Category Archives: “About Cryptocurrency Narratives”

Yet Another Bitcoin Use Case: microtransactions

With the usual drumbeat of bad news continues, fraud, price manipulation, opaque actors, extortion, and just plain “oopsies”, a disinterested observer can be forgiven for wondering if the end is near for crypotcurrencies.

Bitcoin itself is increasingly controlled by giant mining combines who effectively control the Bitcoin network. This situation was assumed to be impossible in the original Nakmoto design [1], but here it is. And it is leading to a catastrophic crackup (AKA the “hard fork”), possibly as soon as August.

Meanwhile, this blog is ticking off the long list of supposed use cases for Bitcoin and blockchains. Supply chains?  Yes.  Remittance? Not on a public blockchain. Local currencies? Nope. Identity? Mostly not.

This week there is yet another use case that isn’t happening: Microtransactions.

From the start, it was imagined that Bitcoin technology could support transactions of any size, down to fractions of a penny. The cost of doing a transaction could be small, possibly even zero, and if so, then there is no reason not to do lots of tiny transactions. This would open the way to all kinds of new business (pay as you go for web content, metered use of services, etc.) including automatic management of IoT resources.

How is this admittedly exciting use case holding up?

Chuan Tian reports in Coindesk that “SatoshiPay to Stop Using Bitcoin Blockchain for MicropaymentsStoshiPay is a nicely developed concept that has, for instance, a plugin for WordPress that would let me charge you a tenth of a penny (in Bitcoin) to read this deathless prose.

Their business model is to take 10% of every transaction—when you paid me, they get 1/100 of a penny.

The original approach was to just use Bitcoin, putting the transactions on the Bitcoin blockchain. Even bundling a bunch of them, these are small transactions, so the cost of pushing them out to the ledger obviously has to be small enough for the 10% cut to be profitable.

As Tian points out, the “essentially zero” transaction costs seen even two years ago are long gone, and more than one company has abandoned microtransactions with Bitcoin. At $2 and more per transaction, it is economically infeasible to implement microtransactions directly in Bitcoin. (By the way, these transaction costs for Bitcoin are now in the range with conventional financial systems.)

Why has this happened? Congestion.

The same scaling issues that are threatening to crack Bitcoin into multiple rival networks have pushed transaction fees higher and higher. The big players who are collect these fees (their entire business model is to collect these fees) have blocked engineering changes that would likely reduce congestion, and lower fees.

It is possible that transaction fees might go down, who knows. But the fact is there isn’t any good reason why you need to use the public ledger to implement microtransactions at all. So companies are moving to other technology.

SatoshiPay is said to be moving to IOTA, which is a blockchain-inspired system targeting the Internet of Things. IOTA implements a cryptographically secured peer-to-peer network, with their own protocol and data structures. They argue that transaction fees will be very low, or even zero.

Actually, the IOTA protocol and data structures are completely different from Nakamoto [2]. IOTA is based on familiar concepts used in large scale data systems, with a peer to peer twist inspired by Bitcoin. They use cryptography and the idea of consensus, but in a way that allows a lot more throughput, along with other interesting features such as smooth offline operation (i.e., you can cut off part of the transactions and merge them back later).

There are some funky things about the protocol (e.g., there is a knob for how confident you want to be about the validity of the transaction tree) but there are no miners and therefore no transaction fees.

IOTA aims to do IOT things, smart machines bargaining with each other. (No puny humans involved!) They call thing the Economy of Things or something like that. But what they have built should also be good for something like SatoshiPay.

As in many Bitcoin use cases, people using SatoshiPay or services that use it will never notice the transaction technology behind the scenes.

Will we finally see digital microtransactions? I dunno. But it won’t be on the public Bitcoin blockchain, that seems clear.

So this use case for blockchain might come true, but, as IOTA puts, with No Blocks and No Chains.

Inspired by Bitcoin, yes.

But implemented by more sophisticated technology, designed for this use case.


  1. Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System. 2009. http://bitcoin.org/bitcoin.pdf
  2. Dominik Schiener, A Primer on IOTA (with Presentation), in IOTA Blog. 2017. https://blog.iota.org/a-primer-on-iota-with-presentation-e0a6eb2cc621
  3. Chuan Tian,  SatoshiPay to Stop Using Bitcoin Blockchain for Micropayments Coindesk.July 17 2017, http://www.coindesk.com/satoshipay-stop-using-bitcoin-blockchain-micropayments/

 

 

Cryptocurrency Thursday

Blockchain for Local Identity?

As soon as I declare that blockchain technology is unsuited for two use cases, Identity and local currency , Wolfie Zhao reports in Coindesk that the Swiss city of Zug is going to have a local ID service using a blockchain.

Oops. These use cases are still open, or at least not as dead as I said.

Of course, there is a difference between a local currency and a local ID service. The former needs to interact with conventional financial systems, the latter needs to interact with conventional ID systems. The press release indicates that digital IDs are not well developed in Switzerland, though I’m sure that digital banking works great.

Similarly, there is a difference between a global ID system, with secure digital passports for everyone including refugees and repressed populations, and a digital ID issued by a city. For that matter, the city is Swiss, which means it already has a well developed national ID system to build on.

So this isn’t quite the use cases I considered earlier.

What it is, is an intersection of them, a simpler problem and a well organized local government. Perhaps this is a favorable “corner” of the use cases, where blockchain will work well.


So far as I can tell, the rationale for this system is that Switzerland has a personal ID system (which I’m sure is quite rigorous and efficient), but digital versions of the IDs have not been successful. Blockchain technology is a way to securely associate a cryptokey with a particular ID. The blockchain is intended to make it possible for digital apps to quickly and cheaply confirm IDs.

Sure. This can work.

We’ll see how well it works. Is there enough need for this sort of crypto ID, and does it work well enough to be useful?   I don’t know, we’ll find out.


I note that blockchain is being used for a tiny part of the problem. As the press release makes clear, citizens must go to a city office to prove their identity and then are issues a digital key. This process is the hard part, and blockchain does nothing to support this service.

We want a single electronic identity – a kind of digital passport – for all possible applications. And we do not want this digital ID to be centralized at the city, but on the blockchain.” (Dolfi Müller, quoted in [2])

It is ironic to see the proponents of this system talk about how this is a “decentralized” solution. What they mean by that is that the part of the process where digital IDs are looked up is “decentralized”, particularly compared to previous systems that have attempted to implement the service with a database.

Essentially, the city doesn’t want to run a database with a secure public interface. Fair enough.

To a certain extent, they are also boasting about the local city’s initiative, too, though IDs issued by one city may have limited use elsewhere. Ethereum runs everywhere, but Zug IDs may not be trusted anywhere outside Zug.

I suspect, though, that Zug is issuing IDs based on Swiss national credentials. In that case, IDs issued in Zug are great throughout Switzerland. These are, of course, centralized IDs in that case.

Looking up IDs is a decentralized problem, but issuing IDs demands trust, and a web of trust between authorities. If every city in Switzerland issues its own crypto IDs, even using the same Federal ID, it will be chaos.


Finally, I have to say, “Ethereum? Really?”

I’m rather surprised that anyone would try to build a trusted system using the catastrophically messed up Ethereum technology. But they probably use Microsoft Windows, too. Massively clever cryptography running on wobbly, hackable software infrastructure.

Anyway, we’ll see how this works out.


  1. Stadtverwaltung Zug. Blockchain-Identität für alle Einwohner. 2017, http://www.stadtzug.ch/de/ueberzug/ueberzugrubrik/aktuelles/aktuellesinformationen/?action=showinfo&info_id=383355.
  2. Wolfie Zhao, Swiss City Announces Plan to Verify IDs Using Ethereum Coindesk.July 7 2017, http://www.coindesk.com/swiss-city-verify-id-ethereum/

 

Cryptocurrency Thursday

“Identity” on the Blockchain?

For the past few years, cryptocurrency and blockchain enthusiasts have been touting a variety of use cases for these technologies, suggesting that they will disrupt/revolutionize pretty much everything [2]. It’s a floor wax and a desert topping!

With time, we are sifting through these use cases, discovering which ones are more realistic.

The most successful uses to date are, unfortunately, extralegal commerce and cybercrime.  Other areas that appear promising are supply chains  and other business to business cases. In also seems likely that private blockchains may well disrupt FINTECH, and eliminate hundreds of thousands of jobs.

What haven’t panned out yet are the benefits for regular folks and the imagined benefits for the world’s poorest.

It is readily apparent that blockchain-based technology isn’t necessarily the right way to do community currencies and similar projects.  Cryptocurrency has made surprisingly little inroads into “the remittance problem”. For that matter, cryptocurrency has made little inroads for real world commerce, mainly because it solves problems that consumers don’t actually care about. (Most people don’t care about the innards of their digital payment systems.)

This month the ID2020 project summit gives reason to think that blockchain is also not a particularly useful technology for “identity”.

ID2020 is an international group dedicated to helping people who lack formal identity papers. This is a significant problem for refugees and others, and it’s quite reasonable to try to create portable digital documentation.

“1.1 BILLION PEOPLE LIVE WITHOUT AN OFFICIALLY RECOGNIZED IDENTITY”

I’m rather baffled by why this is called an ”identity’ problem, which it is mostly an “official recognition” problem.

Michael del Castillo comments in Coindesk, “Identity without the Blockchain? Skepticism Grows for Once-Hot Use Case”. Essentially, the ID2020 people aren’t convinced that blockchain technology is the solution, or at least, the only solution.

I don’t know exactly what their thinking is, but I suspect that a key point is that credentials are all about trust, and in fact, trust in third parties. The importance of credentials aren’t that you can prove that you are who you say you are, but that you can prove to someone that a mutually trusted party says you are who you say you are.

“Trustless” blockchain systems offer little to help provide these proofs. Decentralized blockchains are certainly cheap and easy ways to reliably pass around such certificates, but they don’t address the hard part, which is creating them in the first place.

Identity problems of rich people

There is a second “identity” use case for blockchains, and that is portable and flexible digital identities, i.e,, control of personal information on line. The idea is to make it possible for people to access digital services without having all their information linked. This is truly an important challenge, though, again, I wouldn’t call it a problem of “digital identity” per se, it’s more of an information control problem.

This use case is lumped with the passport issues  above because the same technology could, in principle, solve both. If we had a good way to exchange verifiable cryptographically shielded certificates, we could use them to, say, access services without a universal ID number.

As del Castillo says,

In theory, those users would own their own identities, as opposed to Facebook, Google, the government, or any number of organizations, all of whom want to keep a record of – and profit from – that data.

This is an interesting statement of the problem and perceived solution.

He lumps all organizations, private, public, and “other”, which glosses over important differences, which is intellectually and politically dubious.

The Drivers License folks keep a record of you because they need to certify your qualifications to drive. Doctors keep medical records for obvious reasons. And so on. There are many reasons why organizations keep your history.

On the other hand, advertising companies like Google and Facebook, keep information on you to make money by “selling” you. So do numerous other companies.

Solving this problem is difficult, and not only because there is a lot of money begin made, and the powers-that-be don’t want to be disrupted, thank you very much.

The technical problems are actually quite difficult. Figuring out what sort of information needs to be exchanged and developing secure ways to present just what you need to and no more is very difficult. Furthermore, this process involves—wait for it—trust. No matter how clever the credential scheme, the credentials have to come from somewhere in the first place, and have to be accepted where you need them.

Blockchain technology is a good way to pass around cryptographically shielded credentials. But, again, it doesn’t help the process of obtaining credentials in the first place. If you can create a good system for digital credentials, a blockchain will certainly be one of the places you use it. But the blockchain alone doesn’t solve the problem.


I’ll add one more pedantic point. Some of the enthusiasm for blockchains is actually based on the extreme usefulness of public key cryptography, which will definitely, for sure, be the critical piece in these digital systems. But you can use PKI with lots of different architectures, “centralized” and “decentralized”, and with many different business models. Just because cryptographic signatures address a use case, it isn’t necessarily true that blockchains are relevant.


  1. Michael del Castillo, Identity without the Blockchain? Skepticism Grows for Once-Hot Use Case. Coindesk.June 22 2017, http://www.coindesk.com/identity-without-blockchain-skepticism-grows-hot-use-case/
  2. Don Tapscott and Alex Tapscott, Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World, New York, Portfolio/Penguin, 2016.

 

Cryptocurrency Thursday

Local Digital Currency in Spain: No Blockchain Involved

Cryptocurrency enthusiasts cite many potential benefits of Nakamotan cryptocurrencies (e.g., see [5]). Many of the claims are nonsense (e.g., many of the alleged virtues of “trustless” systems) or based on emotional anti-authority appeals.

Some of the more compelling use cases, though, are about empowering the 99.999%, by enabling access to low cost financial services for everyone, and generally enhancing local economies. These are attractive goals, though little progress has been made to achieve them.

My own view is that blockchain-based systems can be used for such purposes, but are neither necessary nor sufficient. There are better ways to skin that cat.


A case in point are the growing number of local currencies. For example, Aaron Fernando reports on the establishment of a local currency, the grama, in Santa Coloma de Gramanet, Spain. This purely digital currency is created by the local government and is pegged to the official Euro, However, the digital tokens have additional features designed to encourage them to circulate in the local area, rather than immediately fly away to distant banks or corporations.

The currency is only issued in the city, and some local business offer discounts. Most importantly, the currency has a “use by” date, or rather, a “use until” date.

a 5 percent penalty is imposed on exchanging gramas to euros before 45 days, with no exchange penalty after 45 days.

The whole idea is to maximize the value of local spending to the local community.

Personally, I like the idea.

I always try to patronize locally owned businesses, and hire local contractors whenever possible, so it is nice to see a digital system try to enhance this socially positive behavior.

Whether this sort of algorithmic game will have a big economic impact or not isn’t clear to me. For one thing, it’s kind of difficult to draw a boundary around a “local” economy. And however you draw the line, a city or locality is never a closed system.

But it’s better to try something, than to do nothing except complain.

I note that Spain certainly has been brutally punished by using the German controlled Euro [4]. Add in the longstanding nationalist aspirations of Catalonia, and there is a lot of motivation for local economic self-determination, and plenty of justification for experimentation.

The grama is inspired by the Bristol Pound and other contemporary local digital currencies. For that matter, local currencies predate digital technology, including famous case such as Ithaca NY.

So what does the grama tell us about blockchains and cryptocurrency?

I haven’t found much of a technical description of the Santa Coloma grama. I’m pretty sure they are connected to the conventional financial system, though I don’t understand the details.

If they are using a Nakmotoan blockchain, they never say so. I’m pretty suer they have nothing to do with any blockchain, and there is no reason why they would use a blockchain or Nakamoto-style “mining”.. The currency is baccked by Euros (a hated “fiat” currency) and issued by the local city government.

The Bristol Pound is not blockchain based, either, so far as I can tell. Nor are the other local currencies from Qoin.

In short, these leading local currencies could use blockchains, but do not. Why not?

You certainly could use a blockchain, or Bitcoin, or some other cryptocurrency to implement a local digital currency like the grama. But I think there is little reason to do so, and many reasons not to.

In these local currencies, the digital technology is designed to enhance face-to-face interactions among local people, which are inherently trustworthy. Furthermore, the local currency enhances trust in local institutions and businesses, and discourages dealing with anonymous, untrustworthy outsiders.

A local currency is designed to encourage face-to-face, non-anonymous transactions.

A local currency is trusted because it relies on personal relations.

Blockchain technology, in contrast, is designed to move money around the world with little friction, sucking money away from local economies. Transactions are not only not face-to-face, they are partly anonymous. And furthermore, public blockchains such as Bitcoin or Ethereum are “decentralized”, and have no one responsible for them, let alone no local control over decision making.

Cryptocurrencies are the opposite of “local currencies”.

“Decentralized” blockchains are the opposite of “locally controlled” systems.

Cryptcocurrencies are “trustless”, which is antithetical to local solidarity.

The bottom line is that digital technology, including cryptographic signatures, definitely are a good technology for empowering local communities.

However, blockchains in general, and global cryptocurrencies specifically, are really not the right technology for local currencies, and probably not for empowering people in any way.

The key to success for this kind of system is good interface design, local organizing (Santa Coloma has participation from local government and over 100 local businesses), and the backing of the public. It could have a blockchain inside or not—users would never know the difference.

If blockchains are not the right technology for a local currency, then it is worth asking if blockchains are the right technology for any kind of local self-government.

My own view is that, to the degree that blockchain-based systems encourage offshore finance and “autonomous” transactions, they are the perfect tools for the exploitation of local communiities, and likely to be very destructive of local economies.


  1. Bristol Pound Community Interest Company. The Bristol Pound – Our City, Our Money. 2017, https://bristolpound.org/.
  2. Aaron Fernando, How One City in Spain Launched a Local Currency Sharable.June 8 2017, http://www.shareable.net/blog/how-one-city-in-spain-launched-a-local-currency
  3. Qoin. Qoin – Money That Matters. 2017, http://www.qoin.com/.
  4. Joseph E. Stiglitz, The Euro: How A Common Currency Threatens the Future of Europe, New York, W. W. Norton& Company, 2016.
  5. Don Tapscott and Alex Tapscott, Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World, New York, Portfolio/Penguin, 2016.

 

Cryptocurrency Thursday

Chicago Blockchain Center Opens

In cryptocurrency land, amid the continuing news for flash crashes, criminal cases, and inaction on crucial technical issues, Coindesk reports that, “New Chicago Blockchain Center Launches With Government Backing”.

This sounds interesting. I wish I could find out more about it.

As with much of Illinois and Chicago government, the CBC is far from transparent. What is it for?

The announcement and launch are heavy on promotion and light on substance. It looks like there are major financial firms (including the Chicago Mercantile Exchange) and VCs. hanging out with tech startups. So, a business incubator focused on blockchain technology.

The “government backing” appears to be moonlighting by Jennifer O’Rourke, the State of Illinois’ “blockchain business liaison”, which I didn’t know we had. What else is involved in the “partnership” isn’t clear. The state and city governments are said to be looking at blockchain applications for public business, as well as trying to grok regulatory issues.

This center seems mostly harmless, though one wonders where the public money is coming from and what the state hopes to gain.

And, by the way, I notice that there is no academic participation at all in this partnership. There are quite a few world-class researchers at Illinois universities who would love to participate in such a center. It’s a shame to be missing out on this opportunity. (Call me.)


  1. Michael del Castillo, New Chicago Blockchain Center Launches With Government Backing Coindesk.June 8 2017, http://www.coindesk.com/new-chicago-blockchain-center-launches-with-government-backing/

 

Cryptocurrency Thursday

Coindesk’s Crypto “Consensus 2017”: Lot’s Of Talk, Not Much Consensus

Last month saw Coindesk’s “Consensus 2017”, one of, if not the biggest Cryptocurrency and blockchain conferences. Everyone who is anyone was there (well—not me). It’s all too much, I can’t even work through the Coindesk reports, let alone all the presentations, panels, and demos. (Coindesk’s summary recap is here.)

There was a lot of excitement, although I haven’t seen much new technology or actual businesses. The promised land is still just over the horizon, as it has been for several years.

Even the generally enthusiastic Coindesk recognized some of the excess, with headlines like . “Consensus 2017: Even Academics Can’t Keep Pace With Blockchain Change”. A report on the separate Ethereum-centric Ethereal Summit has the memorable headline, “’Spiritual Experience’: Hot, Wild Ethereum Summit is Sign of the Times” <<link>> Castor comments,

If there were a sign that blockchain may be overhyped, or that the industry is in the midst of a massive bubble, the Ethereal Summit may well have been it.

Quite.

The most significant news from the Consensus meeting itself was a somewhat opaque diplomatic communiqué from the Digital Currency Group, announcing a Bitcoin Scaling Agreement.

This is the latest step in the two plus year-long process that is attempting to deal with the perfectly routine engineering issue of adjusting a data structure to keep up with traffic. This issue has demonstrated the dysfunction of the so-called “consensus” governance of Bitcoin, and has nearly broken Bitcoin into multiple competing currencies.

So, “agreement” would be welcome.

Unfortunately, this grand announcement in fact announced that the same steps agreed to February 2016, which were never executed. This group has endorsed a plan that has been languishing for more than a year. (And there is no implementation in sight.)

As Coindesk reports, the underlying technical, business and political issues remain. The technical issue is pretty straightforward, but there are many people and companies using the protocol and network, and their interests conflict.

The decentralized decision-making process has been unable to find sufficient common ground to date, and has exposed deep divides in the “community”. The standard “consensus” process in such a case is for dissident factions to “fork” and do their own thing. That would mean two or more incompatible versions of Bitcoin, multiple protocols and virtual networks. This kind of fork works (sort of) for software, but isn’t a great model for what is supposed to be a universal shared resource.

So, things are not only “hot and wild”, but also on fire and adrift. (And QC will cause it all to fall down with a big thud within a couple of years.)

“It’s doomed, I tell you. Doomed!” 🙂


  1. Amy Castor,  Spiritual Experience’: Hot, Wild Ethereum Summit is Sign of the Times Coindesk.May 20 2017, http://www.coindesk.com/spiritual-experience-hot-wild-ethereum-summit-sign-times/
  2. Digital Currency Group. Bitcoin Scaling Agreement at Consensus 2017. 2017, https://medium.com/@DCGco/bitcoin-scaling-agreement-at-consensus-2017-133521fe9a77.
  3. Pete Rizzo and Alyssa Hertig Bitcoin’s New Scaling ‘Agreement’: The Reaction Coindesk.May 24 2017, http://www.coindesk.com/bitcoins-new-scaling-agreement-reaction/

 

Cryptocurrency Thursday

Does Quantum Computing Kill Bitcoin?

Quantum Crypto Is Upon Us

We know it is coming. Probably.

For the last 25 years and more, we’ve known that quantum computing is coming, and that one of its first uses will be code breaking.

Much of the cryptographic infrastructure of the Internet is based on methods that are proven to be so hard to compute that a brute force or guessing attack is “infeasible”. Generally, this means that with current and projected technology, it would take a long time, years or centuries, to work it out.

But quantum computers should be zillions of times faster at certain kinds of computations, including the beating heart of key crypto algorithms. Uh, oh!

This cuts both ways. Quantum encryption might well be unbreakable by conventional computers (good for the defense, bad for the offense). But much of conventional computing and networks will be effectively clear text (bad for defense, good for offense).

I assume the NSA and all the other technically advanced powers are on the case, though I certainly don’t know exactly what is going on. We do know, for example, that there is a public effort in China to deploy quantum cryptography on a backbone network. Google has announced it has the technology. It is likely that high security nets have already got such technology, long before any public announcements. The future is already here.

Mark Kim writes this month in Quanta Magazine about these developments [3]. In particular, he discusses a paper by Bernstein, Daniel J. and colleagues, which looks at “Post Quantum RSA”, i.e., what happens to RSA encryption in a quantum computing world [1].

The thrust of this paper is proposals for “RSA parameters can be adjusted so that all known quantum attack algorithms are infeasible while encryption and decryption remain feasible.” ([1], p. 1)  As they say, their ideas are “not what one would call lightweight cryptography”. The case they analyze involves a 1 Terabyte key! This is expensive and awkward, but the point is that for cases that demand extreme measures (e.g., guarding root keys, critical backbones, and other vital secrets) there may be ways to protect against quantum decryption attacks, even with conventional computing.

This is a cool idea, assuming it bears out. If nothing else, it dilutes the aura of magical invincibility that surrounds quantum cryptography.

But these measures and other possible approaches, don’t really solve the problem for the bulk of the Internet. It may soon be true that well endowed actors, nation states and googles, can crack any crypto they need to.

What Happens to Bitcoin, blockchains, and other Cryptocurrency?

These developments potentially have serious implications for cryptocurrencies and blockchains, all of which depend on cryptography and, equally important, cryptographically-secured systems.

I’m not sure exactly what parts of the Nakamotoan mechanisms might be affected by quantum computing, some might even be improved. But the big two to worry about are the hashing scheme (the basis of ‘mining’) and the ‘addresses’ which are cryptographic public keys. These mechanisms are secured by algorithms that depend on the speed and cost of computing, so a major disruption of speed could breach the entire basis for Bitcoin.

I don’t know if there are ways to subvert the hashing scheme with quantum computing, and I certainly don’t know what the cost/benefit analysis might be for any such scheme. Quantum computing is likely to be more expensive, so who knows when it is cost effective? (Note that the argument that “it’s too expensive to be reasonable” simply does not apply to state actors.)

One potential problem is if it becomes reasonable for some wealthy miners to have systems that are much, much faster, and thereby to accumulate a large fraction of the total hashing power, then that would be a very serious problem.

An even bigger problem is that governments and large companies will soon be able to crack public keys, and therefore probably will be able to mess with Bitcoin addresses. Yoiks! Unfriendlies not only reading your mail, but manipulating your Bitcoins and your “smart contracts”, too. Again, arguments about supposed economic and cost barriers don’t apply to state actors.

Worst of all, anyone actually using Bitcoin or a blockchain for any normal purpose (i.e., other than mining or currency exchange), relies on the general security of the network and nodes. Even if the blockchain, servers, and wallets aren’t cracked (which they will be), the network itself is likely to be unsecure.

It’s hard to know what might happen, but if unfriendlies can insert man-in-the-middle attacks between nodes, then all bets are off. Anyone trying to actually use Bitcoin with a wallet and local connection would be vulnerable in any number of possible ways.

Game over.

Time’s Up For Cryptocurrencies?

The official Bitcoin wiki pages have a short note on “Quantum computing and Bitcoin”, which whistles past the graveyard. They suggest that there is a decade or more to do something, which is probably optimistic. But even this Pollyanna-ish page notes that there aren’t any solid solutions known at this time.

This isn’t great news, especially given Bitcoin’s disfunctional governance system, which has been spinning its wheels for two years over much simpler technical issues. How in the world will the crypto community cope with the existential threat of QC?

Obviously, I’m far more concerned about the collapse of the whole Internet.

Perhaps Bitcoin and other cryptocurrencies might turn out to be canaries in the coal mine, keeling over just before the the big explosion.


  1. Daniel J. Bernstein, Nadia Heninger, Paul Lou, and Luke Valenta, Post-quantum RSA. Cryptology ePrint Archive: Report 2017/351, 2017. https://eprint.iacr.org/2017/351
  2. Bitcoin Foundation. Quantum computing and Bitcoin. 2016, https://en.bitcoin.it/wiki/Quantum_computing_and_Bitcoin.
  3. Mark H. Kim, Why Quantum Computers Might Not Break Cryptography. Quanta magazine.May 15 2017, https://www.quantamagazine.org/why-quantum-computers-might-not-break-cryptography-20170515

 

Cryptocurrency Thursday