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US Bankruptcy Court Set to Weigh in on Bitcoin's Currency StatusCoinDesk
A California bankruptcy court is set to weigh in on whether bitcoin
should be considered a currency. The hearing, set for 19th February, follows months of legal wrangling between the trustee of bankrupt bitcoin
mining firm HashFast and Marc Lowe, a ...
Posted on 9 February 2016 | 9:46 am
Posted on 9 February 2016 | 8:28 am
Bitcoin Startup Abra Remains Quiet After Series A FundingnewsBTC
companies and startups have received significant amounts of funding over the past few years. This seems only normal, as the technology and protocol making up the Bitcoin
network can be of great value to people and companies all over the ...
Posted on 9 February 2016 | 8:03 am
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Posted on 8 February 2016 | 1:16 pm
The Financial Stability Board, a group of central bank governors and financial regulators, has begun working on blockchain technology issues.
Posted on 9 February 2016 | 11:14 am
A California bankruptcy court is set to weigh in on when or if bitcoin should be considered a currency in a dispute over a HashFast payment.
Posted on 9 February 2016 | 9:46 am
Microsoft's head of technology strategy opens up about the firm's plans to carve out a market position in the blockchain space.
Posted on 9 February 2016 | 4:17 am
CoinDesk looks at how Earthport is adding blockchain technology to existing product lines through its Distributed Ledger Payments Hub.
Posted on 8 February 2016 | 11:21 am
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Bitcoin Group Ltd has once again been forced to delay its public listing on the Australian Securities Exchange, despite its recent IPO.
Posted on 8 February 2016 | 10:11 am
Five major UK fund houses have reportedly partnered on a project to explore blockchain technology's cost saving potential in trading systems.
Posted on 8 February 2016 | 7:40 am
Wall Street veteran Jason Leibowitz answers questions about how bitcoin was created, how it works and why it matters.
Posted on 7 February 2016 | 12:30 pm
How the Australian Securities Exchange's investment in blockchain startup Digital Asset Holdings could influence the company's offerings.
Posted on 7 February 2016 | 9:00 am
The views of the Bitcoin Core developers are not the only ones that should count when deciding its future, says developer Elliott Olds.
Posted on 7 February 2016 | 6:38 am
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In this opinion piece, former ReadWriteWeb editor Richard MacManus talks about how bitcoin could ease difficulties in running an online business.
Posted on 6 February 2016 | 10:00 am
Bailey Reutzel examines how the bitcoin community's reluctant to engage over standards could harm the digital currency in the long term.
Posted on 6 February 2016 | 8:15 am
An Alaskan conservative commentator and self-styled judge has called for the world to embrace blockchain technology.
Posted on 5 February 2016 | 4:01 pm
An advisor to Russian president Vladimir Putin has reportedly spoken out against bitcoin.
Posted on 5 February 2016 | 11:48 am
A UN commission report suggests digital currencies could be beneficial for the Caribbean region.
Posted on 5 February 2016 | 8:30 am
The invitation-only Satoshi Roundtable is set to convene for its second year, this time playing host to discussions on bitcoin scaling.
Posted on 5 February 2016 | 3:11 am
An Israeli bitcoin startup focused on enabling bitcoin purchases with credit cards has recently closed a $7m Series A funding round.
Posted on 4 February 2016 | 7:36 pm
SurBTC has raised a further $300,000 in seed funding to develop a bitcoin exchange for the Chilean market.
Posted on 4 February 2016 | 2:35 pm
Court documents obtained by CoinDesk offer new details about an ongoing legal battle involving digital currency exchange Cryptsy CEO Paul Vernon.
Posted on 4 February 2016 | 10:40 am
This post is by Krystle Vermes.
The cryptocurrency industry has delivered new technology to the world of luxury commerce, and it’s helping weed out the fakes.
It may seem like a frivolous concern, but counterfeit goods are big business. Stopping them is a significant business cost for manufacturers of the real thing. And for consumers who pride themselves on owning luxury goods, getting the real thing is essential to a way of life.
That's where Bitcoin comes in.
“By linking digital certificates to purchased goods, we are able to provide a much higher degree of confidence to buyers, especially when purchasing from online or second-hand retailers,” says Guy Halford-Thompson, founder of Blockchain Tech Ltd.
The company uses blockchain technology to create a secure registry, tracking who owns designer products. In turn, the database has everything a consumer needs to determine whether the product in hand is actually what it’s supposed to be.
With blockchain technology, individuals can track the entire journey of the item from assembly to vendor.
“While some consumers may be looking to purchase more affordable 'look-alikes,’ the concern comes from consumers who are looking to purchase genuine items, but because of the advances in manufacturing processes, it can be very difficult to distinguish between real and look-alike,” Halford-Thompson continued. “This is not a large concern when purchasing from known high-street stores, but it becomes a huge issue when consumers are looking to purchase new or second-hand items off online marketplaces.”
Although obtaining luxury goods is seemingly easier than ever before thanks to the Internet, not every seller is playing by the rules. Halford-Thompson says that watches, handbags and sunglasses are the most counterfeited items he’s seen on the market. However, he has confidence in blockchain and “smart tagging.”
“Smart tagging will provide consumers with a better brand experience, and a higher degree of confidence in the items they are buying,” Halford-Thompson adds.
And he isn’t the only one who feels this way.
“In five years, encrypted chips will be in all of your luxury consumer goods,” says Ryan Orr, CEO of Chronicled. “It’s not ‘if,’ but ‘when.’”
Similar to Blockchain Tech Ltd., Chronicled is a company that uses smart tags to track authentic sneakers that hit the market. With the Chronicled mobile app, shoe shoppers can scan the smart tag of the product and get all of the information about its authenticity in a matter of seconds.
As of right now, Orr claims that Air Jordan 11s and Yeezys are the most commonly counterfeited shoes. He adds, however, that his company is raising the stakes for counterfeiters by providing even more security to consumers.
“By combining blockchain technology and smart tags, undetectable forgery becomes impossible, and wearing fakes becomes socially risky,” Orr said.
But is doing the “uncool” thing by counterfeiting goods going to be enough to persuade people to stop? In the end, the answer may be “yes” for a majority of consumers.
“Trusted sneaker sellers earn at least a 20 percent premium, and it’s not just the ‘buy’ side of the transaction that affects consumers,” Orr points out. “Most of us don’t even consider trying to sell our authentic used luxury goods on the Internet because we know we won’t get fair value.”
However, there’s no doubt that counterfeiters are getting better.
“Wait until they start 3-D printing,” Orr warns.
Counterfeiters might always have a new trick, but blockchain technology will now be chasing the bad guys. Maybe, in the foreseeable future, it can even get ahead of them.
The post Blockchain Startups Take Aim at Counterfeiting of Luxury Products appeared first on Bitcoin Magazine.
This post is by Benjamin Roussey
The first fundraising in the world for an initial public offering of a Bitcoin mining company has raised 5.9 million Australian dollars, (USD $4.2 million) – falling short of its target of AUD $20 million.
Based in Melbourne, the Bitcoin Group announced last week that it had raised AUD $5,927,168.40 in a bookbuild of its Australian Stock Exchange (ASX) listing. The company also announced that it was still progressing though the listing process with ASX.
Even though the amount raised was less than a third of the amount it tried for, CEO of Bitcoin Group Sam Lee called it a “solid result.”
During an interview on CNBC on Tuesday, Lee said the amount raised is sufficient for the company to execute its current strategy of acquiring new mining equipment to expand its footprint.
Although it was scheduled to take place on Tuesday, Bitcoin Group has not yet announced its quote on the ASX. It is expected that the company will trade under the ticker BCG.
The price of shares was at AUD $0.20, with AUD $2,000 as the minimum subscription. There is no maximum subscription. According to the Australian Taxation Office, Bitcoin is an asset for capital gains tax purposes.
This is the first time a publicly listed entity has been led by the Bitcoin Group Management since its incorporation in September 2014. Lee, the CEO, has a background in financial services and digital media.
On CNBC, Nicolas Debock, a venture capitalist at Balderton Capital in London, said he would need to think twice before investing in a Bitcoin mining firm, as it has a number of risks. He added that many venture capitalists have invested in Bitcoin in the last three years, but there still has been no money coming out.
Bitcoin Group produces approximately 1.2 percent of the world’s Bitcoin mining output, with six mining sites in Iceland and China. Due to the affordability of electric supply in China, a large percentage of its operations are conducted in China. However, since it is significantly lacking in diversification, the company could be left vulnerable to changes in regulations resulting from the Chinese stance on Bitcoin.
If the company had raised the AUD $20 million it had hoped for, the plan was to use AUD $18 million as an investment in equipment and facilities for Bitcoin mining. The remaining AUD $2 million was to be used for general corporate purposes, including costs for listing.
On CNBC, Debock said that a large number of people still believe in Bitcoin in the long term, whether it is the technology or the asset.
The post World's First Bitcoin Mining IPO Misses Target by AUD $14 Million appeared first on Bitcoin Magazine.
Segregated Witness has been the center of Bitcoin’s long-lasting scaling debate since it was first introduced by Blockstream co-founder and Bitcoin Core developer Dr. Pieter Wuille two months ago.
A nifty method to move signature data from typical transactions into “add-on blocks,” Segregated Witness is set to improve the Bitcoin protocol in several ways . Moreover, the solution can be rolled out as a soft fork, meaning that only miners need to upgrade their software; all other nodes can do so if and when they please.
The innovation is positioned as the first step of a scalability “roadmap ” as set out by Bitcoin Core, and is supported by a large segment of Bitcoin's development community.
But Segregated Witness is not free of controversy. Rather than a Segregated Witness soft fork, the recently launched alternative Bitcoin implementation Bitcoin Classic plans to increase Bitcoin's block size limit to 2 megabytes through a hard fork, meaning all full nodes on the network need to upgrade synchronously.
These are the arguments against a Segregated Witness soft fork – and their counterarguments.
It Requires 'Ugly' Code
A purist argument against Wuille's proposal is that a Segregated Witness soft fork constitutes an “ugly” workaround of code. Most important, it uses parts of the miner-generated coinbase transaction for purposes they were not originally intended for. The added complexity could potentially cause new problems as the protocol keeps evolving.
While most developers agree a hard fork would be a cleaner solution, this does not necessarily mean a Segregated Witness soft fork is unsafe. The Bitcoin Core development team has rolled out several similar soft forks in the past, and maintains that this one would not carry any more risk.
A hard fork, meanwhile, renders all existing full node software incompatible with newer full node software, which is, arguably, not very graceful either.
It Burdens Developers Too Much
A Segregated Witness soft fork workaround imposes an added burden on developers -- both now and in the future. This is particularly true for Bitcoin library and wallet developers, as they will need to adapt their software to integrate Segregated Witness. This will require more effort than a hard fork block size increase would.
Most current library and wallet developers don't seem to consider the added burden a big problem. Many are even quite excited about the innovation, and they typically consider the added benefits worth the effort. (See Bitcoin Magazine 's development series, as linked below in this article.)
Growth of Added Block Space Will Be Slow
Like Bitcoin Classic’s proposed hard fork, Segregated Witness theoretically offers up to 1 megabyte of added block space, for a total of 2 megabytes. But this optimal added capacity is based on multisig transactions, as these get an accounting “discount.” Yet most transactions are currently not multisig transactions. A more realistic capacity increase could therefore be closer to .6 megabytes of added space, for a total of 1.6 megabytes.
Additionally, this added space might not be fully utilized right away. It can be used only after wallets and other apps have upgraded. In reality, it could take a while before even 1.6 megabytes is reached.
And while the Segregated Witness soft fork is scheduled for April, it remains to be seen if this can be achieved. The solution requires much coding and testing before it can be rolled out, as well as approval by miners.
A public testnet version of Segregated Witness – SegNet – is already available for experimention. This suggests that development is on schedule.
Many library and wallet developers, moreover, estimate that it would take anywhere between a couple of days to several weeks to integrate Segregated Witness. An April release should, therefore, provide enough time for the bulk of wallet and app software to upgrade.
As soon as Segregated Witness is activated, all wallet and app software can utilize the benefits – such as lower fees – immediately. Whether other users utilize the added space as well does not not really matter for them. (And if the added block space is not used, it might just suggest that the need for extra block space was never that great in the first place.)
It should also be noted that multisig transactions might find increasing use as innovation and development of the Bitcoin protocol progresses, because added layers on top of Bitcoin – such as payment channels and the Lightning Network – typically use such transactions. The effective capacity could, therefore, come closer to 2 megabytes later on.
And while the Bitcoin Classic team maintains that a hard fork can be rolled out before April, this is considered overtly aggressive and outright risky by many within the development community. The need for all full node operators to both review and adopt the upgrade, they think, requires at least six months to a year.
It Skews Incentives
Removal of signatures from the original 1-megabyte blocks can effectively increase Bitcoin’s block size. But Segregated Witness does introduce a new type of maximum block size. Roughly: A block without the witness, plus one quarter of the witness size, must not exceed 1 megabyte. As such, upgraded nodes will see blocks that exceed 1 megabyte, since the actual size of the Segregated Witness is larger than the quarter accounted for.
This means that multisig transactions, which include more signature data, get a greater discount. And since multisig transactions are used to establish layers on top of Bitcoin, Segregated Witness artificially skews incentives toward these added layers.
Long-term consequences of such layers – such as the effect on mining fees – are controversial.
Discounting signature data is how Segregated Witness allows for added block space without requiring a hard fork. While this is indeed accomplished through an accounting measure, it is a useful one.
Additionally, witness data can be reasonably considered expendable after a certain amount of time, decreasing the need for full nodes to store it in perpetuity. It, therefore, has a lower cost to the network, making it reasonable to charge a lower fee.
Furthermore, the only way Bitcoin can reach millions of users while also remaining decentralized, secure and censorship-resistant is through the use of added layers. Incentivizing development and use of these added layers is not a bad thing.
It Doesn't Hold Well Under Adversarial Conditions
One argument in favor of a block size limit concerns block propagation and latency. In short: Bigger blocks tend to increase orphan rates, as more miners build on old blocks while newer blocks are still making their way through the network. This, in turn, favors larger miners (or pools): They find more blocks themselves, and start building on these right away, meaning they waste fewer resources.
This also means that large miners could have an incentive to actually create artificially large blocks, specifically designed to increase the orphan rate of competitors.
The current Segregated Witness proposal allows blocks up to about 2 megabytes – though a bit less is more likely. But due to the specific accounting measure to be employed, so-called “selfish miners” could create synthetic transactions designed to stuff up to 4 megabytes of data into a single block. As such, big miners could “attack” competitors with valid 4 megabyte blocks.
Segregated Witness, therefore, requires miners and full nodes to deploy hardware with 4-megabyte safety headroom, while getting significantly less real transaction capacity in return. And if the original block size limit is increased through a hard fork at some point in the future, this risk multiplyer will probably remain.
If 4 megabytes is indeed large enough to successfully pull off an attack – which is unclear – this attack would require the attacking miner to discard all real transactions. The resulting loss of fees serves as a slight disincentive to carrying out such an attack, and it would be obvious to the rest of the network that an attack is going on.
And while the risk multiplier will probably indeed remain even if a hard fork is rolled out later on, it could potentially be decreased through a soft fork as well.
It Degrades Security of Non-upgraded Nodes
A fifth concern is that a Segregated Witness soft fork would degrade the security of all non-upgraded full nodes. These nodes could still accept Segregated Witness transactions, or transactions that depend on a previous Segregated Witness transaction, but be unable to verify whether the signature data is valid. As such, they'd have to rely on validation by miners.
Unconfirmed Segregated Witness transactions would, therefore, be insecure, as these are not yet verified by miners at all.
But even confirmed Segregated Witness transactions would be less secure, as miners could purposely mine invalid transactions into blocks with the intention to double-spend non-upgraded nodes. A non-upgraded node would believe these blocks to be valid until the miners switch their hash power back to the valid chain. If a non-upgraded node accepted transactions from the invalid blocks, he might have lost money.
The costs of such a double-spend would resemble the cost of any other 51-percent-attack, but with added leverage. Attacking miners could potentially leverage hash power from “SPV-miners,” who wouldn't know what's going on themselves, since they don't validate transactions either. And the attacker could leverage funds to double-spend, as he could use any Segregated Witness-protected bitcoin that never belonged to him in the first place.
A Segregated Witness soft fork will be publicly announced far in advance, and transparently voted on by miners. As such, any user running a full node will have plenty of time to take the necessary precautions.
Users running a non-upgraded node should not trust zero-confirmation transactions. But zero-confirmation transactions were always unsafe. Anyone who wants to pull off a double-spend attack with unconfirmed transactions can do so with or without Segregated Witness.
The added risk of confirmed transactions, meanwhile, can be offset by waiting for some additional number of confirmations. (For exact figures of the added risks, see these calculations by Bitcoin developer Oleg Andreev.)
A user who does not want to upgrade to the newest full node status at all, furthermore, could patch his non-upgraded full node with software that flags suspicious transactions – and potentially even reject such transactions completely.
Last, it should be noted that hard forks pose a much greater risk of double-spend transactions. Any non-upgraded node could, in the case of a hard fork, receive completely invalid transactions while potentially never realizing it at all.
It Will Be Deployed without Explicit User Consent
Though arguably small, the security degradation as described above does exist. And what's perhaps more important: This security degradation would be enforced without explicit consent from users. Even if users strongly oppose Segregated Witness, and prefer not to upgrade, a majority of miners could push the change through regardless.
This is at odds with Bitcoin’s promise of personal autonomy; the idea that operators of a full node should always have the possibility to opt-out of any change.
Soft forks cannot be prevented. Miners controlling a majority of hash power can always decide to enforce new rules, as long as they do not break the existing consensus rules. This is inherent to the Bitcoin protocol, and will be possible after a hard fork just as well.
As such, users running full nodes must always bear some responsibility. Either the responsibility to upgrade to the latest version of the software, or the responsibility to wait for an added number of confirmations, or perhaps even the responsibility to not accept any transactions after a soft fork is detected.
And while it’s technically true that users don’t need to change their software after a (contentious) hard fork, and can choose to “stay behind” on the original network, this will almost certainly not be the option in practice. Besides the risk of double-spend attacks, decreased hash power could ensure that transactions never confirm – or confirm very slowly.
An alternate scenario is that the minority chain by hash power introduces its own hard fork to change the proof-of-work algorithm. Bitcoin would then split up into two separate networks, and all users would have to upgrade their software to support one of the options – or both.
Thanks to Jonathan Toomim and Ciphrex CEO, Bitcoin Core, and Segregated Witness developer Eric Lombrozo for proofreading and added feedback.
For more information on Segregated Witness, see Bitcoin Magazine's series on the subject, or part 1, part 2, part 3, part 4, part 5, part 6, part 7 and part 8 of Bitcoin Magazine's development series.
The post On the Detriments of Segregated Witness for Bitcoin appeared first on Bitcoin Magazine.
The long-lasting block size dispute has catapulted into the center of attention again. One of the most talked about developments is Segregated Witness, of which a public testnet iteration – SegNet – was launched in January. The innovation as recently proposed by Blockstream co-founder and Bitcoin Core developer Dr. Pieter Wuille is a centerpiece of a scalability “roadmap” set out by Bitcoin Core.
To find out where the broader development community stands on Segregated Witness, Bitcoin Magazine reached out to library and wallet developers, those who will need to do the heavy lifting in order to utilize the innovation once rolled out.
In part 8 of this series: NBitcoin developer Nicolas Dorier.
Nicolas Dorier is the CTO of Metaco, an open asset (colored coin) company that helps financial institutions emit fiat currency on the blockchain. Dorier is also lead developer of NBitcoin, the main .NET library for Bitcoin development, and he wrote a free ebook on Blockchain Programming: Blockchain Programming in C#.
Dorier already implemented full Segregated Witness support into NBitcoin, and launched a basic block explorer and transaction parser and checker on Segnet. He also briefly contributed to Segregated Witness development itself.
“Segregated Witness is a net win, there is not any downside to adopt it at all,” Dorier said. “It is one of the two pieces of the puzzle – the other being OP_CSV – to make Bitcoin scale to millions of users, by making the Lightning Network highly effective. I am also very excited by the new method to sign transactions, which now includes the value of outputs being spent. This is huge from a security perspective for webwallets and hardware wallets, as it prevents [the] user from adding too much fees by mistake. And last but not least, it increases the capacity of Bitcoin. I expect Segregated Witness adoption to follow an ‘S-curve’; wallets will jump on it very quickly.”
While Segregated Witness has been criticized as being a complicated solution, Dorier’s experience suggests otherwise. According to Dorier:
“From an implementation perspective it was relatively easy. I would say it took a little more than two or three days for NBitcoin support. I had to re-factor internal stuff to make it easier for NBitcoin’s users. Once implemented in NBitcoin, adding Segregated Witness to my block explorer was just a matter of updating the relevant package and redeploying it. Smartbit, another block explorer, has already done this as well, and can attest to the simplicity.”
Roll-out of Segregated Witness on the Bitcoin network is currently scheduled for April. Once a super-majority of miners agrees on the solution, Segregated Witness will be activated, and it can be used by wallet and app software.
Among other benefits, this means that anyone using the new possibilities will use only about two-thirds to half the space in the available 1 megabyte blocks. These transactions get to pay a lower fee, and more transactions can be processed on the Bitcoin network.
But this strategy is being contended by the recently launched Bitcoin Core fork Bitcoin Classic. Bitcoin Classic most likely plans to deploy a block size increase to 2 megabyte blocks through a hard fork once 75 percent of hash power agrees, and a four-week “grace period” for all full nodes on the network to switch to the new rules.
Bitcoin Classic’s strategy has not gathered much support among library and wallet developers, however.
“Let’s be clear: Segragated Witness is the fatest way to bump the block size,” Dorier explained. “The migration to Segregated Witness does not need to be synchronized between service and wallet providers. In other words, anyone can receive Segregated Witness transactions even if their wallet did not upgrade – though in that case you’d have to trust on miners for validation.”
Dorier does believe the block size limit will need to be increased through a hard fork a bit further down the road.
“Even with 1 megabyte blocks, Segregated Witness, and the Lightning Network deployed, Bitcoin will only be able to cater some 14 million users,” Dorier said. “Thanks to Segregated Witness, such an increase is not strictly needed for another year. But if there is consensus about raising the block size limit – and it’s clear it won’t hurt the network – it should be done nevertheless.”
But Dorier does hope this change will eventually come from the Bitcoin Core development team, rather than Bitcoin Classic, explaining:
“Core has proven to be reliable over the past years. All of their contributions to Bitcoin reached the highest standard of software development. Their commits speak for themselves. So I don’t support any ‘change of governance.’ In my opinion, Bitcoin Classic was pushed for political reasons; to try to get the power out of Bitcoin Core’s hands by some unproven team for unknown purposes. I will personally only support a 2 megabyte hard fork with 90 percent hash power vote, and a grace period of a year. This would make it clear the goal is not to raise a war against Bitcoin’s best contributors.
Even if Bitcoin Core doesn’t commit to a specific date, saying something like, ‘We will propose to do it sometime next year’ would fix a lot of the drama. It would also prevent a disastrous hard fork which could result into a split. What Bitcoin Classic proposes is the most dangerous thing that can happen to Bitcoin right now.”
For more information on Segregated Witness, see Bitcoin Magazine’s three -part series on the subject, or part 1 , part 2 , part 3 , part 4 , part 5 , part 6 and part 7 of this development series.
The post NBitcoin's Nicolas Dorier: Segregated Witness Fastest Way to Bump Block Size appeared first on Bitcoin Magazine.
Although scalability (the block size limit) has been the main topic of conversation in the Bitcoin community over the past year, this controversy has also brought up another important subject for the peer-to-peer digital cash system: governance. Bitcoin Core Contributor Peter Todd is no fan of Bitcoin XT, but he does like the fact that Mike Hearn’s alternative implementation of the Bitcoin protocol brought the topic of governance to a wider audience.
So how does Bitcoin governance work? Blockchain Capital Managing Partner Brock Pierce was recently asked this question by Jason Calacanis on This Week in Startups, and he described the checks and balances that exist between different participants in the Bitcoin ecosystem.
A Developer Has to Write the Code
Pierce described Bitcoin governance in layers, noting that a developer must first write code that becomes an option for users of the system:
“The system actually has multiple layers. One, a developer has to write the code and put it forward. It really goes through a peer-review type of process where it gets vetted because it’s a very public process. It’s an open-source project; that’s what it is.”
Some are worried about the perceived centralization currently found in the Bitcoin development process, but in reality, developers have no power over what code Bitcoin users decide to run on their computers. Although Bitcoin Core is currently the reference implementation of the Bitcoin protocol, the five developers with commit access to that particular software client do not have any sort of tyrannical power over the system.
The Consensus of Miners
Once a developer has written some code, it is then up to miners to decide whether they should switch to that new software or stick with the code they’re currently running. Miners even have the ability to not upgrade their software if they do not agree with a change made by the development team behind the current reference implementation of the protocol.
During his interview, Pierce noted much more than 51 percent of miners need to agree on any proposed changes to Bitcoin’s consensus rules:
“The people that are running the infrastructure have to come to an agreement. The miners have to say yes, and then they need to run it, process a certain number of blocks, and you actually need more than 51 percent. You really need – call it 90 percent. You need [social] consensus of those miners.”
The level of social consensus among miners needed to implement a change that would cause a hard fork differs depending on whom you talk to. Bitcoin Foundation Chief Scientist Gavin Andresen would say 75 percent of miners is enough for a hard fork, while the developers behind Bitcoin Core would like to see “near-universal agreement” before implementing such a change. The Chinese Bitcoin community has also decided it will only accept a hard fork to a 2-megabyte block size limit if 90 percent of the network hashrate agrees to it. Having said that, it’s unclear whether they would be willing to switch to Bitcoin Classic in order to make that change.
Users Choose Which Coin Has Value
The last level of Bitcoin governance is the user base. After all, bitcoin miners are only going to mine on a blockchain that actually has value. Pierce explained the role of Bitcoin holders and Bitcoin companies in Bitcoin governance:
“The miners are also influenced by the other parties, which would be the companies: the Bitcoin exchanges, the wallets, [and] the payment process. What happens is you go through this process of a hard fork where you get two versions of the software running, which means now everyone’s coins have been replicated into two wallets. Now, whichever one the payment processors accept as real – they start to have an influence.”
This Week in Startups host Calacanis noted the similarities between the participants in the Bitcoin network and the three branches of government in the United States:
“It’s almost like the government where you have the executive branch, the legislative branch [and the judicial branch].”
The recent launches of Bitcoin XT and Bitcoin Classic have been the first serious tests of this governance model. Bitcoin Core has been able to avoid a hard fork for the time being by implementing Segregated Witness via a soft fork , but there is near-universal consensus on the need for an eventual hard fork to a larger block size limit in Bitcoin.
Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report and many other media outlets. You can follow @kyletorpey on Twitter.
Photo Hans Splinter / Flickr(CC)
The post The Checks and Balances of Bitcoin Governance appeared first on Bitcoin Magazine.
In December Bitcoin Magazine reported that IBM and a group of top tech and finance companies are joining forces to develop a new open source blockchain separated from the Bitcoin blockchain. The group will work with the Linux Foundation to create a public network that lets blockchain applications built on top of it communicate with each other.
Digital Asset Holdings, the fintech startup headed by the financial superstar Blythe Masters, is contributing its Hyperledger mark, which will be used as the project name, as well as enterprise grade code and developer resources. Digital Asset Holdings bought San Francisco-based Hyperledger in June.
Now IBM is starting to reveal some details of its blockchain projects and strategy.
In an interview with IT analyst David Strom published in IBM’s online magazine Security Intelligence, John Wolpert, IBM’s blockchain offering director, said that IBM will eventually have hundreds of developers working on various blockchain projects. IBM didn’t invent blockchain technology but plans to take a leading role in its development, with an approach similar to IBM’s Java developments.
“[Java] wasn’t our technology, but we got behind it and put an army against it,” Wolpert said. “At its height, thousands were working on Java-related projects.”
Wolpert is responsible for engineering, products and open source initiatives at IBM. Previously, he was head of products for IBM’s Watson Ecosystem – IBM’s ambitious Artificial Intelligence (AI) project – and a successful entrepreneur before joining IBM.
At the forthcoming Block Chain Conference on February 10 in San Francisco, Wolpert will give a keynote presentation titled “How to Make Block Chain Real for Business.” The address will focus on IBM’s point of view in this space and its contribution to the open source community led by the Linux Foundation. The open source community is aimed at accelerating the maturity of this shared ledger technology, through a collective, open and coordinated approach.
Wolpert said that Hyperledger code will become an open source industry standard, eventually available on Github just like other open-source software, and developers will be able to build applications on top of Hyperledger.
“There are going to be lots of people who will compete on providing solutions,” he said. “We will try to get the best minds across the industry to work together on this code.”
Developers will be able to deploy Hyperledger applications on the IBM Cloud, a collection of fully integrated services to help IBM clients use data across all digital channels to understand their customers and anticipate their needs. According to the company, IBM Cloud is the first full spectrum cloud built on open technologies, with the world’s most advanced analytics and cognitive computing toolbox.
“We intend to be the best place and fastest place to get blockchain technologies running,” said Wolpert. “We are moving assets on a massive scale in ways that we never thought of before and doing so automatically and without any human intervention. It isn’t just the data, but using the transaction log of the data in new and interesting ways.”
The recent U.K. Government Office for Science report ““Distributed Ledger Technology: Beyond Block Chain” noted that the strong association of blockchain technology with Bitcoin represents an important problem when it comes to communicating the potential benefits of distributed ledgers.
Wolpert agrees, and adds that many banks and other traditional financial institutions were hesitant to be associated with blockchains because of Bitcoin. But IBM’s strategy is more focused on non-banking applications of blockchain technology.
“Now people are talking about how they can use blockchains without endorsing any shadow currencies, and everyone is excited,” said Wolpert. “It has gone beyond being a fad.”
Wolpert is persuaded that blockchain technology could have many important non-currency applications, and, in particular, that it could be a solid foundation for more efficient supply chain networks.
Photo Patrick / Flickr(CC)
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The long-lasting block size dispute has catapulted into the center of attention again. One of the most talked-about developments is Segregated Witness, of which a public testnet iteration – SegNet – waslaunched in January. The innovation as recently proposed by Blockstream co-founder and Bitcoin Core developer Dr. Pieter Wuille is a centerpiece of a scalability “roadmap” set out by Bitcoin Core.
To find out where the broader development community stands on Segregated Witness, Bitcoin Magazine reached out to library and wallet developers, those who will need to do the heavy lifting in order to utilize the innovation once rolled out.
In part 7 of this series: Bitcoin Wallet developer and bitcoinj maintainer Andreas Schildbach.
Segregated Witness Makes Future Extensions Easier
Schildbach is the developer behind Bitcoin Wallet, the first and very popular Bitcoin wallet app for Android. He also maintains the bitcoinj Java library, which was initially created by recent R3CEV-hire Mike Hearn, and provides the basis for Bitcoin Wallet and many other wallet apps.
While Segregated Witness received a lot of attention in light of the block size dispute, many developers are particularly excited about the improvements to the Bitcoin protocol that don’t concern the block size limit directly. Schildbach, too, believes Segregated Witness offers many benefits beyond just the added transaction capacity.
“Segregated Witness complicates wallet development a bit, but I think it is worth the effort, as it will make future extensions to the Bitcoin protocol much easier,” Schildbach said. “Think of stuff like fraud proofs, a new signature algorithm, increased extensibility, not to mention a fix to the malleability problem – things we thought we’d need a hard fork for at some point.”
Segregated Witness also offers an effective block size increase to a range between 1.75 megabytes and 2 megabytes, depending on the types of transactions. Schildbach is skeptical, however, that this will be enough:
“When it comes to the block size topic, I think Segregated Witness is not a solution at all. In the most optimistic estimations, Segregated Witness offers an added 1 megabyte per block. I think that in practice, actual usage will grow slower with Segregated Witness compared to a 2-megabyte hard fork increase, as it requires all wallets and services to upgrade. The space optimization is nice, but just a bit of sugar on top of the other advantages. We will need to see more to achieve real scalability.”
Soft Fork “Liveable”
Roll-out of Segregated Witness on the Bitcoin network is currently scheduled for April. Once a super-majority of miners agrees to the solution, Segregated Witness will be activated, and can be utilized by wallet and app software.
Segregated Witness is currently being integrated in bitcoinj, and Schildbach hopes that both bitcoinj and Bitcoin Wallet will be ready to utilize the benefits once the protocol change is rolled out.
“I drafted a rough schedule for development,” Schildbach said. “Other developers are doing most of the work, so I can focus on code review. I’d say it can be done in a matter of weeks. Once it is done, all wallets built on bitcoinj can simply use the code with minimal effort.”
The intended roll-out method of Segregated Witness through a soft fork is being contested by recent Bitcoin implementation Bitcoin Classic. While a soft fork would require only miners to upgrade, Bitcoin Classic plans to deploy a block size increase to 2-megabyte blocks through a hard fork instead, requiring all full nodes on the network to switch in unison.
Schildbach shared the concerns as presented by Bitcoin Classic, and believes a hard fork to be the preferred solution.
“Blocks are full, and I don’t agree that a hard fork solution would be short notice. We’ve been discussing this issue for years now! I would prefer we roll out a hard fork,” he said.
He added, however, “That said, I can live with a soft fork, too. And I hope one day a hard fork will be used to clean up the soft-forking mess we leave behind.”
For more information on Segregated Witness, see Bitcoin Magazine’s three-part series on the subject, or part 1, part 2, part 3, part 4, part 5 and part 6 of this development series.
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