Wednesday, September 9, 2015
Bitcoin XT Users Allegedly Suffering Coordinated Hack Attack
Investors’ Angel: A New Way to Start-Dom
SEP 9 DIGEST: ShapeShift Raises $1.6 Million; Nick Szabo Says Banks Need Permissionless Blockchains to Survive
New Chip Cards May Actually Increase Credit Card Fraud, Hurt Merchants
Tuesday, September 8, 2015
Instant Cryptocurrency Exchange ShapeShift Raises $1.6 Million
ShapeShift announced today that it had completed its fundraising of $1.6 million USD. ShapeShift is an exchange that allows users to transfer Bitcoin for dozens of other cryptocurrencies without any accounts or personal information being shared.
Barry Silbert’s Digital Currency Group and Roger Ver were the lead investors in this round. Bitfinex, Bitcoin Capital led by Max Keiser and Simon Dixon, Mardal Investments, Bruce Fenton, Trevor Koverko, and Michael Terpin also invested in the funding round.
“ShapeShift demonstrated an entirely new way to think about asset exchange,” said Zane Tackett, Director of Community and Product Development at Bitfinex, in a statement. “We’ve known Erik for a while now and he’s knocked it out of the park with this one.”
According to the company, the exchange has experienced 100x growth since its launch in August 2014. In July, it had over $2 million in USD-equivalent volume, which was a record for the company.
What makes ShapeShift unique is that exchanges are instantaneous and require no personal information. Further, ShapeShift doesn’t actually hold any of the currencies; it simply facilitates the trade from one coin to the other. At present, there are over 40 different digital currencies. This means that ShapeShift offers over 940 different trading pairs. That is greater than any single exchange on the market.
However, one type of currency cannot be traded. ShapeShift has a strict “no fiat” policy, which means that if a user wanted to buy bitcoin with US dollars, they’d be unable to. Instead, the user would have to first buy it from another company and then they could trade on the ShapeShift exchange.
Mega Suffers Hostile Takeover by Chinese Fraudster, Hollywood and New Zealand Gov’t
Gavin Andresen on the Block Size: “It’s Hard to Find a Signal above All the Noise”
Bitcoin XT Developer and Bitcoin Foundation Chief Scientist Gavin Andresen was interviewed on Epicenter Bitcoin earlier this week, with the conversation mainly revolving around concepts related to Bitcoin governance. Development of Bitcoin Core has somewhat slowed recently due to the lack of a clear process for reaching development decisions, which is at least part of the reason Andresen joined Mike Hearn’s Bitcoin XT project.
Reaching consensus is a terribly difficult task when there are so many different individuals involved in a distributed system, such as Bitcoin, which is why Epicenter Bitcoin co-host Brian Fabian Crain asked Andresen about who should have a say in changes made to the protocol.
Everybody Should Have a Say
Andresen believes that everyone should be able to have their say through the various communication channels available to them. During the interview, he noted:
“I think everybody should have a say. It’s hard to balance letting everybody speak and not just being drowned out by the noise. If you look on Reddit, anybody can speak there and talk about whatever issue about Bitcoin they care about. It’s hard to find a signal above all the noise. I don’t think it’s impossible, and I think it is fairly clear what the consensus on Reddit is about the blocksize issue. But it’s hard to find more than a high-level, ‘We think something should be done about this issue.’ When it gets down into the details of exactly what should be done, I think then it gets even harder.”
While allowing everyone to participate in the debate is nice in theory, it becomes difficult to find a solution on a social media platform that is well-known for jumping to conclusions and quickly pulling out pitchforks. In reality, there is a smaller subset of Bitcoin companies, miners and developers who have more pull in the Bitcoin network than the average user. As Andresen explained:
“Who should have the influence? It really comes down to what code are people running and how influential are the people running the code?”
Some Bitcoin Users are More Equal Than Others
After explaining that some Bitcoin users are more influential than others, Andresen began to describe the roles those users play in the Bitcoin ecosystem. He started with exchanges:
“Exchanges are incredibly influential at this stage of Bitcoin’s life. Exchanges are a place where a lot of trading is done. Right now, there’s a lot of speculation; exchanges are where that speculation happens. So what the exchanges want to do matters a lot.”
Speculative trading is still one of the main use cases for bitcoin right now, and anyone who uses an exchange, such as Bitfinex or Coinbase, is subject to the code that the exchange chooses to run on their own servers (as long as the user keeps his or her coin on the trading platform). Of course, users still have the ability to switch to another provider if they don’t agree with the codebase chosen by a particular exchange, but many users of bitcoin banks are also not overly interested in the code running on the server.
Andresen also pointed to the importance of mining pools:
“Miners are also very influential — and more than miners, the mining pools that pool together miners are very influential. So I think they have a big influence and a big voice in what happens.”
Miners control the security of the network, but they’ll also want to run the code that will be the most profitable option for them. If a hypothetical hard fork were to take place and split Bitcoin into two different networks, miners would be incentivized to mine on the blockchain with the more valuable coin. This is one of the reasons that the Satoshi Nakamoto Institute’s Daniel Krawisz believes investors are ultimately in charge of Bitcoin.
When it comes to the average user, Andresen conceded, “It’s harder for them to have a huge influence.”
Who Does Andresen Listen To?
Gavin Andresen also described his own thinking process when it comes to figuring out what he should work on next. The Bitcoin Foundation chief scientist explained that he tries to keep the desires of all bitcoin stakeholders in mind before deciding on his next move:
“The people who have the biggest voices right now are the developers, the exchanges and the mining pools. Those are the three biggest players. I like to think that, as a developer, I try to listen to all the stakeholders. I try to listen to what long-term bitcoin holders want, what people who are actually transacting with Bitcoin want, [and] what the companies like BitPay who are supporting merchants want. And try to balance all those things when I think about what am I personally going to be working on as I write code, as I submit pull requests, [or] as I decide what pull requests I’m going to review? I try to channel everybody to prioritize what I work on, and I think all of the other developers do that, too. We probably have different opinions on what’s important to work on next.”
Andresen is on the technical advisory board of a few exchanges and merchant processors, so that’s how he keeps in touch with the concerns at those companies. He also mentioned bitcointalk.org and Reddit as the two best channels for discussion on changes to Bitcoin by ordinary users — at least for now.
Photo Mikael Altemark / Flickr (CC)
Back to the Future: Adam Back Remembers the Cypherpunk Revolution and the Origins of Bitcoin
Bitcoin Knowledge Podcast host Trace Mayer interviewed legendary cryptographer Adam Back on his role in the creation and deployment of some of the most potent privacy software to ever affect the world of Bitcoin. A transcript of the podcast is published in We Use Coins.
Trace Mayer is an entrepreneur, investor, journalist, an expert on the Austrian School of economic thought of Murray Rothbard and Ludwig von Mises, and a staunch defender of freedom of speech.
Adam Back is the inventor of Hashcash, the proof-of-work system used by Bitcoin and other cryptocurrencies as part of the mining algorithm. “To implement a distributed timestamp server on a peer-to-peer basis, we will need to use a proof-of-work system similar to Adam Back’s Hashcash,” wrote Satoshi Nakamoto in the original Bitcoin white paper.
Back is also one of the authors of the Bitcoin Sidechains white paper “Enabling Blockchain Innovations with Pegged Sidechains,” released in October, and one of the founders of Blockstream.
Blockstream, which in November closed a $21 million seed-funding round with nearly 40 high-profile investors, develops open-source software to implement sidechains and accelerate developments in the cryptocurrency space.
Blockstream recently announced Sidechain Elements, a sidechain development framework with open-source code and a developer sidechain for testing, featuring intriguing new possibilities such as confidential transactions. Blockstream also is working on lightning networks, a somewhat-related concept that shows great potential for Bitcoin scalability.
“We’re going to be having a full week with [Back] on the podcast discussing confidential transaction, sidechains and the lightning network along with some of his other innovations and thoughts on bitcoin and where it’s going,” Mayer announces at the end of the interview.
In fact, the conversation doesn’t go – yet – deep into ongoing technology development. Rather, it’s a recap of the history of cryptography and P2P technologies in the last couple of decades, and – especially – a thoughtful and passionate defense of the techno-libertarian ideas that are dear to both Mayer and Back. Today, with the original pro-privacy, anti-bureaucracy spirit of Bitcoin is threatened and cornered by governments, banks and sanitized “permissioned” blockchains, it’s refreshing to follow Mayer and Back – to the future.
Cryptography pioneers and “cypherpunks” such as Phil Zimmerman, David Chaum, Nick Szabo, Hal Finney, Wei Dai, Stefan Brands, and other affine spirits since the days of Alan Turing, wanted to make society better – by writing code. Phil Zimmerman’s PGP was one of the first cryptographic codes able to change society for the better.
“[PGP was] a way for you to have privacy or anonymity via email,” says Back. “So it’s a simple piece of technology, but they have this kind of mantra cypherpunks write code, which is to say, you know, you can go lobby all you want but what ultimately changes the game is deployment of technology.”
Back tells the story of Hashcash, PGP, David Chaum’s DigiCash and Stefan Brands’s electronic cash system, Bitcoin precursors such as Nick Szabo’s bit gold and Wei Dai’s B-Money, leading to Nakamoto’s Bitcoin white paper.
“So they were a number of people in the cypherpunks list who were talking about designs, and some of them were anonymous because it’s cypherpunks, and they developed the remailers so they were kind of practicing their own technology,” said Back. “So there was some kind of jovial or joking comments from anonymous people that are actually insightful, technical, cryptographic protocol comments from anonymous people. And, of course, we don’t know who they were. Potentially some of them Satoshi, right?”
“Unless you are Satoshi,” says Mayer at that point.
“No comment on that,” replies Back. “Don’t like to speculate on who Satoshi might be. I think it’s probably a good thing that Satoshi is anonymous because you know there’s a lot of political pressure that could land on somebody who is seen to somehow have control and all sorts of things.”
Toward the end of the podcast, Back mentions privacy-preserving cryptocurrencies and recent developments in cryptography that could be applied to new version of Bitcoin, including Zerocoin, Zerocash, and zero-knowledge Succinct Non-interactive ARguments of Knowledge (zk-SNARKs).
It’s interesting to speculate on the possibility to implement Zerocash as a sidechain interoperable with Bitcoin. Hopefully, Back will say more in the forthcoming podcasts.
SEP 8 DIGEST: AXA Bank Considers BTC for Remittance Market; Bitcoin Group’s IPO Back on Track
PayPal Pulls Out of Puerto Rico; Huge Opening for Bitcoin
Monday, September 7, 2015
South Korean Law Enforcement to Launch Investigations on Altcoin Pump-and-Dump Schemes
Chosun, the largest and most popular online news publisher in South Korea has reported that law enforcement is about to begin investigations on altcoin pump-and-dump and bitcoin Ponzi schemes.
The Bank of Korea will support local law enforcement and agencies with the investigation and will provide the necessary infrastructure and technology to search for scam bitcoin projects and programs.
The joint investigation will also focus on the trading of altcoins that have no value, or are suspected of being a pump-and-dump scheme.
“According to our sources, there are 676 altcoins, including bitcoin, listed on coinmarketcap.com. However, only 309 of them have a market cap of USD$10,000, and others are almost worth nothing. Furthermore, there are 550 altcoins that have extremely low daily trading volumes,” said the article.
The Bank of Korea and the local police already have started looking into several different altcoins that have been used over the last few months and are discussing with local enforcement whether to launch a full investigation on these altcoins and on the individuals or organizations that have been promoting the use and trading of altcoins that have recorded substantially low daily trading volumes over the past 48 hours.
Will Scaling Bitcoin Bring Us to Consensus on the Block Size Debate?
“There’s a deep rift amongst bitcoin core devs regarding what the purpose of Bitcoin should be,” said Eric Lombrozo, Bitcoin developer and CEO of Ciphrex. “Unfortunately, the fundamental underlying disagreements aren’t being properly addressed … and most of the discussion has instead focused on the differing conclusions rather than on the real causes of disagreement.”
On August 15, Bitcoin Magazine reported that the first of two Scaling Bitcoin workshops would be held in Montreal on September 12 and 13. This first phase of proposals and presentations is intent on setting the stage for further discussions in phase two, which is planned for December 6-7 in Hong Kong, all with the goal of generating the sort of discussion that Lombrozo is referring to.
“This conference represents a communitywide effort to understand and characterize the plethora of factors that must be considered before coming to any conclusion about how to best scale Bitcoin,” Eric Martindale told Bitcoin Magazine on behalf of Scaling Bitcoin. “Our goal with this first event is to increase awareness of the research that has gone into the scaling problem over the past few years, and encourage a more open dialogue across the entire community.”
The debate over the future of Bitcoin and scalability has ramped up over the past few weeks as proponents of one solution or another have taken to social media, discussion boards and blogs to argue various cases.
On September 1, in an open letter to the Bitcoin community, 32 developers collectively asked people “to not prejudge and instead work collaboratively to reach the best outcome through the existing process and the supporting workshops.”
“There are a lot of things we’ve learned about Bitcoin that were unknown a few years ago that change many of the underlying assumptions about how the network functions,” said Lombrozo, who has since become a signatory to the open letter. “There’s been a lot of progress in ideas … but, unfortunately, there’s also a lot of confusion surrounding how Bitcoin can evolve. I hope we can really take a step back and look at what we can do given what we know now … rather than focusing too much on the way we thought the system should have worked but doesn’t.”
Lombrozo argues that the larger underlying issue is “the lack of a process that allows us to make progress in situations where we lack near-unanimous agreement for hard forks. Until now, the policy has been to not make these kinds of changes unless everyone agrees.” He adds that while he is looking forward to attending the workshops and seeing what the engineers have to offer, he is also “working on some proposals to address the consensus-building process between developers more generally.”
Chinese mining pool BW, which provides approximately 8 percent of global mining power, will also be keeping a close eye on what comes out of the two workshops.
“We would like this to be an opportunity for everyone to get together and sit down to discuss this important issue,” representatives from the company told Bitcoin Magazine. “We are in agreement with the spirit of the open letter and look forward to meeting our colleagues from around the world.”
BW will be sending Mianhuan Li, the manager of their mining farm in Inner Mongolia, to the Montreal workshop. Qingchun Shentu, their resident expert on cryptography and Bitcoin, and doctoral candidate in Signal and Information Processing, will attend the second workshop in Hong Kong.
On the other hand, core developer Mike Hearn, who implemented the BitcoinXT fork along with Gavin Andreson, is skeptical about the Scaling Bitcoin workshops.
“If you look at how the Bitcoin Core devs and Blockstream have acted so far, this fits their modus operandi perfectly — stall for as long as possible whilst claiming that we just need more time for the ‘experts’ to think and debate. But don’t define any way to actually come to conclusions, thus ensuring the debate never ends.”
The workshops, which Hearn will sit out while Andresen attends, have explicitly stated that there will be academic and scientific presentations, but no debate. Furthermore, no decisions or pronouncements on scalability will be made during the workshops.
Core developer and one of the signatories on the open letter, Peter Todd, expressed some skepticism, in correspondence with Bitcoin Magazine, that the workshops will be able meet all the demands of the companies attending.
“If the data supports raising the blocksize to some level safely, and we can agree on what ‘safely’ means, that won’t be a hard thing to get consensus on. It’s just unlikely the amount we can safely raise it to will make people happy.”
He pointed out that what Andersen and Hearn appear to want — “zero or near zero fees forever with most transactions being on chain” — appears to be fundamentally impossible by simply changing a constant.
The Scaling Bitcoin workshops are hosted by CryptoMechanics and underwritten by Blockstream, Chaincode Labs, MIT Digital Currency Initiative and Chain, with further sponsorship support from other Bitcoin and blockchain companies.
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