Friday, March 13, 2015

"Who controls Bitcoin?"

Adopting Features on the Bitcoin Protocol

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Last weekend at the MIT Bitcoin Expo, Gavin Andresen, a lead Bitcoin Developer, was asked, “Who controls Bitcoin?” This question stems from misinformation. Power distribution is a feature embedded in Bitcoin. Features are established by a majority consensus and not by a administrative group. Interaction with digital currencies or exchanges with real currency is a legitimate concern for anyone monitoring the features of blockchain technology. Bitcoin features are a collaboration of core developers and community members. Decisions about new features are established through economic majority.

Mining Rewards Incentivize an Economic Majority

Risk of cartels or other market barriers develop if firms gain large percentages of market power. Completing transactions and the number of hash computations that can be completed is what judges power on blockchain technology. A Hashrate is a unit of measurement that measures how many pairs of SHA-256 calculations can be done in a second. Peak Network Hash Rates have reached speeds up to 391 Phash/s or 391 quadrillion hashes per second. Bitcoin Mining Farms are expanding hashrate baselines with every new product line. A majority of hashing power can be produced by one mining group, but they still would not be able to control changes to the Bitcoin Protocol.

If a large mining firm attempts to implement a harmful change that could create a barrier to enter the mining market, that branches mining rewards become compromised. The coins mined can be sold on an open exchange but markets accepting Bitcoins can choose any branch (sidechain) they wish to accept. This is a transparent element of Bitcoin that keeps new features beneficial for all users and miners. A trust-less consensus is only achieved because of the transparent nature of decentralized ledgers that are the backbone of blockchain technology.

Bitcoin Development

If a change is large in scale or potentially disruptive, the change is broadcast to the mailing list

Bitcoin is OpenSource and is not a centralized technology. Bitcoin Core Features are collected in various developer forums. GitHub credits 284 registered contributors to Bitcoin Protocol. Contributors do not control the complete development of Bitcoin protocol with live updates or patch cycles. Development of features is independent of the main blockchain, and each developer makes changes on their own branch before submitting revisions. If a developer wants to make a small change, one of the Bitcoin development team members researches the developer’s request via a pull request. The process of how developers submit changes to be tested is streamlined for developers. Bounties can be offered when arranging features to test.

Common Bitcoin Development forums:

Bitcoin Developer Archive lists previous discussions held between developers who have signed up for this mailing list.
Bitcointalk.org is another popular forum for Bitcoin developers
IRC Channels listed are used for collaborative efforts

The Core Developers of Bitcoin Protocol (Bitcoin.org):

Gavin Andresen (Core Dev Team Future Outlook)

Email: gavinandresen@gmail.com

Wladimir J. van der Laan

Email: laanwj@gmail.com

Pieter Wuille

Email: pieter.wuille@gmail.com

Jeff Garzik

Email: jgarzik@bitpay.com

Gregory Maxwell

Email: greg@xiph.org

Bitcoin Improvement Proposals

Features that follow an adequate development phase are filtered into Bitcoin Improvement Proposals. Bitcoin development has no formal structure for exchanging ideas so Proposals were created to better suit formulating improvements. Features are labeled with a corresponding number for easy referencing. BIPs are organized into: Standard Track BIPs, Informational BIPs and Process BIPs.

The elevated adoption of Bitcoin Improvement Proposals are measured by the economic acceptance level of the Bitcoin community. The Bitcoin community, in this sense, is anyone who offers things of value in Bitcoin. That value could translated to goods, services, or other currencies. A majority consensus in a blockchain environment is different than a traditional 51/49 margin.

Thursday, February 19, 2015

Securing Information on a Blockchain

Visualizing Blockchain Data Handling

Being able to visualize how to use a blockchain service aids in seeing aplications for the technology. A current service that exchanges data in a similar system to blockchain technology are Torrents. Torrent users are seeding and leeching data by participating in a barter system. Several participants exchange data, in exchange for other data, to access the complete file in the specific Torrent network such as BitTorrent. Decentralized apps (Dapps) are developed with electronic token systems, on a virtual network, that exchange tokens for information to be recorded and validated on a ledger. Dapps are modeled to trade tokens for data rather than trading data for data. The value of each token is based on the value of information that can be unlocked with that token. In the case of Bitcoin, the value of having a decentralized token is worth enough to exchange government issued currency. Not all blockchain services will want to trade their tokens on an open market.

Mastering Bitcoin by Andreas M. Antonopoulos

Napster is one of the biggest modern day examples how a dApp model can impact an industry with resource distribution. Napster provided the first resource distribution application platform for music. Human participants interacted with music data, connected in a communal fashion, and Napster had a transparent business model. A current dApp that offers computing services is Filecoin. Filecoin model networks a portion of a user's hard disk space for tokens that they can exchange on their network for their own file storage or exchange for outside currency. Not all dApps are based on a dynamic membership though. Some models will encourage any user to interact with their specific blockchain. Other blockchain companies will offer Smart Contracts via resource redistribution that will appeal to businesses/consumers that want predictable decision outputs.

DApps that offer smart contracts offer a trustworthy intermediary compared to traditional service. Legal documents, credit history, user information, and other data are secured in each transaction. This security is proved via a cryptographic method known as Hashcash, to create a Proof-of-Work. The Secure Hash Algorithm (SHA256 for bitcoin) creates a string of characters that the sender computes before sending a transaction request.

Example of data input / cryptographic output

Bitcoin is the incentive for correctly verifying the Proof-of-Work in each block in the blockchain. The verification in a Bitcoin transaction is by the calculation of an algorithm that can adjust it's difficulty. The reward for solving a Proof-of-Work calculation, or Mining, rewards 25 BTC on the bitcoin network. Individual blockchain ledgers can reward their own token, or altcoins, for solving these algorithms other than Bitcoin. These tokens, importantly, do not need to carry value outside of their own network.

Blockchained companies use Proof-of-Work or Proof-of-Existence in proving validity when providing smart contract services. The market for services that provide digital asset validation could expand in the next few years. Caution is still advised as scammers will take advantage of user ignorance while the blockchain tech space is still expanding. Having an understanding of protecting your private key will decrease the likelihood of information being mishandled and tokens lost. Legitimacy of blockchain offerings will increase as more people understand the gears moving in other successful dApp services. Where these services emerge will drive innovation in this new field of technology.

Additional Infograph

Services Explained

Altcoins - A token reward set by a blockchain developer for distribution between users for various services. The value of each token is in relation to the value of the data that can be accessed with that token.

Signatures - a cryptographic signature is a mathematical mechanism that allows a user to prove ownership. On a blockchain network the token, and the wallet it is associated with, are linked by an algorithm. The software that interacts with the blockchain will sign the transaction with the private key of the parties interacting in the transaction. Private keys are a hash signature to show absolute ownership of the contents of the associated wallet.

Miners - Hardware in a blockchain network that is rewarded for processing services which can include transaction requests, synchronizing, and proof-of-work (mathematical) calculations. Miners can connect to their blockchains via various software and hardware.

Proof-of-Existence Services - Convert data files into a cryptographic hash algorithm (SHA256 specifically) which represent the file (as a whole) when the hash was created. The hash that is created of the document is unique to the contents of the document, and any adjustments to the document will result in a different SHA256 hash and would invalidate the transaction, rejecting the change. Website

Smart Contracts - Multiple inputs are placed into a single transaction. Those individual inputs can be independently signed by multiple parties and once conditions are agreed upon. The single output of all the inputs generates a unique hash. These contracts, located on a blockchain, can be used for multiple functions. Example: Assurance Contracts & Wills

Block Explorer - a service that provides an interface to interact with blockchain information. This service is a third party interaction to the client itself.

Private Keys - Every bitcoin wallet contains at least 1 private key. A private key grants the ability to spend the bitcoins attached to a transaction. Once a private key is used it can no longer be used again to spend those bitcoins.

Genesis Block - The first block, or ledger, created on a blockchain.

Oracles - Scripts or Code written to determine if a mechanism has passed or failed certain parameters. Oracles are implemented as a test condition and for verifying outputs.

Escrow Services - Perform duties as a representative of a particular account. Escrow services dealing in cryptocurrencies often offer private and public key representation.

M-of-N - N is the total amount of private keys assigned to validate a specific address. M is the minimum number of N keys needed to validate a transaction from that address. A 2-of-3 transaction requires 2 of the 3 private keys to validate the transaction.