Category Archives: Features

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Big Miners Back Bitcoin Classic As Scaling Debate Evolves

Category : Features

TNABC

Following a months-long debate on how best to scale the bitcoin network to accommodate a greater number of transactions, bitcoin mining firms are voicing their support for a newly introduced proposal called Bitcoin Classic.

Though a new entrant to the debate, Bitcoin Classic so far has the support of bitcoin developers including former Bitcoin Core maintainer Gavin Andresen, Bloq CEO Jeff Garzik and Ledger Journal editor Peter Rizun, among others. If adopted, Bitcoin Classic would increase the size of blocks on the bitcoin blockchain to 2MB, up from 1MB today.

The proposal has created controversy in the industry for running counter to the recommendations of the Bitcoin Core developers, the network’s main development team, which has introduced aroad map that advocates for a change that would not directly increase block size, but boost transaction capacity four-fold.

However, bitcoin mining firms believe that the solution to the scaling debate must come in the form of a direct increase to the network’s block size limit, and that Bitcoin Classic offers a more immediate solution to the perception problem that bitcoin as a whole is not doing enough to accommodate new users.

To date, miners including BitFury, Bitmain and Genesis Mining are among seven groups that the Bitcoin Classic initiative has said have pledged support to the project.

At The North American Bitcoin Conference (TNABC) this week, all three groups were vocal in their enthusiasm, putting forth the argument that Bitcoin Classic is the fastest way to achieve a solution that moves the open-source project forward.

Speaking on a panel session, BitFury CIO Alex Petrov explained:

“Right now, the Bitcoin Core team is slowly introducing a solution, and it’s a really complicated solution, and it’s been a half a year and they are still in tests. Bitcoin Classic is a fast answer.”

Elsewhere on the panel, FinalHash CTO Marshall Long, Genesis Mining CEO Marco Streng and Bitmain’s Yoshi Gato spoke positively about the proposal, while underscoring that they believe the industry is in need of a solution that prioritizes speed.

“The transition with Bitcoin Classic can happen in a few weeks,” Gato said.

Despite the consensus among the day’s panelists, however, some Chinese miners have suggested that their support for Bitcoin Classic may be wavering, with major mining firms in China putting forth an uncertain stance on which proposal they favor.

Notably, developers like Andresen have voiced support for both proposals, suggesting others may be willing to align with whichever concept gains traction in the market, thus helping the network scale.

‘Straightforward’ solution

In his statements, Long perhaps best spoke to Bitcoin Classic’s merits, calling the proposal the “most direct” from a technology standpoint.

The panelists indicated their belief that the Bitcoin Classic proposal only intends to increase increase the block size, and that additional changes will not be included as part of the proposal despite confusion it would also aim to change bitcoin’s mining algorythm

“We’re supporting Bitcoin Classic because we feel it solves the current problem,” Streng told the audience. “Bitcoin Classic is a proposal for increasing the block size without changing the rest.”

Still, some in the community are worried about the message such an action would send to the Bitcoin Core team and its developers.

For example, Blockstream CEO Austin Hill, whose company funds the work of many of Core’s more notable developers, has argued that Bitcoin Classic sends a message that the efforts and reasoned recommendations of developers are under-appreciated.

Dangerous upgrade

But while straightforward in its rule changes, Bitcoin Classic differs from the road map put forward by Bitcoin Core in that it would require a hard fork of the bitcoin blockchain, meaning that it would enact a change that makes the latest edition of the software incompatible with older versions.

“Core is saying, well the miners might do it, the service providers might do it, but not the merchants or other entities. That’s their argument, saying we have to be sure that everyone wants it,” Streng continued.

Gato noted that there is a potential danger that a certain segment of the community will continue running Bitcoin Core, thus creating a situation where there are two versions of the bitcoin blockchain, each with transaction histories that couldn’t be reconciled.

“I think the perception of Bitcoin Classic is that because it’s a hard fork change, the existing system will branch into two separate blockchains,” he said.

Petrov also argued that, despite the risk, time was of the essence in dealing with the problem given that blocks on the bitcoin blockchain are becoming increasingly full.

Calling it a “question of survival” for the project, Petrov added:

“If the Bitcoin Core team doesn’t deliver [a solution] in time, we should force the process and that’s why we’re supporting classic. It’s not the best way, it’s painful, but we should do it.”

Overcoming obstacles

Still, Long voiced his opinion that the bitcoin community needs to come together to solve the human challenge involved in a hard fork given that, as more businesses and consumers seek to use the blockchain, it’s likely future increases will be needed.

The opinion is similar to one originally voiced by Garzik at Scaling Bitcoin Hong Kong, at which the community’s developers considered a number of solutions and theories on how blockchains can and could be designed.

“One benefit that I think everyone agrees on is that if we do [a hard fork] gracefully, it proves that we can actually do something that form the outside is hard, not from a technological level, but a communication level,” Long said.

Petrov acknowledged that “a lot” of work would need to be done to increase the community’s awareness about the change, but that this was preferable to waiting on a solution.

Petrov concluded:

“It will be not easy to implement, but we can do it one month. This is why we are supporting Bitcoin Classic.”

 


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5 Must-Read Excerpts from the UK Government’s Blockchain Report

Category : Features

uk, government

“The progress of mankind is marked by the rise of new technologies and the human ingenuity they unlock.”

That’s the glowing foreword to a new report on blockchain and distributed ledger tech issued by the UK government’s Chief Scientific Adviser this week.

Taking a positive outlook on the emerging technology, the document recommends a broad government initiative to develop and demonstrate blockchain and distributed ledger technology, one that has caught the attention of the global media while emboldening the growing chorus of “blockchain” enthusiasts.

Perhaps the most important takeaway from proposal is that the UK government was encouraged to pursue applications of the technology.

Author Mark Walport wrote:

“Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services.”

However, Walport goes on to make a series of additional recommendations that foretell how the UK government could move forward on his suggestions.

For those who missed the report, we’ve compiled five of its most compelling takeaways below:

1. Use blockchain tech

Government’s first role in supporting the development of distributed ledgers is to develop a vision of how the technology can improve the way government does business and delivers services to citizens, Walport wrote.

He then recommended that government should act as an “expert customer” and itself start using the technology.

In doing so, he argues government can “support and influence” the development of economic activity in this sector.

Recommendation:

Provide ministerial leadership to ensure that government provides the vision, leadership and the platform for distributed ledger technology within government.

Specifically, the Government Data Service should lead work in government as a user of distributed ledgers and the DCMS Digital Economy Unit should lead work on government as an enabler of distributed ledgers (working with the Department of Business, Innovation and Skills and with Innovate UK).

 

 

2. Invest in research

“As well as ensuring that the technology is robust and scalable, we need to understand the ethical and social implications of different potential uses and the financial costs and benefits of adoption,” says Walport.

He encourages research and the creation of a UK capability to trial and experiment with different distributed ledger solutions.

With regard to research and development, the UK is in a “good position”, he suggests, while warning that there is interest and competition in development of distributed ledger technology around the world

Recommendation:

The UK research community should invest in the research required to ensure that distributed ledgers are scalable, secure and provide proof of correctness of their contents. They need to provide high-performance, low-latency operations, appropriate to the domain within which the technology is being deployed. They need to be energy efficient.

The newly-created Alan Turing Institute, working with groupings such as the Whitechapel Think Tank, could play an important role in co-ordinating and ‘self-organising’ the public and private research and development sector interested in this and related technologies.

The private sector should consider investing in the Alan Turing Institute to support the pre-competitive research that will ultimately facilitate new commercial applications that are robust and secure. This includes work on obvious areas such as cryptography and cybersecurity but also extends to the development of new types of algorithm.

3. Create a regulatory framework

Following research and development, successfully implementing distributed ledgers will require good governance to protect the participants and stakeholders, the author contends.

To ensure the system is resilient to “systemic risk or criminal activity”, adequate regulation must also be in place.

“The challenge is to strike the balance between safeguarding the interests of participants in the system and the broader interests of society whilst avoiding the stifling of innovation by excessively rigid structures,” he says.

Recommendation:

Government needs to consider how to put in place a regulatory framework for distributed ledger technology. Regulation will need to evolve in parallel with the development of new implementations and applications of the technology.

As part of the consideration of regulation, government should also consider how regulatory goals could be achieved using technical code as well as legal code. The DCMS Digital Economy Unit could take ownership of this recommendation.

4. Set standards to ensure security and privacy

While acknowledging that cryptographic systems are “extremely hard to break”, Walport spells out the risks of human error due to problems such as inadequate coding or hardware that risks security and confidentiality.

He therefore points to the government’s role in setting adequate standards to ensure the robustness of distributed ledger systems, while calling for research into these potential issues.

Recommendation:

Government needs to work with academia and industry to ensure that standards are set for the integrity, security and privacy of distributed ledgers and their contents.

These standards need to be reflected in both regulatory and software code.

5. Build trust and interoperability

In digital systems, trust is based on two key requirements: authentication and authorisation. Walport recommends the use and creation of “much more powerful and robust” identity management tools to provide authentication whilst protecting users’ privacy, whether they are individuals, other organisations or government.

Furthermore, he suggests that, in order to “maximise the power of distributed ledgers”, they will need to be able to work with other ledgers.

Beyond authentication, he says, this will require agreement on data interoperability, policy interoperability and the implementation of international standards.

Recommendation:

As well as top-down leadership and coordination, there is also a need to build capability and skills within government. We recommend the establishment of a cross-government community of interest, bringing together the analytical and policy communities, to generate and develop potential ‘use cases’ and create a body of knowledge and expertise within the civil service.

GDS and the Data Science Partnership between GDS, Office for National Statistics, Cabinet Office and the Government Office for Science could act as the convenors of this community of interest. There are important opportunities for government to stimulate the business sector by acting as a smart customer in procuring distributed ledger applications.


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Is Digital Asset’s $50 Million Funding a Blow to Bitcoin? VCs Weigh In

Category : Features

Businessman

Founded in 2014 and led by CEO and ex-JP Morgan executive Blythe Masters, Digital Asset Holdings had long been the subject of speculation that suggested that, despite its high-profile leadership, the startup was having difficulties raising an initial funding round.

All that uncertainty was laid to rest last week, however, when Digital Asset silenced rumors by raising upwards of $50m (some reports say $52m was the total) from 13 major financial institutions, among them traditional financial giants such as Citi, CME Ventures and Santander InnoVentures.

The $50m round is the largest to date for a startup seeking to use private or permissioned blockchain technology, which unlike the open-source bitcoin network, is purposed for use by a selected number of trusted institutions for use cases including syndicated loans, US Treasury repo, foreign exchange, securities settlement and derivatives.

Further, the news comes amid a decline in funding for bitcoin-focused startups in the sector. Data from the forthcoming CoinDesk State of Bitcoin 2015 Report, for example, reveals that, when revised historically, “blockchain startups” have collected 34% of the estimated $1bn in publicly reported industry funding.

For many observers, the Digital Asset round confirms what they believe is a trend that suggests venture capitalists are increasingly interested in blockchain startups, and that bitcoin-focused companies are experiencing more difficulties.

However, some of bitcoin’s most high-profile supporters in the venture capital community believe that the attention the Digital Asset round brings to blockchain technology is good for ecosystem as a whole, even for startups focused on the public bitcoin blockchain.

Tally Capital founding partner Matt Roszak told CoinDesk:

“At a high level, it’s a positive signal that people are putting money into this space. The public vs private blockchain debate is a different dynamic, but it’s important for financial services companies, and Wall Street, to invest in this space.”

Bart Stephens, managing partner at Blockchain Capital, an industry-focused fund whose investments include Abra, BitFury and Ripple, voiced his firm’s opinion that the “blockchain not bitcoin” trend is a “false dichotomy”.

“Bitcoin and the bitcoin Blockchain are inextricably linked, but not limited,” he said. “Certain use cases of blockchain technology might not include the bitcoin blockchain.”

Still, Stephens sought to stoke the flames of competition, adding:

“May the best chain win.”

‘Sink or swim’

While positive for the ecosystem, investors surveyed also indicated their view that the pressure is on Masters and her team to deliver a product or products worthy of the brand’s big entrance.

Virtual Capital Ventures partner William Mougayar echoed this sentiment, telling CoinDesk that, in his view, it is now on Digital Asset to “showcase actual implementations and deployed use cases”.

“I would expect [Digital Asset] to clarify further their product roadmap, given that there is a degree of mashup of technology acquisitions inside their offerings. That said, I’m sure that each one of their investors will also keep them busy with projects, since they are all potential recipients of blockchain technology,” Mougayar said.

Less optimistic was Trace Mayer, an angel investor in bitcoin firms such as Kraken and Armory, who said he believes Masters may be fighting an uphill battle against a superior version of blockchain technology.

Mayer further voiced concerns about the backgrounds of Digital Asset’s new investors, telling CoinDesk:

“When you look at the list of everyone who’s investing there, it looks like they’re keeping it in the club, and that’s part of the problem. If they would have invented new technology, they would have invented new technology, and yet they’re going back to themselves to try and do this innovation? What do I think is going to happen? I think they’re going to lose a lot of money.”

Mayer suggested that Digital Asset would now have to prove the quality of their code, or else face potentially hard consequences.

“Blythe is sink or swim now,” he added.

Notably, Digital Asset has already begun the process of opening up about code produced by its team, recently detailing the specifications of its Hyperledger platform, which is being transferred to the Linux Foundation’s Open Ledger Project for further development.

Hiring crunch

Among those who contributed comment, Mayer was more critical about Digital Asset’s outlook. As noted by Roszak, the bitcoin industry is currently undergoing a period of acquisitions, but the two were mixed on what were likely to be the results.

In particular, Mayer put forth the criticism that Digital Asset was likely to experience challenges hiring developers who could help it fulfill its technology goals.

“[This is] a seven-year-old industry,” Mayer said. “[Masters] comes from an industry with millions and millions of years of [combined] experience. When you need a senior analyst, it’s pretty easy to go find one. But if you want to find a senior blockchain specialist, where are you going to go find one?”

Mayer was also skeptical of the acquisitions Digital Asset has so far made, which have included blockchain startups such as Blockstack.io, Bits of Proof and Hyperledger.

Roszak, in turn, spoke more broadly about this climate, suggesting that developers who have been or will be acquired will now have the chance to contribute to further innovation.

“This is good because those innovators and entrepreneurs are going to continue that innovation track with other companies,” he said.

Impact on startups

Cross Pacific Capital Partners’ Marc van der Chijs, an investor in BEX.io and frequent panelist at industry conferences, noted his belief the early-stage startup ecosystem could be most impacted by the deal.

“With this round, Digital Asset is suddenly the leading player in the blockchain field, so it will be harder for emerging startups to compete,” van der Chijs said.

Less concerned was Adam Draper, CEO of the San Mateo-based startup accelerator Boost VC, who called the news “great for the market”.

Draper said:

“Bitcoin and blockchain are so intertwined, I think that it brings enthusiasm for both when something good happens.”

The statements suggest that Draper believes the deal is unlikely to affect dealflow among Boost’s early-stage applicants, which have included bitcoin startups Blockcypher and Wealthcoin, as well as blockchain startups like Epiphyte and Align Commerce.

Preference for permissioned

Still, observers were not in agreement that the Digital Asset round would be a boon for bitcoin and other public blockchains.

Alex Tapscott, CEO of North West Passage Ventures, an advisory firm for early-stage companies in the blockchain sector viewed the funding as a strong signal that market interest has shifted.

“[The funding round] demonstrated, once again, banks’ strong preference for permissioned distributed ledger systems over open blockchains, such as bitcoin and Ethereum,” he said.

Tapscott further lauded Masters as a “pioneer” that has successfully shifted conversation to blockchain technology among industry incumbents.

Van der Chijs added that the announcement confirms “private blockchains are in fashion” and that “public blockchains are dead” in the eyes of institutions and the public.

Now, he said, it’s up to the bitcoin ecosystem to respond and innovate, first by ending the block size debate and then proving public ledgers like bitcoin are more secure than private alternatives.

He concluded:

“I think [there could be a] change again.”

 


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