-charged-two-initial-coin-offerings-with-defrauding-investors/">REcoin and DRC World were charged with fraud</a> and so on.<br />
<br />
On one hand, the future of ICOs may be looking grim, with the law enforcement making it harder for various projects to raise money by issuing tokens. On the other hand, the new classification of (some) ICOs as securities might be one of the best things that has happened in the space lately. We might be on the bring of a new wave of ICOs, and here is why...<br />
<br />
<h3>
Historical waves</h3>
<br />
Long-term bitcoiners might start to see some pattern in history. Early on, we had the pioneering invention that was Bitcoin. After a few years, it became somewhat successful, earning its early adopters some hefty amount of money. We then saw a few other projects pop up saying "I too would like some money". We then saw first a trickle of new coins appearing, altering the Bitcoin codebase slightly, and then an entire wave of thousands of altcoins doing the same, tweaking the parameters and claiming they are better than Bitcoin, therefore they should get the money Bitcoin gets.<br />
<br />
We then saw a new wave come in. Coins that were generally not mined, but created and pre-sold to raise the money the team needed to build their product. Mastercoin, Ethereum, etc. Soon after, once a few high-profile projects have made bank, we saw a repeat of what happened before - a large influx of projects also doing an ICO in a "me too" mentality.<br />
<br />
It is rather likely that the next wave of altcoins / ICOs will follow the same trends - starting with a trickle of trail-blazers, following with a wave of followers.<br />
<br />
<h3>
ICO Securities and the next wave</h3>
<br />
For awhile now, you could see a number of ICOs skirting the line of being a security or a utility token. Perhaps giving a wink to their pre-purchasers - "of course you should not expect a profit, but you know we're just like that other ICO that made such great ROI. We're not promising ours will do the same, but you know...". Maybe they tacked on some functionality to have an excuse to call themselves a utility token - "this token will be used to pay for ads to display to our users. It only has a utility value of those ads. You should definitely not speculate on the token representing a share in the platform we're building" or something like that.<br />
<br />
Now, with the SEC report, it seems that some ICO projects are taking things a bit more seriously. The grey area between a utility and a security token has become less of a safe harbour. We can expect ICOs to take a firmer stance on what they are. On one hand, we will have token ICOs staying far away from being a security to avoid the extra compliance burden associated with that, but on the other hand, we will see some new ICOs emerge - ICOs that fully embrace being a security and go all-out.<br />
<br />
If you're already aiming to be a security and do all of the due diligence associated with it, you could drop the song and dance of utility from your token. We might see tokens that represent shares in a company, tokens that represent rights to dividends and so on, rather than trying to pretend they are tied to some specific functionality of a utility token.<br />
<br />
More importantly, by embracing the due diligence of being a security, those tokens might attract the more traditional investors. Companies could do ICOs instead of IPOs, raise money through token presales rather than seed rounds and so on.<br />
<br />
This might be the next big wave of ICOs - ICO securities. We will probably see first trailblazers like <a href="http://www.newswire.ca/news-releases/canadas-1st-legal-cryptocurrency-crowdsale-launched-by-impak-finance-640700373.html">impak Coin</a> soon, and we can expect the wave to come soon after. We might see a number of people trying to get rich quick, but hopefully we will also see some true innovators creating something new we haven't seen before in the crypto space. I have a few ideas of my own of what those might be, but one shouldn't give away the billion dollar ideas too quickly ;).<br />
<br />
<h3>
Conclusions</h3>
<br />
In the past, we have seen a wave of altcoins and a wave of ICOs sweep into the crypto world. Due to the recent SEC report, we might soon see a new wave of ICO securities repeat the same cycle, hopefully bringing in a wave of new kinds of investors into the space.<br />
<br />
If you're interested in launching an ICO compliant with the securities regulation, perhaps you'd be interested in checking out the new company I work for - https://www.icomplyico.com/ . We're focused on helping new projects launch compliant ICOs.ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-78614276480476907012017-11-13T08:21:00.000-08:002017-11-13T08:21:54.430-08:00The need for universal opt-in replay protection<a href="https://lists.linuxfoundation.org/pipermail/bitcoin-segwit2x/2017-November/000685.html">SegWit2x got cancelled</a>, and with it probably the most heated "battle" in the Bitcoin space thus far draws to a close. There are many lessons to be learned from this ordeal as well as <a href="https://tpbit.blogspot.ca/2017/11/what-is-bitcoin-in-light-of-hard-forks.html">some other forks that are happening around Bitcoin</a> - what constitutes "consensus" in the community, how will the future forks be handled and so on. One important aspect I haven't seen discussed as much currently is the ongoing issue of fork-proof replay protection - a feature that caused some controversy by its absence in <a href="https://bitcoinmagazine.com/articles/segwit2x-and-case-strong-replay-protection-and-why-its-controversial/">SegWit2x</a> and made Bitcoin Gold a laughing stock when they <a href="https://github.com/BTCGPU/BTCGPU/issues/51">created a bounty for it</a> very close to their forking date.<br />
<br />
<h3>
Strong vs opt-in replay protection</h3>
<br />
There is an important distinction to be made between strong and opt-in replay protection. When a fork occurs, the former is always on and prevents any transaction on one side of the fork from being valid on the other side of the chain. Bitcoin Cash has <a href="https://bitcoin.stackexchange.com/questions/56867/how-does-bitcoin-cash-implement-replay-protection">strong replay protection</a> for example.<br />
<br />
Opt-in replay protection on the other hand is optional - you can create a transaction that won't be valid on the other side of the fork, but you are also able to have a transaction that is valid on both sides.<br />
<br />
Strong replay protection is useful when you want to split from the main chain and remain an independent project. However, it can be detrimental when the changes you're proposing are meant to be an upgrade to the current code rather than forking off into a new project. This is why <a href="http://www.trustnodes.com/2017/10/10/segwit2x-removes-opt-replay-protection">SegWit2x didn't opt to have a replay protection</a> - it was meant to be an upgrade to the Bitcoin project and be the only version used. The only way to achieve that was to <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">make it hard for both sides of the fork to coexist</a>.<br />
<br />
<h3>
Problem with opt-in replay protection</h3>
<div>
<br /></div>
<div>
While opt-in replay protection sounds like the proper way to go, there is one important problem to consider - how do you implement it in a way that will apply to all future forks?</div>
<div>
<br /></div>
<div>
In a perfect world, every fork would be carefully maintained and it would make sure to make its opt-in replay protection create transactions only valid on its own chain. However, as Bitcoin Gold and other projects have proven - we can't rely on forks being managed competently. Hence, we need a universal opt-in replay protection, one that is agnostic to any future forks (even those that don't honour any replay protection whatsoever) and creates transactions that will be only valid on one chain.</div>
<div>
<br /></div>
<h3>
Universal opt-in replay protection</h3>
<div>
<br /></div>
<div>
A fork that splits off from the main project can be caused by any alteration to the protocol. There is no universal way to differentiate between both sides of the fork ahead of time save for one - the blockchain history. You can mimic anything about the code, <a href="https://github.com/btc1/bitcoin/pull/109">even pretend to be some different client</a>, but for certain at some points the blockchains will diverge - otherwise we wouldn't be dealing with a fork. Once that is done, the data can be used to implement the replay protection.</div>
<div>
<br /></div>
<div>
If one could flag a transaction to only be valid if a given block hash is present in the blockchain, that would be enough to ensure it will always be possible to safely move coins around on any fork that might occur in the future.</div>
<div>
<br /></div>
<div>
If both sides of the fork honour that flag, only one side will include the transaction in the block. Do this on both sides and the coins will be safe to spend on two sides of the fork.</div>
<div>
<br /></div>
<div>
If only one side of the fork honours the flag however, the replay protection could still work, albeit with some limitations. You would need to create a transaction with the flag on the chain that doesn't honour it. This way the chain will include the transaction in its blockchain, but the main chain will reject it, since it would not recognise the block hash. After the first transaction is confirmed, it would be safe to spend the coins on the other side of the fork.</div>
<div>
<br /></div>
<h3>
Conclusions</h3>
<div>
<br /></div>
<div>
It is possible to implement a universal opt-in replay protection that will still be effective even if only one side of a given fork will respect its rules. This should be sufficient to protect one's bitcoins in an event of a possible future bitcoin fork.</div>
<div>
<br /></div>
<div>
The proposed implementation is rather simple and elegant. I came up with this idea when contemplating SegWit2x awhile back, but then became pleasantly surprised when I found out someone else <a href="https://github.com/bitcoin/bips/blob/master/bip-0115.mediawiki">already proposed it as a BIP115 a year before</a> :). It's not part of the main codebase yet, but maybe by the time next fork rolls around we'll have something to protect our bitcoins with...</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-68198067491203031482017-11-05T08:25:00.000-08:002017-11-05T08:25:25.379-08:00What is Bitcoin in the light of hard forks?This year has been one of the more controversial years for Bitcoin thus far. We have already seen a number of important forks happen - <a href="https://thenextweb.com/contributors/2017/09/13/fork-segwit-everything-need-know-bitcoin-scaling/">SegWit</a>, <a href="https://en.wikipedia.org/wiki/Bitcoin_Cash">Bitcoin Cash</a> and <a href="https://coinsutra.com/bitcoin-gold/">Bitcoin Gold</a>, and we're scheduled to witness some other forks soon - <a href="https://www.coindesk.com/bitcoin-cash-developers-set-date-november-hard-fork/">Bitcoin Cash doing a hard fork</a>, <a href="https://www.coindesk.com/understanding-segwit2x-bitcoins-next-fork-might-different/">SegWit2x</a> looming ever closer, and we might even see <a href="https://github.com/BitcoinHardfork/bitcoin/pulls">some emergency PoW change hardfork</a> in response to SegWit2x. Amidst all of that, many people are asking themselves, debating and fighting over an important question - "What is Bitcoin?" (<a href="https://www.youtube.com/watch?v=Um63OQz3bjo">that iconic question</a>).<br />
<br />
<h3>
The power of the name</h3>
<div>
<br /></div>
<div>
Earlier this year, there was a small debacle as to what Bitcoin Cash should be called. It seems that some of its opponents wanted to dismiss the fork by calling it "<a href="https://np.reddit.com/r/btc/comments/74oizq/no_supporter_of_bitcoin_cash_ever_called_it_bcash/">Bcash</a>" to further distance it from the Bitcoin project. It seems the "Bitcoin" name by itself holds value like any other brand, otherwise we wouldn't have so many projects using it:</div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-sIJxSwblqb0/Wf8snLsQl7I/AAAAAAAAQ4M/O514rj3PPzAGG4ZpoNTV2fuX2ZVcWF8UwCLcBGAs/s1600/6a8vxklotqtz.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="433" data-original-width="435" height="318" src="https://2.bp.blogspot.com/-sIJxSwblqb0/Wf8snLsQl7I/AAAAAAAAQ4M/O514rj3PPzAGG4ZpoNTV2fuX2ZVcWF8UwCLcBGAs/s320/6a8vxklotqtz.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
How many Bitcoins do we have? (<a href="https://np.reddit.com/r/CryptoCurrency/comments/78eiw7/this_might_just_be_getting_a_bit_ridiculous/">source</a>)</div>
<div>
<br /></div>
<div>
In response to Bitcoin Cash being called Bcash, some supporters of that project <a href="https://www.bitcoin.com/info/bitcoin-cash-is-bitcoin">started calling Bitcoin Cash by just "Bitcoin"</a>, and referring to the SegWit side of the fork as "<a href="https://www.youtube.com/watch?v=VoFb3mcxluY">SegWit Coin</a>".</div>
<div>
<br /></div>
<div>
While at the start it might not seem like much, a definition of what "Bitcoin" is and which side of a fork gets to call itself that is really important. Bitcoin is a currency with over 125B USD market cap, a liquid market on numerous exchanges, and countless of projects using it, many of whom would barely be able to follow what's going on in this debate. A fork of Bitcoin, on the other hand, has to start out with nothing and build up that market almost from scratch.</div>
<div>
<br /></div>
<div>
This is why <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">contentious forks</a> are so problematic and why <a href="https://bitcoinmagazine.com/articles/segwit2x-and-case-strong-replay-protection-and-why-its-controversial/">such a simple thing as replay protection is controversial</a> - whoever wins in the fork and gets to call itself "Bitcoin" will be the project that matters, while the loser won't matter anymore. A fork with a hard replay protection is easy to dismiss as an altcoin, while one without is much easier to pass on as an upgrade to the protocol, as Bitcoin has historically never done replay protection (while it seems <a href="https://twitter.com/vitalikbuterin/status/918372499091374080?lang=en">Ethereum might be getting that as a standard in the future</a>).</div>
<div>
<br /></div>
<h3>
So what is Bitcoin, really?</h3>
<div>
<br /></div>
<div>
With all of those forks past and future, many people have to ask themselves - "What is Bitcoin, really?". <a href="http://gavinandresen.ninja/a-definition-of-bitcoin">Gavin Andresen's definition</a> has been a good guide so far:</div>
<div>
<br /></div>
<blockquote class="tr_bq">
“Bitcoin” is the ledger of not-previously-spent, validly signed transactions contained in the chain of blocks that begins with the genesis block (hash 000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f), follows the 21-million coin creation schedule, and has the most cumulative double-SHA256-proof-of-work.</blockquote>
<div>
<br /></div>
<div>
It might, however, be worthwhile to start drilling down the definition and listing all of the important semantics that have or might be important in the future.</div>
<div>
<br /></div>
<div>
So Bitcoin could be defined as:</div>
<div>
<ol>
<li>A blockchain</li>
<li>Beginning with the genesis block hash 000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f</li>
<li>Containing only validly signed transactions</li>
<li>Containing only not-previously-spent transactions</li>
<li>Containing no more than ~21M coins</li>
<li>Following the<a href="https://en.bitcoin.it/wiki/Controlled_supply"> ~130 year coin distribution</a></li>
<li>Continuously, publicly mined</li>
<li>Double-SHA hashed</li>
<li>With a difficulty adjustment every 2016 blocks</li>
<li>Mined using a PoW algorithm</li>
<li>Following the chain with the most cumulative work</li>
<li>With a block limit of 1MB</li>
<li>...</li>
</ol>
</div>
<div>
<br /></div>
<div>
There are many such nitty-gritty details to list and rank. An important exercise for a lot of people is to rank these various features, and in case of a contentious fork - figure out which of those features might be changed.</div>
<div>
<br /></div>
<div>
So for example, if Bitcoin Gold is creating a fork that changes the PoW algorithm and <a href="https://www.bitsonline.com/bitcoin-gold-scam-btg/">doing private mining for awhile</a>, versus Bitcoin Cash changing the block limit and changing <a href="https://bitcoinmagazine.com/articles/miners-are-milking-bcashs-difficulty-adjustments-and-why-problem1/">the difficulty adjustment algorithm</a>, we have forks that change the features 10 and 7, vs 12 and 9. Following this ordered list, Bitcoin Cash would be less contentious (which is not to say - not contentious at all) as it alters features lower down the list.</div>
<div>
<br /></div>
<div>
So would Bitcoin be Bitcoin under <a href="https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2017-October/015217.html">Script being changed to Simplicity</a>? SegWit2x changing the block size? A fork that changes the PoW? Which part of the fork would be "more Bitcoin" than the other?</div>
<div>
<br /></div>
<div>
Of course, there is more to a fork than just such rules - <a href="https://tpbit.blogspot.ca/2017/10/blockstream-vs-miners-looking-at.html">there is a lot of politics involved</a>, and sometimes a more controversial fork still remains dominant. <a href="https://tpbit.blogspot.ca/2016/06/perfection-or-bust-rise-and-fall-of-dao.html">Ethereum's DAO fork</a> for example meant the "main" chain violated a very important rule - containing only valid transactions, but that side of the chain is still a lot more widely used than the "purer" alternative - Ethereum Classic.</div>
<div>
<br /></div>
<h3>
Conclusions</h3>
<div>
<br /></div>
<div>
Battling over which side of the fork is "the real Bitcoin" is more than just fighting over a name. It is the battle for market dominance, wide acceptance and legitimacy in the eyes of the laymen. The winner will be the world's best know cryptocurrency, while the loser will be hardly talked about outside of the crypto circles.</div>
<div>
<br /></div>
<div>
Seeing which side of the debate will endure the upcoming forks will definitely be a seminal point in the story of Bitcoin.</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-50529013242057499112017-10-29T08:01:00.000-07:002017-10-29T08:01:00.907-07:00Blockstream vs miners - looking at the incentives around the SegWit2x forkThe past few months in the Bitcoin community have been filled with discussion of an upcoming hardfork - <a href="https://www.coindesk.com/explainer-what-is-segwit2x-and-what-does-it-mean-for-bitcoin/">SegWit2x</a>. There have been a lot of people voicing their opinion on the matter of whether that fork should be allowed to pass or not, but today I would like to look at who I believe to be two key players in this debate - <a href="https://blockstream.com/">Blockstream</a> (<a href="http://www.trustnodes.com/2017/10/07/blockstream-loudly-segwit2x">opposing SegWit2x</a>) and the miners, the core signatories of <a href="https://medium.com/@DCGco/bitcoin-scaling-agreement-at-consensus-2017-133521fe9a77">the New York Agreement</a>. More specifically, I will be focusing on the incentives both of those parties have when it comes to dealing with SegWit2x.<br />
<br />
<h3>
What is SegWit2x?</h3>
<div>
<br /></div>
<div>
SegWit2x was <a href="https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2017-March/013921.html">first proposed as a compromise</a> between the various factions in Bitcoin that were trying to solve the problem of <a href="https://tpbit.blogspot.ca/2015/07/who-stands-to-benefit-from-spam-attack.html">blocks being full</a>. It aimed to both enable the activation of <a href="https://en.wikipedia.org/wiki/SegWit">SegWit</a> to enable <a href="https://tpbit.blogspot.ca/2016/03/big-blocks-small-blocks-side-blocks-off.html">off-chain transactions</a>, and to increase the block size to 2MB to increase the number of transactions that can be processed on-chain. It was to be deployed in two stages - first by activating SegWit in the summer (which already took place), and then by increasing the block size in winter (which is still pending).</div>
<div>
<br /></div>
<h3>
Basic incentives for everyone</h3>
<div>
<br /></div>
<div>
When examining why people would be for or against a certain change, it is often useful to look at the incentives they have for being on either side of the fence. An incentive shared by every Bitcoin user and company is to see Bitcoin succeed, be used by more and more people and to gain in value. You can occasionally see someone stating the opposite (along the lines of "it's good the price is going down, it will slow the adoption rate so the project will be developed further before mainstream starts to use it", or people wanting to buy the dip in price), but most people that are invested in Bitcoin want to see it grow, that's pretty much a given.</div>
<div>
<br /></div>
<div>
Beyond that, things tend to get murky. You can see some ideologies come into play and so on. But if you focus on SegWit2x, the basic incentive for both sides appears to come down to the good old money...</div>
<div>
<br /></div>
<h3>
Incentives of Blockstream and the miners</h3>
<div>
<a href="https://www.crunchbase.com/organization/blockstream"><br /></a></div>
<div>
<a href="https://www.crunchbase.com/organization/blockstream">Blockstream is a for-profit company</a>. As such, it is expected it will increase in value and, at least eventually, start generating revenue. While it had <a href="https://www.reddit.com/r/btc/comments/6uae8q/blockstream_investor_is_pissed_congrats_to/">some projects that seem to be a money sink</a>, the core business plan seems to <a href="https://tpbit.blogspot.ca/2015/10/liquid-when-sidechains-say-fuck-it.html">still focus on sidechains</a> - "<a href="https://www.forbes.com/sites/laurashin/2017/10/23/will-this-battle-for-the-soul-of-bitcoin-destroy-it/#179db0b63d3c">sell[ing] side chains to enterprises, charging a fixed monthly fee, taking transaction fees and even selling hardware</a>" (which <a href="https://twitter.com/adam3us/status/923309367260274688">the Blockstream CEO even explicitly confirmed</a>). The original SegWit proposal <a href="http://coinivore.com/2017/08/07/bitcoin-proposal-bip-141-segwit-set-lock-tomorrow/">was introduced by Blockstream's co-founder</a>.</div>
<div>
<br /></div>
<div>
So with this, we have a clear picture - Blockstream's revenue stream will come from off-chain transactions. Now, let's look at the other side of the debate.</div>
<div>
<br /></div>
<div>
Miners are paid directly in BTC by the blocks they <a href="https://en.bitcoin.it/wiki/Mining">mine</a>. They mint new coins with each block, and they also collect <a href="https://en.bitcoin.it/wiki/Transaction_fees">fees</a> for any transactions they include in that block. At the moment the block reward is 12.5BTC, and the fees add up to about <a href="https://www.smartbit.com.au/charts/transaction-fees-per-block">0.5 to 2 BTC on average</a>. Pretty straightforward and as described <a href="https://bitcoin.org/bitcoin.pdf">in the original whitepaper</a>.</div>
<div>
<br /></div>
<div>
So the miners are incentivised to include as many transactions in their blocks as they can, giving priority to those that pay more fees than the others per unit of size.</div>
<div>
<br /></div>
<h3>
Clash of incentives</h3>
<div>
<br /></div>
<div>
Both sides of this debate get their money from the same source - transaction fees. Blockstream wants more transactions to flow through their proprietary service to collect more fees from institutions and individuals. The miners on the other hand benefit from more transactions taking place on the blockchain - they earn transaction fees only for the transactions that are included in the block and get nothing from off-chain transactions until they come back onto the chain. With finite amount of money flowing through the network, this is a classic zero-sum game - the more transactions flow through your preferred channel, the more money you have and the less money your opponent has.</div>
<div>
<br /></div>
<div>
In an ideal scenario, we would let both of those options onto the free market and let the consumer choose what they want to use. Some would choose off-chain transactions for their speed, others would prefer on-chain transactions for the immutable records, etc. In a truly free market, the best product will win and the market will reach equilibrium. However, one side is currently at a disadvantage.</div>
<div>
<br /></div>
<div>
The size of the blocks is currently fixed at 1MB and SegWit has been activated on the network. This means that the miners have a finite amount of space to work with, while Blockstream and similar service providers don't have to do much to promote themselves - when the consumer will see on-chain transactions being too expensive for them and the blocks being full, they will by necessity make their way onto their platform to be able to transact.</div>
<div>
<br /></div>
<div>
Moreover, <a href="https://en.bitcoin.it/wiki/Block_weight">SegWit transactions have a smaller "weight" to them</a>, meaning you can put more of them in a block and even go over the 1MB block limit with them.</div>
<div>
<br /></div>
<div>
So we have a company that benefits from the traditional blocks being filled, while also giving preferential treatment to on board onto and off board from its proprietary services, while blocking others from increasing the overall throughput, all for "the benefit of the consumer". This is basically the Net Neutrality battle all over...</div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<iframe allowfullscreen="" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/wtt2aSV8wdw/0.jpg" frameborder="0" height="266" src="https://www.youtube.com/embed/wtt2aSV8wdw?feature=player_embedded" width="320"></iframe></div>
<div class="separator" style="clear: both; text-align: center;">
Internet access or block throughput, it's all the same in the end...</div>
<div>
<br /></div>
<h3>
Dynamics of power</h3>
<div>
<br /></div>
<div>
Looking at this only from the lens of money is of course a bit of a simplistic view of things. There is probably a lot more politics, ideology and power in play - SegWit2x is a hard fork to the Bitcoin network being pushed by the miners rather than the traditional core developers. If it is allowed to pass, it will show that they don't have full control over the project and thus remove them from <a href="https://www.youtube.com/watch?v=rStL7niR7gs">a position of power</a>, while giving the miners more power on top of the computing power they already hold.</div>
<div>
<br /></div>
<h3>
Conclusions</h3>
<div>
<br /></div>
<div>
If you look at things from pure monetary perspective, the fight over SegWit2x is a fight about where the transaction fees will flow - whether they will be on or off the chain. Increasing the block size will mean more money will be going to the miners, while keeping it low will force more money to flow through SegWit-enabled services, and to a degree, through Blockstream.</div>
<div>
<br /></div>
<div>
SegWit2x is also a struggle for power in the space - who will be able to make changes to the protocol and how things will be handled in the future.</div>
<div>
<br /></div>
<div>
The struggle might be framed in many ways - allowing an average user to run Bitcoin on RaspberryPi, the centralisation of power in the hands of the miners or core developers, an attack on the Bitcoin network, etc. How much of that is genuine concern and how much of it is propaganda from either side it will be hard to discern.</div>
<div>
<br /></div>
<div>
But in the end, it's probably about money and power...</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-5346082525243517432017-07-11T08:58:00.000-07:002017-07-11T08:58:26.857-07:00A mark of one's existence - records in the blockchainPart of being a human is wanting to leave a mark on the world. Within us lies the deep need to be remembered, in some form, after we die. We see it in the <a href="https://en.wikipedia.org/wiki/Cueva_de_las_Manos">Cueva de las Manos - Cave of the Hands</a>, where the inhabitants left the outlines of their hands painted on the walls as early as 13'000 years ago.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-nKEO7UPF0lE/WWSTfDmqI6I/AAAAAAAAPfs/ACr2ihHBFhMTkTeKVuMcnY6qD6UzokonACLcBGAs/s1600/SantaCruz-CuevaManos-P2210651b.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://3.bp.blogspot.com/-nKEO7UPF0lE/WWSTfDmqI6I/AAAAAAAAPfs/ACr2ihHBFhMTkTeKVuMcnY6qD6UzokonACLcBGAs/s320/SantaCruz-CuevaManos-P2210651b.jpg" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
Cave of the Hands</div>
<br />
We hear the same plight from <a href="https://en.wikipedia.org/wiki/Horace">Horace</a> some 2000 years ago in his <a href="https://en.wikipedia.org/wiki/Odes_(Horace)">Odes</a> when he states "non omnis moriar" - "not all of me will die". Similarly, to condemn someone to be forgotten was a fate worse than death for the ancient Romans. It was called <a href="https://en.wikipedia.org/wiki/Damnatio_memoriae">damnatio memoriae</a>, or "the condemnation of memory".<br />
<br />
In our digital age it is perhaps easier than ever to remove someone from history. While it is easier than ever to record what's going on, it is similarly just as easy to alter and distort the events thanks to tools like Photoshop.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-pRPAZ_LjY00/WWSVucyh2FI/AAAAAAAAPf8/XEfsHZvDEWQP8xL0sIjfsZtAzR6euKNegCLcBGAs/s1600/ovE8LpI.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="416" data-original-width="581" height="229" src="https://3.bp.blogspot.com/-pRPAZ_LjY00/WWSVucyh2FI/AAAAAAAAPf8/XEfsHZvDEWQP8xL0sIjfsZtAzR6euKNegCLcBGAs/s320/ovE8LpI.jpg" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://www.reddit.com/r/atheism/comments/1qay1v/frequency_of_miracles/">Frequency of miracles</a></div>
<br />
Photos can be altered, memories can be called into question, records could be rewritten, and we can end up with <a href="http://mandelaeffect.com/berenstein-or-berenstain-bears/">the Mandela Effect</a>. Add to it <a href="https://en.wikipedia.org/wiki/Right_to_be_forgotten">the right to be forgotten</a>, and soon it might be hard to believe any record or lack of it on the Internet. George Orwell would be proud of what we could do to make someone an <a href="https://simple.wikipedia.org/wiki/Unperson">unperson</a>.<br />
<br />
Everything could be subject to change. Everything that is, except blockchains.<br />
<br />
<h3>
Proof of Existence</h3>
<br />
While working at Factom I heard a great tagline - "It is hard to guess today what lie you want to tell tomorrow". It might be a very profound statement in today's world of digital records - if you can't backdate, alter historical records or the like, you'd better be completely sure how you want to proceed ahead of time.<br />
<br />
All of this is of course only possible through the Proof of Existence and the blockchain technology. Only networks such as Bitcoin or Ethereum can be seen as objective records of history anymore. They alone are big enough to be secure from tampering (if you can't 51% attack the blockchain, you can't rewrite the history) and public enough to ensure any attempt at tempering with them will be a publicly known event. Because of that, any data embedded in the blockchain will remain unchanged and hopefully preserved as long as the blockchain persists.<br />
<br />
<h3>
Record of my data</h3>
<br />
Today is my 30th birthday, and I decided to celebrate with a little experiment.<br />
<br />
A few months back I contacted the <a href="http://www.personalgenomes.ca/index.html">Personal Genome Project Canada</a> to participate in their research and get my genome sequenced. It has been an interesting experience, and I did find some correlation between my genetic predispositions and the health quirks I've been experiencing my whole life.<br />
<br />
During the study I requested a copy of my sequenced genomic data. It was shipped to me on an external hard drive as the files themselves were 200GB. After leaving my computer to crunch the numbers, the SHA256 results was spit out - "de7a8430be51538ebcdd031390e0de3f7cde74a9c88a76e64406e88b6259d4fe". That was the hash of my genetic information - probably the most elegant version of a digital hand print I could find.<br />
<br />
After playing with the debug options in BitcoinQT, I managed to wrap it up neatly in the transaction <a href="https://blockchain.info/tx/32a0f8febb0f9f9c7fe1ce9a6b2a59356f443e27186d2e4b5c5a9a3e5e16f4cd?show_adv=true">32a0f8febb0f9f9c7fe1ce9a6b2a59356f443e27186d2e4b5c5a9a3e5e16f4cd</a>, sent from my two favourite addresses - 17TQLZvXjKTrUyRnV9DuQs4RVDgNjUPeXQ, the address in which I received <a href="https://blockchain.info/tx/33bfa21a2245f78505f8663168018f2b6818bb229dd3c7a3c0f958a2eb050bf1">my first coins in 2011</a>, and 1PiachuEVn6sh52Ez7o6Fymvw54qvQ4RBm, my own geeky little <a href="https://tpbit.blogspot.ca/2015/04/vanity-pool-geekiest-service-in-bitcoin.html">vanity address</a>. And so, in block <a href="https://blockchain.info/block-index/1597975">1597975</a> (000000000000000000b43bb4162374befa73a882efa6279d87cd3f11548cff59) my transaction was anchored and became part of the blockchain history, along things like <a href="https://www.cryptocoinsnews.com/bitcoin-wedding-marriage-on-the-blockchain/">the blockchain marriage</a>, <a href="https://bitcoin.stackexchange.com/questions/3370/in-which-block-was-len-sassaman-memorialised">a tribute to Len Sassaman</a>, and <a href="https://en.bitcoin.it/wiki/Genesis_block">the infamous Times headline chosen by Satoshi Nakamoto</a>. To the best of my knowledge, I'm the first person to have embedded a hash of their full genetic information this way.<br />
<br />
It wasn't my first foray into embedding data into the Bitcoin history. That honour had to go to <a href="https://bitcoin.stackexchange.com/questions/3444/has-any-illegal-data-been-saved-in-the-block-chain/3527">the illegal number from 2012</a> that was done as part of my <a href="https://bitcointalk.org/index.php?topic=88149.0">master thesis research</a>.<br />
<br />
<h3>
Larger records of data</h3>
<br />
Admittedly, the process of saving the data into the Bitcoin blockchain was a bit complicated. Preparing the inputs by hand, making sure the data itself is fairly small, it can all be rather limiting and potentially get expensive with larger amounts of records. Hence why it might be worthwhile to consider protocols that extend the Bitcoin protocol, while still offering the same cryptographic proof of existence. In comes Factom (full disclosure: I work for Factom).<br />
<br />
With the intent of storing the same data, I created a new chain with my name and alias - <a href="https://explorer.factom.org/chain/ef020b0dc14223ca454cb69b36143ffbafa8b09c0ff962b18742cd97a02735c9">ef020b0dc14223ca454cb69b36143ffbafa8b09c0ff962b18742cd97a02735c9</a>. The hash was anchored in transaction <a href="https://explorer.factom.org/entry/cdeb46cad69c01f79864e20a56cb227b94c9738b79d8291e4181f5cbd9b86f27">cdeb46cad69c01f79864e20a56cb227b94c9738b79d8291e4181f5cbd9b86f27</a> that became part of the block <a href="https://explorer.factom.org/dblock/d8fea7d7df13f0e629817a552719a7e7e9860023313ddaa5fa76ad34d655ace1">96731</a> (d8fea7d7df13f0e629817a552719a7e7e9860023313ddaa5fa76ad34d655ace1).<br />
<br />
Now, there is an extra step that needs to be taken between here and Bitcoin - the anchoring process. That is performed externally by the an automatic server. It created a transaction <a href="https://blockchain.info/tx/bebfc29801239ad254da97b253c864736257143f17e3519e03e05e3761f57a8f">bebfc29801239ad254da97b253c864736257143f17e3519e03e05e3761f57a8f</a> that made its way into the Bitcoin block <a href="https://blockchain.info/block-index/1598016">1598016</a>. And here comes the magic trick that gets us between a Factom transaction into a Bitcoin block, "the receipt":<br />
<blockquote class="tr_bq">
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"receipt":{</blockquote>
<blockquote class="tr_bq">
"entry":{</blockquote>
<blockquote class="tr_bq">
"entryhash":"cdeb46cad69c01f79864e20a56cb227b94c9738b79d8291e4181f5cbd9b86f27"</blockquote>
<blockquote class="tr_bq">
},</blockquote>
<blockquote class="tr_bq">
"merklebranch":[</blockquote>
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"left":"cdeb46cad69c01f79864e20a56cb227b94c9738b79d8291e4181f5cbd9b86f27",</blockquote>
<blockquote class="tr_bq">
"right":"0000000000000000000000000000000000000000000000000000000000000003",</blockquote>
<blockquote class="tr_bq">
"top":"07e5e997757ce1c4e935aecff3e1fb4bb9f7c466329de38ae19c342106283e7b"</blockquote>
<blockquote class="tr_bq">
},</blockquote>
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"left":"c48f1c742f8aea8c834b07615776e6c9f79d2300b4e1eb29ea6e295a55823402",</blockquote>
<blockquote class="tr_bq">
"right":"07e5e997757ce1c4e935aecff3e1fb4bb9f7c466329de38ae19c342106283e7b",</blockquote>
<blockquote class="tr_bq">
"top":"6d423f0c963ce0a9744eec94e07816263b82c1514c048fc43c791e19a44b7458"</blockquote>
<blockquote class="tr_bq">
},</blockquote>
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"left":"ef020b0dc14223ca454cb69b36143ffbafa8b09c0ff962b18742cd97a02735c9",</blockquote>
<blockquote class="tr_bq">
"right":"6d423f0c963ce0a9744eec94e07816263b82c1514c048fc43c791e19a44b7458",</blockquote>
<blockquote class="tr_bq">
"top":"d985f353aa34b1b7f021a30816019eac3cfd486743eb81b63295d12e7aa182f6"</blockquote>
<blockquote class="tr_bq">
},</blockquote>
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"left":"76c2296711dfc90eff2cec432b5592155ce13c4bd0f9cc15b01f842994358f35",</blockquote>
<blockquote class="tr_bq">
"right":"d985f353aa34b1b7f021a30816019eac3cfd486743eb81b63295d12e7aa182f6",</blockquote>
<blockquote class="tr_bq">
"top":"cb75287e2e1b170e5f5dc99ae7b738139305ad822e0c311cbdfb82ab0fa5d31d"</blockquote>
<blockquote class="tr_bq">
},</blockquote>
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"left":"3c00225e5d9f6d5e62c2926c02c5c03c31eaa831ee48d6e216dbe3b637125665",</blockquote>
<blockquote class="tr_bq">
"right":"cb75287e2e1b170e5f5dc99ae7b738139305ad822e0c311cbdfb82ab0fa5d31d",</blockquote>
<blockquote class="tr_bq">
"top":"fd03d8be680bb8c36ba01f224c71160f934c732a42de1c6d1d106b678e0f23a6"</blockquote>
<blockquote class="tr_bq">
},</blockquote>
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"left":"fabbd3f11bb85847530a6493361f3654d8617ab82ea3e34ddcc337c976917ec9",</blockquote>
<blockquote class="tr_bq">
"right":"fd03d8be680bb8c36ba01f224c71160f934c732a42de1c6d1d106b678e0f23a6",</blockquote>
<blockquote class="tr_bq">
"top":"92545cf4f7485731b6ee9007f9d3348759cd2edda60a9e5e7bc6ef2fa4f11cd1"</blockquote>
<blockquote class="tr_bq">
},</blockquote>
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"left":"35f75955731e0cfd98653a5979c6e53a0e97cd49ae91b06ec31001a96625666c",</blockquote>
<blockquote class="tr_bq">
"right":"92545cf4f7485731b6ee9007f9d3348759cd2edda60a9e5e7bc6ef2fa4f11cd1",</blockquote>
<blockquote class="tr_bq">
"top":"4c9d45d122337f6a85084b1492bbd3fe5fcd8a2bbfc71e7bacf283668fa0770b"</blockquote>
<blockquote class="tr_bq">
},</blockquote>
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"left":"4c9d45d122337f6a85084b1492bbd3fe5fcd8a2bbfc71e7bacf283668fa0770b",</blockquote>
<blockquote class="tr_bq">
"right":"d9d488d0ddc24aae887d86ce094de1579fe10ce06e8f6b8cdb434f45c8d0cdcd",</blockquote>
<blockquote class="tr_bq">
"top":"c0ee8f8410515485de6ca7831dcd09856e08ec89799cf90778ea3211b41b4ba5"</blockquote>
<blockquote class="tr_bq">
},</blockquote>
<blockquote class="tr_bq">
{</blockquote>
<blockquote class="tr_bq">
"left":"e327276f2bbfa0bb9dc9d89095abcb0fe7dc3373a31392892099824c89c332a4",</blockquote>
<blockquote class="tr_bq">
"right":"c0ee8f8410515485de6ca7831dcd09856e08ec89799cf90778ea3211b41b4ba5",</blockquote>
<blockquote class="tr_bq">
"top":"d8fea7d7df13f0e629817a552719a7e7e9860023313ddaa5fa76ad34d655ace1"</blockquote>
<blockquote class="tr_bq">
}</blockquote>
<blockquote class="tr_bq">
],</blockquote>
<blockquote class="tr_bq">
"entryblockkeymr":"6d423f0c963ce0a9744eec94e07816263b82c1514c048fc43c791e19a44b7458",</blockquote>
<blockquote class="tr_bq">
"directoryblockkeymr":"d8fea7d7df13f0e629817a552719a7e7e9860023313ddaa5fa76ad34d655ace1",</blockquote>
<blockquote class="tr_bq">
"bitcointransactionhash":"bebfc29801239ad254da97b253c864736257143f17e3519e03e05e3761f57a8f",</blockquote>
<blockquote class="tr_bq">
"bitcoinblockhash":"000000000000000000746bcc20463036af6deb09931d78fbd02546042b80f1d1"</blockquote>
<blockquote class="tr_bq">
}</blockquote>
<blockquote class="tr_bq">
}</blockquote>
</blockquote>
<br />
While it might look like gibberish, it's a <a href="https://bitcoin.org/en/glossary/simplified-payment-verification">simplified payment verification</a>-style merkle branch leading from the transaction hash through the entry block <a href="https://www.factom.com/devs/docs/guide/factom-data-structures">key merkle root</a>, the directory block key merkle root, up to the Bitcoin transaction itself. As the chain of hashes is complete, one is able to mathematically prove that the transaction indeed made its way into the Factom block and got anchored into the Bitcoin blockchain.<br />
<br />
The same mechanism could be used to anchor data such as text into the blockchain, for example securing entire blog posts to prove they existed unaltered in their current state at a given point in time. I intend on doing that for this blog once I narrow down the ideal format, but that's a story for another day.<br />
<br />
<h3>
Conclusion</h3>
<br />
Bitcoin is probably the first, objective, immutable record of history we have. Any data saved into the blockchain will hopefully remain preserved for a long time. It is possible to extend the Proof of Existence into larger data sets without needlessly expanding the Bitcoin blockchain.ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-85842916500989010282017-05-29T07:22:00.000-07:002017-05-29T07:22:48.035-07:00What other cryptos can learn from RippleWhile last week I <a href="https://tpbit.blogspot.ca/2017/05/counterarguments-to-xrp-value.html">criticised Ripple's XRPs</a>, we can't <a href="https://tpbit.blogspot.ca/2014/05/on-death-of-ripple.html">equate the whole system to its currency</a>. There are many fundamental features of the Ripple system that other cryptos can learn from. A lot of them are small and obscure to anyone who hasn't had a hands-on experience developing systems on top of cryptos. Luckily enough, <a href="https://bitcointalk.org/index.php?topic=88149.0">that's my speciality</a>.<br />
<br />
So here are a few features of the Ripple system that other cryptos can learn from, as viewed by a programmer.<br />
<br />
<h3>
AccountTxnID and Memos</h3>
<br />
Sometimes you need to send a transaction with some extra data attached. Whether it's an invoice ID, customer number, or some other business-related information, you have some data that needs to go into the blockchain. This will help you keep track of what transaction did what, give some identifiable information as to the origin of the transaction and so on.<br />
<br />
Even Bitcoin recognised the need for this feature by introducing <a href="https://bitcoin.org/en/release/v0.9.0#opreturn-and-data-in-the-block-chain">OP_RETURN in 2014</a>. Before that, people used to create unspendable transaction outputs that the system would have to keep track of forever.<br />
<br />
Ripple already had that at launch in 2012 in the form of <a href="https://ripple.com/build/transactions/#accounttxnid">AccountTxnID</a> and <a href="https://ripple.com/build/transactions/#memos">Memos</a>. The first is a short field, ideal for including transaction IDs and similar short strings. The latter can store a lot more complex data structures - long strings, multiple hex arrays, that sort of things.<br />
<br />
<h3>
LastLedgerSequence</h3>
<br />
When building a more complex cryptocurrency system, you have to deal with the fuzzyness of transactions before they enter a block. Essentially, when you send a transaction out, you might not know what will happen to it until it either becomes part of a block, or a conflicting transaction becomes part of a block. If a transaction becomes lost in the network, gets stuck in a processing queue, or there is something else wrong with the system, it's essentially stuck in a limbo. It may be confirmed in the next second, it may never be confirmed, or maybe it will take a few hours.<br />
<br />
So here's the problem - how do you handle such transactions? You can try resubmitting them if you have the hex representation of them, but that still doesn't guarantee an outcome. You can try double-spending yourself, but then you have two transactions stuck in a limbo. Do you resubmit a different transaction to credit the same person? Then you might accidentally send them the money twice if you're not careful. All of those outcomes are less than ideal.<br />
<br />
Here is where LastLedgerSequence comes in. It's a field you can include in a transaction that allows you to specify when a transaction will DEFINITELY fail. You put a ledger number sometime in the future, and if the transaction is not included before that given ledger number, you know for sure it will NEVER be included in a ledger. The transactions are allowed to <a href="https://en.wikipedia.org/wiki/Graceful_exit">fail gracefully</a> in a predictable manner.<br />
<br />
<h3>
Data vs Metadata</h3>
<br />
First generation cryptos are fairly straightforward. A transaction does one thing and one thing only - move money around. If a transaction gets included in a block it means the transfer went through, if it doesn't - it didn't. There are only two outcomes here.<br />
<br />
When talking about a more complex system, there will naturally be more possible outcomes. Maybe a transaction got included in a block and it did exactly what it was supposed to. Maybe it got included in a block but failed to achieve anything. Maybe there are different paths it could've taken to get to the outcome, etc.<br />
<br />
This is why Ripple transactions have both <a href="https://tpbit.blogspot.ca/2016/04/transaction-data-vs-metadata.html">data and metadata</a> to them. The first shows what a transaction SHOULD do, the second - what it DID do. This allows the transactions to be more complex, while still ensuring that any given transaction call returns all the information relating to a given transaction.<br />
<br />
<h3>
Built-in, dedicated distributed exchange</h3>
<br />
An efficient <a href="http://tiny.cc/Crypto">Crypto 2.0 system</a> benefits a lot from having a distributed exchange built into it. While some systems like NXT only allow trading a given IOU for its native token, Ripple goes one step further and treats all currencies the same. You can trade <a href="https://xrpcharts.ripple.com/#/">any currency for any other</a>, even to the point of <a href="https://tpbit.blogspot.ca/2017/05/counterarguments-to-xrp-value.html">undermining the value of XRPs because of it</a>. It is also a very important part of a few other features.<br />
<br />
While systems with smart contracts like Ethereum can mimic the functionality of Ripple's built-in exchange, it would be hard to compete with the efficiency of a dedicated exchange logic. As someone who has experience programming a crypto exchange, I can attest that order sorting and matching can be a complex task that would be hard to efficiently execute in a smart contract. Ripple has the strongest distributed exchange that I've seen in any crypto project.<br />
<br />
<h3>
Trades as part of a payment</h3>
<br />
In a system with multiple currencies, how do you go from having currency A to sending someone currency B? Quite often, you'll have to take that currency to some sort of market, trade it, then use the resulting funds to send the second currency directly. Alternatively, you use some sort of third party to brokerage the deal, take a cut and take its sweet time to get there.<br />
<br />
This is not a case with Ripple. A trade can happen as a part of a payment. Sending money from one address to another is just as simple whether you hold the same currency or not. <a href="https://docs.google.com/presentation/d/17pDHnVmmrsnNEg8O0_zDVhVNmM93_5IGXWTlL295irk/edit?usp=sharing">The currencies don't matter, only the value does</a>.<br />
<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-7Er7k_Kldfw/WSvq8TcUoqI/AAAAAAAAN7o/Ixb-XMZTO_E8MVrTRKHMPh848oz3uOxVwCLcB/s1600/Ripple%2Bpayment.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1042" data-original-width="1600" height="208" src="https://1.bp.blogspot.com/-7Er7k_Kldfw/WSvq8TcUoqI/AAAAAAAAN7o/Ixb-XMZTO_E8MVrTRKHMPh848oz3uOxVwCLcB/s320/Ripple%2Bpayment.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
A Ripple payment that can be fulfilled by 4 different currencies</div>
<br />
This feature leverages the power of a distributed exchange to its full potential. Everyone has access to the same market and doesn't need to hold more than one currency to transact with anyone on the network.<br />
<br />
<h3>
Atomic, multi-currency transactions</h3>
<br />
A big issue with transactions that span multiple currencies is the possibility of the transaction failing partially and the funds ending up in some transitory currency. If you're sending USD and expecting them to end up as GBP, you wouldn't want to end up with EUROs. This would be a bad outcome discouraging people from sending more complex transactions.<br />
<br />
Ripple solves that issue by forcing every transaction to be atomic. Either the transaction is fully processed, or it completely fails. There is no way to end up somewhere down the middle. Moreover, there is virtually no limit to how complex a transaction can be. You can send out one type of currency, which would take multiple different routes and touching on multiple currencies before ending up at your destination as the intended currency. It is rather remarkable.<br />
<br />
<h3>
The consensus algorithm and predictable block times</h3>
<br />
Ripple does not rely on a traditional mining algorithm to create its blocks. Instead, Ripple uses <a href="https://tpbit.blogspot.ca/2015/05/mining-versus-consensus-algorithms-in.html">a consensus algorithm</a> to issue its ledgers. While the system is more centralised than most cryptos because of that, it solves a lot of other important issues.<br />
<br />
First of all, the block times are quite consistent. You know exactly how often they are created and the interval between the blocks is very short and stable. Secondly, the system is more resilient against <a href="https://en.wikipedia.org/wiki/Front_running">front running</a>, making the distributed exchange more honest. Lastly, the system in general is less susceptible to market manipulation by the miners - they can't stall certain transactions or oracle data in hopes of manipulating the market and gaming the system.<br />
<br />
<h3>
Conclusions</h3>
<br />
While the Ripple system has its flaws, it also has a lot of interesting features other cryptos can learn from.<br />
<br />ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-49573162008077837192017-05-22T07:16:00.001-07:002017-05-22T07:16:15.799-07:00Counterarguments to XRP value prepositionAs some of you might know, I really like the idea behind the Ripple system. Creating a settlement layer based on trust and <a href="https://tpbit.blogspot.ca/2015/05/bitusd-vs-usd-ious.html">IOUs</a>, being able to issue <a href="https://tpbit.blogspot.ca/2015/02/the-rise-of-fiat-denominated-cryptos.html">any asset</a> easily, working quite well as <a href="https://tpbit.blogspot.ca/2014/12/ripple-as-middleware_31.html">a middleware layer</a>, <a href="https://tpbit.blogspot.ca/2015/04/specialists-not-generalists-upcoming.html">incentivising specialisation</a>, creating <a href="https://docs.google.com/presentation/d/17pDHnVmmrsnNEg8O0_zDVhVNmM93_5IGXWTlL295irk/edit?usp=sharing">a singularity of money</a>, all of that is great. The system is not without its flaws however - <a href="https://ripple.com/technical-faq-ripple-consensus-ledger/">centralisation of validators</a> is an issue, and so is <a href="https://tpbit.blogspot.ca/2015/08/a-legitimate-reason-for-premining-tokens.html">the token distribution</a>. While both are interesting topics, with the recent <a href="https://tpbit.blogspot.ca/2017/05/another-crypto-bubble-and-rise-of.html">meteoric rise in XRP price</a>, I think it's worth focusing on that part of the discussion.<br />
<br />
<h3>
Basics of Ripple and XRPs</h3>
<br />
Ripple is a <a href="http://tiny.cc/Crypto">Crypto 2.0 system</a> launched in late 2012. It is based on a protocol predating Bitcoin by a few years, known as <a href="https://en.wikipedia.org/wiki/Ripple_(payment_protocol)#Early_development_.282004.E2.80.9312.29">Ripplepay</a>. As any good Crypto 2.0 network, Ripple allows its users to issue and transact in any currency. It also supports its own native currency - ripples, or XRPs.<br />
<br />
XRPs have a few key uses on the Ripple network. They are used to pay <a href="https://ripple.com/build/transaction-cost/#transaction-cost">transaction fees</a>, and are required as <a href="https://ripple.com/build/reserves/">reserves</a> for any address using the network and creating trust lines. All in all, it serves as an anti-spam measure for the network. Moreover, since every account on the Ripple network can accept XRPs, it is also promoted as <a href="https://en.wikipedia.org/wiki/Ripple_(payment_protocol)#As_a_bridge_currency">a bridge currency</a>.<br />
<br />
IOUs are user-created currencies. While any address can issue their own currency, most people will be using IOUs issued by <a href="https://ripple.com/build/gateway-guide/">gateways</a>. Those will usually be denominated in <a href="https://tpbit.blogspot.ca/2015/02/the-rise-of-fiat-denominated-cryptos.html">fiat</a> or crypto. The IOUs can be <a href="https://ripple.com/insights/the-life-of-a-ripple-market-maker/">traded directly on the network</a>, sent from one user to another, and even perform atomic, multi-currency bounces in a single transaction.<br />
<br />
There are a few key differences between XRPs and IOUs. IOUs have a counterparty risk - if the issuing gateway defaults, the tokens will be worthless. You can only send IOUs to or through people that also trust the same gateway. The gateways usually charge a small percentage fee on every transaction. IOU transactions are a bit bigger and more complicated, meaning they can cost more to execute. XRPs are their own cryptocurrency, meaning they are not redeemable for anything directly.<br />
<br />
Beyond that, the Ripple network handles both XRPs and IOUs identically - both can be traded on the decentralised exchange built into the network, both can be part of multi-currency transactions, both operate at the same speed and they are both highly divisible.<br />
<br />
<h3>
Criticism of XRPs</h3>
<br />
The main criticism levelled at XRPs and thus also against the Ripple network is the way the coins were distributed. Ripple Labs, the creators of Ripple, created the network with 100B XRPs in it, and no new XRPs were created since the network inception. This is not an unknown practice in the crypto space - a lot of networks premine their tokens. However, the network creators usually only keep a fraction of the tokens for themselves, preselling the rest to anyone that wishes to buy some. Ripple Labs however, still owns about <a href="https://coinmarketcap.com/currencies/ripple/">60% of the originally issued tokens</a>. This raises a few issues.<br />
<br />
First, the company could try cashing out and potentially crash the market. It is very unlikely however. Ripple Labs has recently taken steps to promote <a href="https://ripple.com/insights/q1-2017-xrp-markets-report/">its XRP market</a> and put the majority of their XRPs into <a href="https://ripple.com/insights/ripple-to-place-55-billion-xrp-in-escrow-to-ensure-certainty-into-total-xrp-supply/">an escrow</a> (then again, the escrow is unlocking 1B XRP every month for the next ~4.5 years, so it could be better).<br />
<br />
Secondly, since the network fees are paid through burning XRPs, they essentially enrich everyone in proportion to the amount of XRPs they hold (if 1% of the tokens got burned, the remaining tokens would be worth about 1% more provided the market doesn't change). This means Ripple Labs is essentially earning 60% of all network fees on the network. This probably doesn't amount to much at the current time, but may be more important in the future.<br />
<br />
Lastly, the amount of XRPs owned by one company gives it a negative reputation. A lot of people in the crypto space dismiss Ripple outright as "a premined scamcoin" just because of the amount of coins owned by Ripple Labs.<br />
<br />
All in all, that isn't too damning really. Ripple Labs appears to be reputable enough not to try cashing out of what appears to be their golden goose. However, they are not the only major players around...<br />
<br />
The founders of Ripple Labs, Jed McCaleb, Chris Larsen and Arthur Britto gave themselves <a href="https://news.ycombinator.com/item?id=7795870">20B XRPs early on</a>. This <a href="https://en.wikipedia.org/wiki/Ripple_(payment_protocol)#Reception">later came to bite Ripple Labs in the ass</a>. Jed left the team to start his own version of Ripple called <a href="https://www.stellar.org/">Stellar</a>, and decided <a href="https://tpbit.blogspot.ca/2014/05/on-death-of-ripple.html">to sell his XRP stash</a>, resulting in <a href="https://pando.com/2014/08/15/ripple-settles-with-estranged-founder-jed-mccaleb-outlining-a-metered-sale-of-his-xrp-holdings/">a legal kerfuffle</a>, <a href="http://www.coindesk.com/ripple-jed-mccaleb-settle-suit-over-1-million-in-disputed-funds/">a settlement</a>, and <a href="https://forum.ripple.com/viewtopic.php?f=1&t=7641">a schedule</a> for how those coins may be sold. If those numbers are correct, Jed is still cashing out 20k USD per week, and come ~2019, he will be able to cash out 750M XRP (worth ~256M USD at today's price of 0.34 USD/XRP). Not an ideal situation if the money from your network will be going to a former employee building your direct competitor to the tune of a quarter of billion dollars. While some of those funds <a href="http://jedmccaleb.com/blog/my-settlement-victory-with-ripple/">might go to charity</a>, that's still not an ideal outcome.<br />
<br />
Now that we've dealt with most of the issues XRPs had to face, let's have a look at how XRPs fare on their own network.<br />
<br />
<h3>
XRPs vs IOUs</h3>
<br />
While Ripple the network has to compete with Bitcoin, Ethereum and other cryptocurrency networks, XRPs the currency have another important competitor - the rest of the assets on the Ripple network. Some networks, <a href="http://tiny.cc/Crypto">like NXT or Counterparty</a>, ensure their native token is at the centre of every trade - you can't trade IOUs for one another on those networks. In Ripple, you can transact purely in IOUs all day every day without touching XRPs for anything else than the fees.<br />
<br />
This ties to the central value proposition of XRPs - being the universal medium of exchange.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-gZcaTYTxIs0/WSK6XrbgLZI/AAAAAAAAN3U/GgRrT_zxCq0eZJrMSdXNu3AavuHgBwWzgCLcB/s1600/xrp-bridge3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="167" src="https://2.bp.blogspot.com/-gZcaTYTxIs0/WSK6XrbgLZI/AAAAAAAAN3U/GgRrT_zxCq0eZJrMSdXNu3AavuHgBwWzgCLcB/s320/xrp-bridge3.jpg" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
Distributed currency network vs XRP as medium of exchange (<a href="http://blog.rippex.net/br/2016/03/o-interledger-o-ripple-e-o-xrp/">source</a>, <a href="https://www.slideshare.net/ripplelabs/ripple-developer-conference-2013-at-money2020">presentation</a>)</div>
<br />
In short, the problem is as follows. If you have many different currencies on the network, you can have potentially a very large number of markets between those currencies (mathematically, twice as many markets as there are currencies). This means you would have to have a lot of market makers providing liquidity to every market. However, if everyone agreed to use XRPs as the common currency, you would only need to make one market per currency - between that currency and XRP.<br />
<br />
At the moment, it looks like that is the case - <a href="https://xrpcharts.ripple.com/#/">the major markets on the Ripple network</a> are all trading XRPs for the various currencies issued on the network. At the time of writing, 11M USD worth of trades and 88M USD worth of payments have been executed on the Ripple network in the last 24 hours, majority of which were using XRPs.<br />
<br />
The main advantages given for XRPs being better than IOUs are:<br />
<br />
<ul>
<li>XRPs are acceptable by anyone on the Ripple network</li>
<li>There are no extra transfer or trade fees on XRPs</li>
<li>XRPs have no counterparty risk</li>
</ul>
<br />
However, there are also some drawbacks to XRPs, even not counting the coin distribution and centralisation.<br />
<br />
Just because someone can receive XRPs, doesn't mean they'll want to settle in XRPs. The network just essentially forces everyone to have an unlimited trust line to XRPs, even if they wouldn't want to hold them.<br />
<br />
XRPs might be a decent universal currency for people that want to hold XRPs, but that might not be ideal for banks or big institutions. That's why we see networks like <a href="https://tpbit.blogspot.ca/2017/01/corda-and-distributed-ledger-technology.html">Corda</a>, or even <a href="https://interledger.org/">Interledger Protocol</a> (also developed by Ripple Labs) that don't rely on a native cryptocurrency gain traction, while the best example of a real-world application relying on crypto token in the middle is <a href="https://www.goabra.com/">Abra</a>. Creating a universal, international settlement currency was the idea behind Bitcoin, and you don't really see banks using it for that cause.<br />
<br />
Market making essentially boils down to either trading the currency like any other crypto, or copying the market from another source to offset your trades. The amount of liquidity you could copy with XRPs is small in comparison to the nigh-bottomless FX market from the real world. If you are going to see real-world use cases being deployed on Ripple, it will be more likely to see them leveraging the existing FX markets rather than going through XRPs.<br />
<br />
While XRPs have no counterparty risk, they also have no counterparty protection. If anyone steals your XRPs, they are gone. With IOUs, you can still appeal to the issuing gateway to halt the transaction and potentially track down where it was withdrawn to. The IOUs are thus much less of a target.<br />
<br />
On a similar note, XRPs are much harder to track, which would make them less appealing from a compliance standpoint. Gateways on the other hand can whitelist and blacklist addresses that can use their IOUs, thus having an easier time identifying anyone that uses their IOUs.<br />
<br />
If a value of a given currency changes in value, you only need to adjust the market using that currency. If XRPs were the universal currency against which all of the currencies would be traded, any time the value of XRPs would fluctuate, you'd have to adjust the entire market.<br />
<br />
Adding a new currency to the distributed IOU network wouldn't necessarily mean you'd have to trade it against every other currency. You could only start trading it against the most popular currency or a few currencies that are easy to make the market for (say, fiat<->USD, fiat<->EUR). Because you can easily execute multi-currency atomic transactions on the network, connecting to even one other currency connected to the network instantly means you are connected to the rest of the network.<br />
<br />
XRPs have no transfer fees attached to them. While is possible for a gateway to issue IOUs without transaction fees (that's essentially <a href="https://tpbit.blogspot.ca/2016/01/full-proof-of-solvency-pondering-tether.html">Tether's business model</a>, but on another network), perhaps even leveraging some other big crypto like Bitcoin or Ethereum through <a href="https://tpbit.blogspot.ca/2016/08/avoiding-bitfinex-scenarios-with-voting.html">voting pools</a>, the fees on those IOUs can always be changed. It seems that the network standard for transfer fees is <a href="https://www.gatehub.net/fees">about 0.2%</a>, which seems to be smaller than the spread on XRP's <a href="https://poloniex.com/exchange/#btc_xrp">biggest market</a> (at the time of writing, 0.00015086 sell, 0.00015003 buy, giving about 0.55% spread). So it is possible that sending money through a very liquid FX market you would pay less in transfer fees than going through a less liquid XRP market on just the spread.<br />
<br />
So this leaves XRPs with their primary role - paying <a href="https://ripple.com/build/transaction-cost/">transaction fees</a> and fulfilling the needed <a href="https://ripple.com/build/reserves/">reserves</a>. All in all, about 50-100 XRPs per person / account would be enough for a lifetime of usage. That used to be less than 1 USD, and now is about 35 USD.<br />
<br />
<h3>
Conclusions</h3>
<br />
The Ripple network is a very useful <a href="http://tiny.cc/Crypto">Crypto 2.0</a> tool. However, because of the high flexibility and value propositions of the IOUs on the Ripple network, they are XRPs' main competitor in its home court. While XRPs are still needed to pay the network fees, most of the remaining value prepositions can be seen as overstated. The recent rise in the price of XRPs appears to be largely relying on market speculation (as is the case for all crypto) and <a href="https://www.cryptoninjas.net/2017/05/08/korean-bitcoin-exchange-coinone-announces-launch-ripple-xrp-trading/">a new exchange coming on the market</a>.<br />
<br />
<h3>
Related links</h3>
<div>
<br /></div>
<ul>
<li><a href="https://www.xrpchat.com/topic/4565-ripple-for-dumdums-a-laymans-explanation/">Ripple for dumdums - a layman's explanation</a></li>
<li><a href="https://np.reddit.com/r/CryptoCurrency/comments/6bhjoa/explaining_ripple_xrp/">Explaining Ripple XRP</a></li>
<li><a href="https://np.reddit.com/r/Ripple/comments/6b1vec/why_xrp_will_be_valuable/">Why XRP will be valuable</a></li>
<li><a href="https://np.reddit.com/r/litecoin/comments/6bloxw/xrp_the_death_of_crypto/">XRP & The death of Crypto</a></li>
<li><a href="https://ripple.com/xrp/">XRP portal</a></li>
<li><a href="https://steemit.com/cryptocurrency/@lennartbedrage/the-ripple-xrp-effect-fundamental-analysis">The Ripple(XRP) Effect - Fundamental Analysis</a></li>
</ul>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-56686665083754196192017-05-14T23:25:00.000-07:002017-05-14T23:25:18.223-07:00Another crypto bubble and the rise of altcoin markets - a story in 9 chartsThe crypto markets seem to be in another bubble, orders of magnitude bigger than the last. However, this time a lot of the money is flowing into altcoins interestingly enough. How this situation will play out and where the market will stabilise at will be a really interesting story to watch unfold - whether Bitcoin will re-capture the market, or will some other crypto take its place. I would like to take this time to go over some of the history that brought us here however, as it's also a fascinating tale (if you like graphs).<br />
<br />
Here is a short version of the story, in one graph by <a href="http://woobull.com/">Woobull</a>:<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-Sz1zer-2QnU/WRjRJoPOqhI/AAAAAAAANzQ/ZdMSR06ME_An5k1mv_N_nZehVSQOqZgMQCLcB/s1600/c2q1kilxjiwy.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em; text-align: center;"><img border="0" height="201" src="https://3.bp.blogspot.com/-Sz1zer-2QnU/WRjRJoPOqhI/AAAAAAAANzQ/ZdMSR06ME_An5k1mv_N_nZehVSQOqZgMQCLcB/s320/c2q1kilxjiwy.jpg" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
Bitcoin network congestion, market dominance, and altcoin marketcap, by <a href="http://woobull.com/">Woobull</a>.</div>
<br />
<br />
This is a cautionary tale for Bitcoin, but before we can really talk about how Bitcoin might be impacted, we have to talk about some altcoins. So strap yourself in for this whale of a tale in 9 charts...<br />
<br />
<h3>
Story leading up</h3>
<br />
The story of this bubble really starts around 2015, when some Bitcoin core developers wanted to <a href="https://github.com/bitcoin/bips/blob/master/bip-0101.mediawiki">address the network congestion</a> they saw coming in Bitcoin. This was the start of the <a href="https://tpbit.blogspot.ca/2017/03/bitcoin-hard-fork-if-you-want-peace.html">Bitcoin scaling debate</a> that gave rise to <a href="https://tpbit.blogspot.ca/2017/03/fourth-year-of-rbitcoin-moderation.html">BitcoinXT, Bitcoin Unlimited, SegWit, UASF</a>, etc. The writing was on the walls - if Bitcoin continued to grow in popularity, soon the blocks would be full and <a href="https://tpbit.blogspot.ca/2015/07/who-stands-to-benefit-from-spam-attack.html">we would have to deal with the consequences</a>. Two years have passed, and no consensus has been reached, thus priming us for the current events.<br />
<br />
<h3>
Bitcoin Unlimited Rally</h3>
<br />
The bubble proper was started by the disagreement on how to scale Bitcoin. At the moment, there were <a href="https://tpbit.blogspot.ca/2017/03/fourth-year-of-rbitcoin-moderation.html">two major solutions being proposed</a> to address the issue - <a href="https://bitcoincore.org/en/2016/01/26/segwit-benefits/">SegWit</a> and <a href="https://en.wikipedia.org/wiki/Bitcoin_Unlimited">Bitcoin Unlimited</a>. Perhaps tired of waiting for consensus to emerge, perhaps prompted by Roger Ver's ambitions, Bitcoin Unlimited started to rally people behind its hard fork. Those came in two main waves - around October 2016, and March 2017, increasing both node count and number of blocks mined.<br />
<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-9yK1vFyS6Og/WRjVeEbSDyI/AAAAAAAANzU/_TdYtzT2Df8z8byDGnt7Gylb1kZIG-_9ACLcB/s1600/coin-dance-unlimitednodes.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="123" src="https://1.bp.blogspot.com/-9yK1vFyS6Og/WRjVeEbSDyI/AAAAAAAANzU/_TdYtzT2Df8z8byDGnt7Gylb1kZIG-_9ACLcB/s320/coin-dance-unlimitednodes.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://coin.dance/nodes/unlimited">Bitcoin Unlimited node count</a></div>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-ulBLhDhAW0c/WRjWJT89_cI/AAAAAAAANzY/0EjDBTezQxYR5MxBPVAawoFnl7LFgaKWQCLcB/s1600/coin-dance-blocks.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="123" src="https://4.bp.blogspot.com/-ulBLhDhAW0c/WRjWJT89_cI/AAAAAAAANzY/0EjDBTezQxYR5MxBPVAawoFnl7LFgaKWQCLcB/s320/coin-dance-blocks.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://coin.dance/blocks/historical">Bitcoin Unlimited mined blocks (green)</a></div>
<br />
The fact that Bitcoin Unlimited was gaining momentum, coupled with <a href="https://bitcoinmagazine.com/articles/bitcoin-unlimited-miners-may-be-preparing-51-attack-bitcoin/">rumours of a planned 51% attack</a> to cull <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">a network split</a> made serious waves in the community. We were faced with a real possibility that <a href="https://tpbit.blogspot.ca/2017/03/hard-fork-contingency-plans-and-segwit.html">the network will fork and perhaps split</a>. Every major player was taking sides in the discussion, and the tensions kept rising. The problem got exacerbated by the <a href="https://bitcoinmagazine.com/articles/breaking-down-bitcoins-asicboost-scandal-solutions/">Covert ASICBOOST scandal</a>. If Bitcoin had <a href="https://en.wikipedia.org/wiki/Doomsday_Clock">a doomsday clock</a> for the network splitting, it would probably be uncomfortably close to midnight.<br />
<br />
With the uncertainty of Bitcoin's future and the rising tensions, other events started to take place.<br />
<br />
<h3>
Rise of Ethereum</h3>
<br />
2016 has been a bit of a rollercoaster for Ethereum. The year started at a sub-dollar price per ETH, reached about 20 USD/ETH due to <a href="https://tpbit.blogspot.ca/2016/06/perfection-or-bust-rise-and-fall-of-dao.html">The DAO</a>, then slumped to about 7 USD/ETH after its <a href="https://blog.ethereum.org/2016/10/18/faq-upcoming-ethereum-hard-fork/">hard fork</a> and <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">network split</a>. The new year started on a positive note with <a href="https://www.ethnews.com/ethereums-road-map-for-2017">a roadmap for the future of Ethereum</a>. ETHs were sitting comfortably at #2 market spot by market cap, increasing a bit with Bitcoin price increases (<a href="https://coinmarketcap.com/historical/20170122/">1</a>, <a href="https://coinmarketcap.com/historical/20170205/">2</a>, <a href="https://coinmarketcap.com/historical/20170219/">3</a>, <a href="https://coinmarketcap.com/historical/20170226/">4</a>) as you'd expect in a calm market.<br />
<br />
Then March came along. Bitcoin Unlimited started gaining popularity, and the fear of a potential Bitcoin network split started shaping the market. While historically Bitcoin has been seen as the stable gold standard among cryptos, the safe heaven you'd park your money at if you didn't want to cash out into fiat. However, with the future of the network being uncertain, some people decided to move their wealth elsewhere.<br />
<br />
March was the month where Bitcoin slumped and Ethereum was there to pick up the money moving away (<a href="https://coinmarketcap.com/historical/20170305/">1</a>, <a href="https://coinmarketcap.com/historical/20170312/">2</a>, <a href="https://coinmarketcap.com/historical/20170319/">3</a>, <a href="https://coinmarketcap.com/historical/20170326/">4</a>). You can practically see the ~21B USD market cap shifting gently towards Ethereum, giving it a boost from 1.6B USD to 4.6B USD in that month, while Bitcoin went from 20B USD to 15B USD.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-nl4GXi-Jb3U/WRjc-nWLy-I/AAAAAAAANzo/SX_HYhpzfqIrlxFKJ1zIE1pkxh3ON1mxQCLcB/s1600/BTC.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="164" src="https://3.bp.blogspot.com/-nl4GXi-Jb3U/WRjc-nWLy-I/AAAAAAAANzo/SX_HYhpzfqIrlxFKJ1zIE1pkxh3ON1mxQCLcB/s320/BTC.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://coinmarketcap.com/currencies/bitcoin/">Bitcoin price chart</a></div>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-38Pwdwhgc5w/WRjc-msXnHI/AAAAAAAANzk/CbKvBw9l5B4917g0HLuhtZDbQy-GUqqBgCLcB/s1600/ETH.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="164" src="https://4.bp.blogspot.com/-38Pwdwhgc5w/WRjc-msXnHI/AAAAAAAANzk/CbKvBw9l5B4917g0HLuhtZDbQy-GUqqBgCLcB/s320/ETH.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://coinmarketcap.com/currencies/ethereum/">Ethereum price chart</a></div>
<br />
In April the Bitcoin situation started to calm down. Bitcoins started to recover along with their market cap going back to 21B USD by the end of the month (<a href="https://coinmarketcap.com/historical/20170402/">1</a>, <a href="https://coinmarketcap.com/historical/20170409/">2</a>, <a href="https://coinmarketcap.com/historical/20170416/">3</a>, <a href="https://coinmarketcap.com/historical/20170423/">4</a>, <a href="https://coinmarketcap.com/historical/20170430/">5</a>). However, another important development started brewing elsewhere...<br />
<br />
<h3>
Litecoin and SegWit</h3>
<br />
<a href="https://en.wikipedia.org/wiki/Litecoin">Litecoin</a> has always been "silver to Bitcoin's gold", its shadow. Sometimes outperforming Bitcoin price increases percentage-wise, but rarely making a big splash overall. Seeing Bitcoin stumble with its scaling solutions, it seized on the opportunity to make a name for itself.<br />
<br />
What is important to remember, is that Litecoin can be classified as a "<a href="https://tpbit.blogspot.ca/2014/04/smart-contracts-and-demise-of-copycoins.html">copycoin</a>" - a cryptocurrency largely operating similar to Bitcoin, on a pretty similar codebase with minor tweaks. It's so similar, that by chance or negligence, <a href="https://github.com/litecoin-project/litecoin/issues/179">Litecoin's multisig addresses have the same prefix as Bitcoin</a>. Copycoins in general operate on hype and innovation (real or <a href="https://bitcointalk.org/index.php?topic=896480.0">manufactured</a>) - there are so many similar coins that if you don't stand out from the crowd, you're going nowhere.<br />
<br />
While Litecoin did not have the network congestion issues of Bitcoin, it still decided to improve its network and push for SegWit adoption. While <a href="http://litecoin-segwit.info/">it looks like the process started in February</a>, there was a considerable rally for SegWit in late March, as indicated by the sudden jump in SegWit blocks and market activity.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-7DLzIJEhI8Y/WRjj7DZ33zI/AAAAAAAANz4/zYOPtrjBQIQivV6Myw18BBwR6U-PYC3eQCLcB/s1600/Litecoin%2BSegWit.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="142" src="https://2.bp.blogspot.com/-7DLzIJEhI8Y/WRjj7DZ33zI/AAAAAAAANz4/zYOPtrjBQIQivV6Myw18BBwR6U-PYC3eQCLcB/s320/Litecoin%2BSegWit.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://litecoin-segwit.info/">Litecoin SegWit adoption</a></div>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-gd2oT0JhhZs/WRjc-r8m8PI/AAAAAAAANzs/8YL_RX_6NismwgrdNlPE7zt9A58UiPz2ACEw/s1600/LTC.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="164" src="https://2.bp.blogspot.com/-gd2oT0JhhZs/WRjc-r8m8PI/AAAAAAAANzs/8YL_RX_6NismwgrdNlPE7zt9A58UiPz2ACEw/s320/LTC.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://coinmarketcap.com/currencies/litecoin/">Litecoin price chart</a></div>
<br />
The process was spearheaded by <a href="https://twitter.com/SatoshiLite">Charlie Lee, the creator of Litecoin</a>. A notable opposition to the SegWit progress were <a href="https://www.cryptocoinsnews.com/bitmain-suddenly-increases-antpool-hashrate-litecoin-block-segwit-activation/">Bitmain and Antpool</a>. Supposedly they were blocking Litecoin's SegWit activation to prevent further SegWit adoption on the Bitcoin blockchain, where they are allegedly profiting from <a href="https://bitcoinmagazine.com/articles/mining-manufacturer-blocking-segwit-benefit-asicboost/">Covert ASICBOOST</a>. After a long ordeal, Litecoin finally locked in and activated SegWit <a href="http://www.coindesk.com/litecoin-successfully-activates-long-debated-segwit-upgrade/">mere days ago</a>.<br />
<br />
There have been some other <a href="https://bitcoinmagazine.com/articles/which-altcoins-are-implementing-segwit-1481577969/">altcoins that also followed Litecoin's SegWit adoption</a>, but their stories aren't that interesting.<br />
<br />
The price also reflected that - going from under 5 USD/LTC at the start of the year with about 220M USD market cap, to a high of 35 USD/LTC and 1.8B USD market cap in the recent weeks. While this would normally allow it to take #3 spot on the crypto market cap list, another network had a meteoric rise that came largely out of nowhere...<br />
<br />
<h3>
Rise of Ripple</h3>
<br />
Ripple has had a mixed reputation in the Bitcoin community. It's the oldest and one of the most prominent <a href="http://tiny.cc/Crypto">Crypto 2.0 networks</a>. It has been caught the ire of bitcoiners in 2013 for being seen as "pro-regulation" during <a href="http://www.coindesk.com/bitpay-ripple-hearing-us-senate-committee-banking/">US Senate hearings</a>, <a href="https://tpbit.blogspot.ca/2014/05/on-death-of-ripple.html">declared dead in 2014</a> (Bitcoin has been declared dead <a href="https://99bitcoins.com/bitcoinobituaries/">over 100 times now</a>), has been <a href="http://www.coindesk.com/fincen-fines-ripple-labs-700000-bank-secrecy-act/">fined by FinCEN for Bank Secrecy Act Violations</a>, etc. Ripple Labs have developed essentially <a href="https://tpbit.blogspot.ca/2014/12/ripple-as-middleware_31.html">a competitor to its own network</a> - <a href="https://interledger.org/">the Interledger Protocol</a>.<br />
<br />
However, more recently it looks like the company is going back to its roots and focusing on the Ripple network. It stated publishing <a href="https://ripple.com/insights/q1-2017-xrp-markets-report/">quarterly market reports on XRPs</a> and <a href="https://letstalkpayments.com/the-tumultuous-rise-of-ripples-xrp/">talking about its plans for the future</a>. There are more and more news about <a href="https://ripple.com/network/financial-institutions/">various banks using its network</a>. All in all, it looks like the market has warmed up to the currency:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-wDdci_gXWHc/WRjc_NRbGEI/AAAAAAAANzw/pxKjsYt3nvIY4cCnJcY1R8C0sHDrtkxxwCEw/s1600/XRP.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="166" src="https://1.bp.blogspot.com/-wDdci_gXWHc/WRjc_NRbGEI/AAAAAAAANzw/pxKjsYt3nvIY4cCnJcY1R8C0sHDrtkxxwCEw/s320/XRP.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://coinmarketcap.com/currencies/ripple/">Ripple price chart</a></div>
<br />
While we see a small blip on the chart in early April when it crossed 1B USD market cap, the currency started to enter a meteoric rise around the start of May (<a href="https://coinmarketcap.com/historical/20170430/">1</a>, <a href="https://coinmarketcap.com/historical/20170507/">2</a>, <a href="https://coinmarketcap.com/historical/20170514/">3</a>). The year started with a market cap of 220M USD and a price of 0.006 USD/XRP, while currently it sits at 8.4B USD and 0.22 USD/XRP.<br />
<br />
Now, let's look at how this all comes together.<br />
<br />
<h3>
Market dominance</h3>
<br />
<a href="https://coinmarketcap.com/historical/20170514/">At the time of writing</a>, we this is how the market looks like:<br />
<br />
#1 Bitcoin - price: 1813 USD/BTC, market cap: 29.6B USD<br />
#2 Ripple - price: 0.22 USD/XRP, market cap: 8.4B USD<br />
#3 Ethereum - price: 90.8 USD/ETH, market cap: 8.3 BUSD<br />
#4 Litecoin - price: 29.6 USD/LTC, market cap: 1.5B USD<br />
<br />
Total market capitalisation of all coins: 55B USD, of which 25B USD are in altcoins. This means Bitcoin's market dominance is under 55%, while at the start of the story, it was about 85%:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-jZb8hbwR2W0/WRkB0b38X-I/AAAAAAAAN0A/9W6EE1PCiNQ16pE8qfgn5DDCdJIvTmaLgCLcB/s1600/Market%2Bdominance.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="164" src="https://2.bp.blogspot.com/-jZb8hbwR2W0/WRkB0b38X-I/AAAAAAAAN0A/9W6EE1PCiNQ16pE8qfgn5DDCdJIvTmaLgCLcB/s320/Market%2Bdominance.png" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://coinmarketcap.com/charts/">Market dominance</a></div>
<br />
Bitcoin has historically been the "gold standard" for crypto. The market leader, the first mover, the biggest whale. However, it seems like in this market if you're standing still, you're moving backwards.<br />
<br />
Since the start of our story, Bitcoin has periodically dipped in its price, but overall we're seeing all-time high price. The recovery was probably due to people worrying less about the potential network split that might come from Bitcoin Unlimited. Bitcoin is certainly stronger than ever, but there might also be blood in the water - despite the price of bitcoins rising, so too did the altcoin markets grew in leaps and bounds.<br />
<br />
Whether this bubble we're in right now (and it <a href="https://www.reddit.com/r/Bitcoin/comments/6a3lvd/today_i_took_out_a_325239_equity_loan_on_my_house/">certainly has</a> the <a href="http://www.barrypopik.com/index.php/new_york_city/entry/when_even_shoeshine_boys_are_giving_you_stock_tips_its_time_to_sell_joseph">look of a bubble</a>) will pop hard and the market will rebound in Bitcoin's favour, or whether a new paradigm will be made where bitcoins play less of a dominant role, only time will tell. It is very unlikely Bitcoin will ever sink too deep <a href="https://coinmarketcap.com/">into the coin list</a>, but if the scaling stalemate continues, Bitcoin's advantage will be eroded over time.<br />
<br />
For years one could easily dismiss altcoins as being a fad, nowhere near as mature as Bitcoin. But at some point you have to realise you might have to compete for your top dog spot. We're living in a market that is used to <a href="https://www.youtube.com/watch?v=DZCm2QQZVYk">exponential growth</a>, and Bitcoin's market cap is "only" two doublings away from its next competitor.<br />
<br />
<h3>
Conclusions</h3>
<br />
<div class="separator" style="clear: both; text-align: left;">
We are probably in the biggest crypto bubble to date. Not only has once again reached its all-time high price recently, but the altcoins have also grew by leaps and bounds.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
In the near future, I would expect some large contraction, especially in the alt market. Litecoin will probably dip back down now that SegWit is activated and its rally is over.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
It will be interesting to see where the money will flow if the value of bitcoins will pop - whether people will be cashing out to fiat, or altcoins.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
The biggest threat for Bitcoin is still the scaling issue - if that's not dealt with soon, the issue might just go away... along with many Bitcoin users that will switch to some of the alternatives.</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-60221964810312283412017-05-07T23:01:00.000-07:002017-05-07T23:01:39.548-07:00Direct and indirect earnings in cryptoThe crypto space is a strange place to be in over a long period of time. Once the coins you bought for a few dollars start becoming a noticeable portion of your net worth, you may start thinking to yourself - "should I work a normal job, or should I work for the cryptocurrency"?<br />
<br />
This mostly stems from the fact that you generally can't use a cryptocurrency without also being invested in it. I may hold $1000 in a credit card, but I don't own any shares in Visa or Mastercard. However, when I hold $1000 worth of bitcoins, I inevitably own a part of the Bitcoin economy. As its value rises and falls, so too do the coins in my wallet. While this also is true for real-world currencies, <a href="https://en.wikipedia.org/wiki/Circulation_(currency)">their market cap</a> is so far beyond us mere mortals that we can't really hope to influence it in a significant way. Cryptos are still fledgling economies where each person could make an impact.<br />
<br />
Some of the <a href="https://github.com/bitcoin/bitcoin/graphs/contributors">Bitcoin core developers</a> are also early Bitcoin adopters. I would imagine a good number of them hold a significant amount of coins. Those that do don't need to expect a salary for developing the core technology behind Bitcoin if their work contributes to the increased price of Bitcoin. If you hold $1M worth of coins and the value increases by 10% in a year, you have indirectly earned $100k that year. This is essentially the same as working for equity, except you can cash out more freely.<br />
<br />
The same goes to a lesser or greater extent to everyone else in the space. Anyone holding the coins stands to benefit from the coins increasing in value. While this can be benevolent, the same economic forces can <a href="https://www.cryptocoinsnews.com/maidsafe-embroiled-safecoin-presale-mastercoin-pump-dump/">encourage people to use their influence for personal gain</a> at the expense of the much broader community. Because coins aren't stocks, you can cash out and change "allegiance" at a drop of a hat unfortunately.<br />
<br />
Even when we're not talking about people that can influence the market, <a href="https://en.wikipedia.org/wiki/Endowment_effect">the endowment effect</a> is very much real in the crypto community. You value and perceive the coins you own much more favourably than the ones you don't. If you don't own ethers you might have cheered <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">when the network forked</a> and belittle its rise in price in the more recent times. It's a similar mechanism behind the "<a href="https://www.reddit.com/r/Bitcoin/comments/2b8t78/whats_hodl/">hodl</a>" mentality. Even though you may benefit from selling coins when the value is going down and buying when the value is going up, some people tend to prefer holding onto their coins going up and down rather than realising their gains or losses. "If the price is going up, my bitcoins will be worth more. If the price is going down, I'll be able to buy more bitcoins".<br />
<br />
With the value of various coins going through the roof in recent months, more and more of us will have to face the dilemma of what to do in regards to our growing crypto stash. Whether we continue working our day jobs like nothing happened, retire to a possible life of luxury, or perhaps start working for our cryptos in hopes of contributing to the community and indirectly to the value of our coins. A single person's contribution might not be that large, but a large community working towards similar goals can be influential. Everyone owning a crypto has their skin in the game.ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-14391868980076080652017-04-30T22:58:00.000-07:002017-04-30T22:58:49.864-07:00IOU price vs trust - a look at Tether<a href="https://tpbit.blogspot.ca/2015/02/the-rise-of-fiat-denominated-cryptos.html">Fiat-denominated IOUs</a> have a long history in the crypto space. Ripple launched in 2012 with its host of <a href="https://www.gatehub.net/gateways">fiat gateways</a>. <a href="https://bitsharestalk.org/index.php?topic=7521.msg100271#msg100271">BitUSD</a> and <a href="http://omnichest.info/lookupsp.aspx?sp=31">TetherUS</a> began circulating in 2014. <a href="http://www.bitcointalkradio.com/gaw-announces-coinstand-enabling-users-to-purchase-with-a-20-paycoin-value-will-it-work/">PayCoin</a> launched and died in 2015. It seems that recently Tether has gotten itself into some banking problems and <a href="http://www.jsfour.com/untethered/">its price started to reflect that</a>. While the ordeal is not great for the company or anyone holding the tokens, it's still an important lesson to be learned in the crypto space - <a href="http://tomconnor.hungrypeasant.com/2015/06/21/the-value-of-money/">a dollar is not a dollar is not a dollar</a>.<br />
<br />
Related articles:<br />
<br />
<ul>
<li><a href="https://tpbit.blogspot.ca/2015/02/the-rise-of-fiat-denominated-cryptos.html">The rise of fiat-denominated cryptos</a></li>
<li><a href="https://tpbit.blogspot.ca/2015/05/bitusd-vs-usd-ious.html">BitUSD vs USD IOUs</a></li>
<li><a href="https://tpbit.blogspot.ca/2016/01/full-proof-of-solvency-pondering-tether.html">Full Proof of Solvency - pondering Tether</a></li>
</ul>
<br />
<h3>
Tether</h3>
<div>
<br /></div>
<div>
<a href="https://tether.to/">Tether</a> is a company issuing fiat IOUs on the Omni network. At the moment they offer USD and EUR IOUs and claim to be <a href="https://wallet.tether.to/transparency">100% backed</a> by their assets with <a href="https://tpbit.blogspot.ca/2016/01/full-proof-of-solvency-pondering-tether.html">a proof of solvency</a>. However, their terms of service <a href="https://twitter.com/Bitfinexed/status/858559740611317761">don't inspire confidence</a>:</div>
<div>
<br /></div>
<div>
"</div>
<div>
There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.</div>
<div>
"</div>
<div>
<br /></div>
<div>
That being said, for a long time their USD <a href="https://coinmarketcap.com/assets/tether/">price remained rigid</a> in comparison to things like <a href="https://coinmarketcap.com/assets/bitusd/">bitUSD</a>. That is understandable - <a href="https://bitcointalk.org/index.php?topic=1785007.0">exchanges</a> would accept it at par rather than trading it like any other asset.</div>
<div>
<br /></div>
<h3>
Banking problems</h3>
<br />
A month ago, Bitfinex and Tether ran into some banking problems with Wells Fargo. The latter was acting as a correspondent bank and decided to <a href="https://www.reddit.com/r/Bitcoin/comments/63zass/180_million_usd_belonging_to_bitfinex_and/dfy8xqg/?utm_content=permalink&utm_medium=front&utm_source=reddit&utm_name=Bitcoin">block wire transfers between the crypto companies and their customers</a>. Those wishing to cash their tethers out <a href="http://www.jsfour.com/untethered/">need to go through Kraken</a>, which decided to take a ~7% premium for the service due to the market problems.<br />
<br />
There are also some alleged shenanigans going around the <a href="https://www.reddit.com/r/Bitcoin/comments/6719bj/tether_announcement_about_their_banking_problems/dgn4yqt/">actual use of tethers by exchanges</a> and the <a href="https://www.reddit.com/r/Bitcoin/comments/6816h2/bitfinex_paid_back_bfx_tokens_with/">BFX tokens</a> (<a href="https://tpbit.blogspot.ca/2016/08/secondary-and-debt-markets-for-exchanges.html">related article</a>), but that's not directly relevant to our discussion at hand.<br />
<br />
<h3>
Dollar-dollar market</h3>
<br />
What this scenario shows is that there is that every currency needs a real market.<br />
<br />
A long time ago, before central banks became prominent, each <a href="https://www.bloomberg.com/view/articles/2012-10-19/when-banks-were-able-to-print-their-own-money-literally">bank used to issue their own banknotes</a> and the value of said banknotes would fluctuate based on the trust in the bank and so on. While that was a horribly inefficient system for the brick and mortar world of retail, wasting countless hours on currency conversions, individual counterfeit measures and so on, it could work really well in the digital space.<br />
<br />
A dollar from one bank or exchange is not worth the same as a dollar from another. A faster, more efficient exchange would have their tokens valued more favourably than a slow, clunky one. Eventually, the market would settle at some price that would indicate the level of confidence or quality of the exchange and that metric would be clear for every customer to see. We had that with <a href="https://tpbit.blogspot.ca/2016/08/secondary-and-debt-markets-for-exchanges.html">the final days of MtGox</a>.<br />
<br />
At the current time, the only place we can see a clear market like that is Ripple - <a href="https://charts.ripple.com/#/markets/USD:rhub8VRN55s94qWKDv6jmDy1pUykJzF3wq/USD:rvYAfWj5gh67oV6fW32ZzP3Aw4Eubs59B?interval=1d&range=2w&type=line">you can actually trade USD IOUs from two different gateways for one another</a> (at the time of writing, the exchange rate between Gatehub and Bitstamp USDs is about 1.11). While each gateway accepts their own tokens at par and allows you to withdraw the USD to your bank account, the price is driven by market makers that decide what premium to charge. If someone else finds a way to close that gap, they have a chance to make some money and <a href="https://tpbit.blogspot.ca/2015/04/specialists-not-generalists-upcoming.html">bring the market into a more realistic exchange rate</a>. In the end, the market decides what each IOU is worth, not some exchange.<br />
<br />
<h3>
Conclusions</h3>
<br />
While the current Wells Fargo problem is an important issue for Tether and Bitfinex, it is an important example for why we need a liquid market for all tokens, even those denominated in fiat. That and why <a href="https://tpbit.blogspot.ca/2014/12/ripple-as-middleware_31.html">correspondent banking</a> is a thing that needs to be replaced by cryptocurrency networks.<br />
<br />
A dollar is not a dollar is not a dollar.ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-22030269549137082662017-04-09T23:06:00.000-07:002017-04-09T23:06:30.284-07:00A path to riches and rags - crypto trading and investingCryptocurrencies are a fascinating development in technology. At the same time being an ingenious application of cryptography, the software designed to run it, and the currency that flows through the system. It is perhaps this tantalising mix of emerging technology and money that drives a lot of people that discover cryptocurrencies to greed at some point in their experience.<br />
<br />
A lot of people got rich with this technology already, whether through investing, innovating, gambling or dumb luck. Those people are often visible and praised, but let's not forget about the <a href="https://en.wikipedia.org/wiki/Survivorship_bias">survivorship bias</a> - there are probably just as many if not more people that have lost a lot of money trading cryptocurrencies.<br />
<br />
<h3>
The gold rush</h3>
<br />
A number of people I've talked to seem to be going through something akin to a "<a href="https://en.wikipedia.org/wiki/Gold_rush">gold rush</a>" at some point of their crypto career. This usually happens early on - you discover this new technology, figure out it's a form of money, then look at the past gains and tell yourself "wow, this can make me rich!". You immerse yourself in the crypto world, take in the torrent of information, then try going into mining, trading, or something similar. In my case - it was discovering the GPU mining during the first few days of <a href="https://tpbit.blogspot.ca/2016/06/bitcoin-historical-rallies-halvenings.html">the first Bitcoin bubble</a> (where the price went to a whopping ~$30 in the end).<br />
<br />
In most cases, the rush is rather unsustainable as a hobby - mining is a specialised industry, short-term trading is a gamble, and services developed by inexperienced developers <a href="https://bitcointalk.org/index.php?topic=83794.0">can be a liability</a>. You are more likely to get burned than to make an actual profit.<br />
<br />
From here, you can generally see a few transition options - deciding to cut one's losses and leave crypto altogether, "buy and hold" approach, or going professional.<br />
<br />
<h3>
Crypto as an investment</h3>
<br />
It is possible to treat cryptocurrencies as an investment - a high-risk investment. If you're lucky, you can get high returns. If you're not - you will end up with nothing.<br />
<br />
A long while ago I came across an idea that "buying bitcoin is like investing in the entire bitcoin economy". Given Bitcoin's finite supply, the only way for the Bitcoin economy to grow to accommodate larger trades is through increase in velocity (how fast the coins circulate) and through the increase in value. Assuming you expect the Bitcoin economy to grow, you can expect the value of Bitcoin to grow as well. Same goes for other cryptocurrencies adhering to similar principles.<br />
<br />
That being said, it is very important to remember that an investment in a cryptocurrency is not the same as an investment in a company that makes that cryptocurrency. <a href="https://tpbit.blogspot.ca/2014/05/on-death-of-ripple.html">XRP is not the same as Ripple Labs</a>, factoids are not the same as Factom, etc. By investing in a company, you enter into a legally binding agreement. By buying the tokens, you're just holding the tokens. The company may do well developing <a href="https://interledger.org/">projects unrelated to the token it initially created</a>, which will increase the share price, but not necessarily the token price. Same is true the other way around - someone else may step in and make the token valuable, or possibly manipulate the price (for example, <a href="https://www.cryptocoinsnews.com/maidsafe-embroiled-safecoin-presale-mastercoin-pump-dump/">the hairy MAIDSafe presale on Mastercoin</a>). The distinction is important to make.<br />
<br />
While there are a lot of investment vehicles available for people in the developed countries, cryptocurrencies might be a more inclusive way to invest for <a href="https://tpbit.blogspot.ca/2014/10/for-unbankables.html">the less fortunate people</a>, or those wishing to hedge away from their <a href="https://tpbit.blogspot.ca/2016/01/cryptocurrencies-as-protection-from.html">government's monetary policy altogether</a>. While this sort of way of investing can certainly yield great benefits, it can also be a fertile ground for scammers.<br />
<br />
As usual, the age-old advise applies - don't invest more than you can afford to lose, hold, don't try to day trade, keep your coins safe.<br />
<br />
I'd also add an advise to buy coins with long-term growth potential - coins developed by competent people, being a dominant player in their own crypto niche, etc. Those have a higher chance of sticking around than <a href="https://tpbit.blogspot.ca/2014/04/smart-contracts-and-demise-of-copycoins.html">the flash-in-the-pan copycoins</a>.<br />
<br />
<h3>
Crypto trading</h3>
<br />
An alternative to buying coins and holding them is to do trading. Bitcoin, the biggest crypto out there is certainly <a href="https://btcvol.info/">a volatile currency</a>. <a href="https://coinmarketcap.com/">Altcoins are just a wild ride</a>, <a href="https://bitcointalk.org/index.php?topic=896480.0">pumpers exist to exploit people</a>, <a href="http://www.cnbc.com/2014/10/09/bitcoins-bearwhale-and-the-future-of-a-cryptocurrency.html">whales can sway the market</a>, <a href="https://www.wired.com/2013/12/bitcoin_honey/">the honey badger don't care</a>, etc. If you can make sense of this madness, there is certainly a lot of money to be made here.<br />
<br />
However, <a href="https://www.reddit.com/r/ethtrader/comments/606fz4/my_final_margin_call/">the same riches can be lost as easily as they can be gained</a>. A few interesting words of wisdom:<br />
<br />
<br />
<ul>
<li><a href="https://www.reddit.com/r/ethtrader/comments/5zaplw/daily_discussion_14mar2017/dexn2z5/?context=3">The market can stay irrational longer then you can stay solvent</a></li>
<li>Leverage trading in a volatile market is essentially gambling</li>
<li><a href="https://www.reddit.com/r/wallstreetbets/comments/63rp98/i_lost_30k_in_2_months/dfwhp09/">Meaningless pleasure is worthless, gambling doesn't produce anything but debt</a></li>
</ul>
<div>
<br /></div>
<div>
Generally, trading cryptos is about speculating on which system will deploy the next big feature, get the next big headline, or score the next big partner. The only problem here is that the markets are so thin in comparison to the wallets of the big players, that they can be easily swayed in a direction that is not rational - this is why short-term trading is very risky.</div>
<br />
<br />
<h3>
If you don't know what you're doing, don't try to be too smart</h3>
<br />
In my crypto career I've had ample opportunity to make mistakes and learn from them. In the end, I came out ahead by sticking to what I know and not trying to be too smart for my own good. Here are some lessons I've learned along the way:<br />
<br />
You can't really predict the market - don't try to trade if you're not a trader.<br />
<br />
<a href="https://www.reddit.com/r/bitcoinmemes/comments/1p5iny/never_go_full_fiat/">Never go full fiat</a>. I once sold all of my coins when the market slowly crawled to about $25/BTC in early 2013. I had to buy them back at $35/BTC when the signs were clear the market wasn't going back down.<br />
<br />
Don't diversify your portfolio into stupid things, don't invest in any company that can't realistically outperform Bitcoin. Back in the day I liked the idea of being able to buy stocks in Bitcoin companies with bitcoin itself. In the end, I'm a few coins poorer, have some mostly worthless "stocks" held <a href="https://www.havelockinvestments.com/20131101-announcement.php">by a company in Panama</a>.<br />
<br />
Don't keep your coins at a rickety company. While I was lucky / smart enough to survive a number of Bitcoin exchanges going under without losing any coins (I've used <a href="http://siliconangle.com/blog/2011/08/01/third-largest-bitcoin-exchange-bitomat-lost-their-wallet-over-17000-bitcoins-missing/">Bitomat</a>, <a href="https://en.wikipedia.org/wiki/Mt._Gox">MtGox</a>, <a href="http://www.coindesk.com/bitcoin-polish-law-enforcement-investigating-bitcurex-exchange-shutdown/">BitCurex</a>, <a href="https://news.bitcoin.com/cryptsy-bitcoin-exchange-announces-massive-theft-shuts-indefinitely/">Cryptsy</a>, etc.). The two times my coins were lost were due to Ripple - some at <a href="https://en.bitcoin.it/wiki/WeExchange">WeExchange</a> (a gateway that also had some crypto stocks AFAIR), and others due to the Ripple's official wallet <a href="https://forum.ripple.com/viewtopic.php?f=2&t=3454">being a brainwallet by default</a>.<br />
<br />
Don't lend crypto. Back in the day, I tried BTCJam. Lost all of the coins I put in, and it didn't look like the company had any plans of trying to enforce the collections. <a href="https://www.reddit.com/r/Bitcoin/comments/3f12oi/btcjam_autoinvest_have_in_average_48_of_fraud/ctkbwu5/">Other users have similar experience of high default rates</a>. I've been staying clear of such websites ever since.<br />
<br />
Be patient, make informed, long-term decisions. In the end, this approach has been the most successful for me. I haven't sold a single coin in a long time and I have a decent diversity of cryptos I expect to do well for themselves in the long run.<br />
<br />
<h3>
Conclusions</h3>
<br />
Cryptocurrencies are a high risk investment. They can yield great returns, but also end up losing you all that you've invested in them overnight.ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com2tag:blogger.com,1999:blog-6364422533827776870.post-64901219381520437372017-04-02T23:35:00.002-07:002017-04-02T23:35:31.087-07:00Do you need a blockchain? A simple overview.Recently, I had a conversation with an entrepreneur that wanted to integrate blockchain into his business. After a lengthy conversation, we reached a conclusion that his project wouldn't really benefit from the technology at the current stage. While some blockchain enthusiasts might argue that most ventures would be better with a blockchain integration, figuring out when the technology isn't right for a project is just as important as increasing its adoption when it is.<br />
<br />
In light of that event, I put together some simple guidelines of when you should consider using a blockchain technology or cryptocurrencies in general, what benefits they can give you and what are some downsides. If none of those criteria fit, it might be best to reconsider chasing the blockchain fad for the time being.<br />
<br />
<h3>
1) You can't use the traditional banking system</h3>
<br />
If you are operating a business that has problems with the traditional banking system, you can use the cryptocurrencies to accept payments. Perhaps <a href="http://www.homebusinessmanuals.com/2013/02/list-of-paypal-unsupported-countries.html">PayPal is not supporting</a> your country, charging high fees, or <a href="https://tpbit.blogspot.ca/2014/10/for-unbankables.html">the nature of your business makes you undesirable for banks</a>. Maybe your local currency is under strong <a href="https://en.wikipedia.org/wiki/Foreign_exchange_controls">foreign exchange control</a> or experiencing <a href="https://en.wikipedia.org/wiki/Hyperinflation">hyperinflation</a>. In all of those examples, using cryptocurrencies such as Bitcoin as an alternative means of payment is an option.<br />
<br />
You might have problems getting your customers to pay you in those currencies, but this might be better than nothing.<br />
<br />
<h3>
2) You are sending money internationally</h3>
<br />
International bank wires can take a lot of time and be expensive. It is possible to circumvent some of that through the use of cryptocurrencies. There are some companies that support last-mile payments, such as <a href="https://coins.ph/">Coins.ph</a> in the Philippines, or <a href="https://www.goabra.com/">Abra</a> wanting to create "the Uber for money transfers". You could, conceivably, send a local wire transfer to your local Bitcoin exchange, convert it to BTC, then use those coins to complete the international payment.<br />
<br />
Solutions like these are still in their infancy however - you would have to make sure the right companies exist on both sides of your transaction and that the fees are reasonable.<br />
<br />
<h3>
3) Your business is forming close payment loops</h3>
<br />
If the money in your business is always flowing in one direction, say, from your customer's credit cards, through your bank account, down to your employees and suppliers, there isn't much room for the blockchain. The process of on boarding and off boarding would detract from your business. However, when your business starts forming closed loops of payments, you can start applying the blockchain.<br />
<br />
Say, you're moving money back and forth between two countries. You can keep track of the payments on a system like Ripple or Ethereum and only settle the difference at the end of the day, rather than having to perform a wire transfer each time money moves back and forth.<br />
<br />
While in this scenario you could accomplish a similar goal with a simple database, the more complex your system gets and the more actors get involved, the better you are fit for <a href="https://tpbit.blogspot.ca/2015/11/sample-bankchain-feature-set.html">a blockchain solution</a>.<br />
<br />
<h3>
4) You have a good infrastructure you can open to other parties</h3>
<br />
Let's say you are really good at handling the <a href="https://en.wikipedia.org/wiki/Last_mile">last mile payments</a> in your country. Whether it's a country that's hard to reach financially like China, or perhaps less focused on like the Philippines (going once more with our <a href="https://coins.ph/">Coins.ph</a> example). You can do good business there by yourself, but if you open your infrastructure for other people to use, you can be earning an extra income from them. In this scenario, the blockchain essentially <a href="https://tpbit.blogspot.ca/2014/12/ripple-as-middleware_31.html">acts as middleware</a> between your system and anyone that wants to use your connections. Coupled with a network effects of an open system like that, even a few vendors can form a very appealing web that spans the globe.<br />
<br />
You don't need to be handling payments to be in the infrastructure business. Market making, FX trading, international settlement and the like are also very much in demand.<br />
<br />
Unfortunately, systems like these aren't very common at this time. You might be building an infrastructure for the future, but at the present you might only get nominal activity at first.<br />
<br />
<h3>
5) You are creating a decentralised system</h3>
<br />
If you are building a decentralised system, a blockchain may be useful for it. If it's well implemented, it can be a convenient, reliable way to synchronise data across many nodes. You can also create a cryptocurrency token to go along with the system to manage the scarce resources you would be dealing with, whether it's storage, bandwidth, or something else. <a href="https://maidsafe.net/">Decentralised storage</a>, <a href="https://namecoin.org/">DNS</a>, perhaps a new <a href="https://tpbit.blogspot.ca/2014/12/the-paradox-of-presales-pondering-gems.html">social network</a> or the like could all benefit from using a blockchain technology.<br />
<br />
That being said, a lot of decentralised systems might not benefit from this system. If you're dealing with the real world or trying to use the blockchain just as a settlement layer, you might not benefit from adding a specialised blockchain layer. Similarly, a blockchain won't make a bad project good - making a "Facebook killer" will take a lot more than that.<br />
<br />
<h3>
6) You need extra transparency</h3>
<br />
You are operating a business that can benefit from radical transparency and accountability. Perhaps you want to show <a href="https://news.bitcoin.com/dhs-awards-200k-factom/">your data hasn't been changed after it was created</a>, or that you have <a href="https://tpbit.blogspot.ca/2016/01/positive-and-negative-proofs-in.html">all of your financial records accounted for</a>. That's definitely where blockchain projects like <a href="https://factom.com/">Factom</a> can help you (full disclosure - I work at Factom). One of the core features of the blockchain technology is that the past data cannot be altered without invalidating any future records. And if the records are public, any alteration becomes evident.<br />
<br />
The main caveat for this approach is that blockchain-based proof of existence hasn't yet been tested in court, which means the first use of it as evidence would have to jump through some additional hurdles.<br />
<br />
<h3>
7) You want to innovate with the smart contracts</h3>
<br />
<a href="https://tpbit.blogspot.ca/2014/04/smart-contracts-and-demise-of-copycoins.html">Smart contracts</a> are an innovation in the blockchain space. They allow for the creation of autonomous programs that have access to their own money. This means you can run <a href="http://www.ledgerjournal.org/ojs/index.php/ledger/article/view/29">self-contained casinos</a>, create <a href="https://tpbit.blogspot.ca/2016/06/perfection-or-bust-rise-and-fall-of-dao.html">decentralised autonomous organisations</a>, etc. All very interesting and cutting-edge stuff that you can probably earn a pretty penny by building for and consulting to other companies that want to get into the blockchain space with their idea.<br />
<br />
Unfortunately, the space is currently very niche and a lot of the noteworthy projects are very much their own thing. If you know you want to be developing smart contracts and have an idea of what you want to build, you don't need this guide really.<br />
<br />
<h3>
8) You want to build for the cryptocurrency community</h3>
<br />
The cryptocurrency community is as vibrant as any community built around an emerging technology. There is some good money to be made catering to that, whether by tapping into new markets, <a href="https://www.alphapoint.com/">building exchanges</a>, wallets, payment processors, all sorts of stuff. There is money to be made in this space if you have the right product to offer.<br />
<br />
On the flip side, if you don't understand the market, you might not be able to earn enough money to get by. There have been countless companies that went under or never launched in the short history of the blockchain technology.<br />
<br />
<h3>
9) You want to create a new economy</h3>
<br />
We are getting into the more contentious use of the blockchain technology - creating new currencies, or "altcoins". Perhaps you are part of a community that wants to start its own currency - maybe <a href="https://tpbit.blogspot.ca/2015/05/time-banking-economics-of-sharing.html">based on time</a>, <a href="https://en.wikipedia.org/wiki/Auroracoin">nationality</a>, implementing <a href="https://tpbit.blogspot.ca/2015/03/sustainable-crypto-universal-basic.html">universal basic income</a> or the like. If you want the currency to be independent, freely traded in your community, you can use the blockchain technology for that. Many have tried that before.<br />
<br />
On the flip side, if you want to use this as some means of getting rich or the people you are working with don't have a strong need for their own currency, you might be creating another pump and dump coin that will come and go. We don't need <a href="https://coinmarketcap.com/">more of those</a>.<br />
<br />
<h3>
10) You want to raise money for your project with a crowdsale</h3>
<br />
Another contentious topic in the blockchain community - ITOs - <a href="https://tpbit.blogspot.ca/2014/12/the-paradox-of-presales-pondering-gems.html">Initial Token Offerings</a>. If you have a project that needs some funding to succeed and you can make a good case of how you can integrate it with a blockchain, you can try doing a token presale to get some money instead of looking for actual investors. There have been some good projects that used this model, like <a href="https://blog.ethereum.org/2014/07/22/launching-the-ether-sale/">Ethereum</a>, but there also have been a lot of bad projects that have gone down this route.<br />
<br />
Often, adding a token to a project doesn't make sense or makes <a href="https://tpbit.blogspot.ca/2014/12/the-paradox-of-presales-pondering-gems.html">the final product worse</a>. ITOs have a bad rep in the community for a reason. Unless you really know what you're doing or <a href="https://bitcointalk.org/index.php?topic=896480.0">are just in it for the money</a>, then you can use the blockchain technology for this goal.<br />
<br />
<h3>
Conclusions</h3>
<br />
These are roughly the main reasons why you'd want to consider using the blockchain technology in your business or project. If any of these resonate with what you're doing, you might find something to make your project better or at least more interesting. If not, your effort is probably best spent elsewhere.ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-16218361824163681242017-03-29T08:49:00.000-07:002017-03-29T08:49:13.667-07:00Hard fork contingency plans and SegWit readiness - a challenge to solution evangelistsCurrently, the biggest discussion in the Bitcoin community concerns the possible forks we might see this year - Bitcoin Unlimited and SegWit. Whether those forks should or should not be activated and whether they will create <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">a network split</a> is an important discussion, but what is less discussed is the <a href="https://www.scrumalliance.org/community/articles/2013/2013-may/risk-management-in-agile">risk mitigation</a> in case either of those forks happen. I would like to post a challenge to the various solution evangelists to see if their software is ready for any outcome.<br />
<br />
Note - some questions apply to more than one scenario. Duplicates have been omitted for conciseness.<br />
<br />
<h3>
Scenario 1 - SegWit activates before Bitcoin Unlimited</h3>
<br />
Lets say SegWit activates before Bitcoin Unlimited or any other block scaling solution takes place.<br />
<br />
First, some questions to the Core team:<br />
<br />
<b>How much extra transaction throughput are you expecting to see with this solution?</b><br />
Do you have any estimates as to how many transactions should move off-chain in the near future? When do you expect this solution to start reaching critical mass to alleviate the block congestion?<br />
<br />
<b>How many of the big Bitcoin companies will be ready for SegWit?</b><br />
This important question is somewhat answered by <a href="https://github.com/bitcoin-core/bitcoincore.org/blob/gh-pages/_data/segwitsupport.csv">a handy spreadsheet</a> or <a href="https://bitcoincore.org/en/segwit_adoption/">two</a>. Let's have a look and see if some important players are missing... Coinbase is "planned" so far. BitPay is nowhere to be seen. BitGo is "wip". <a href="https://coinmarketcap.com/currencies/bitcoin/#markets">Top exchanges</a> - Poloniex, bitFlyer, BTC-E, OKCoin are missing. For the wallets - Armory, BreadWallet are wip, Bither, Exodus and Multibit HD are planned.<br />
<br />
All in all, the coverage looks good, but some top players still need to get on board.<br />
<br />
<b>What are the fees users should be expecting?</b><br />
A large pressure for the increase in the network capacity comes from the high fees to the average user. What fees should the users expect under SegWit? I've seen mention that <a href="https://bitcoincore.org/en/2016/10/28/segwit-costs/">on-chain fees will drop from 0.5BTC/block to about 0.2BTC/block</a>, but some numbers on the off-chain fees would also be interesting.<br />
<br />
<b>What is the block scaling plan going forward?</b><br />
Are you planning on changing the block size following SegWit? If so, when are we likely to see the size change and what would it be?<br />
<br />
And a big question for the Bitcoin Unlimited team:<br />
<br />
<b>Is your client SegWit ready?</b><br />
Are you ready to integrate SegWit into your client? <a href="https://www.reddit.com/r/Bitcoin/comments/6212lj/bitcoin_unlimited_crashes_assert_when_it_sees/">Will it have some issues</a> in case SegWit activates?<br />
<br />
<h3>
Scenario 2 - Bitcoin Unlimited activates first, network splits</h3>
<br />
In this scenario, Bitcoin Unlimited activates first and the network <a href="https://tpbit.blogspot.ca/2017/03/bitcoin-hard-fork-if-you-want-peace.html">splits itself</a> into Bitcoin Core and Bitcoin Unlimited.<br />
<br />
Question to both sides:<br />
<br />
<b>How are you mitigating the damages of the split for your users?</b><br />
There are many things that need to be considered when <a href="https://tpbit.blogspot.ca/2015/06/handling-bitcoins-during-hard-fork.html">the network splits</a>. How are you mitigating the cross-split replay vulnerability? How will you avoid the confusion when it comes to addresses being the same on both networks?<br />
<br />
Bitcoin Unlimited devs:<br />
<br />
<b>Is your code ready to be pulled to Bitcoin Core?</b><br />
A lot of people consider Bitcoin Core to be the "gold standard" when it comes to Bitcoin clients. Developing a different client without allowing the options to be pulled into Bitcoin Core cleanly will only make the adoption of your client harder.<br />
<br />
So, is your code ready to create a pull request to Bitcoin Core? Do you have a branch that is up-to-date with the latest commits to Core, or <a href="https://www.reddit.com/r/Bitcoin/comments/6212lj/bitcoin_unlimited_crashes_assert_when_it_sees/dfj1s7v/">will you need to catch up</a>? If you don't have these ready, it is almost inviting a network split, rather than working on keeping the network unified.<br />
<br />
<b>Will you be activating SegWit on your network?</b><br />
There are some good use cases for off-chain transactions - will you be activating SegWit or other soft forks required to run off-chain transactions on your network anytime soon?<br />
<br />
<b>How are you planning to convince more exchanges to adopt Bitcoin Unlimited?</b><br />
Some developers have sworn off BU completely - for example, <a href="https://www.cryptocoinsnews.com/bitgo-outlines-its-course-of-action-in-the-event-of-a-hard-fork-will-not-support-bitcoin-unlimited/">BitGo</a> (and thus indirectly - BitStamp, OKCoin, Kraken, etc.), while others <a href="http://www.coindesk.com/bitcoin-exchanges-unveil-emergency-hard-fork-contingency-plan/">might be on the fence</a>. Do you have any plans on convincing them to start supporting your software?<br />
<br />
Bitcoin Core devs:<br />
<br />
<b>Will you make your client opt-in compatible with Bitcoin Unlimited?</b><br />
This question was <a href="http://gavinandresen.ninja/ask-a-simple-question">originally asked by Gavin</a> - since "Bitcoin Core does not want to and does not make decisions on Bitcoin’s consensus rules", is Bitcoin Core prepared to let the users op-in to be able to connect to the Bitcoin Unlimited network? It shouldn't be that much work to add a flag disabling the block size check at the very least.<br />
<br />
<h3>
Scenario 3 - Bitcoin Unlimited activates first, minority network gets attacked</h3>
<br />
In this scenario, Bitcoin Unlimited activates first, the network splits, but the minority chain gets attacked by miners <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">in hopes of preserving only one side of the fork</a>.<br />
<br />
Bitcoin Core devs:<br />
<br />
<b>What is your contingency plan for such an attack?</b><br />
As I understand, the current plan is to change <a href="https://news.bitcoin.com/bitcoin-developers-changing-proof-work-algorithm/">the PoW algorithm in a hardfork</a>. Is that hard fork already in the works? Is the new PoW algorithm decided on yet? Has the hardfork been tested? It is a large change - you don't want to be scrambling around trying to figure this out while an attack is ongoing. Do you have your <a href="https://np.reddit.com/r/Bitcoin/comments/60ast5/bitfury_george_pledges_to_sue_all_involved_with/">legal side of things covered</a>? Will you be coordinating actions with important Bitcoin players, such as exchanges?<br />
<br />
Since hardforks don't come as often, are you planning on implementing any of <a href="https://en.bitcoin.it/wiki/Hardfork_Wishlist">the hardfork wishlist items</a> while you're at it? Will the hardfork also include SegWit?<br />
<br />
Bitcoin Unlimited devs:<br />
<br />
<b>What is your plan for such an outcome?</b><br />
Will you be endorsing the attack, or will you be disowning it? Are you prepared for potential legal, community, etc. backlash you might receive if the attack takes place (even if it's not of your own doing)?<br />
<br />
<h3>
Conclusions</h3>
<br />
There are many important questions that need to be addressed early on before Bitcoin starts forking. While we might still have some time before either fork activates, it's better to mitigate the potential risks early on than to scramble when they actually take place. I'm looking forward to developers from either of the sides sharing their thoughts on the issues raised here.ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-66496923711374339392017-03-26T23:04:00.000-07:002017-03-27T01:10:31.731-07:00Bitcoin hard fork - if you want peace, prepare for warOver the last few weeks we had a lot of people discussing <a href="https://tpbit.blogspot.ca/2017/03/fourth-year-of-rbitcoin-moderation.html">Bitcoin forks</a>. Every member of the Bitcoin community is voicing their opinions on the matter, so I figured I'd write down my thoughts as well.<br />
<br />
<h3>
Historical perspective</h3>
<br />
While the debate has picked up a lot recently, it's by no means a new problem. <a href="https://github.com/bitcoin/bips/blob/master/bip-0101.mediawiki">BIP101 proposed increasing the block size in mid-2015</a> and <a href="https://github.com/bitcoin/bips/blob/master/bip-0141.mediawiki">BIP-141 introduced SegWit in late 2015</a>. Since then we had a number of projects wanting to fork Bitcoin - <a href="https://en.wikipedia.org/wiki/Bitcoin_XT">BitcoinXT</a>, <a href="https://en.wikipedia.org/wiki/Bitcoin_Unlimited">Bitcoin Unlimited</a> and <a href="https://en.wikipedia.org/wiki/Bitcoin_Classic">Bitcoin Classic</a>. This is in addition to things like <a href="https://tpbit.blogspot.ca/2015/09/the-dawn-of-great-crypto-extinction-and.html">Sidechains</a>, <a href="https://tpbit.blogspot.ca/2015/10/liquid-when-sidechains-say-fuck-it.html">Liquid</a>, <a href="https://themerkle.com/bitfury-mines-a-block-signalling-the-segwit-user-activated-soft-fork/">user-activated soft forks</a>, etc.<br />
<br />
All in all, we can all agree (well, <a href="https://np.reddit.com/r/Bitcoin/comments/5qelvk/lukejrs_bip_for_blocksize_increase/">with some exceptions</a>) that we need to expand the Bitcoin network transaction capacity. We can't really wait much longer - this <a href="https://tpbit.blogspot.ca/2015/07/who-stands-to-benefit-from-spam-attack.html">was starting to be an issue in 2015</a>, and now it has become a necessity.<br />
<br />
<h3>
Bitcoin slowing down</h3>
<br />
Bitcoin for a long while had the first mover advantage - everyone wanted to get into it, develop on top of the platform, etc. Being in the community early was really fun - <a href="http://www.cbc.ca/news/technology/world-s-first-bitcoin-atm-opens-in-vancouver-1.2286877">seeing the first ATM launch</a>, getting merchants on board, etc. However, nowadays it's a different story. Waiting multiple blocks to get one confirmation, paying <a href="https://tradeblock.com/bitcoin/historical/1h-f-tsize_tot-01011-tfee_tot-01071">over 30 cents in fees</a>, etc. - that's not an ideal situation in comparison to what we saw years ago.<br />
<br />
If nothing changes, we'll probably see a lot of the big Bitcoin companies expand or migrate to other platforms. <a href="http://www.coindesk.com/coinbase-charge-fees-blockchain-transactions/">Coinbase already doesn't want to pay the fees by themselves</a>, <a href="http://blog.storj.io/post/158740607128/migration-from-counterparty-to-ethereum">Storj has moved to Ethereum</a>, etc. With Ethereum's <a href="https://coinmarketcap.com/">growing market cap</a>, there are only so many reasons to stay with Bitcoin...<br />
<br />
<h3>
The fork</h3>
<br />
So this brings us to the fork situation. There is currently a lot going on in the community, but from what I can understand, there are two main camps when it comes to forking at the moment - those that want to activate Bitcoin Unlimited and soon, and those that want to get SegWit activated sometime this year.<br />
<br />
When figuring out what can happen next, we have to keep in mind the scant few examples we had of <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">contentious coin hard forks in the past</a>.<br />
<br />
From what I can tell, Bitcoin Unlimited is heading in the direction of activating its hard fork no matter what. It's ramping up in node and mining power count. It is likely that <a href="https://np.reddit.com/r/Bitcoin/comments/5urfhs/fake_bitcoin_unlimited_nodes_popping_up/">the node count is fake</a>, and there have been some reports about the possibility of attacks on pools that don't signal Bitcoin Unlimited (<a href="https://np.reddit.com/r/Bitcoin/comments/617uwh/bu_block_signalling_means_nothing/">by orphaning non-signalling blocks in a minority attack</a>). There is also a concern with miners being blacklisted by <a href="https://np.reddit.com/r/Bitcoin/comments/5xklma/everyone_must_remove_his_hashpower_from_antpool/deisqgq/">the effective monopoly in mining ASICs</a> if they signal SegWit.<br />
<br />
Lastly, we need to keep in mind the man pushing for Bitcoin Unlimited adoption - Roger Ver. I'm not going to get into discussing his past or personality (there are plenty of trolls that have you covered), instead, lets focus on one fact - he's an early Bitcoin adopter, and he appears to be loaded. <a href="http://bitcoinist.com/roger-ver-sell-bitcoin-btu-trade/">Being able to trade 130k BTC loaded</a>. That's more than 4 times the amount of BTC Ethereum raised during its presale. So my guess is, that he could safely pay out of pocket to fund the forking effort, even if it doesn't make economic sense.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://i.imgur.com/SZAXMD7.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="176" src="https://i.imgur.com/SZAXMD7.jpg" width="320" /></a></div>
<br />
So because of this, I think the Bitcoin Unlimited will activate its fork sometime soon. Now, what will happen next?<br />
<br />
<h3>
The aftermath</h3>
<br />
It was interesting hearing <a href="http://gavinandresen.ninja/ask-a-simple-question">Gavin's exchange with Matt</a> on whether Bitcoin Core should have an opt-in flag to accept the possible fork or not. It looks like the answer for the time being is "no", which means the repository everyone considers to be the "gold standard" for Bitcoin will not accept Bitcoin Unlimited blocks, causing a fork.<br />
<br />
If you want to keep Bitcoin network on only one side of the fork, <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">you have to attack the other side</a>. Whether that is a moral or legal way of handling the situation - it's up for debate. At any rate, 51% attack on the Bitcoin Core side of the fork is a possibility that has to be kept in mind. Luckily, there is "a nuclear option" to defend against something like that - <a href="https://news.bitcoin.com/bitcoin-developers-changing-proof-work-algorithm/">PoW change</a>. Since the vast majority of Bitcoin mining power is in ASICs, any change to the mining algorithm makes all of that hardware obsolete. This will mean that an attacker that has been stacking up on ASICs will end up with a large pile of useless hardware, but also that <a href="https://np.reddit.com/r/Bitcoin/comments/60ast5/bitfury_george_pledges_to_sue_all_involved_with/">your honest miners will have the same issue</a>.<br />
<br />
So if Bitcoin Unlimited forks and tries attacking the Bitcoin Core side of the fork, it is likely we will end up with a PoW change fork and the unchanged, SHA256 fork. The SHA256 fork will either be kept alive by miners that oppose the Unlimited fork, or it will be left by the wayside as they will realise where the wind is blowing and switch over to Bitcoin Unlimited to maintain some income from their hardware.<br />
<br />
Early on, the PoW fork would still be vulnerable to an attack. There are a lot of <a href="http://www.cryptocoinsinfo.com/">altcoin miners</a> out there ready to put their CPUs and GPUs to work. Whether they will stand with the Bitcoin PoW fork supporters or be mercenaries for hire by the attackers remains to be seen.<br />
<br />
If there is no attack on the minority fork, the Bitcoin landscape will probably be more peaceful, but also more divided. A number of exchanges have already signed <a href="http://www.coindesk.com/bitcoin-exchanges-unveil-emergency-hard-fork-contingency-plan/">a statement on the hard fork matter</a>, and it looks like they will either be ignoring Bitcoin Unlimited, or treating it as an altcoin. So all in all, we'll have the Ethereum / Ethereum Classic scenario once more.<br />
<br />
If a fork happens and Bitcoin Unlimited doesn't secure key supporters early on (miners, exchanges, developers, etc.), it is possible it will go <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">the way of Elacoin</a>. A coin needs to be traded and developed upon to stay relevant.<br />
<br />
<h3>
Preparations</h3>
<br />
Since the fork has not yet happened, there is still some time for preparations. Every Bitcoin business will have to consider the implications of the fork on what they're doing. <a href="https://tpbit.blogspot.ca/2015/06/handling-bitcoins-during-hard-fork.html">How will customer BTC balance be handled? How will you prepare for the relay attack?</a> What are the edge cases you need to think about?<br />
<br />
Even working for <a href="https://factom.com/">Factom</a> I had a discussion about this issue, and we're not holding BTC balance for our users.<br />
<br />
Finally, every Bitcoin user will have to prepare for the fork. Whether you decide to hold onto bitcoins at a responsible exchange, keep it in your wallet, or sell it for now in hopes of buying cheap coins during the turmoil, you should make a conscious decision on what to do, or risk getting some of your coins lost in the process.<br />
<br />
<h3>
Conclusions</h3>
<br />
Bitcoin needs to address its transaction throughput sooner than leter. It is likely Bitcoin Unlimited will attempt to hard fork soon. The fork will either lead to the community being divided, or an attack on the minority chain to force everyone to switch. The attack will likely lead to another fork and an uncertain future fo the minority chain. Everyone should ready themselves for the fork.<br />
<br />
<a href="https://en.wikipedia.org/wiki/Si_vis_pacem,_para_bellum">If you want peace, prepare for war</a>.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://i.imgur.com/73QJxZe.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="209" src="https://i.imgur.com/73QJxZe.png" width="320" /></a></div>
<br />ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com1tag:blogger.com,1999:blog-6364422533827776870.post-51008780797601062012017-03-19T23:00:00.001-07:002017-03-19T23:00:54.631-07:00Fourth year of /r/Bitcoin moderationLast week marked my fourth year of moderating <a href="https://www.reddit.com/r/Bitcoin/">/r/Bitcoin</a> . A lot has changed in the last year, but also, <a href="https://tpbit.blogspot.ca/2016/03/on-rbitcoin-moderation-three-years-in.html">a lot has stayed the same</a>. So I figured I'd make some post to collect my thoughts on our current situation and a few important events that have transpired recently.<br />
<br />
Related topic - <a href="https://tpbit.blogspot.ca/2016/03/on-rbitcoin-moderation-three-years-in.html">On /r/Bitcoin moderation - three years in review</a><br />
<br />
<h3>
Coinbase and the mod reshuffle</h3>
<div>
<br /></div>
<div>
A few more perceptive readers might notice something has changed <a href="https://www.reddit.com/r/Bitcoin/about/moderators">in the mod team on /r/Bitcoin</a> - I'm claiming to have been moderating for four years, but the page only accounts for seven months. This mod reshuffle has been due to <a href="https://np.reddit.com/r/Bitcoin/comments/4v69le/coinbase_and_reddit_ceos_discuss_removal_of/">the alleged discussion between Coinbase and Reddit CEOs about removal of Theymos from the /r/Bitcoin mod team</a>. Our top mod reshuffled the mod team to ensure BashCo would be the first in line in case he gets removed, as unfortunately Reddit has some issues when it comes to managing moderators. While not an ideal situation from my perspective obviously, I could get behind BashCo being the top moderator if worse came to worse.</div>
<div>
<br /></div>
<div>
So, why was Coinbase allegedly discussing removal of Theymos? That was most likely spurred by the thread coming from Theymos to <a href="http://themerkle.com/theymos-threatens-to-ban-coinbase-from-reddit-bitcointalk-and-bitcoin-org/">label Coinbase as an altcoin service for their support of BIP 101</a> (the 8MB hardfork), effectively banning it from /r/Bitcoin and bitcointalk, two of the more prominent places to discuss Bitcoin.</div>
<div>
<br /></div>
<div>
My stance on this situation is that companies should be free to make their stance on the hard fork known without fear of being punished for it. Consensus on the hard fork comes from discussion, not from silencing dissident opinion. An opinion of one moderator should not dictate the discussion of the entire forum.</div>
<div>
<br /></div>
<div>
I would love to talk with Coinbase and Reddit CEOs about what issues they might have with our subreddit and how they would like to resolve them.</div>
<div>
<br /></div>
<h3>
Forks</h3>
<div>
<br /></div>
<div>
There is no denying it, Bitcoin blocks are practically filled by now. Some measure has to be taken in order to fix this problem soon. There have been many proposed solutions by now, including:</div>
<div>
<ul>
<li><a href="https://np.reddit.com/r/Bitcoin/comments/5qelvk/lukejrs_bip_for_blocksize_increase/">Decreasing the block size to 300kB with a scaling schedule that would go over 1MB around 2024</a> (thanks but no thanks Luke)</li>
<li><a href="https://en.wikipedia.org/wiki/Bitcoin_XT">BitcoinXT</a>, <a href="https://en.wikipedia.org/wiki/Bitcoin_Unlimited">Bitcoin Unlimited</a></li>
<li><a href="https://bitcoincore.org/en/2016/01/26/segwit-benefits/">SegWit</a></li>
<li>Even some <a href="https://np.reddit.com/r/Bitcoin/comments/5zsk45/i_am_shaolinfry_author_of_the_recent_user/">user-activated soft fork</a> has been proposed</li>
</ul>
</div>
<div>
Unfortunately, the scaling / forking debate has become more heated recently due to <a href="http://www.coindesk.com/code-bug-exploit-bitcoin-unlimited-nodes/">a bug in Bitcoin Unlimited that crashed a lot of nodes</a>. Following that, a lot of hostilities in the community have sprung up (along with terms like "<a href="https://np.reddit.com/r/btc/comments/608pxl/meanwhile_in_north_corea/">North Corea</a>"), and a number of exchanges have released <a href="https://www.scribd.com/document/342194766/Hardfork-Statement-3-17-11-00am#from_embed">a statement with their take on the situation</a>. <a href="https://np.reddit.com/r/Bitcoin/comments/607go5/bitcoin_unlimited_gonna_have_a_president_it_seems/">Bitcoin Unlimited is forming a Confederation with a president</a> and <a href="https://np.reddit.com/r/Bitcoin/comments/5zlgu3/why_i_think_bu_is_more_about_centralization_of/">getting some criticism for it</a>.</div>
<div>
<br /></div>
<div>
All in all, with the rising tensions in the community, I feel like we're headed towards <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">a contentious hard fork and a network split</a>. We will have an Ethereum / Ethereum Classic situation on our hand. While that doesn't bode well for our current situation, it looks like <a href="https://np.reddit.com/r/ethtrader/comments/5zz0ae/putting_things_into_perspective_thedao_vs_today/">Ethereum has more than recovered since its DAO incident</a>, so there is some hope in long-term recovery...</div>
<div>
<br /></div>
<div>
My stance on the hard fork situation is pretty much the same as it was last year. Bitcoin needs a scaling solution, and it pretty much needs it last year. The block size needs to be increased, or perhaps even <a href="https://en.wikipedia.org/wiki/Zero_one_infinity_rule">abolished one day</a>. That being said, SegWit is also <a href="https://tpbit.blogspot.ca/2016/03/big-blocks-small-blocks-side-blocks-off.html">not a bad idea</a>. It by no means should be the only solution, but it would work as a complementary approach.</div>
<div>
<br /></div>
<div>
As for the BU crash and the subsequent fallout, well, people make mistakes. It's unfortunate, but inevitable. Smaller teams are understandably more susceptible to unexpected crashes since there are fewer eyes on the repo and fewer people on at the same time to look out for new exploits 24/7. If any solution becomes the dominant Bitcoin implementation, it will have more scrutiny put on it. If it forks the network and remains its own blockchain, well, that's a different story entirely. It's hard for a small team to maintain a large financial system like Bitcoin.</div>
<div>
<br /></div>
<h3>
Too little and too much moderation</h3>
<div>
<br /></div>
<div>
A big divide in the Reddit Bitcoin communities is the issue of moderation. /r/Bitcoin moderation is generally seen as heavy-handed for obvious reasons, so a few communities have sprung up that are focused on much lighter moderation - <a href="https://www.reddit.com/r/bitcoin_uncensored/">/r/bitcoin_uncensored/</a> and <a href="https://www.reddit.com/r/btc/">/r/BTC</a> being the most prominent.</div>
<div>
<br /></div>
<div>
It was interesting to hear some thoughts from /u/jratcliff63367 , <a href="https://web.archive.org/web/20150817062035/https://www.reddit.com/r/Bitcoin/about/moderators">a former /r/Bitcoin mod</a>, when he announced <a href="https://np.reddit.com/r/btc/comments/5x3x7r/why_im_resigning_as_a_moderator_of_rbtc/">his resignation from the /r/BTC moderation team</a>. It seems that neither side of the /r/Bitcoin - /r/BTC split is sunshine and rainbows.</div>
<div>
<br /></div>
<div>
I could take time iterating over the various problems with both subreddits and communities, but that wouldn't be productive really. It seems like there is room for a new subreddit that would attempt to move away from the politics and take lessons from the existing communities on what to avoid, but that is neither here nor there at the moment.</div>
<div>
<br /></div>
<div>
My stance on the situation is that some moderation is needed, but moderation should not be shaping the discussion of potential forks. Oh how I miss /r/Bitcoin from early 2015, before the community grew more divided...</div>
<div>
<br /></div>
<h3>
Conclusions</h3>
<div>
<br /></div>
<div>
The /r/Bitcoin moderation situation for me hasn't changed much in the last year. Unfortunately, the Bitcoin community has grown more divided over the years, which makes the pressing issue of Bitcoin block debate even less civil. I hope that by this time next year something good will come of this and we'll be able to put some of our differences behind us, but I'm not holding my breath. It feels like we're heading for crossroads that will further drive a wedge between us...</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com1tag:blogger.com,1999:blog-6364422533827776870.post-26427151284899247252017-02-20T01:31:00.003-08:002017-02-20T08:53:17.549-08:00Blockchain Terminology - a developer perspectiveOne of the discussions I had with <a href="https://www.scc.ca/">SCC</a>'s committee on "<a href="https://www.scc.ca/en/standards/committees/iso-tc-307-blockchain-and-electronic-distributed-ledger-technologies">Blockchain and electronic distributed ledger technologies</a>" was about the various terminologies used by the Bitcoin / blockchain community. In light of that, I figured I would put together some of my interpretations of those terms as they might be viewed by a developer working in the field. The following list is by no means exhaustive and it could be further refined, but I hope at least some of the examples and nuances in meaning would be helpful in expanding some of the definitions of more rigorous dictionaries.<br />
<br />
<h4>
Address</h4>
<div>
A string of characters representing the destination of a funds transfer on a Blockchain. For example, "1PiachuEVn6sh52Ez7o6Fymvw54qvQ4RBm" is a Bitcoin address, "0xcd234a471b72ba2f1ccf0a70fcaba648a5eecd8d" is an Ethereum address. Addresses are usually a human-readible representations of a Public Key composed using <a href="https://en.bitcoin.it/wiki/Technical_background_of_version_1_Bitcoin_addresses">a fixed scheme</a>, but they can also represent concepts that don't correspond to Keys, like <a href="https://ethereum.stackexchange.com/questions/760/how-is-the-address-of-an-ethereum-contract-computed">Ethereum's contract addresses</a>.</div>
<div>
<br /></div>
<div>
In most blockchain systems, every entity can own many addresses. Some blockchains like Bitcoin focus on <a href="https://en.bitcoin.it/wiki/Address_reuse">creating a lot of addresses</a>, while others, like <a href="https://ripple.com/">Ripple</a>, focus on reusing the same address many times over.</div>
<div>
<br /></div>
<div>
Addresses are analogous to <a href="https://en.wikipedia.org/wiki/Bank_account">bank account numbers</a>.<br />
<br /></div>
<h4>
Altcoin</h4>
<div>
A term that originated early in the Bitcoin history, an Altcoin refers to "an alternative coin implementation", usually being an alternative to Bitcoin. It has often been used dismissively and sometimes even derogatorily, especially when referring to a lot of "<a href="https://tpbit.blogspot.ca/2014/04/smart-contracts-and-demise-of-copycoins.html">copycat coins</a>" that are a carbon copy of Bitcoin with minor tweaks. Most well known Altcoins include Litecoin and Dogecoin.</div>
<div>
<br /></div>
<div>
A lot of Altcoins mostly focus on tweaking small parameters of Bitcoin while preserving how the system operates on a higher level. The tweaks most often focus on the Hashing Algorithm, Block creation time, Coin distribution, name and branding.</div>
<div>
<br /></div>
<div>
When an Altcoin is created solely to be speculated on and then abandoned, it's usually referred to as a "<a href="https://en.wikipedia.org/wiki/Pump_and_dump">pump and dump</a>" or a "ScamCoin".</div>
<div>
<br /></div>
<div>
Some part of the community refers to every non-Bitcoin cryptocurrency as an Altcoin, while others shy away from this term when talking about more sophisticated projects that differ greatly from Bitcoin, such as Ripple or Ethereum.<br />
<br /></div>
<h4>
Block</h4>
<div>
A Block is a cryptographically secured collection of Transactions along with some extra information stored in the Block Header. That extra information usually states the Hash of the previous Block, the current time, and the Merkle Root of the transactions, among other information.</div>
<div>
<br /></div>
<div>
There is usually some limitation to how many and how often Blocks are created in a given Blockchain project. In Bitcoin, the Blocks require a Proof of Work to be valid. Ripple Blocks require <a href="https://tpbit.blogspot.ca/2015/05/mining-versus-consensus-algorithms-in.html">a consensus to be reached</a>.</div>
<div>
<br /></div>
<div>
Blocks are usually referred to by their Hash. Due to how their Hash is computed, the Block cannot be altered without creating a completely different Hash.<br />
<br /></div>
<h4>
Blockchain</h4>
<div>
A Blockchain is a collection of Blocks refering to one another in a linear sequence all the way to a <a href="https://en.bitcoin.it/wiki/Genesis_block">Genesis Block</a>. Because of how the chain is created, any change to any Block in the sequence would invalidate all of the Blocks that came afterwards. This is one of the core features of a Blockchain known as Immutability.</div>
<div>
<br /></div>
<div>
If two or more Blocks refer to the same previous Block Hash, this is known as a Fork. In most systems, only one of those Blocks will be considered valid, usually the one that will end up in the longest branch.</div>
<div>
<br /></div>
<div>
The term "Blockchain" is also used to refer to the projects that use Blockchains. Bitcoin is a Blockchain project that contains the Bitcoin Blockchain. This term was popularized in <a href="https://tpbit.blogspot.ca/2015/06/bitcoin-vs-blockchain.html">mid-2015</a> by large enterprises such as Overstock and NASDAQ wanting to use the then called "Bitcoin technology" without using the term "Bitcoin" due to its various connotations.<br />
<br /></div>
<h4>
Colored Coins</h4>
<div>
A Colored Coin is an idea of "earmarking" particular outputs of a given Transaction and assigning some extrinsic value to them, usually representing some real world assets or currencies. This is the most basic implementation of <a href="https://www.blogger.com/"><span id="goog_1673042413"></span>a Crypto 2.0 system<span id="goog_1673042414"></span></a>, allowing simple Blockchains such as Bitcoin to track non-native currencies.</div>
<div>
<br /></div>
<div>
There are specific rules governing how a perticular implementation of Colored Coins handles <a href="https://bitcoin.stackexchange.com/questions/450/is-there-any-way-to-track-an-individual-bitcoin-or-satoshi">transaction mixing</a> and other related features.<br />
<br /></div>
<h4>
CryptoCurrency</h4>
<div>
A CryptoCurrency is a <a href="https://en.wikipedia.org/wiki/Cryptography">cryptographically</a> secured currency. The authorisation of transfers of CryptoCurrency between Addresses is handled either by <a href="https://en.wikipedia.org/wiki/Public-key_cryptography">public-key cryptography</a>, or Smart Contracts.</div>
<div>
<br /></div>
<div>
Most Blockchain projects contain at least one form of Native CryptoCurrency, often referred to as a Coin or a Token. Bitcoin the project is used to transact in bitcoin the currency, Litecoin - litecoins, etc. Some projects have multiple native tokens (such as Factom with its Factoids and EntryCredits), while a few projects (usually Permissioned Blockchains) have none (such as <a href="https://www.hyperledger.org/">Hyperledger</a> or <a href="https://erisindustries.com/">Eris</a>).</div>
<div>
<br /></div>
<div>
Some Blockchain projects, sometimes referred to as "<a href="http://tiny.cc/Crypto">Crypto 2.0</a>", can also support user-created CryptoCurrencies. Those usually take a form of an IOU for a real-world asset, such as <a href="https://charts.ripple.com/#/value">BitstampUSD</a> on Ripple, or <a href="https://tether.to/">TetherUSD</a> on Omni. A few projects also create currencies <a href="https://tpbit.blogspot.ca/2015/02/the-rise-of-fiat-denominated-cryptos.html">based on derivatives</a> from the Native Tokens, such as <a href="https://tpbit.blogspot.ca/2015/05/bitusd-vs-usd-ious.html">BitUSD</a>. Some of the Crypto 2.0 projects that support Smart Contract allow for complex <a href="https://en.wikipedia.org/wiki/Scripting_language">script</a> to manage how the currency behaves.<br />
<br /></div>
<h4>
Decentralized Autonomous Organizations</h4>
<div>
A Decentralized Autonomous Organization (or DAO) is a computer software that is able to manage money without being reliant on third parties. They usually take a form of an automated Smart Contract, but the definition can also include some Blockchain Projects as a whole, such as <a href="https://tpbit.blogspot.ca/2015/05/bitshares-probably-first-self.html">BitShares</a>.</div>
<div>
<br /></div>
<div>
DAOs are created with a set of rules governing how it will handle its money (usually in a form of the Native Cryptocurrency). Once put in place those rules are usually immutable.</div>
<div>
<br /></div>
<div>
DAOs can exist in a legal gray area due to their distributed nature. One of the first concepts for a DAO is that of <a href="http://www.ledgerjournal.org/ojs/index.php/ledger/article/view/29">a decentralized casino</a>. While operating an online casino might be illegal in some jurisdictions, it is hard to say whether a DAO casino is legal or not.</div>
<div>
<br /></div>
<div>
The most well-known example of a DAO was called "<a href="https://tpbit.blogspot.ca/2016/06/perfection-or-bust-rise-and-fall-of-dao.html">The DAO</a>".<br />
<br /></div>
<h4>
Distributed Ledger Technology</h4>
<div>
Distributed Ledger Technology is a term used to describe a superset of the Blockchain Technology and <a href="https://tpbit.blogspot.ca/2017/01/corda-and-distributed-ledger-technology.html">ledgerless crypto suites</a> (such as Corda or Open Transactions).</div>
<div>
<br /></div>
<div>
The term is relatively new as of February 2017 and it may be seen as a way for governments and big companies to further <a href="https://tpbit.blogspot.ca/2015/06/bitcoin-vs-blockchain.html">move away from the terms "Bitcoin" and "Blockchain"</a>.<br />
<br /></div>
<h4>
Fork</h4>
<div>
There are multiple different concepts in the Blockchain space that are referred to as "forks".</div>
<div>
<br /></div>
<div>
The simplest Fork is a <a href="https://help.github.com/articles/fork-a-repo/">Repository Fork</a> - a term originating from software development where a developer copies a repository of a given project to create their own version of the software. This is most often used to create Altcoins - most of them are Forks of the Bitcoin repository, or other forked repositories.</div>
<div>
<br /></div>
<div>
Another type of Fork is a Blockchain Fork. It is an event in which there are multiple competing blocks of the same height. Those Forks may occur naturally due to multiple Miners creating a Block each at a similar time, or they can be malicious, for example - a result of a <a href="https://en.bitcoin.it/wiki/Majority_attack">51% Attack</a>.</div>
<div>
<br /></div>
<div>
The last type of Fork is a Blockchain Fork caused by changes in the software operating the Blockchain (such as bitcoind). Those Forks may be incidental (such as the <a href="https://en.wikipedia.org/wiki/History_of_bitcoin#The_fork_of_March_2013">March 2013</a> Bitcoin fork), or deliberate (<a href="http://www.coindesk.com/ethereum-executes-blockchain-hard-fork-return-dao-investor-funds/">Ethereum's DAO fork</a>). The latter are generally split into two kinds - Soft Forks and Hard Forks.</div>
<div>
<br /></div>
<div>
<a href="https://en.bitcoin.it/wiki/Softfork">Soft Forks</a> are less invasive and mainly require the Miners to upgrade their software. Old software will still recognize new blocks created after the Soft Fork as valid. An example of a Soft Fork could be the bugfix for <a href="https://en.bitcoin.it/wiki/Value_overflow_incident">Value Overflow Incident</a>.</div>
<div>
<br /></div>
<div>
<a href="https://en.bitcoin.it/wiki/Hardfork">Hard Forks</a> are more invasive and require everyone to upgrade their software. Old software will not recognize new blocks or transactions as valid after the Hard Fork. The <a href="http://www.coindesk.com/ethereum-executes-blockchain-hard-fork-return-dao-investor-funds/">Ethereum DAO Fork</a> is perhaps the most famous example of a Hard Fork.</div>
<div>
<br /></div>
<div>
Contentious Hard Forks can sometimes lead to <a href="https://tpbit.blogspot.ca/2016/08/contentious-bitcoin-fork-will-create.html">network splits</a>, where a part of the network and community decide not to opt into the Forked code and Blockchain, and instead decide to take a different approach. <a href="https://ethereumclassic.github.io/">Ethereum Classic</a> is a network split that resulted from the DAO Fork.<br />
<br /></div>
<h4>
Hash</h4>
<div>
A Hash is <a href="https://en.wikipedia.org/wiki/Hash_function">a cryptographic digest</a> of a piece of data. Hashes are most often used to refer to a given Transaction or a Block, as each of them would have a unique Hash, and the length of that Hash is short enough to be easy to use.</div>
<div>
<br /></div>
<div>
Most Blockchain Projects use the <a href="https://en.wikipedia.org/wiki/SHA-2">SHA256</a> hashing algorithm dominantly, with ocasional use of other algorithms (such as <a href="https://en.wikipedia.org/wiki/RIPEMD">RIPEMD-160</a> being used by Bitcoin for <a href="https://en.bitcoin.it/wiki/Technical_background_of_version_1_Bitcoin_addresses">creating its Addresses</a>).</div>
<div>
<br /></div>
<div>
The Block Hash is also an integral part of the Proof of Work Mining algorithm.<br />
<br /></div>
<h4>
Merkle Tree</h4>
<div>
<a href="https://en.wikipedia.org/wiki/Merkle_tree">Merkle Tree</a> is a tree build out of Hashes. Each node in the tree is a hash of its child nodes. The final hash in the Merkle Tree is called a Merkle Root.</div>
<div>
<br /></div>
<div>
Merkle Trees are used to create a single Hash that represents a collection of Hashes. It can be used in Simplified Payment Verification or Proof of Existence to prove a given Transaction was part of a Block by specifying only log2(n) hashes, rather than n hashes it would take to list all of the Transaction Hashes. SPV is an important part of Light Nodes / Wallets.<br />
<br /></div>
<h4>
Miner</h4>
<div>
Miner is an entity involved in the Mining process of a Proof of Work Blockchain, such as Bitcoin. Other <a href="https://tpbit.blogspot.ca/2015/05/mining-versus-consensus-algorithms-in.html">Block generation schemas</a> use different terminology for similar functions - Validators, Farmers, etc.</div>
<div>
<br /></div>
<div>
The term Miner can refer to:</div>
<div>
<ul>
<li>The machine doing the computations</li>
<li>The business owner running said machines</li>
<li>Less frequently, to the piece of software performing the computations</li>
</ul>
<div>
Miners often use Mining Pools to pool their computation resources and create Blocks together to reduce the variance of their income.<br />
<br /></div>
</div>
<h4>
Mining</h4>
<div>
Mining is the process by which Miners create a Proof of Work Block in Blockchains such as Bitcoin. It is a process of iterating through many possible Blocks (often iterating using the Nonce) until the Block satisfied the PoW criteria. This involves the Hash of the Block being a number smaller than the Target for a given block (see: Difficulty).</div>
<div>
<br /></div>
<div>
The Miners are rewarded for creating a valid Block by the Block Reward and any Fees spent by Transactions included in the Block.</div>
<div>
<br /></div>
<div>
There are also a handful of minor activities similar to Block Mining that serve a different purpose. As Addresses are essentially random numbers, some people iterate over them in a process of <a href="https://tpbit.blogspot.ca/2015/04/vanity-pool-geekiest-service-in-bitcoin.html">Vanity Address Mining</a> to create a desirable looking Address (similar to <a href="https://en.wikipedia.org/wiki/Vanity_plate">vanity plates for cars</a>). One can also mine for different Transaction Hashes, but it's a fringe activity used only in special cases.<br />
<br /></div>
<h4>
Node</h4>
<div>
A Node is a computer running the specialized software used to communicate directly with a Blockchain Network. A Node is often a Wallet, but it doesn't need to be.</div>
<div>
<br /></div>
<div>
Generally, there are two types of Nodes - a Full Node and a Light Node.</div>
<div>
<br /></div>
<div>
A Full Node downloads and stores all of the Blockchain information. It can provide the data to other Nodes in the network as needed. Distributed Blockchain Networks require a web of Full Nodes to be operating at all times to maintain the network.</div>
<div>
<br /></div>
<div>
A Light Node only downloads the core data it needs to validate the current Blockchain status (most often - Block Headers) and any information relating to the Addresses it cares about. It has a much lower memory and network footprint than a Full Node, but it cannot provide all of the information a Full Node might. A set of Full Nodes is till required to maintain the network.<br />
<br /></div>
<h4>
Nonce</h4>
<div>
A <a href="https://en.wikipedia.org/wiki/Cryptographic_nonce">nonce</a> is a random number used to easily create a different input. It is most notably used in <a href="https://bitcoin.org/en/developer-reference#block-headers">a Block Header</a> to create a different Block Hash without changing any important information stored in a Block. This is most often used in Proof of Work Blockchains that need to iterate over many block hashes. Due to the <a href="https://en.wikipedia.org/wiki/Avalanche_effect">avalanche effect</a>, changing even a single bit in the nonce creates a completely different Hash.<br />
<br /></div>
<h4>
Permissioned Blockchain</h4>
<div>
<a href="https://tpbit.blogspot.ca/2015/06/bitcoin-vs-blockchain.html">A Permissioned Blockchain</a> is a Blockchain Project that restricts access to its Blockchain in some way to the users. It could require user authentication before they can connect their nodes to the network, or even download their Clients.</div>
<div>
<br /></div>
<div>
In constract, Permissionless Blockchains, such as Bitcoin, are inclusive by nature, allowing anyone to join and transact on the network.</div>
<div>
<br /></div>
<div>
Permissioned Blockchains are still in early phases of adoption as of February 2017. For their time being, their target market consists of banks, governments and other large entities that want to exert some form of control over their Blockchain network. This could be done due to regulatory, KYC or other reasons.</div>
<div>
<br /></div>
<div>
Some Permissionless Blockchains do offer some features for their users to restrict access to some of their financial assets. Ripple allows explicit white- and blacklists of Addresses, while Smart Contract scripts give even finer control over how a given asset can be used.<br />
<br /></div>
<h4>
Proof of Existence</h4>
<div>
Proof of Existence is a cryptographics-based proof that a given piece of data existed, unchanged, at a given point in time. It can be used as a replacement for a notary service.<br />
<br />
Proof of Existence relies on a public Blockchain, such as Bitcoin's. The data in question is hashes and embedded into a Transaction or a Block. Given that a Block contains a timestamp and it is impossible to rewrite old Blocks without invalidating the proceeding Blocks, it is possible to prove the data existed in its current form no later than when that Block was created.<br />
<br />
Factom is one Blockchain project that focuses on providing Proof of Existence "as a service". It maintains its own Blockchain that is itself "anchored" into the Bitcoin Blockchain, extending the Proof of Existence to a bigger amount of data.<br />
<br /></div>
<h4>
Proof of Stake</h4>
<div>
Proof of Stake is an alternative Block creation algorithm to Proof of Work. Instead of relying on a lot of computational power to create a Block, one instead relies on a large supply of Coins. The reasoning behind Proof of Stake is that an attacker trying to subvert the network would be risking a lot of their wealth in the attempt, therefore they would be disincentivised to attack the network to preserve the value of their Coins. Similarly, users with a lot of Coins have a high stake in keeping the Blockchain operating properly to increase the value of their Coins.</div>
<div>
<br /></div>
<div>
See also: <a href="https://tpbit.blogspot.ca/2014/08/thoughts-on-delegated-proof-of-stake.html">Delegated Proof of Stake</a><br />
<br /></div>
<h4>
Proof of Work</h4>
<div>
Proof of Work is a Block creation algorithm that uses a Hashing algorithm to ensure predictable Block creation rate. It relies on the fact that a Hash of a Block is essentially a very large random number, and that it takes some computational time to create the Hash. While it might take a fraction of a second to create one Hash, having to create a lot of Hashes takes a significant amount of time and resources.</div>
<div>
<br /></div>
<div>
A valid Block has a Hash smaller than a given Target (see Difficulty). To create a Hash that satisfies that criteria, the Miner needs to compute many potential Hashes until they find a satisfactory one. Since Hashes are essentially random numbers, it is easy to approximate how many times one would need to compute a Hash to get one that is small enough.</div>
<div>
<br /></div>
<div>
As more Miners join the network with more powerful Mining machines, they naturally can compute more Hashes in the same amount of time. The Proof of Work algorithms are designed to handle that by making it harder to compute a valid Hash by lowering the Target more and more. If the Miners leave the network and the available computational power decreases, the Target increases to maintain the Block creation speed.</div>
<div>
<br /></div>
<div>
Another important design of the Proof of Work algorithm is that it takes a lot of computational power to create a valid Hash, but very little to verify it (one needs to hash the data once).</div>
<div>
<br /></div>
<div>
Proof of Work is used to secure the Blockchain Network from attackers trying to subvert it (they would need to have a lot of spare computing power), as well as to create a fair distribution model for the Coins (Miners are rewarded with newly minted Coin for creating a valid Block).<br />
<br /></div>
<h4>
Smart Contracts</h4>
<div>
A Smart Contract is a simple computer script that represents an implicit contractual agreement between the parties to transact in the way described by that contract ("Code is Law"). Smart Contracts are an important aspects of such Blockchain Projects like Ethereum. In contrast to traditional legal contracts, Smart Contracts do not need a legal team to enforce them, and once put in place they usually cannot be altered. Smart Contracts can contain functions that can be called by creating a specific Transaction. The code execution is deterministic and is carried out by the Miners.</div>
<div>
<br /></div>
<div>
Smart Contracts may be paired with legal contracts (such as in the case of <a href="https://tpbit.blogspot.ca/2017/01/corda-and-distributed-ledger-technology.html">Corda</a>), but that's rarely the case on most Blockchains.</div>
<div>
<br /></div>
<div>
See also: Decentralized Autonomous Organizations.<br />
<br /></div>
<h4>
Transactions</h4>
<div>
A Transaction is an atomic operation on the Blockchain. It usually involves transfer of Cryptocurrency between Addresses, but some Blockchain Projects also have non-monetary Transactions (such as invoking a function in a Smart Contract on Ethereum, or setting a trustline in Ripple). Transactions are grouped into Blocks.</div>
<div>
<br /></div>
<div>
In Blockchains like Bitcoin, Transactions specify the Transaction outputs they consume to cover their fees and the outputs they create. There are some Blockchains (like Ripple or Factom) that operate on account-balance model, which keeps a running tally of the funds remaining in an account, so a Transaction doesn't need to specify which outputs they are consuming.</div>
<div>
<br /></div>
<div>
Transactions are authorised by the use of private-public key cryptography. A Transaction spending an output from a given Address is only valid if the private key associated with a given Address has signed the transaction.</div>
<div>
<br /></div>
<div>
Most Blockchain projects contain some special Transaction types. Most common special Transaction type is the Coinbase Transaction. It is the first Transaction of a given Block that credits the Miner newly minted Coins for creating that Block. This Transactions has no Inputs and is not signed by any Address. Coinbase Transactions are both rewards to the Miners and a way to distribute new Coins into the network.<br />
<br /></div>
<h4>
Wallet</h4>
<div>
A Wallet is a collection of Addresses along with their associated private keys. The term can also refer to the piece of software that manages that Wallet, and the file that stores the data (a Wallet file).</div>
<div>
<br /></div>
<div>
Wallets can take the form of a standalone application (sometimes paired with a Node or a daemon, such as BitcoinQT), a web application (such as Blockchain.info's MyWallet), or be managed by a third party (such as Coinbase).</div>
<div>
<br /></div>
<div>
Access to the private keys is an important aspect of the Wallet design. There are services that host encrypted Wallet files, but don't have access to the keys as the user is encrypting and decrypting the file on their local machine. Other services secure their own keys and manage user's funds akin to a bank.</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-80035544996170401372017-01-30T09:26:00.000-08:002017-01-30T09:26:49.699-08:00Corda and the Distributed Ledger TechnologyRecently I became involved with <a href="https://www.scc.ca/">SCC</a>'s committee on "<a href="https://www.scc.ca/en/standards/committees/iso-tc-307-blockchain-and-electronic-distributed-ledger-technologies">Blockchain and electronic distributed ledger technologies</a>". During one of the discussions, I've learned about a new term that seems to have become very popular in the banking industry - "Distributed Ledger Technology" (DLT). Apparently <a href="https://www2.deloitte.com/global/en/pages/about-deloitte/articles/reimagining-financial-services-with-blockchain.html">companies like Deloitte</a> or even <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/492972/gs-16-1-distributed-ledger-technology.pdf">the UK government</a> have picked up on this new thing and seem to be abuzz with it.<br />
<br />
Instantly this reminded me of 2015 when big companies like NASDAQ and Overstock expressed their interest with "the Bitcoin technology", but they didn't want to be associated with "Bitcoin", therefore decided to rename this whole thing as "<a href="https://tpbit.blogspot.ca/2015/06/bitcoin-vs-blockchain.html">blockchain technology</a>". Maybe this was just another way for companies to invent a new five dollar word and charge a hefty sum to consult on it?<br />
<br />
After doing some research, I couldn't find much on what exactly DLTs were - there doesn't seem to be a concrete definition floating around yet. However, a few people pointed me to one example of an actual implementation of a DLT - <a href="https://www.corda.net/">Corda</a>. Lucky enough, someone coincidentally decided to organize <a href="https://www.meetup.com/Vancouver-Decentralization-Meetup/events/236530357/">a meetup about Corda</a> around the time, so I had some good opportunity to learn what it's about.<br />
<br />
<h3>
Corda</h3>
<br />
<a href="https://www.corda.net/">Corda</a> is a Distributed Ledger Technology implementation by <a href="http://www.r3cev.com/">the R3 consortium</a>. It is <a href="https://github.com/corda/corda">open source</a>, comes with <a href="https://slack.corda.net/">a Slack</a>, <a href="https://static1.squarespace.com/static/55f73743e4b051cfcc0b02cf/t/57bda2fdebbd1acc9c0309b2/1472045822585/corda-introductory-whitepaper-final.pdf">a whitepaper</a> and all that.<br />
<br />
Corda has been created from the grounds-up for the use by banks and other financial institutions, prioritising their needs first. This dictated a few important design choices:<br />
<br />
<ul>
<li>Private transactions - transactions in the system are only disclosed to the parties involved. They are not globally broadcast for everyone to verify, instead only circulating in very limited circles as small as two peers.</li>
<li>No blockchain - since there is no need to let everyone know about every transaction that took place, there is also no need for a blockchain, be it <a href="https://tpbit.blogspot.ca/2015/10/blockchain-for-banks-overview.html">public or permissioned</a></li>
<li>Legal smart contracts - much like a <a href="https://en.wikipedia.org/wiki/Ricardian_Contract">Ricardian Contract</a>, the smart contracts executed on the Corda network have explicit legal prose attached to them.</li>
<li>Optional notaries - if two parties don't trust one another, they can bring in optional notaries to verify various aspects of the transaction (no double-spending, uniqueness of transaction, etc.)</li>
</ul>
<br />
Knowing these features, we can try figuring out what existing cryptocurrency project it resembles most. Looking at this chart comparing various projects in the space (provided funnily enough by Tim Swanson a few years back before he joined R3):<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-qu_w7eUnfKk/WI4BEJ9bO-I/AAAAAAAAM2k/aMRssRat4y4mHHGl5TCIz1CTXVSp8yOdwCLcB/s1600/current-cryptoprotocol-infrastructure.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="270" src="https://1.bp.blogspot.com/-qu_w7eUnfKk/WI4BEJ9bO-I/AAAAAAAAM2k/aMRssRat4y4mHHGl5TCIz1CTXVSp8yOdwCLcB/s400/current-cryptoprotocol-infrastructure.png" width="400" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
Tim Swanson's "Current Cryptoprotocol Infrastructure" from his "<a href="http://www.ofnumbers.com/the-guide/">Great Chain of Numbers</a>"</div>
<br />
It looks like Corda can fall in only one spot, which is the "Ledgerless Crypto Suite", alongside <a href="http://www.opentransactions.org/open-transactions.pdf">Open-Transactions</a>. Indeed, the resemblance is quite strong.<br />
<br />
The following explanation is based on the "<a href="https://vimeo.com/200926271">Introduction to Corda</a>" presentation and other materials I managed to come by.<br />
<br />
Corda's base building block is a cryptographic transaction. It can be a simple payment, or a more complex smart contract. The transactions specify which inputs they are spending and what outputs they are generating (this works just like Bitcoin and is different from an "account-balance" approach of say, Ripple). Each transaction has a hash of a legal prose attached to it which governs how the transaction should operate. The transaction is then signed by all of the participating parties that agree to execute it - it could only be one entity when it is a simple "send money" transaction, or span multiple parties if it is a more complex swap or financial agreement.<br />
<br />
The transaction can also be notarised or verified by third parties as needed. This could be as simple as a server doing a blind signature to verify the transaction is unique, or perhaps the whole transaction could be disclosed to some auditors as needed.<br />
<br />
After a transaction is signed, that's about it - every party that knows about the transaction records it in their ledgers and the financial contract is thus binding. There might be some follow-up on the smart contract as it matures or other trigger points execute it, but with no blockchain, block generation or the like, there isn't much else to it.<br />
<br />
As it stands, Corda seems to fit in as a common middleware for banks and financial institutions to standardise their interactions with one another, especially in the realm of financial contracts. This puts the project in a similar space to <a href="http://opentransactions.org/">Open Transactions</a> or <a href="https://interledger.org/">Interledger</a>, not too far from <a href="https://ripple.com/">Ripple</a> or <a href="https://ethereum.org/">Ethereum</a>.<br />
<a href="https://interledger.org/"><br /></a>
<h3>
Corda criticism</h3>
<br />
Due to its focus on catering to the financial institutions, Corda might be seen as "more of the same", rather than trying to revolutionise the field like Bitcoin. Some people might dismiss it out of principle for not fighting to make the banks more transparent.<br />
<br />
A system built on private transactions will be easier to manipulate than a proper blockchain. Unless all of the transactions need to be accounted for by some independent auditor, you loose the option to have "<a href="https://tpbit.blogspot.ca/2016/01/positive-and-negative-proofs-in.html">negative proofs</a>". Since the amount of parties involved is so small, they can easily conspire to rewrite or delete the past transactions to suit their present needs. This could be mitigated by using <a href="https://en.wikipedia.org/wiki/Proof_of_Existence">a proof of existence</a> and anchoring the various hashes of transactions into something like <a href="https://factom.com/">Factom</a>.<br />
<br />
However, if properly maintained, the system can enforce accountability. While the transactions may not be a part of a blockchain, they do form a transaction chain - every transaction spending the previous output. Having any single transaction signed by the various parties could be used against them - they might be compelled to provide the full, unbroken chain of transactions leading up to that transaction. While this might not uncover all of the transaction branches, there is at least some cryptographic trace of what happened.<br />
<br />
Linking the legal prose to the smart contract is also asking for trouble. Even now people can have legal disagreements as to <a href="http://www.omniglot.com/language/articles/multilanguagecontracts.htm">which interpretation should take precedent</a> when you have a contract written in two human languages. Woe to anyone who wishes to mix legal prose with a smart contract. This would either require a new profession of some lawyer-programmer, some sort of legalese language interpreter / compiler, or the smart contract will be just a farce that could be overturned so easily it might not even need to exist.<br />
<br />
<a href="https://vimeo.com/200926271">Corda's presentation</a> seems to indicate the legal prose takes precedent over the code. This might mean that there would need to either be some backdoor for third parties to overwrite or amend the contract, or the parties involved would have to work around the code to achieve settlement in the end. All in all, this can lead to a lot of mess in the code down the line. Some might prefer the approach of "code is law", but then we have the story of <a href="https://tpbit.blogspot.ca/2016/06/perfection-or-bust-rise-and-fall-of-dao.html">the DAO</a> as a cautionary tale.<br />
<br />
Moreover, the contracts dealing with international law and regulations would be even more complicated. This could lead to fewer transactions taking place between various jurisdictions to avoid the legal hassle.<br />
<br />
Beyond that, Corda seems to rely on a few known key actors common to <a href="https://tpbit.blogspot.ca/2014/03/crypto-20-systems.html">the Crypto 2.0 space</a>. Lack of native currency means the system will need <a href="https://tpbit.blogspot.ca/2015/02/the-rise-of-fiat-denominated-cryptos.html">gateways to issue assets</a>. <a href="http://www.redchalk.com/feature/r3-files-distributed-ledger-patent-for-corda-unique-privacy-component-of-blockchain-financial-services-platform/">Some design documents</a> mention <a href="https://tpbit.blogspot.ca/2015/04/pondering-codius-where-smart-oracles.html">Smart Oracles</a>, etc.<br />
<br />
<h3>
Distributed Ledger Technologies</h3>
<br />
Based on the example of Corda and Open Transactions, we can try drawing some conclusions of what the Distributed Ledger Technologies might be as a general term.<br />
<br />
<ul>
<li>The technology seems to be focused more on transactions and less on grouping them into blocks.</li>
<li>With the absence of blocks, we necessarily have to do away with any form of distributed, native currency - there is no way for that currency to be objectively generated. The system instead uses <a href="https://tpbit.blogspot.ca/2015/02/the-rise-of-fiat-denominated-cryptos.html">IOUs for currencies and assets</a>.</li>
<li>The system relies on a number of key nodes / entities to operate - auditors, validators, legal authorities, banks, etc. This means the system would be at best "<a href="https://medium.com/@bbc4468/centralized-vs-decentralized-vs-distributed-41d92d463868#.syuoqwc1f">decentralised</a>"</li>
<li>Cryptography is still used to authorise various transactions and move the money around.</li>
</ul>
<div>
<br /></div>
<h3>
Conclusions</h3>
<br />
<br />
Distributed Ledger Technologies seem to sound more impressive than they are in reality. Some have proposed to use this term to refer to things like Corda as well as the existing Blockchain Technologies, but it seems to be mostly an unnecessary buzzword. The existing DLTs are not really distributed, but decentralised. The word "ledger" correlates more closely to a block of transactions than what we have in Open Transactions (where you can discard old transactions as they are not needed once they are confirmed spent). So perhaps a more accurate term would be "decentralised set of transactions"? DSoTs? DSoTTs if you want to include "technology" at the end as well...ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com1tag:blogger.com,1999:blog-6364422533827776870.post-45689998653896764922017-01-02T08:55:00.000-08:002017-01-02T08:55:36.953-08:00Ideas for Reddit moderation improvementsAwhile back <a href="https://www.reddit.com/r/Bitcoin/">the /r/Bitcoin community</a> got upset over <a href="https://www.reddit.com/r/Bitcoin/comments/4v69le/coinbase_and_reddit_ceos_discuss_removal_of/">Coinbase CEO talking with Reddit CEO about /r/Bitcoin's moderation and the possibility of removing the moderators of the subreddit</a>. It has been a few months and luckily not much has come of it. However, this got me thinking about how we could improve the moderation of the subreddit, or at least what different approaches could be taken.<br />
<br />
None of the points mentioned are meant to be an attack on anyone - thy are merely ideas worth considering in probably many communities, not just ours.<br />
<br />
This can be viewed as a continuation from the "<a href="https://tpbit.blogspot.ca/2016/03/on-rbitcoin-moderation-three-years-in.html">On /r/Bitcoin moderation - three years in review</a>" blog post.<br />
<br />
<h3>
Head moderator responsibilities</h3>
<div>
<br /></div>
<div>
Everyone has different approaches to moderation. Personally, I find myself starting with a lot of enthusiasm early on and later petering out over time as more people join the team and are able to take on the responsibilities. Being the second moderator on /r/Bitcoin for a long awhile and facing the community backlash at our top moderator gave me an opportunity to think about how I would run things. While this might not be an ideal solution for everyone, here is the approach I might take - focus on being the moderator of moderators and an arbitrator between them, rather than dictating the direction of the subreddit.</div>
<div>
<br /></div>
<div>
My personal approach is that everyone makes mistakes - moderators are no different and I'm no different. The best approach to take is to fill the moderator positions with people that aim to support the community and see it grow. Most importantly, however, those people should be open to discussing and challenging views held by themselves and other moderators as needed. One person might make a mistake, but if five people agree on something, it is less likely to be a mistake. If someone disagrees, it is important that they express their reasoning and let their peers come to a conclusion whether something needs to change or not. Many of the /r/Bitcoin moderators, both past and present luckily are able and do voice their opinions even if it's not in line with the current rules.</div>
<div>
<br /></div>
<div>
Being the top moderator on Reddit gives one the power to control everything in the given community, but in my opinion that power should be used very rarely. Ideally, the top moderator of the subreddit would perhaps only step in if the other moderators are acting against the community and need to be removed. This could mitigate the use of moderation to push one's agenda - if the top moderator doesn't actively moderate, they can't change much to suit their agenda. Other moderators know that if they usurp the community, they will be removed. Thus some balance of power could be reached for the betterment of the community, provided the top moderator could be trusted.</div>
<div>
<br /></div>
<h3>
Anonymous discussions</h3>
<div>
<br /></div>
<div>
At times the moderators might need to discuss some matter anonymously. Perhaps it would be an issue of removing a certain mod or other controversial topic. Unfortunately, Reddit doesn't leave many options for anonymizing one's conversations while still being certain you're talking with the same group of people. However, here is a simple solution to this problem:</div>
<div>
<br /></div>
<div>
Every moderator would create a random account. They would message someone saying they are a mod, but not reveal their original identity. That person would gather the list of all accounts that messaged them and present the list to the moderation group. Everyone would then acknowledge that the account they created is indeed on that list (without disclosing which account it is). If everyone acknowledges their account being present and the numbers match, you have a list of anonymous account that can be used to discuss anything without worrying about negative repercussions to your other account.</div>
<div>
<br /></div>
<h3>
Mod removals</h3>
<div>
<br /></div>
<div>
Having the anonymous discussions, it becomes much easier to discuss the removal of fellow moderators in an objective manner. You might want to call someone out on some actions they have taken or their general behaviour and see how other mods feel about the situation without becoming "that guy".</div>
<div>
<br /></div>
<div>
One of the responsibilities for the head mod would be to make sure the proper mods are removed (in case say, they are the second most senior mod that nobody else can remove). But perhaps the biggest mark of greatness for the top mod would be recognising if the community and other mods would not want them to continue at their position and step down like <a href="https://www.youtube.com/watch?v=wT_rev5VAQc&feature=youtu.be&t=181">a true Roman Dictator</a>, having put the power in the hands of the next worthy person chosen by the community and the moderators.</div>
<div>
<br /></div>
<h3>
Community oversight</h3>
<div>
<br /></div>
<div>
Another topic I've heard mentioned a few times comes in the form of insight into moderation logs. While those could probably be disclosed fully, they rarely tell the whole story - a good deal of moderation happens over modmail, which sometimes needs to remain private. It might be good practice to perhaps appoint a few representatives of the community to oversee the moderation process without being full moderators themselves. They would have insight into modmail and moderation logs, but shouldn't be acting as a full moderator. This could reassure some people that the mods aren't conspiring against someone or some company in particular, and it would also provide a good pool of candidates to pick from in case the moderation pool needs to be expanded.</div>
<div>
<br />
<h3>
Talking with the community</h3>
<br />
Communication with the community is important. Whether it's announcing policy changes or just having a general talk once a month, it might be useful to reach out to the community and hear what they have to say. This could boost the community's confidence in the moderators, help address some issues early on and hopefully make the relationships between mods and redditors better than what it sometimes becomes.<br />
<br /></div>
<h3>
Conclusions</h3>
<div>
<br /></div>
<div>
Those are some of my thoughts on how moderation in Reddit as a whole could be improved, or at least how I would try to improve it given the chance.</div>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0tag:blogger.com,1999:blog-6364422533827776870.post-8490038902360533702016-11-07T23:33:00.000-08:002016-11-07T23:33:18.293-08:00OneCoin round 2 - it's all about the "family" and merchantsThe saga of <a href="https://tpbit.blogspot.ca/2016/07/how-not-to-blockchain-look-at-onecoin.html">OneCoin</a> continues. We've talked about the issues they might be running into with <a href="https://tpbit.blogspot.ca/2016/10/problems-with-big-numbers-in-crypto-how.html">using big numbers for their currency</a>, how <a href="https://tpbit.blogspot.ca/2016/10/big-numbers-dont-mean-big-money.html">market cap or coin supply is essentially meaningless</a>, and now let's analyse the actual <a href="https://www.youtube.com/watch?v=WI6l4N4MQaE">OneLife Mastermind Bangkok Event</a>.<br />
<br />
<h3>
What was the event about?</h3>
<br />
Looking at the three hour long video of the event, there is a lot to cover. All of it strikes an uncanny resemblance to a Multilevel Marketing event:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<iframe allowfullscreen="" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/s6MwGeOm8iI/0.jpg" frameborder="0" height="266" src="https://www.youtube.com/embed/s6MwGeOm8iI?feature=player_embedded" width="320"></iframe></div>
<br />
We have a lot of pomp, a lot of hype, bragging, talking about how everyone is forming a giant "family" and asking them to start buying and peddling the newest product - merchant applications. There is a lot of small pieces of information here and there on how they envision their system working, and a lot of it raises red flags.<br />
<br />
The event certainly packed a lot of showmanship - live musical performances, important sounding speakers and so on. I've been to a few cryptocurrency conferences already, and they are completely different - you hear a lot about the technology, new developments, etc., and there is a lot less cult of personality.<br />
<br />
<h3>
Merchant program</h3>
<br />
One of the more important but overlooked parts of the event was the news about OneCoin's new merchant program. There are two new packages being sold - one for $1000 that comes with one whitelabel application, and a $5500 one that comes with seven applications. OneCoin expects its members to purchase those applications and sign up merchants, giving them those applications. Their goal is to reach one million merchants in the coming years. With the merchant adoption, the coin is supposed to gain liquidity and value.<br />
<br />
Why should the merchants join? To gain access to OneCoin's "family" and the network, and they incur no cost for the first year. The coin should be "very stable" and merchants "should prefer it to PayPal, Visa, Mastercard".<br />
<br />
So yes, the merchant program is as they say "free", and by free, they mean it costs $1000 to the person that signs up the merchant. So the marketing and on-boarding the merchants falls on the coin users that also get to pay for the privilege. But at least you will finally have some place to spend your OneCoins, right?<br />
<br />
Well, not quite. The merchants will be able to specify how many OneCoins they will be accepting. They can choose to accept, say, 20% of the payment in OneCoin and 80% from the user's Credit Card (conveniently connected to the account already). This implies that OneCoin doesn't even do the most basic thing that every Bitcoin payment processor does - sell the coins for the merchant and pay them in fiat.<br />
<br />
So let's compare that to say, <a href="https://bitpay.com/">BitPay</a>, one of Bitcoin's oldest payment processors. It allows you to sign up for free, it's free to use for some small volume transactions, or it costs the merchant 1% otherwise. You can accept Bitcoin for 100% of the purchase and you get all of your money in whatever form you want - BTC, wire, etc. For OneCoin, you need to have someone else pay $1000 for the application, sign you up, then you specify how much OneCoins you will be accepting for every transaction, then you have to figure out how to cash those out (without a real exchange yet), and you might be charged something after a year of using it.<br />
<br />
So yeah, it doesn't look good - more like a barely serviceable product that you want your current members to buy and convince people to use to make their coin accepted somewhere and thus gain value. It's a good MLM strategy, but terrible usability strategy.<br />
<br />
<h3>
Other things</h3>
<br />
We've already covered <a href="https://tpbit.blogspot.ca/2016/10/big-numbers-dont-mean-big-money.html">the coin doubling event</a>, so there isn't much more to cover in that regard. It's silly, watching people get excited for a 100% increase in coin supply without an increase in coin's value. So instead, here is a list of various pieces of information that were stated thorough the event:<br />
<br />
<ul>
<li>There have been 14 million accounts created, with 2.5M active distributors</li>
<li>The price of the coin was 50 eurocents, now it is 9 euros, and they aim to get to 25 euros</li>
<li>OneCoin is launching some social media website called OneSaito, which will feature Groupon-like discounts. So it's like 2010</li>
<li>"To make sure we continue to produce coins, we need tokens, and tokens come from product packages"</li>
<li>They want to achieve critical mass in a year's time</li>
<li>"We will eventually move to the next stage when what we're doing will become self-evident" - do they mean people will catch on to the MLM structure?</li>
<li>"We don't want to create idiots"</li>
<li>"Any one of you could've launched Pokemon Go"</li>
<li>Whoever maxes out their 35k Euro contribution on the day of the event will have the opportunity to max out another 35k Euro contribution the following day</li>
<li>"<a href="https://youtu.be/WI6l4N4MQaE?t=10633">So guys in Sofia, if you don't switch it on, we'll come for you and kill you, yeah? Always good to motivate the office too...</a>"</li>
<li>OneCoin will be going into the remittance business (so they're joining the Bitcoin hype from a few years ago that <a href="https://letstalkpayments.com/19-bitcoin-remittance-startups-that-wont-let-the-cryptocurrency-die/">has already been explored by 19+ companies</a>?)</li>
<li>OneCoin will be going public in Q2 2018</li>
<li>OneLife has created 350 millionaires in its history. There were <a href="http://lilyharvey.com/wp-content/uploads/2015/04/OneCoin_Leadership_July2015.pdf">450 diamonds in the event</a></li>
<li>OneCoin is a special network, because it acts "like a family"</li>
</ul>
<br />
<h3>
Conclusions</h3>
<br />
OneCoin is quite obviously <a href="https://www.youtube.com/watch?v=s6MwGeOm8iI">a MLM pyramid scheme</a>. Quite brilliant actually - instead of peddling products people have to start storing in their garages and try to sell to other people, they are selling a "crypto" currency and telling everyone to buy as much as they can to raise it's value. They have virtually no production costs, therefore every dollar spend is essentially profit. Instead of investing that money into development of some actual products, like exchanges, payment processors, etc., they just get people to buy into the scheme more and more, to promote the coin further to drive the sales.<br />
<br />
The most symbolic part of the event <a href="https://youtu.be/WI6l4N4MQaE?t=9324">came in around 2:35</a>. The speakers talk about celebrating OneCoin's second birthday with a cake, "the largest cake ever" - OneCoinCake. 2x2 meters in diameter. Unfortunately, since there were 11500 people in the audience during the event, "not everyone will get to taste the cake". This is perhaps a good analogy to how OneCoin works - everyone pays for the cake, you make a large cake, and the elites will stuff themselves while everyone else will only get to admire the cake from afar...<br />
<br />
Related links:<br />
<br />
<ul>
<li><a href="https://www.reddit.com/r/Bitcoin/comments/55e0dd/onecoin_is_now_bigger_than_bitcoin_according_to/">"OneCoin is now bigger than Bitcoin, according to OneCoin."</a></li>
<li><a href="https://www.reddit.com/r/Bitcoin/comments/55h590/what_the_fuck_did_i_just_see/">"What the fuck did I just see?"</a></li>
<li><a href="http://www.mas.gov.sg/IAL.aspx?sc_p=O">MAS listing OneCoin on their Alert List</a></li>
</ul>
ThePiachuhttp://www.blogger.com/profile/04226887294989256787noreply@blogger.com0