Thursday, September 10, 2015
John McAfee to Run for US President after Creating Own ‘Cyber Party’
Wednesday, September 9, 2015
Nick Szabo on ‘Permissioned Blockchains’ and the Block Size
In many recent articles, Bitcoin Magazine reported the trend toward private, “permissioned” non-Bitcoin blockchains, supported by Accenture and Digital Asset Holdings CEO Blythe Masters, among others. Permissioned blockchain developments for banks and financial operators have been started by giant Swiss bank UBS, Bitcoin exchange itBit and more.
Permissioned blockchains would offer the advantages of digital currencies powered by public blockchains – fast and cheap transactions permanently recorded in a shared ledger – without the troublesome openness of the Bitcoin network where anyone can be a node on the network anonymously.
Instead of anonymous miners, only banks and vetted financial operators would be allowed to validate transactions in permissioned blockchains.
While Wall Street seems determined to go ahead with permissioned blockchains, it’s wise to bear in mind one simple fact: Bitcoin works. While closed, permissioned blockchains might theoretically work tomorrow, Bitcoin works in practice today, and perhaps the chaotic anarchy of the Bitcoin network is the very reason it works.
That’s the opinion of former Bitcoin Foundation director Jon Matonis, who is persuaded that private, permissioned blockchains might fall short of their objectives. “It could end up being very similar to centralized payments networks we have right now, without the benefit of the network effect of bitcoin,” he said.
Now, legendary cryptographer Nick Szabo has weighed in on current issues in the Bitcoin space, including permissioned blockchains, in an interview published in International Business Times titled “Nick Szabo: If banks want benefits of blockchains they must go permissionless.”
“[Bank] bureaucracies are so heavily invested in the expertise and importance of local regulations and standards that it’s extremely difficult for them to cut the Gordian knot and implement seamless global systems,” said Szabo. “So they keep trying to re-inject points of control, and thus points of vulnerability, into blockchains, e.g. through ‘permissioning’; but this nullifies their main benefits, which come from removing points of vulnerability.”
On the contrary, according to Szabo, the banks should embrace the crowd-sourced power and resiliency of permissionless blockchains like Bitcoin.
In his book “Digital Gold: Bitcoin and the inside story of the misfits and millionaires trying to reinvent money,” The New York Times technology and finance reporter Nathaniel Popper argued that Szabo is the most likely person behind the pseudonymous identity of Bitcoin’s inventor Satoshi Nakamoto. A recent interview with Adam Back – another legendary cryptographer – underlines the key contributions of Szabo in the developments that led to Bitcoin. Szabo’s positions are taken very seriously within the Bitcoin community.
In the International Business Times interview, Szabo also weighs in on another very hot topic: the block size. Szabo is against Gavin Andresen’s BIP 101 proposal to increase the maximum block size from the current 1 megabyte to 8 megabytes, and double it every two years after that until it reaches 8,192MB. Andresen didn’t just submit a proposal, but actually launched Bitcoin XT as an alternative to Bitcoin Core, which angered other Core developers and notable members of the Bitcoin community.
According to Szabo, a large increase in block size would sacrifice security for performance.
“If you reduce the redundancy of messages to allow for larger block sizes, beyond the growth of limiting-resource technology, that reduces the automated integrity that makes Bitcoin distinctive in financial IT,” he says.
Among the proposed block-size tweaks currently on the table for discussion, Szabo prefers Bitcoin Core developer Peter Wuille’s proposal, BIP 103, which would increase the block size limit by only 17.7 percent per year starting in 2017.
In 2001, Szabo spoke of smart contracts that solved the problem of trust by being self-executing, and having property embedded with information about who owns it. For example, the key to a car might operate only if the car has been paid for according to the terms of a contract.
Now, Szabo expects emerging “Bitcoin 2.0” smart contracts platforms like Ethereum to have a disruptive impact on financial and legal systems, comparable to that of Bitcoin itself. “[E]ventually more so, since Ethereum’s more flexible and general language can facilitate a much wider variety of commercial and other formal relationships.”
Spend Bitcoin Online at Any Merchant that Accepts VISA with E-Coin’s New Virtual Debit Card
E-Coin wants to make managing your personal finances easier with their debit card that allows you to pay for goods and services instantly by converting bitcoin into U.S. dollars, euros or British pounds.
Since 2014, E-Coin’s physical debit cards have allowed users to pay for goods and services in person wherever VISA cards are accepted. Today, E-Coin is announcing the release of a virtual debit cards. Now, anyone can create an account online and receive a virtual VISA card number that they can use to instantly spend bitcoin online at any merchant that accepts VISA. This announcement opens up thousands of new places that bitcoiners can shop online and pay with bitcoin through E-Coin. E-Coin virtual debit cards can also be used with other payment networks including PayPal and eventually ApplePay, according to the company.
E-Coin’s uses a multi-signature wallet to store each customer’s bitcoin. Every personal wallet is issued with three keys, generated and stored on different devices, providing increased security and fraud protection.
The London-based startup has already reached 25,000 customers and is available in 173 countries. The company plans to expand its reach to more countries and will soon be accepting more currencies.
E-coin representative Dmitry Lazarichev told Bitcoin Magazine that promoting bitcoin means that using bitcoin has to become more user-friendly than it is now:
“E-coin is dedicated to the widespread adoption of bitcoin and wants to make things as easy as possible for potential users. Ultimately, we believe that the blockchain and the current financial infrastructure should be merged.”
Users can load up to USD$20,000 onto their E-Card and withdraw up to USD$3,000 in cash daily. The company uses BitGo’s multi-signature security and is insured by XL Group.
E-Coin’s app is coming to iTunes and Google Play soon and will enable contactless payments on certain mobile devices, according to the company.
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SEP 9 DIGEST: ShapeShift Raises $1.6 Million; Nick Szabo Says Banks Need Permissionless Blockchains to Survive
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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.
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