Tag Archives: Grace Caffyn

A Blockchain-Based Art Installation

One of the projets at Ars Electronica this year was “Plantoid is a bionic blockchain-based installation.” Plantoids are are large metal sculptures portraying flowers. These flowers are nourished by a gentle rain of Bitcoins:

“In its physical form, it is a welded mechanical sculpture on display in a public space —an aesthetic ornaments that exhibits its mechanical beauty and begs to be appreciated by the public. Appreciation is done via interactions with the public who can ‘tip or feed’ the Plantoid by sending tokens into its Bitcoin wallet.

When it receives funds by the audience, the Plantoid evolves and turns into a more beautiful flower, by e.g. moving around a means to gratify the donor and progressively opening up its petals as more and more funds are stored into its wallet.

At first I thought this was something frothy and silly, using a trendy technology just because it is possible. (Not that I am averse to “it could be done, so we had to do it”.

This project touches so many trendy topics, I didn’t know how to label this blog entry. Is this a Bitcoin thing? A biomimetic design thing? A “new way of working” thing? Or even an “Internet of Everything” thing? Grace Caffyn of Coindesk certainly views it as a Bitcoin thing, and I can see her point.

Looking closer, it became clear to me that there is a lot of substance to this project, with many layers of ideas to think about.

In one sense, the part about a sculpture that accepts Bitcoin is a bit silly, and not really different from any number of web sites begging for bitcoin ((Kickstarter?).

But there is much, mush more to the story. These “plants” are “self-owned and self-sufficient”, and, in fact, are designed to illustrate a Distributed Autonomous Organization (DAO), (self-)managed by digital contracts and the Bitcoin Blockchain.

The Plantoids are actually a mesh network, organized as a family tree. Some of the income of a Plantoid flows to it’s parent, to help sustain them. When a Plantoid accumulates sufficient Bitcoins, it commissions some humans to build a new (child) Plantoid. This transaction is done via “smart contracts’’.  This is all strange and wonderful—isn’t that one description of “Art”?

The DAO angle is actually quite deep water here, and this is not by chance.  One of the principals  Primavera de Filippi is a leading thinker about these issues from a legal viewpoint, and she knows what she is talking about. As she has explained, these entities are “autonomous” and self-governing, but occupy a yet-to-be-defined legal status.

Legally speaking, Plantoids do not have any legal entity, since —as opposed to corporations— the law does not recognize legal personhood to commodities or things. Yet, as opposed to traditional art pieces, Plantoids are not bought or sold; nor can they be owned as objects.

It is also interesting to see the comment that Plantoids are a “self-sustainable system”, but not a pyramid scheme. This distinction is clearer to a lawyer than to me.

Phew! All this makes my head hurt! Where to start.

First, I have to say that the name “Plantoid” is unfortunate because there already is a robotics project with that name, doing different but equally interesting stuff.

Second, the “bionic” label is, in my opinion, misleading. Furthermore, this is not a very biomimetic design. Whatever merits this hybrid, virtual-physical, DAO system might have, it is not easily related to any biological system that I know.

OK, the Plantoids are supposed to learn and evolve, as successful interactions with humans will yield more Bitcoins, and enable that strain to reproduce. While this evolutionary process is patterned after biological evolution, it is rather simplified, to the point of triviality. For one thing, no living thing is dependent on one and only one resource, nor is any living thing connected to its environment solely through attention, nor are interactions conducted via contracts.

Thinking about it, I found my biggest objection is the purely parasitic dependence on pleasing humans in order to get Bitcoins. The system would be so much more sustainable if these Plantoids had other sources of inputs, and other kinds of outputs.

For instance, if the petals age and fall off, they could be recycled, with a payment in Bitcoin for the scrap. Perhaps all the leaves fall in the winter, “rotting” to yield Bitcoins that flow to the dormant plant to fuel next season’s growth.

Even better, the Plantoid could actually mine Bitcoins. Perhaps harvesting solar energy and quietly running a small node, generating small payments. This is technically, possible, though I don’t know about the economics. Of course, human gardeners can help the Plantoid with donations to fertilize it.

Another biomimetic concept might be to collect some of the Bitcoins into metal “seeds” that are dropped from the Plantoid. This would be a cool way to handle the contracts, no? The contract is recorded on the Blockchain, but actual transfer is done by delivering a physical seed (with the appropriate key and encrypted wallet). Thus, these Plantoids could be farmed by people, who harvest a crop in exchange for nourishing the Plantoid.

Finally, the ecosystem is absurdly simple. There should be a whole assortment of Plantoids and other ‘–oids’, that compete for Bitcoins, and even “eat” each other to suck out Bitcoin nutrients. So, the Aphid-oids should plug into some of the Plantoids, and draw off a few Bitcoins.

For that matter, it would be very realistic, both biomimetic and digitally, if the Plantoids are infected with various (digital) viruses, which may be passed among the population along with the payments, and, for that matter, potentially passed to and via the people who interact with the Plantoids.

Now that would be cool!

I think that this is more than just project an exercise in artificial life. If DAOs become common and widespread, there will certainly be many of them, and they will interact with each other “automously” (and we will need a better vocabulary for this situation). I believe that the only possible model for such a situation is a biological ecosystem.

Plantoids made me realize that today people are thinking about simple cases where there is only one Blockchain, and only a handful of autonomous entities. We need to think much, much bigger. “Billions and billions.” More DAOs than humans. As many DAOs as microbes. DAOs that create new DAOs. Yoiks!

One last thought. I’d like to see this something like this tied to something other than the Bitcoin Blockchain. Specifically, I would love to have a similar system that is backed by something like “socially valuable activity” rather than completely meaningless, energy sucking, computation. I’m imagining this would involve integration with some kind of social sensing, that keeps score and “powers” the mining.

In this vision, the Plantoids spread and flourish as we care for each other, our communities, and our planet. Plantoids encourage us to do positive things, which nourishes the Plantoids. We can harvest a fraction of this “good” in the form of “fruits” harvested fro the Plantoids.

Now that would be really interesting.


Cryptocurrency Thursday

Bitcoin Communities: The Currency Of Choice For Ransomware

I have been considering all the sub-sectors of “the” Bitcoin community, communities defined by interests in using Bitcoin or Bitcoin related technology. There are at least a half dozen such communities, united in enthusiasm for Bitcoin, but disunited in their other goals and hopes.

One of the unfortunate developments in the last year has been the emergence of Bitcoin as the preferred payment for cybercrime, especially for Ransomware and other forms of extortion. Extortion has existed forever and digital forms have been possible for years. But untraceable digital cash is just the thing for this business.

Ransomware has now been automated to the point that it is pretty much run by robots. The victim system is encrypted, with instructions to pay Bitcoin to a specific address in order to get the key to recover your stuff. No human criminals needed, and the payoff disappears into the hidden world of Bitcoin.

Recently, the Cyber Threat Alliance provided a detailed examination  of one family of such ransomware, ‘CryptoWall’. [PDF]  This highly automated system appears to have yielded Bitcoins worth hundreds of thousands of dollars.

While everyone knows that it is unwise to pay off extortionists, there is currently little that can be done once your files have been captured. Paying up may be the only choice, as even law enforcement professionals must concede.

Note that cryptocurrency is not only convenient for the criminals, the anonymity and decentralization of Bitcoin are essential to this particular scheme. (The report details the mechansims used to vanish the transferred funds into a fog of rapid transactions.)  Payment through any conventional system would be traced and blocked. And Bitocins can flow anywhere in the world, quickly and without pesky border controls.

This industry, along with drug and weapon sales are some of the most vibrant uses of Bitcoin today. I don’t have detailed statistics, but a back of the envelope calculation indicates that ransomware alone could be 10-20% of all Bitcoin transactions. Adding in other criminal activities, and it looks like Bitcoin is mainly used for illegal activities (in the sense that the majority of money is for illegal purposes

Is it any wonder that governments and legitimate businesses are wary of Bitcoin?

One other thought: I have to wonder if spam attacks on Bitcoin could provoke a response from cybergangs. If the day comes that the Bitcoin network is seriously disrupted, and it interferes with multimillion dollar extortion and drug trafficking, won’t there be a push to defend the network forcefully?

Gang warfare. Swell.


  1. Cyber Threat Alliance, Lucrative Ransomware Attacks: Analysis of the CryptoWall Version 3 Threat. Cyber Threat Alliance, 2015. http://cyberthreatalliance.org/cryptowall-report.pdf


Cryptocurrency Thursday

A Useless Blockchain “Solution”

The Holberton trade school  in Silicon Valley (“a two-year higher-education program to become a full-stack software engineer”) plans to issue their certificates using the Bitcoin blockchain.  Basically, cryptographic signatures are used to issue a notarized statement of completion., which are posted to the Bitcoin blockchain.

It isn’t clear whether the cryptographic certificate actually solve any important problem, or just sounds sexy and innovative.

I’ll set aside the question of whether someone who knows the current “full stack”, “different types of applications and systems on different devices, operating systems and clouds, with a large variety of programming languages, tools and algorithms” is a qualified “software engineer” or not.  (Likely, not, in my own view.)

This blockchain certificate (pioneered earlier by the offshore University of Nicosia) seems to address the perceived problems of company HR offices, who must verify credentials presented by applicants. This approach might be cheaper for the issuing institution, as well, but seems to offer no particular value to honest students.

Gracy Caffyn comments that employers have reason to be concerned about false credentials, and the Internet makes it easy to create beautiful, artistic, fakes. However, most reputable institutions have mechanisms to quickly verify certificates, diplomas, and transcripts.  Whether the blockchain solution is better or even cheaper than other solutions is not obvious to me.

On a related front, Bitfury issued a white paper discussing “Public vs. Private Blockchains”.  ([Part 1] [Part 2])  The interesting point here is their discussion of “permissiveness”:  the public blockchain is writeable by everyone.  “Private” blockchains would use similar technology but the protocols would limit who can write to the blockchain.

The report itself tries to systematically lay out the differences between these technologies, ultimately concluding that they are largely compatible.  It is almost always possible to create a “private” protocol on top of or linked to the public blockchain, so this is not really an either/or proposition.

But the main thing here about the Bitfury paper is to think a bit about how much you want to trust the records on a blockchain that anyone can write to.  In the simplest form, the records are simply assertions that the blockchain protocol assures us have not been monkeyed with. The assertion itself could be true or false, and  since everything is unauthenticated, we have no way to know who actually made the assertion, from the blockchain itself.

The Holberton certificates are a perfect example of this point.    They are reported to use BitProof technology  , which generates a cryptographically sealed checksum for the certificate (this part is not new technology), and stores the checksum on the bitcoin blockchain. Anyone can read it there, but to decode it to prove that it is valid you need to find the full document, which has to be kept secure.

The fundamental record is an assertion that “School A issued certificate B to student C”. The checksum, after you unwind it, proves if you have an unmodified copy of the document in question, but you can’t recover the actual document from the blockchain alone.

First of all, this “trustless” system requires you to trust Bitproof.   Furthermore, this trust will surely be based on the cryptography that they used, not the use of the public blockchain to publish the checksum.  The blockchain does make it difficult for to fiddle with or erase one of the checksums –which does eliminate some (probably uncommon) frauds.

This chain of trust extends further.  Bitproof provides a database that proves that someone sealed this document.  To determine that a certificate was actually issued by the relevant body to the relevant person, you need to identify the parties. The cryptography helps, but you still need to authenticate the parties somehow, or the cryptography is just circular.  (I have a key proving to you that I have Bob’s key.  Who is Bob?  Am I really Bob?  Ditto for Holberton School.)

And, once authenticated, you still have to decide if you trust them.  A completely valid record can still be fraudulent if the actors are dishonest.

How does this process work without the blockchain?  Well, you issue a signed document that is published at a replicated database run by, say, the university itself.  The process is the same, except you jump directly to the question of whether you trust the institution and have a valid link to it; and at the same time, you have to validate the identity of the person claiming to be the graduate. The blockchain is irrelevant to this part of the work, indeed, it simply adds a tiny bit of useless extra work, talking to Bitproof and the blockchain to bootstrap the process.

The point here is that using the blockchain itself is adding very little to the process; the contribution of the blockchain (as opposed to cryptographic signatures) is relatively unimportant.  What matters is the reputation of the institution (which Holberton and Nicosia are striving to build by using trendy technology), and authenticate the identity of the graduate, which ultimately requires some kind of “trust”.

This “app” for the blockchain looks to me like more hype than hope.

Cryptocurrency Thursday

Bitcoin Network Under Stress, No Relief In Sight

Last week I reviewed a range of technical changes and alternatives to the current Bitcoin protocol. These and other changes are needed urgently, because, as I pointed out before, the decentralized Bitcoin network is impossible to defend in its current design.

This month has seen a repeat of the “spam attack” that occurred in July, as I predicted. The October event caused a huge backlog in transactions waiting for confirmation, simply by submitting gigantic numbers of tiny transactions. Note that there is nothing “wrong” with such transactions, indeed, many people would like to see slews of microtransactions to expand the digital economy—which would stress the network in exactly this way.

The backlog cleared out in a day or so, which is bad but not fatal. However, the swollen load had a disproportionate effect on smaller, low cost nodes, to the extent that many had to shut down. They have not returned so far, and many surely will not because they were basically running as a charity to help the whole community. This is a 10% drop in the total number of nodes in the Bitcoin network, and a 20% drop in the last year. At less than 9,000 nodes, the Bitcoin network is far short of the “whole Internet”.  (As a comparison, if you are sitting in a coffee shop in any major city, there are probably 10,000 computers within 1KM of your chair.)

The other effect has been a bidding war, raising the fees on transactions in response to long queues. This basically blocks out services that seek to provide low fees, concentrating service to the wealthier clients, effectively “centralizing” the population of traders (and raising “taxes” on everyone). Note, too, that higher fees probably blocks out microtransactions.

Basically, the spam attacks affect the long tail of small, slow, and cheap nodes, pruning the weak, and raising the bar for participating in the Bitcoin network as it is currently conceived.

If this trend continues it will do deep harm to both the technology and the culture of Bitcoin. The “Bitcoin network” is a decentralized collection of thousands of computers contributing to the consensus that keeps the blockchain viable. The network is voluntary, and is intended to include anyone who wants to join. This openness is critical for the “trust” that people put in this “trustless” system. The day that the Bitcoin network becomes captive of a wealthy interest groups will be the last day that anyone takes Bitcoin seriously.

Worse, if the number of nodes is too small, the system is easier to manipulate, and many of the algorithms break down, no longer operating as they should. The general idea of the Bitcoin network is that “the Internet” is so large that it is impossible for any handful of large, high performance servers to dominate the consensus. But if the network is too small then it is quite possible for a group to amass enough power to control the transactions. End of Bitcoin.

As an engineer, I have to see the single, global ledger of Bitcoin as a point of failure and target for attacks, regardless of how many copies there may be. The underlying assumptions about the invulnerability of the peer-to=peer protocol seem to be based as much on faith as engineering.

Many of the proposed changes I have looked at elaborate the network into hierarchies or shards or both. These moves should make spam attacks more survivable, as well as providing other benefits including better response time and more options for how to use the system.

I’m not sure that these proposals will be favorable to the low-cost processors who have been spammed off the net this month. We may be moving beyond the “running a Bitcoin node in your basement” phase of the technology. If so, then Bitcoin will be changing both technically and culturally. Will it still be Bitcoin?



Cryptocurrency Thursday

Google Searches And Bitcoin Trading Volume

If Google has done nothing else, they have provided “abundance” to low budget data wranglers. Following the highly publicized (yet essentially trivial) Google Flu Trends, who have generated a neverending series of studies to show “Google Searches Predicts X”, and similar discoveries.

This week we have another one, “The Predictor Impact of Web Search Media On Bitcoin Trading Volumes” by Martina Matta, laria Lunesu, and Michele Marchesi.

The investigators used data from Google trends and public data on Bitcoin transactions to look at possible correlations and predictions during 2014 and 2015. Specifically, they compared the frequency of searching for the term “bitcoin” to several measures of global Bitcoin activity.

The results showed a strong relationship between searches for ‘bitcoin’ and the volume of trading (Bitcoin to and from US dollars). Notably, the study did not report any predictive relationship with the exchange rate or number of blockchain transactions or other important statistics.

They conclude that “Google Trends is a good predictor”, at least in that the volume queries about “bitcoin” predict the volume of trading.

It’s not clear to me why we want to predict this particular statistic, unless we run a trading exchange. And in any case, we know for a fact that Google queries do not actually cause such trades, so what do we really know from this correlation?

It is pretty well understood that Google Trends reflects what the Internet is chattering about. For instance, as Marina et al note, there is a spike in capital flight from Greece, which motivated people to learn about using bitcoin to move assets, and then was followed by increased trading. We don’t really need Google trends to understand this spike in traffic, and it actually reflects the way Google is used more than the way Bitcoin works.

As Grace Caffyn notes in CoinDesk, other studies indicate a reciprocal relationship, with changes in Bitcoin activity triggering both media reports and Google searches, as well as the other way around.

Besides the basic doubts about the usefulness of these findings, there are plenty of other methodological issues. For starters, the search term “bitcoin” is pretty vague—I’m surprised they got any results at all. (Imagine using the GFT data for searches on “dollar”.) I suspect that most of the trend is coming from new users searching on the equivalent of “what is bitcoin?” or “how do I use bitcoin?”. It would be interesting to try some more refined queries like these to see if they are even better predictors.

I have to be a bit cautious about the query data itself, which is normalized. I’m not sure how large the actual volumes of queries actually are, or how much they vary.

I’m not really certain what the trading volume data means. What trading is included in this measure, and what is left out? Does this include the whole world including China? Does this include dark markets? For that matter, what is the relationship between this trading volume and the actual overall use of Bitcoin?

I’m particularly concerned because a lot of Bitcoin trading is algorithmic, so it is difficult to see how Google searches should have any connection to the behavior of the robots.

My own interpretation of these findings is that Google is one of the entry ports for people who have never used Bitcoin who want to start using it. If every new user sets up a wallet and buys a little Bitcoin (about 3 days later), then there is your correlation. Perhaps the robots are amplifying the signal, following the market trends.

In the end, I can’t get excited about this finding. A meaningless correlation between two pointless statistics.


  1. Martina Matta, laria Lunesu, and Michele Marchesi, The Predictor Impact of Web Search Media On Bitcoin Trading Volumes, in Information Filtering and Retrieval – DART 2015. 2015: Lisbon.


Cryptocurrency Thursday

Bitcoin Community Thrashing: Intractable Engineering Tradeoffs

[A long and somewhat technical comment on the Bitcoin fork.]

The cryptocurrency community is apparently able to shake off a continuous stream of arrests, and naturally sees China’s economic woes as Exhibit A for why you want to use Bitcoin. Sadly Bitcoin exchange rates are crashing, which suggests that Bticoin is not considered a safe asset by “the markets”.

But the most interesting story since the Nakamoto Document is the massive code fork, which is more like a religious schism than a political coup. As I remarked last week, such a software fork is almost always a very bad thing for developers and businesses, making engineering more complex and error prone, and making planning difficult. Building your product today, you have to guess which software will still be used next year.

The technical issues appear to be fundamental and basically intractable. (Grayce Caffyn has a useful summary at Coindesk.)   At its heart, Bitcoin seeks to be a real time transaction based system, where “real time” means the latency is “reasonable” for humans. If you try to buy something with Bitcoin, waiting a few seconds “feels right”, but waiting an hour is too long.


Second, Bitcoin aspires to support a global, anyone-to-anyone transaction system (in real time). There are potentially a lot of anyones on the planet, so this is potentially a lot of transactions. As an exercise, suppose that everyone on the planet used Bitcion once per day. That’s an average of 80,000 transactions per second. This is a tall order, and, of course, the number of transactions in the world economy is much, much larger than that.

Third, Bitcoin is supposed to be “decentralized”, and secured in part by the participation of millions of independent processors, including relatively small Mom and Pop operators. If Bitcoin processing becomes dominated by a relative handful of large operations, it is open to manipulation and generally no better than the conventional systems it seeks to displace. For this reason, the Bitcoin software and protocols are open, and have generally tried to be designed to not only be fair to all players, large and small, but to be feasible for at least modest sized computers.

This last goal has taken a beating in the last few years, as a technical arms race has seen the growth of extremely large nodes and pools of nodes, which have overwhelmed the ability of average Joe to really participate individually.

So, the Bitcoin software requirements amount to “infinitely fast, infinitely many transactions, executable on any computer and network”. Does anyone see a problem here?

Actually, this is a very common set of software requirements, everyone always wants infinite capability and zero cost.

In the specific cast of the August Fork Event (which could be a good name for a band), the arguments center on the core distributed data structure, the Blockchain. This data structure is the core of Bitcoin in that it is what everyone shares. So we have to agree on it, or the game is over.

Each transaction must be entered into a block on the Blockchain, and each block contains, you guessed it, a block of records. How big should a block be? How big should batches of transactions be? There is no one right answer, it depends on what you are trying to do and details of the networks and computers.  “Big” is relative to the speed of the network and to your memory and processor, so it changes over time and may mean something different to you or me.

Batching up transactions creates various engineering tradeoffs. Collecting a bunch of transactions in a batch is more efficient for the network (shipping one big chunk rather than a lot of little ones), and the network is usually the bottleneck. But collecting a batch means delay for some transactions, until the train is full. So you probably want to process a batch every so often (every few seconds), even if not completely full.

The other issue is that if blocks are allowed to be really big, then they take a long time to pass around, and a lot of memory to handle them. This is an important issue because Bitcoin “mining” is a race to process incoming (blocks of) transactions. Every participating node must be able to handle every block, and to be able to process it reasonably quickly. Even setting aside the competitive nature of mining, transactions need to be confirmed pretty quickly, or Bitcoin cannot be used for payments.

The big problem that led to the fork flap, is that the current protocol limits blocks to 1MB, which is small enough that most networks and computers can handle them. But the rub is that there are so many transactions happening that there soon will not be enough room in the blocks to immediately enter all the records. Transactions will get stuck in queues waiting for an empty subway car. This is really bad, and both theory and practice tell us that this will lead to a melt down of the whole system, with infinite wait times. Game over.

Stepping back for a minute, let’s consider how conventional data systems handle these challenges. (Bitcoin certainly did not invent these probems!) First, most “centralized” systems are organized as federations of nodes, and you usually interact with some local pool of servers, not with any arbitrary server in the world. Behind the scenes, the federation cooperates to pass your transaction to other nodes as needed. All that part of the network is definitely not your Mom and Pop home computer or network.

Second, the systems use a lot of caching and buffering to reduce latency. There may well be really large blocks of data, which is feasible because the systems are specialized and expensive. They are also complex, and surely out of the reach of ordinary people or even most corporations.

In other words, the goal of democratic decentralized processing limits the use of many standard engineering tricks, because they require “centralization” and “trust”.

Back to the Bitcoin fork.

The fork is intended to deal with the problem of “running out of room” in the blockchain. This problem has been discussed for a quite a while, but, as I have discussed, there is no obvious solution. Every response has good and bad points, and, more important, different uses and goals are affected differently.

The BitcoinXT initiative / sect / coup takes the bull by the horns and simply increases the size of the blocks, up to 8MB initially, increasing further in the future. This at least pushes the problem farther into the future, at the cost in latency and possibly forcing smaller nodes out of business.

Resistance to this approach, aside from the religious  and political objections, is about the effect on smaller nodes, and also on hoped for transaction fees. When the blocks are congested and space is in high demand, this is an opportunity to charge fees to jump the queue, and also to develop alternatives.

The queue jumping seems like a bad idea long term. At the extreme, poorer users get priced out and get long delays or even failed transactions. It’s hard to justify a Bitcoin that only works for the wealthy—that’s no better, and generally worse than conventional finance. (One of the useful effects of “centralized” systems, is they can enforce non-market notions of “fairness”.)

The alternatives under consideration involve the fundamentally sensible idea that a single, global blockchain can’t possibly support all the transactions in the world. So, there should be additional layers of record keeping, localized or specialized to be efficient, which use the blockchain as their backbone. And analogy would be how a merchant might call the local bank to verify a local patron’s check. Past that local confirmation, the check will then follow a slower process to be cleared and all balances adjusted.

There are many ways this might be done, and they all add complexity. They also make the “trust” equation more complex. Even if you “trust” the main Bitcoin blockchain, who knows if you should trust records from some sidechain? That depends on the sidechain. And if there can be an infinite number of such sidechains, how do we sort them out?

Another alternative is to change the one-size-fits all hard limit with a mechanism that enables miners (the ones most affected by this aspect of the protocol) to ‘negotiate’ the limit.  This will allow the limit to gradually increase in the future, under the control of the operating nodes (rather than developers or investors).

This approach buys time, acknowledges “engineering reality”, and basically cedes control of Bitcoin to the miners. It also surely won’t work very well, it will basically amount to a gradual increase in the blocksize at a pace to suit a tiny segment of the Bitcoin community.

After all these words, what do you think should be done, Bob?  Take a stand!

With the caveat that I have only a general understanding of the technical details, let me say this.

The BitcoinXT approach seems technologically harmless (8MB vs 1MB—not that big a deal). It also does not really solve the problem, except for the short run.

The “incentivize” processors by raising fees ideas is a non-starter. It will never work, at least not the way intended.  Why?  We already have plenty of for-fee transaction systems that work as well or better than Bitcoin for most uses.

The sidechain ideas are definitely the right way to go, including ideas like Ripple, which has its own blockchain, but could easily be anchored to the Bitcoin blockchain if you wanted to. However, these solutions are not strictly “peer-to-peer”, “trustless” systems. They can be engineered in any way you want, which is a good thing in the long run.

In fact, these aren’t mutually exclusive solutions, technologically. Raising the size of the block buys time to implement other, off-chain approaches that probably will be needed in the end.

But I have to say that I think the fork was a terrible idea technologically and sociologically. Taking my football and starting a new league is bad politics and a good way to break the technology. And it’s really, really, not the way to run a “community”.


In that sense, the ‘BIP 100′ proposal, which is technically similar, is much better community relations even though it actually makes the miners the unelected ‘central bank’ of Bitcoin.  That will be bad in the future, if Bitcoin lasts that long.


Cryptocurrency Thursday

Cryptocurrency Communities Struggle with Fundamental Issues

Among all the prosecutions and funding announcements,  and an exciting “flash crash”, there are some interesting stories emerging from the cryptocurrency communities.

Rizzo on “Why Bitcoin?”

This week Pete Rizzo of Coindesk ponders Bitcoin’s biggest question, “Why use it?”


He elaborates on an analogy between Bitcoin (“it’s better than money!”) and Segway scooters (“better than walking”). Just as most people don’t consider “walking” to be too hard or “broken”, most normal people aren’t really looking to “fix” money (we just need to get enough of it to get by).

Rizzo elaborates on this point, commenting that today getting access to Bitcoin requires access to conventional financial services, which “doesn’t fit easily into a business model.” Nor, I would say, does “bank account + Bitcoin” give you very much beyond just “bank account”.

Rizzo expresses the hope that “whatever it is, bitcoin works today and it’s useful, just maybe not for the kinds of things we’re accustomed to doing already.”

Actually, this isn’t quite true, since Bitcoin is widely adopted in extralegal trade, gambling, and crime. These are things some people are “accustomed to doing”, but many of us wish they wouldn’t.

I would add to these points by commenting that the central narrative of Bitcoin (“We will disrupt and reinvent money!”) is definitely swimming upstream historically and culturally. Money being money, it is extremely well developed: if any technology has a deep “penetration” into the economy, society, and culture, then it has to “money”. You may as well try to “reinvent” Oxygen!

Technological Schism: Bitcoin “Forks”

Meanwhile, Gavin Andresen has left the “Bitcoin Core” development, and started his own “fork”, as well as his own open source process. I freely admit that I don’t understand the technical issues driving this split (see, perhaps, Morgan Peck for IEEE Spectrum), but I definitely understand the implications of multiple source bases. Basically, there soon will be more than one Bitcoin network, and probably various hacks and patches to bridge between them.

Uh oh!

This is a headache familiar to most programmers, and an invitation to catastrophe.

In a sense, this is the natural outcome of the vaunted “decentralized” governance model that Bitcoin is supposed to represent. Grace Caffyn reports in Coindesk that one impetus for this schism was a paralysis created by the “consensus” model of the original Bitcoin foundation/ core development. Change requires the agreement of everybody, even people with minimal or marginal stake in the software.

I understand the frustration, and I understand why the programmers would want to move to a more conventional open source model, one that is open but not infinitely open. But experience teaches us that “forking” is really, really bad for software, especially APIs and infrastructure. It creates all kinds of friction and whole new classes of bugs: there will now be bugs due to, and arguments about, the compatibility of the forks.

Old proverb: There is a fortunate man, who only has one clock. He always knows what time it is.

New proverb: There is a fortunate programmer, who only has one fork. He always knows which software contains the bugs.

Of course, Bitcoin being Bitcoin, both the old and new branches claim to represent the one true spirit of the great God Nakamoto.  Cade Metz quotes Mike Hearn in Wired.com, saying the new fork is the true way, because “Satoshi was very clear about what he wanted. My article quotes him to prove this.”  In response, a faux “Satoshi” countered that “The developers of this pretender-Bitcoin claim to be following my original vision, but nothing could be further from the truth.”

Obviously, there is much more than a technical or even personal disagreement here.  This is about The Truth.

Caffyn On Blockchain Surveillance

If the relatively calm and apolitical software developers are schismatic, how can we expect the rest of the community to hang together?

Grace Caffyn comments on Sabr.io along with other similar companies who offer “blockchain reconnaissance”. It’s far from obvious exactly what Sabr actually does, their web page says their service “integrates data from multiple Blockchains, as well as other public and proprietary sources” along with “unique position and partnerships within the network underlying the decentralized digital currency ecosystem”. No idea what that actually means.

In general, analytics use the public—and I emphasize that word—blockchain to construct datasets and analyses that document the traffic patterns. This is hardly unprecedented, but better ready-to-use tools can make it easy for anyone, including Your Local Constable, to figure out what’s going on.

However, some techniques can involve more than passive analysis, such as running nodes for the purpose of monitoring traffic patterns to identify the location and identity of parties. This is at least irritating, and potentially can interfere with the smooth operation of real users.

Caffyn notes that these activities are controversial for at least two reasons. Some do not welcome any effort to help law enforcement “unmask” Bitcoin transactions, desiring unregulated commerce. Others are concerned about covert exploitation of the public commons, which may ‘poison the well’ for everyone.

The decentralized design means that no one really controls how the protocol and blockchain are used, so it is difficult to stop people from using or even abusing the blockchain and protocols   If nothing else, these developments indicate an unfortunate (if inevitable) “arms race” is underway, as a cryptocurrency spy-vs-spy narrative unrolls.

Clearly, there are inherent logical conflicts among the interests in having a transparent, public infrastructure, and having private or anonymous transactions. Is Bitcoin “private”? Or is it “transparent”? Is the blockchain “open to all”? Or should it only be open for “acceptable use”?  The technology can’t answer these questions. Indeed, I don’t think there can be answers.


Cryptocurrency Thursday