While debate remains over the origin and implications of the rising transaction fees on the bitcoin network last week, the sudden increase in network use appears to be creating pressures for industry businesses.
To date, this has mostly manifested in public calls to action by industry CEOs who have taken to blog posts to detail concerns over the current state of the network. Though there’s disagreement on finer points, those wishing to send a bitcoin transaction today are paying higher fees[1], or else waiting longer to have transactions confirm.
In the midst of this development, bitcoin wallet provider Blockchain[2] has released data that indicates its users are issuing more complaints related to service disruptions, providing a window into how bitcoin’s larger consumer-facing businesses are being affected by the network developments.
Blockchain CEO Peter Smith indicated in a Medium[3] post today that the startup is seeing “new records” for support tickets related to “unconfirmed transactions”, however, it did not go into further detail.
Data provided by Blockchain to CoinDesk indicates that support tickets in this category rose 110% from January to February, a figure that dwarfed a 14% increase observed from December to January.
Blockchain co-founder Nic Cary said:
“In the first week of March, we’ve set a company-wide record in issue management. We’ve had nearly as many cases this past week as we did the entire month of [February].”
Cary went on to state that support tickets are being resolved on average in just over two hours, but that this is putting added pressure on the company’s staff and users.
“Many of the of the voices opining on the state of the network and scaling debate do not serve end users and so they don’t really know how frustrating it’s getting for regular folks trying to make transactions,” Cary said.
Larger debate
Still, just how much pressure this is putting on startup business models, and how much of a concern this should be for developers, remains a contentious topic.
Blockchain’s figures come at a time when industry leaders are beginning to speak out on the issue following a private industry meeting from 26th to 28th February[4] in which the topic of how best to scale the bitcoin network was discussed.
Conversation about the event was minimal until a controversial post by Coinbase’s Armstrong on Friday in which he criticized[5] Bitcoin Core developers, calling the team overly ideological and immature. He further advocated for a proposal called Bitcoin Classic[6] that would increase the capacity of transactions the bitcoin network would be able to process in each data block to 2MB, up from 1MB today.
Such comments set off a firestorm of criticism on social media, inspiring blog posts by developers such as Oleg Andreev, who argued[7] that as the blockchain system with the biggest network effect, bitcoin does not need to rush to add users.
Rather, Andreev argued advances from other blockchain-based systems will simply be added to bitcoin, meaning users are unlikely to adopt another system despite added fees and longer wait times for confirmations.
He suggests that the network’s security and integrity should be paramount, and that they should not be risked on short-term gains.
Network pressure subsides
Against this background, data from 21 Inc indicates that the average fee needed for a 30-minute transaction confirmation was in decline on Monday.
Last Thursday, users needed to pay 60 satoshis per byte for a transaction confirmation time of roughly 30 minutes, a figure that was up slightly from than the 50 satoshis per byte observed at press time.
Data also indicates[8] that the number of blocks that are near capacity or filled to capacity is subsiding after spiking last week.
Adding further fuel to the debate are allegations that network activity contributing to last week’s transaction surge should be viewed as “demand”, and that a capacity increase is needed to accommodate users who are being denied service.
For example, some observers believe that individuals or entities may be colluding to drive up[9] the number of transactions on the network to sway the ongoing technical debates.
However, Blockchain’s data provides evidence that bitcoin’s users are experiencing issues regardless of the root cause.
Cary concluded:
“Most of these users are not worried about the politics behind technical changes, they depend on bitcoin to be functional and reliable.”
Bitcoin startup Blockchain has added a former banking chairman and a former Facebook executive to its team of advisors.
The announcements were issued on Blockchain[1]‘s blog over the past two days, with former chairman for Merrill Lynch Europe, Middle East and Africa Bob Wigley, revealing his role in a post[2] today.
The news followed a separate post[3] in which Salil Pitroda, who previously worked for Facebook as a corporate development executive, disclosed he has been working with Blockchain as an advisor for the past year.
In a separate article published in TheFinancial Times[4], Wigley detailed he has also made an investment in Blockchain for an undisclosed amount.
Wigley wrote in his announcement that he had been approached by other bitcoin startups seeking venture funding, and that his interest in the technology increased as he continued to learn more.
He wrote:
“Bitcoin strikes me as one of those developments you see infrequently that won’t just change one particular aspect of the way an existing service or product is delivered but has the potential to totally revolutionise world payments.”
Pitroda pointed out how bitcoin can have an impact on both consumers and merchants that interact with it.
“For consumers, bitcoin will offer a more efficient, accountable and lower cost way to transfer funds and pay in many use cases,” he wrote. “For businesses, the blockchain will allow sharing of information for its participants, trust between unknown parties and greater security and risk management for transactional flows.”
Founded in 2011, Blockchain offers a bitcoin wallet service and blockchain explorer product. The company has raised $30.5m[5] in one round of venture funding.
Yesterday, social media lit up with the news that bitcoin creator Satoshi Nakamoto had emerged from the shadows to make a transaction.
The mysterious figure is estimated to own somewhere in the region of one million coins[1], all mined during the currency’s early months. His fortune, now worth[2] $281.6m, has not moved[3] in six and a half years.
Yet speculation bubbled after a user spotted what appeared to be signs that some coins had moved, according to data from Blockchain.info. The site displayed coins in bitcoin’s genesis block, or ‘block one’, moving to an address created this year[4].
Despite initial excitement – and concern – from some, other users spotted a data discrepancy across alternative block explorers. Sites including Blocktrail[5], Blockr.io[6] and others did not display the transaction, indicating that perhaps the movement didn’t actually happen.
Observers have stated that the issue was due to Blockchain.info’s API accepting transactions without validating them, eliciting criticism across social media platforms. The company later acknowledged the issue on Twitter[7], stating that more details would be forthcoming.
Funds attributed to Satoshi Nakamoto have not moved. They are unconfirmed by the Bitcoin network and likely spoofed. More details to follow.
Earlier today a user took to Reddit claiming to have been responsible[9] for the transaction, stating that he is a researcher from Central Europe who wanted to test the response to sending invalid transactions.
When reached for comment, Blockchain CEO Peter Smith characterized the event as a “publicity stunt”, arguing that the network would have never validated the transaction.
However, the company has updated its API with a fix that Smith says will prevent a similar situation from developing in the future.
“I think we can do a better job of filtering and we currently employ a lot of custom filtering rules so people don’t use our API for malicious purposes like spamming, dust transactions, etc.,” he told CoinDesk. “We’ve already implemented some new rules to make this kind of transaction impossible in the future.”
As it stands, it appears Satoshi’s coins remain dormant – for now.
American Banker’s second annual digital currencies conference was also its first to put an equal emphasis on the emerging opportunities posed by bitcoin’s distributed ledger, the blockchain.
The idea that conversation around the technology has altered drastically in the last year was first noted by American Banker editor in chief Marc Hochstein in the event’s opening address. The talk proved forward-thinking in its praise for the promise of more expansive and experimental use cases for the blockchain while acknowledging that bitcoin, as its first application, had kickstarted a new wave of innovation.
“I’m not going to opine on the price, I’m going to talk about bitcoin, because the idea of it has made me a better editor at American Banker,” Hochstein said. “Bitcoin has cast everything that came before it in a new light.”
This tug-of-war between ideologies shaping the technology’s development was on display most prominently in the event’s early offerings, including a solo speaking slot by Eris Industries co-founder Preston Byrne and a panel featuring Symbiont’s Adam Krellenstein, Digital Currency Group CEO Barry Silbert and author Tim Swanson.
The most interesting talks centered around the still evolving question of whether private blockchains pose a threat to public ledgers like bitcoin, or if they are simply another evolution of the technology specialized for more specific use cases. Still, most panels sought to showcase the technology’s place in conversation surrounding larger concepts affecting the financial industry, such as digital identity, data security regulation and recordkeeping.
Representing incumbent banks in this conversation was BNY Mellon[1] managing director Cheryl Gurz, who spoke on a panel meant to highlight future use cases for blockchains. Gurz shed light on the difficulty of mediating a conversation between enthusiastic technologists and sometimes critical economists while trying to uncover whether the technology can offer solutions.
Gruz said:
“We shouldn’t just be listening, we should be challenging. We should be in the conversations with the regulators. So much is being assumed that we’re going to do, so much is driven by others.”
Still prominent was conversation about bitcoin as a currency and its price against the dollar, though some panels and speakers touched on its potential use case in areas where financial services have yet to permeate.
Masters takes the stage
Perhaps the day’s most anticipated session was the opening keynote by Digital Asset Holdings CEO Blythe Masters[2], the former JP Morgan executive.
Masters began her talk by addressing the opportunity she saw in distributed ledger technology as well as the personal journey that led her to get involved in its development.
While she said not every “cool technology” could be a catalyst for change and that real barriers toward wider adoption would prohibit short-term adoption, Masters was effusive in voicing her belief that the blockchain and distributed ledgers pose a significant opportunity.
Masters said:
“It should be fairly obvious that the addressable market for this technology is absolutely gigantic. We’re talking markets that are measured in the trillions, not the billions. However, there are real frictions that exist, like the cash that we use is fiat cash and resides in bank accounts and not on digital ledgers.
Echoing comments raised in a recent article penned by executives at technology consulting firm Accenture, Masters also went on to note some of the more specific questions that she feels need to be addressed, such as how the industry should move toward standardization and deal with property titling issues.
Overall, Masters seemed keen to present a unifying message to the audience, suggesting that the best course of action for the industry is to work to understand the issues faced in the traditional financial industry.
“We need to be communicating with the existing legacy of financial infrastructure. It’s important that we’re respectful of that existing infrastructure, it works today and it has to work,” she said.
Elsewhere, Masters addressed questions from the crowd, with one attendee posing a hypothetical situation designed to test the limits of permissioned or private ledgers. In this case, Masters was asked how a Venezuelan bank might interact with a permissioned ledger.
In response, she issued one of her first public comments on the bitcoin blockchain as a subset of the larger innovation, stating:
“I’m not making claims that the bitcoin blockchain has no useful purpose.”
Separating bitcoin from blockchain
This friction surrounding the idea that certain parties in the industry are attempting to separate bitcoin’s speculative currency from its digital ledger again created sparks in the panel including Krellenstein; Silbert; Swanson; and New York Law School’s Houman Shadab.
It was perhaps Swanson and Silbert that served as the polar opposites around which the conversation pivoted, with Silbert emphasizing the expected high future price of bitcoin and Swanson revisiting his published work critiquing the cost efficiency of the bitcoin network when compared to tokenless blockchains.
“If you’re doing a public network, maybe the only way to do that is a token. But if you’re working with known entities on a private network, you can have contractual obligations to secure this network,” Swanson explained.
He went on to relay an anecdote in which he suggested a bank had asked him whether it would be liable if it was involved in a transaction where the validating miner was perhaps operating in a country sanctioned under US law. Swanson suggested that, with the bitcoin network, answers to questions like this still remain too unclear.
Silbert took the opposite approach attempting to galvanize audience interest in bitcoin by appealing to the speculative value associated with its tokens. His remarks suggested he sees a potential outcome where bitcoin is propelled past alternative blockchains as the use of its network could create new wealth for users.
“You didn’t buy bitcoin because you were trying solve issues with loans, you bought it out of greedy speculation,” Silbert said. “You have a financial incentive to see bitcoin succeed.”
In the midst of these disparate voices was Shadab, who successfully translated the debate into a moderate stance. Shadab argued that blockchains should be seen as transaction platforms that can be designed to offer certain advantages and disadvantages.
Shadab was also agnostic in his view on the bitcoin network, adding:
“These problems can be solved, but there are technological issues that you all will need to deal with it. Is it a token-based blockchain or a permissioned blockchain? As bitcoin grows in size and as transactions grow over time, some of the benefits of bitcoin, low-to-marginal transaction fees, may disappear over time. So there’s trust tradeoffs.”
Elsewhere, Swanson raised eyebrows with his typically confrontational approach to the panel session, suggesting that industry firm ShapeShift was perhaps providing a “money laundering service” due to its approach to regulation.
The blockchain as software
Perhaps best known for its colorful public messaging, distributed ledger startup Eris Industries made a splash with a confident presentation by co-founder Preston Byrne.
Byrne offered what may be some of the first public details on the project, revealing it intends to focus on smart contracts that use code to move and manage digital assets on a blockchain, thereby eliminating the need for a token.
Byrne claimed Eris is already working with “several tier-one banks”, all of whom he says are interested in its centralized approach to the technology. “Decentralization doesn’t work within existing legal paradigms. It causes more commercial problems than it solves,” he argued.
Instead, Byrne sought to assert that the true innovation behind bitcoin was that it had created new database efficiencies, effectively merging a database with its log. “Bitcoin is a very successful piece of software, but it’s just software,” he said.
Byrne also gave insight into the trajectory of the company, which he said built a decentralized Reddit and YouTube in 2014 to prove the data processing capabilities of blockchains.
Still, he stressed that centralized alternatives to public blockchains like bitcoin could possibly be faster today while solving problems for enterprise clients.
“There are no network effects for a database, you’re serving a market,” he said. “Blockchain technology is better now than it was six years ago. You can get confirmations in a block in two seconds. They work in private segments, not necessarily decentralized ones.”
Nasdaq
The clearest insight into the evolving debate over the technology’s development was perhaps provided by the day’s final panel, which focused on its impact in financial markets.
Dominick Paniscotti, associate vice president of enterprise architecture at Nasdaq, provided the session’s highlights, discussing how bitcoin only “scratched the surface” of the potential of bitcoin as a technology.
He told the crowd:
“You start off with this, ‘Oh it’s a digital currency, should we put up a bitcoin exchange? Could we trade spot bitcoin? We can set up an exchange any time we want to trade bitcoin, the power is to identify this person. I can identify that I sent something to someone and then everyone can look at it and say yeah that occurred.”
Paniscotti went on to suggest he sees bitcoin as being one of a number of competing blockchains, ones that are better optimized for other needs.
Symbiont co-founder Mark Smith and Digital Asset Holdings CMO Dan O’Prey also provided insight in the difficulty of delivering technology to institutions such as Nasdaq, speaking about the “long sales cycle” and lack of education that is holding back efforts.
“When you’re walking into the door and explaining what is bitcoin, you have maybe a year, a year and half sales cycle,” moderator Brendan O’Connor, CEO of Genesis Global Trading, said. “When you walk in there and you’re talking about utilizing bitcoin with this wallet provider, and you start having these kinds of questions, you know they’re giving it more serious thought.”
Smith went on to talk about how the emphasis on the blockchain as a technology had opened more doors to enterprise institutions, concluding:
As the Greece debt crisis unfolds and capital controls are forced down the throats of their people, bitcoin has moved back into the mainstream spotlight. With long lines[1] in front of ATM machines reminiscent of the Cyprus bail-in, once again bitcoin appears to offer a safe haven.
While many people focus on bitcoin’s price[2] fluctuations and potential increase in adoption, currency is just the first application of this game-changing technology. The core of the blockchain provides an alternative governance model to the current oligarchic control shown in the harsh austerity[3] forced against the will of the Greek people.
In the six years of its existence, public awareness of this technology has grown by leaps and bounds. Now, most who are aware of this groundbreaking innovation know the blockchain is a ledger. Yet, this ledger is not simply for accounting monetary transactions.
At its core, it is a platform that allows people to come to agreement on virtually anything without intermediaries. It provides a foundation to make social contracts based on the principle of consensus. Foremost, it enables a larger function of accounting; performing checks and balance on the self interests and the corruptible tendencies that exist in society.
In his white paper[4] published in 2008, anonymous creator of this technology Satoshi Nakamoto noted it was invented as a solution to the inherent weaknesses of the trust-based model. Roger Ver, aka ‘Bitcoin Jesus’, an angel investor in bitcoin startups, recently remarked on the Greek financial crisis, pointing out the fallible nature of the existing forms of governance that create one-way contracts:
Governments don’t have the consent of the governed. They have forcible control of the governed, with the “consent” of a third party. #grexit[5]
Bitcoin self-regulates through algorithm, eliminating counter-party risk and the need for traditional legal and regulatory tools that have shown to be ineffective in events such as HSBC money laundering[7] and the giant banking industry’s currency printing and market rigging[8]. The core of this invention is distributed trust and is enabled through a mechanism called proof of work.
Proof of work
In his presentation Consensus Algorithms, Blockchain Technology and Bitcoin, security expert and author Andreas Antonopoulos described[9] how proof of work is composed of specific cryptographic hash functions and sets of game theoretical equilibrium systems that dynamically adjust and create economics of scale.
Proof of work plays a vital role in securing the system. Adam Back, inventor of Hashcash[10], which contributed to the fundamentals of bitcoin, noted[11] how it “constructs a computational irrevocability from proof-of-work and consensus”.
This means no one can undo the work one has done. No one can fake the work or go around it. Miners at the heart of the bitcoin ecosystem have to perform hash operations by using precious resources and if they play by the rules they receive value, and if not, they lose value. In other words, all are held directly accountable by being required to spend their resources and show the presentation of their work.
This makes the blockchain bulletproof and resistant to manipulation. It also guards against the hyperinflation created as a result of government intervention through measures such as quantitative easing. When looked at as a larger governance model, this accounts for potential selfish attempts that try to benefit from the good will of people.
Genius of economic incentive
What gives the impulse for this self-organizing system and, most of all, where does this force of accountability come from? There is no central planner in bitcoin. In a sense, Satoshi’s anonymity embodies the technology’s essence. There are effectively no fingerprints on this technology. At the center of this mathematical invention is a vital economic incentive that spontaneously organizes miners to make the ledger decentralized and immutable.
This incentive structure manifested in its built-in digital scarcity is an underlying current behind the bitcoin network. This was built with a realistic and honest assessment of man’s self-interests.
History is filled with evidence of what happens when we fail to account for our selfish tendencies within. Dark memories of atomic bombs, slavery, Holocaust and genocide remind us of the cruel and violent parts inherent in humanity and the mass destruction we are capable of committing.
“The blockchain creates incentive for participants to work honestly, where rules are applied to all equally.”
When self-interests are not acknowledged, they quickly escape consciousness. Lower aspects of our humanity that are denied can then easily gain the upper hand. They become a kind of insatiable hunger that drives people to the pursuit of power, creating fraudulent systems where anti-social forces attack networks, take over economies and undermine the sovereignty and will of the people.
Through accounting for selfish motives and greed and using rewards to encourage good behavior in a transparent open network, the blockchain creates incentive for participants to work honestly, where rules are applied to all equally.
This way, the system can more effectively mitigate the risk of humanity’s destructive potential.
Distributed accountability
The bitcoin network fosters a true consent of the governed through voluntary participation and enables self-regulation taken up by each choosing to abide by the rule of consensus.
What emerges in this innovation is a new form of social accountability. Unlike traditional representative models of governance, where systems of checks and balance are exercised through third parties, under bitcoin’s consensus model, accountability is distributed directly and exercised by all in the network.
This removes single points of failure and provides far better security than existing systems. With the blockchain’s transparency, those who prefer profit without work will have no place to run and no place to hide.
There are already creative initiatives to strengthen political accountability through the use of this technology. London mayoral candidate George Galloway is calling for the city to adopt blockchain-based accounting in order to provide full transparency for the public of the city’s financial activities.
Along with the host of the RT’s financial report Max Keiser, Galloway created The Mayor’s Chain Project[12] that would put the city’s annual budget on a blockchain to foster collective auditing by citizens.
Enshrined in the bitcoin protocol is a blueprint for decentralized forms of governance. This is a real invention and can’t be uninvented. As the global crisis of legitimacy deepens, austerity will continue, with insolvent banks bailing themselves out and hedge funds getting away with cooking the books.
Bitcoin might not be able to save Greece in this moment, but its core technology offers tools for those who want to innovate a truly viable alternative to the centralized institutions of mandated trust and move into a society based on networks of distributed democracy.
Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.
Blockchain has launched an alpha version of its latest bitcoin wallet.
The launch precedes a formal debut that is likely to be the bitcoin wallet and block explorer provider’s biggest announcement since it raised a then-record $30.5m[1] Series A in October 2014. Blockchain[2]‘s wallet has been downloaded nearly 3.8 million times[3] since launch in 2011, according to its own statistics.
Following its most recent fundraising, Blockchain has been relatively quiet with new announcements, experiencing heavy user backlash amid security issues in December[4] as well as an under-the-radar CEO change[5].
Alpha users of the wallet are nonetheless able to get a first look at the service’s new security center, improved account management and simplified interface. Overall, the new wallet presents a streamlined version of its current offering.
Alpha version of Blockchain’s latest wallet product.
Somewhat diminished are the prominent affiliate advertisements seen in its current product, as well as the tabs that allow users to toggle between local bitcoin services providers, meaning the emphasis in the alpha falls more squarely on Blockchain’s services.
Screenshot of current Blockchain bitcoin wallet.
Instead, users will find a left-hand navigation bar that allows them to access their transaction history, three stages of security settings and prominent way to contact the company for support.
Blockchain’s Alpha wallet features prominent support page.
The end result may be more familiar to users of competing bitcoin wallet provider Coinbase, which features a similar design that mimics the usability of a traditional email inbox.
However, the closed alpha is ongoing and the company is actively courting feedback from its initial group of users, meaning that the wallet’s design and functionality could change as development continues.
Bitcoin in the Headlines is a weekly look at bitcoin news, analysing media and its impact.
Bitcoin’s Wild West days may be numbered, or so the headlines would have us believe.
This week saw the release of the final version of the BitLicense, New York’s long-awaited, and still heavily debated, state-specific regulation for bitcoin businesses. Unsurprisingly, the news was extensively covered in the media, and often heralded as a milestone in the evolution of the emerging technology.
Many stories used legitimizing language and headlines that foreshadowed that bitcoin had taken yet another step toward inclusion in the wider financial world.
However, the technology’s growing pains were still on display this week, as it continued to be associated with illicit Deep Web-based activities and development issues dogged one of its most well-funded startups.
Milestone legislation
The victory lap for the BitLicense came swiftly following its 3rd June release, with the mainstream narrative all but arranged to trumpet the government’s stamp of approval.
The Wall Street Journal’s Michael J Casey wrote a piece, which noted[1]:
“Outgoing New York Superintendent of Financial Services Benjamin Lawsky released sweeping new rules for licensing digital-currency businesses in the state Wednesday, staking part of his legacy on launching a specialised regulatory regime for an industry that many experts believe could play a significant role in the financial system.”
In the article, Casey quoted Lawsky’s statements in which he voiced his belif that the legislation struck the appropriate balance between protecting customers and rooting out illicit activity, while showing commitment to not “doom promising new technologies before they get out of the cradle”.
“Whereas some have questioned why existing money transmission regulations can’t be used for virtual currency businesses, Mr Lawsky said those Civil War-era laws simply wouldn’t work for digital currency, a technology unlike anything we had ever seen before,” said Casey.
More marginalized were the many dissenting voices[2] who occasionally appeared in such content, arguing that the BitLicense would discourage the same spirit of innovation that propelled the early Internet.
Extensively covered by Western mainstream media, the news was also picked up by less likely outlets around the world, showcasing the technology’s growing appeal abroad.
Kommersant, a Russian Daily, ran a headline[3] which implied bitcoin had been legitimised as a digital currency; a loosely translated version read: “Cryptocurrency Recognised A Full Part of The Financial Market”.
The article said:
“The key provision of the new rules is that now all the companies that work with cryptocurrency, you must have a special license from the Department, which should improve the safety of customers and transparency of operations cryptocurrency.”
Such articles could no doubt have an influence on coming conversations regarding regulation that is seeking to ban the technology in Russia under rules for monetary surrogates.
Nail in the bitcoin coffin
It wasn’t all good news for bitcoin.
Following Silk Road[4] creator Ross Ulbricht’s life sentence[5] last week, it was not surprising to see how the debate around bitcoin’s use in illicit activities was reignited.
Forbespublished[6] a piece by Jason Bloomberg in which the author outlined the digital currency’s link to the Deep Web.
He wrote:
“Silk Road kingpin Ross Ulbricht’s recent conviction and life sentence was more than simply a crackdown on a massive online black market for illegal drugs. It was a nail in the coffin for the radical new cryptocurrency bitcoin, as bitcoin was the glue that held Silk Road together.”
Backtracking slightly, Bloomberg asked how significant the demise of Silk Road was for bitcoin, noting that this was part of an ongoing debate.
“Controversy, however, is nothing new for bitcoin. In fact, it seems the story of this digital currency consists of nothing but controversy,” he wrote, adding: “In fact, perhaps the greatest challenge for bitcoin is divining the technology’s true purpose. Early innovators often espoused radical Libertarian goals for revolutionising the banking system and with it, the world economy”.
“By disintermediating third parties, bitcoin promised to usher in a new world order free of market commerce,” noted Bloomberg.
Despite this, the author proves seemingly negative about bitcoin’s performance.
“Bitcoin soon became a haven for criminals – not just Silk Road, but any number of money launderers and other shady types who gravitated toward an anonymous, relatively safe method for conducting financial transactions, in particular across national borders,” he said.
The Guardian ran a piece[10] with an alarmist headline given the small number of users apparently affected, writing:
“Blockchain has issued an update for the Android version of its bitcoin wallet after discovering a critical failure which breaks the cryptocurrency’s security.”
Whether intentional or not, the latter seems to imply that Blockchain’s bug could potentially affect bitcoin as a whole, as opposed to just users who store their holdings on Blockchain’s wallets.
Writer Alex Hern explained:
“Bitcoin wallet application Blockchain has rushed to release an update after a critical bug left multiple users unaware that they were sharing a bitcoin wallet, leaving their cryptocurrency completely unsecured.”
He continued: “The bug affected users running Blockchain’s app on Android version 4.1 or older […] it resulted in one specific address being generated multiple times, leading to a loss of funds for a handful of users.”
According to Hern, the bug was due to a series of questionable development choices:
“Bitcoin wallets are typically created by randomly generating a public address and a related private key. As a result, it is important for address and key to be truly random, or else it may be possible to guess the private key by looking at the public address.”
It seems that Blockchain used two sources to create the random numbers, pulling a random number from Android’s built-in generator, and then connecting to online service Random.org to obtain the second combination.
Hern noted that on some Android devices, the built-in random number generator failed to connect and report back Blockchain’s app.
Then, the battering continued.
Michael Mimoso wrote a piece[11] for Threat Post with “Crypto Calamity For Blockchain Android App” as its headline.
Describing Blockchain as one of the busiest bitcoin wallets, the article said: “Shoddy crypto is being blamed for the loss of bitcoin for an unnamed number of Blockchain users.”
It seems that New York’s plans to regulate digital currency companies, at least for now, will do little to help solve the pain points for companies still struggling to gain wider adoption.
California-based semiconductor manufacturer Intel appears to be dipping its toe in the digital currency space, following a bitcoin-related job posting.
The multinational company is looking for a cryptographic researcher to join its Special Innovation Projects Group, part of its in-house research organisation, Intel Labs[1].
An advertisement posted on job site Indeed notes[2] the chosen candidate will be required to “investigate hardware and software capabilities that advance the performance, robustness, and scalability of open, decentralised ledgers”.
It continues:
“Working with a team of distributed systems, operating systems and security technologists you [the candidate] will focus on development of cutting-edge, cryptographic algorithms for improving […] transaction verification within an open, decentralised ledger”.
The advertisement also mentions the potential of the blockchain beyond peer-to-peer bitcoin payments, referencing the “many secondary uses that the research and startup community are exploring” – also known as bitcoin 2.0[3].
Interest in bitcoin
While Intel[4] is the latest multinational to have expressed interest in the bitcoin space, it’s not the first.
As previously reported, IBM[5] is rumoured to be creating[6] a digital cash and payment system for traditional currencies that uses blockchain technologies.
In January the US-based tech giant also revealed[7] its proof of concept for ADEPT, a system developed in partnership with Samsung that uses elements of bitcoin’s underlying design to build a distributed network of devices – a decentralised Internet of Things.
CoinPlay, the indie game site that lets developers and publishers get paid in bitcoin, has relaunched following a series of design improvements.
Shane Park, CoinPlay[1]‘s co-founder and CEO, told CoinDesk the relaunch was an important step for the company to move away from third-party solutions and implement its own e-commerce platform.
“The storefront will do a better job of showcasing games,” he said, adding that “game keys will be redeemed on the site to reduce email clutter and users will start earning Reward Coins (reward points) for every purchase they make”.
CoinPlay accepts bitcoin, dogecoin and litecoin via payment processor GoCoin[2].
Park added that the Kansas-city based company is monitoring trends in the bitcoin space and hinted at other potential digital currency initiatives in the future.
He said:
“Our first priority are gamers and game developers, but supporting them means knowing what technology can benefit them. I think blockchain technology can be part of the big picture.”
Play, a Chinese startup that plans to disrupt the incumbent online game industry using blockchain tech to remove trust, has recently ‘gone public’ as a decentralized autonomous company (DAC) on crowdfunding platform DACX.com.
In its prospectus, Play claims it offers a third-party verifiable mechanism to ensure true randomness and fairness for gamers by placing the games’ logic on a blockchain. This would remove the need for trust in centralized institutions, it says.
The startup will also offer a platform to aggregate all games using its proprietary technology, and an in-game assets-trading platform to make tokens, props acquired from different games and Play’s crypto-shares exchangeable.
The DACX platform[1] is operated by Zafed, a Shanghai-based financial service provider established in September last year, which itself has raised seven-figure dollar investment via Lightspeed Partners[2] in China.
Distributed company model
The ambitious-sounding project will not take the form of a company, in the formal sense, meaning it will not be subject to regular company laws, but will instead be governed purely through the alignment of incentives.
Play’s own description of itself as a DAC reflects its aim to disrupt the existing company model.
The project seeks to raise 3,000 bitcoin by selling 20% of its total two billion total shares to global investors who, regardless of the jurisdictions they operate in, can invest in this project by sending bitcoins to the designated address.
As of 15th January, 2015, Play’s website indicates it has raised 1,777 BTC – 59.27% of its target.
Speaking to CoinDesk, Zafed CEO James Gong explained Play’s key value propositions.
One problem that hinders the success of small-chance game developers (games such as dice and online poker), he said, is the “trust issue”.
While larger developers have stronger incentives to ensure fairness when their reputation is at stake, for smaller game developers such incentive can be easily overwhelmed by the prospect of short-term gain. Users, aware of the risk, tend to shun the latter as a result.
The proposed solution is what Gong calls ‘on-chain games’. These are “games that run their entire logic on the blockchain and that are independent from any external centralized intuitions”, he said, and will lead to reduction of trust-related risks.
The project’s white paper, which can be downloaded on its website here[4], elaborates more on the topic:
“Chance games have come to rely almost exclusively on trusted third parties to provide random feeds. While this system works well enough, it is based on a centralized trust model, and suffers from the possibility of cheating by players. Even thought some crypto based games on the Internet have probably random feeds, which can be verified by the public, hidden players can cheat by submitting selective favorable transactions because they know the random secret in advance.”
Real-life predictions
Play has also described new types of games that will utilize the technology that it develops, although the company claims the games will be developed by third-party developers.
“The goal of Play is to afford the players with access to a rich variety of games on the Play platform, all to be provided by third-party developers. The platform will not only offer probability games, but also include more advanced games like betting on real events, chess games and board games.”
It goes on to describe some games. One is a real-event betting game, otherwise known as a ‘prediction market[5]‘.
Participants will bet on whether an event will happen, or how something will happen, in the future. For example, if a particular celebrity will get married or divorced in a specific amount of time.
Play explains:
“This data needs to be inserted into the blockchain, a job that can be done by ‘delegates’. Because delegates are elected by shareholders, we assume the results of vote are reliable. If not, the consequence is shared by Play shareholders who elected the delegates, which means that it will fall on the whole community, in which case, it is still fair.”
Building an economic system
Aside from the enhanced fairness and innovation in the games, Play also proposes to build an exchange platform to form a wider economic system surrounding them.
According to its white paper, “Play allows users to issue customized assets, which will be tradable on the platform of Play and can be sold for the crypto shares that Play issued.”
Gamers will be able to buy and sell their game tokens and props on the exchange, which results in what the paper calls an “inter-server and inter-game P2P economic system”.
Correction (21st January 2015, 14:06 GMT): Removed reference to bitcoin’s blockchain.
