BitcoinGambler.com : Bitcoin news and Domain names for sale

Providing Bitcoin-related news and Bitcoin domains for sale.

Please go to Buy This Domain to purchase these domain names:

BitcoinDeal.com, BitcoinCommerce.com, BitcoinGuns.com, BitcoinRetail.com, BitcoinRetailers.com, BitcoinSale.com, BitcoinSales.com, BitcoinTicket.com, BitcoinSellers.com, BinaryCoin.com, Bitcoin8.com, Bitcoin9.com, Bitcoinate.com, Bitcoing.com, Bitcoinize.com, Bitcoink.com, BitcoinU.com, Bitcoin4U.com, BitcoinUs.com, MegaBitcoin.com, OrBitcoin.com, Podcoin.com, CuBitcoin.com, Ramcoin.com, Pubcoin.com, Simcoin.com, TiBitcoin.com, Bitcoint.com, GigaBitcoin.com, SuperBitcoin.com, WeBitcoin.com, Bitcoin2Gold.com, Bitcoin2Silver.com, Bitcoin4Silver.com, silver2Bitcoin.com, silver4Bitcoin.com, silverBitcoin.com, BitcoinAccount.com, BitcoinAudit.com, BitcoinAuditor.com, BitcoinAudits.com, BitcoinBug.com, BitcoinBuyers.com, BitcoinCharge.com, BitcoinCheap.com, BitcoinClear.com, BitcoinCents.com, BitcoinDealers.com, BitcoinDimes.com, BitcoinHaven.com, BitcoinHedge.com, BitcoinLenders.com, BitcoinPip.com, BitcoinPledge.com, BitcoinRates.com, BitcoinSave.com, BitcoinSavers.com, BitcoinSavings.com, BitcoinSell.com, BitcoinSpread.com, BitcoinSwaps.com, BitcoinTicker.com, BitcoinTrend.com, BitcoinTrends.com, BitcoinWire.com, btcBanking.com, btcFund.com, btcTrades.com, cashBitcoin.com, CheapBitcoin.com, CheapBitcoins.com, clearBitcoin.com, deBitcoin.com, escrowBitcoin.com, escrowcoin.com, forexBitcoin.com, gold2Bitcoin.com, sendBitcoin.com, Bitcoinsure.com, Bitcoins4free.com, BitcoinBot.com, BitcoinBots.com, BitcoIntel.com, BitcoinCoder.com, BitcoinCoders.com, BitcoinDesk.com, BitcoinDev.com, BitcoinDns.com, BitcoinEmail.com, Bitcoinet.com, BitcoinHack.com, BitcoinHacks.com, BitcoinKeys.com, BitcoinLib.com, BitcoinLog.com, BitcoinLogin.com, BitcoinLogs.com, BitcoinPlugin.com, BitcoinServer.com, BitcoinSniffer.com, BitcoinTool.com, BitcoinTools.com, BitcoinAssist.com, BitcoinBackup.com, BitcoinCop.com, BitcoinCrypt.com, BitcoinConnect.com, BitcoinDonate.com, BitcoinDrop.com, BitcoinExperts.com, BitcoInform.com, BitcoinGuard.com, Bitcoinnect.com, BitcoinValet.com, BitcoinPolice.com, BitcoinCorp.com, BitcoinLaw.com, BitcoinMaker.com, BitcoinPad.com, BitcoinSearch.com, BitcoinService.com, BitcoinSpy.com, BitcoinStealth.com, BitcoinStorage.com, BitcoinStudy.com, BitcoinTest.com, remoteBitcoin.com, saferBitcoin.com, safercoin.com, fastBitcoin.com, BitcoinTrace.com, BitcoinTrack.com, quickBitcoin.com, simpleBitcoin.com, work4Bitcoin.com, Bitcointer.com, Bitcoinote.com, BitcoinLock.com, SatoshiNakamoto.com, BitcoinBlocks.com, BitcoinMill.com, Bitcoinomics.com, Bitcoinomy.com, Bitcoinism.com, Bitcoinist.com, BitcoinBetters.com, BitcoinUp.com, BingoBitcoin.com, BitcoinBidding.com, BitcoinBooker.com, BitcoinBookie.com, BitcoinBookies.com, BitcoinBookmaker.com, BitcoinCasinos.com, BitcoinGambler.com, BitcoinGamblers.com, BitcoinHall.com, BitcoinJoker.com, BitcoinLand.com, BitcoinPlace.com, BitcoinPlay.com, BitcoinPlayer.com, BitcoinPlayers.com, BitcoinPlays.com, BitcoinPrize.com, BitcoinWager.com, BitcoinWin.com, casinoBitcoin.com, BitcoinCity.com, pokerBitcoin.com, winBitcoins.com, BitcoinBrothel.com, BitcoinElite.com, BitcoinGirl.com, BitcoinGirls.com, BitcoinLadies.com, BitcoinVIP.com, BitcoinWomen.com, escortBitcoin.com, escortsBitcoin.com, MissBitcoin.com, BitcoinBook.com, BitcoinFan.com, BitcoinMag.com, BitcoinStudio.com, BitcoinMovie.com, BitcoinArmy.com, BitcoinChurch.com, BitcoinDown.com, BitcoinLight.com, BitcoinParties.com, BitcoinWars.com, BitcoinWave.com, HexCoin.com,

What is Bitcoin?

Bitcoin is a digital crypto-currency with no single point of failure due to its decentralized peer-to-peer architecture. The source code is publicly available and changes to the reference Bitcoin client are made via concensus within the community. Advantages of Bitcoin include irreversible transactions (i.e. no possibility of chargebacks as with credit cards), pseudo-anonymous, limited and fixed inflation, near instant transactions, multi-platform, no double-spend and little to no barriers to entry and more. It was created by an anonymous person known as Satoshi Nakamoto. Find out more at WeUseCoins.com.

Bitcoin Latest News

Major Magazine Publisher to Accept Bitcoin Payments

Posted on 18 December 2014 | 12:43 pm

Mozilla accepting Bitcoin

Posted on 20 November 2014 | 1:55 pm

Wikimedia Foundation Now Accepts Bitcoin

Posted on 30 July 2014 | 3:14 pm

German Newspaper "taz" accepts Bitcoin

Posted on 22 July 2014 | 1:32 pm

airBaltic - World’s First Airline To Accept Bitcoin

Posted on 22 July 2014 | 11:03 am

Expedia to accept Bitcoin payments for hotel bookings

Posted on 12 June 2014 | 12:41 pm

Bitcoin Core version 0.9.1 released

Posted on 8 April 2014 | 4:27 pm

Bitcoin taxfree in Denmark

Posted on 25 March 2014 | 5:46 pm

Bitcoin v0.9.0 released

Posted on 19 March 2014 | 6:44 am

Bitcoin-Qt v0.9.0rc3 released

Posted on 13 March 2014 | 3:21 am

Bitcoincharts and SSL

Posted on 4 March 2014 | 2:21 pm

Advertise with Anonymous Ads

Mt.Gox Statement

Posted on 3 March 2014 | 3:44 am

Discount Drink App Hotspot Allows Patrons To Pay With Bitcoin - CryptoCoinsNews


CryptoCoinsNews

Discount Drink App Hotspot Allows Patrons To Pay With Bitcoin
CryptoCoinsNews
An app called Hotspot allows bar and restaurant patrons in Seattle, Washington to earn discounts on drinks when paying with bitcoin, according to GeekWire. It also allows the establishments to accept bitcoin payments. The merchant incurs a transaction ...

Posted on 12 February 2016 | 1:15 pm

US Deputy CTO Weighs In On Bitcoin And Policy - Forbes


Forbes

US Deputy CTO Weighs In On Bitcoin And Policy
Forbes
A person touches the screen of a bitcoin ATM of Bitchain Spanish company in a shopping center in Barcelona on July 10, 2015. Bitchain Spanish company sent today to Athens a bitcoins ATM that will allow Greek citizens who use this digital currency to ...

Posted on 12 February 2016 | 12:57 pm

Estonian Supreme Court Holds Landmark Public Hearing on Bitcoin Case - CryptoCoinsNews


CryptoCoinsNews

Estonian Supreme Court Holds Landmark Public Hearing on Bitcoin Case
CryptoCoinsNews
Estonia's Supreme Court began a public hearing on the case of Dutchman Otto de Voogd, a Bitcoin entrepreneur, who is facing fines upward of €32,000 and jail time for not disclosing information about his Bitcoin associated clients. In a case that began ...

Posted on 12 February 2016 | 12:32 pm

UN Paper: Pushing Bitcoin for Third World Issues is 'Techno Colonialism' - CoinDesk


UN Paper: Pushing Bitcoin for Third World Issues is 'Techno Colonialism'
CoinDesk
A new UN working paper argues that the bitcoin community has a tendency towards "techno-colonial solutionism" and "techno-libertarian evangelism" in proposing the digital currency as a solution to issues in the developing world. Authored by independent ...

and more »

Posted on 12 February 2016 | 9:48 am

Bitcoin Price Analysis: Decision Time - CryptoCoinsNews


CryptoCoinsNews

Bitcoin Price Analysis: Decision Time
CryptoCoinsNews
Of course, this structural analysis can equally be applied to advancing waves in the bitcoin chart, but a critical component is lacking in the current chart, namely “higher highs”. Price has no trouble rebounding from the lows but is not advancing ...

Posted on 12 February 2016 | 8:47 am

China's Role In Bitcoin: How Cultural Differences Are Affecting The Technology's Progress - Forbes


Forbes

China's Role In Bitcoin: How Cultural Differences Are Affecting The Technology's Progress
Forbes
For the last year, the Bitcoin community has been embroiled in what is, on one level, a technical debate over how to upgrade the network to accommodate growing transaction volume. The fighting reached a head in mid-January, when a prominent developer ...
The Schism Over Bitcoin Is How Bitcoin Is Supposed to WorkWIRED
A Super Bowl parody outshines this week's State of Bitcoin reportNew York Business Journal
Bitcoin Governance as CompetitionCato Institute (blog)
CoinDesk -Financial Times -FT.com (blog)
all 32 news articles »

Posted on 12 February 2016 | 7:17 am

Bitcoin Price Watch; Keeping Things Simple - newsBTC


newsBTC

Bitcoin Price Watch; Keeping Things Simple
newsBTC
So, with all this said and out of the way, what are the levels we are looking at in today's bitcoin price (European afternoon session) and where will we look to get in and out of the markets according to our breakout strategy today? As ever, take a ...

Posted on 12 February 2016 | 3:54 am

PayPal Blocks Bitcoin Parody of Super Bowl Commercial - CoinDesk


CoinDesk

PayPal Blocks Bitcoin Parody of Super Bowl Commercial
CoinDesk
According to the Wall Street Journal, after bitcoin supporters became "riled" at the ad's claim, Shiloh Silverman, owner of video production firm Silver Park Studio, made a new version of the video. His spoof cut in images of people using bitcoin and ...
Video: PayPal Shuts down Bitcoin Parody of Its Super Bowl CommercialCryptoCoinsNews

all 5 news articles »

Posted on 11 February 2016 | 8:23 am

SEC Seeks $10 Million Default Judgment Against GAW Miners

The Securities and Exchange Commission is seeking more than $10 million from the cryptocurrency mining firms GAW Miners and ZenMiner.

Posted on 12 February 2016 | 2:31 pm

One of South Korea's Biggest Banks is Developing Blockchain Remittances

South Korea's KB Kookmin Bank is developing a blockchain remittance solution with the aim of ushering in "safer and faster" foreign exchange services.

Posted on 12 February 2016 | 1:01 pm

Ripple Settles $1 Million Lawsuit With Former Executive and Founder

A months-long legal dispute involving distributed ledger tech startup Ripple and its co-founder Jed McCaleb has come to an end.

Posted on 12 February 2016 | 12:00 pm

Nasdaq to Launch Blockchain Voting Trial for Estonian Stock Market

Stock market giant Nasdaq has announced it is developing a shareholder voting system based on blockchain tech.

Posted on 12 February 2016 | 11:15 am

UN Paper: Pushing Bitcoin for Third World Issues is 'Techno Colonialism'

A new UN working paper providing an overview of bitcoin has criticised the attitudes of some in the bitcoin community towards the developing world.

Posted on 12 February 2016 | 9:48 am

ASX Details Blockchain Strategy in Financial Update

The Australian Securities Exchange has revealed its spending as it prepares to build blockchain solutions to improve the Australian equities market.

Posted on 12 February 2016 | 7:35 am

Russian Central Bank Official Predicts Blockchain Future

The deputy chair of Russia’s central bank has reportedly told banking representatives that they should prepare for the spread of blockchain tech.

Posted on 11 February 2016 | 3:10 pm

Stock Market Giant Deutsche Börse Working on Blockchain Prototypes

German stock market operator Deutsche Börse discusses its blockchain strategy and interest in industry startups.

Posted on 11 February 2016 | 2:29 pm

Industry Businesses Pledge to Avoid Bitcoin Network Split

A group of bitcoin miners, exchanges and service providers have issued a letter stating that they would not back hard forks of the network.

Posted on 11 February 2016 | 1:17 pm

Why Bitcoin’s Scaling Debate is An Opportunity Not a Flaw

Writer Nozomi Hayase looks at how bitcoin's scalability debate should be seen as just another phase in the growth of the digital currency.

Posted on 11 February 2016 | 10:00 am

PayPal Blocks Bitcoin Parody of Super Bowl Commercial

A parody of a PayPal Super Bowl commercial that was posted on YouTube has been blocked by the Internet payments company.

Posted on 11 February 2016 | 8:18 am

Linux, IBM Share Bold Vision for Hyperledger Project, a Blockchain Fabric for Business

CoinDesk speaks to some of the driving forces behind Hyperledger, an initiative that aims to create an open fabric for blockchain technology.

Posted on 11 February 2016 | 3:38 am

Bitcoin Classic Publishes Code That Could Double Bitcoin's Block Size

The first release for the alternative bitcoin implementation of Bitcoin Classic has been published.

Posted on 10 February 2016 | 3:59 pm

Online Retailer Overstock Spent $8 Million on Blockchain Projects in 2015

Online retailer Overstock.com has announced that it spent $8m last year on its blockchain-backed securities trading initiative.

Posted on 10 February 2016 | 11:02 am

Have We Reached Peak Blockchain Hype?

A number of sceptical voices are calling out the blockchain space and the media for over-hyping the potential of distributed ledgers. Are they right?

Posted on 10 February 2016 | 10:26 am

How Decentralized Applications Could Bring the Blockchain to New Industries

This is a guest post by Michael Gord and the opinions represented are those of the author.

From socializing to hailing a cab to finding our way around, there’s an app to help. Now, there is a new and improved model that is revolutionizing the way we build scalable applications called a DApp, or decentralized application.

David Johnston, CEO of the DApp Fund, predicts in his white paper that “decentralized applications will someday surpass the world’s largest software corporations in utility, user-base, and network valuation due to their superior incentivization structure, flexibility, transparency, resiliency and distributed nature.”

What Is a DApp?

A DApp has four characteristics. It must be open source, with all changes made by a majority consensus of the user base. Data must be stored on a public blockchain to avoid a central point of failure. There must be a cryptographic token, referred to as an App Coin, to access the application, and these tokens must be issued according to a standard cryptographic algorithm acting as a proof of the value to nodes that contribute to the application.

Bitcoin is an example of a DApp, as it is an open-source token and uses the blockchain, a peer-to-peer and public distributed ledger, to form a trustless system. In fact, Bitcoin is the most popular DApp, as it simplifies many aspects of the traditional financial system, such as transferring money across the world.

Another application of a DApp is something built as a protocol that uses another blockchain and its own token to function. An example is the Omni Protocol, which “is a protocol built as a layer over Bitcoin that allows you to generate, send, trade, redeem, pay dividends to and make bets with tokens representing any kind of asset,” said Patrick Dugan, who’s a board member of the project, in an interview with Bitcoin.com.

Alternatively, a DApp can be built as an extension to the program. For example the SAFE Network, a peer-to-peer storage network, uses the Omni Protocol to issue “safecoins,” which operate the network. With the SAFE Network, decentralized applications are ensured complete data security, and there are projects such as SAFEpress, similar to WordPress, for the SAFE Network, to help people develop on the Network.

Imagine a DApp becoming the computer operating system (OSX or Windows), the programs used on the system (Photoshop, Dropbox), or specialized software that uses the programs, such as a blog that integrates Dropbox. Bitcoin is only the tip of the iceberg of what is possible with this new type of application.

Can App Coins Have Value?

David Johnston and team define App Coins in another white paper as “tokens that are native to Decentralized applications that have a digital token associated with their use or monetization.”

Tokens can also be developed to behave in a way that Bitcoin cannot, at least for the time being. A Javascript-based programming library called Solidity and another Python-based library called Serpent allow decentralized applications to be built on Ethereum.

In addition, networks can choose to operate exclusively with their network’s coin, such as the safecoin that powers the SAFE Network. Doing anything on the SAFE Network requires safecoins, and developing on the SAFE Network provides additional value to developers.

“I want to host my apps on SAFE and not have to worry about servers,” said Francis Brunelle to Bitcoin Magazine. Brunelle is an app developer and enthusiastic community member who predicts that “safecoins will be valuable because it will be the only way to buy storage space on the SAFE Network.”

A strong user base on an application can be reinforced through a successful integration of App Coins. An application that rewards contributing developers and lead users with tokens that have a monetary value has an intrinsic advantage over one that does not. Furthermore, a large user base that uses an App Coin presents a barrier to exiting to a competing service with a less popular coin.

Finally, App Coins provide monetary choice as an alternative to both fiat currency and to Bitcoin. People have different opinions on monetary policies, especially with the rise of digital currencies. App Coins can adopt any number of monetary viewpoints and allow everyone a vote to their preferred economic policy.

The Consumer Future

DApps will likely soon become “consumer apps,” as there are already many in development. The Safe Network decentralizes Internet services and guarantees privacy to all Internet users. Ethereum provides a decentralized application layer and programming language for DApps to be developed.

Factom is a scalable data layer that simplifies big data management record-keeping. Augur is a decentralized prediction market that allows people to forecast events and be rewarded.

As Johnston says in Johnston’s Law: “Everything that can be decentralized, will be decentralized.”

The post How Decentralized Applications Could Bring the Blockchain to New Industries appeared first on Bitcoin Magazine.

Posted on

BitPay's Stephen Pair: Community Needs to Become Proficient at Managing Bitcoin Forks

As opposing sides in Bitcoin's long-lasting scaling dispute seem to be inching closer, one of the remaining sources of contention is not whether, but how to achieve a small block size bump.

TheBitcoin Core development team wants to increase the maximum block capacity through a Segregated Witness soft fork, which has since been embraced by a large part of Bitcoin’s development community and a significant segment of the Bitcoin industry.

Others, like CEO of major payment processor BitPay Stephen Pair, believe the perceived benefits of soft forks over hard forks are being overstated.

Speaking to Bitcoin Magazine, Pair explained:

“I think soft forks aren't the panacea that many people perceive them to be. It's true that not all nodes on the network need to upgrade at the same time with a soft fork. But once the majority of hashing power has adopted new consensus rules, anyone running a full node should probably want to upgrade to validate the new transaction semantics. And this is especially true when you consider that SPV-nodes make the assumption that peers are performing full validation to keep miners in check.”

A centerpiece of Bitcoin Core’s scalability “road map,” Segregated Witness is set to increase the effective block size to some 1.6 megabytes to 2 megabytes by moving signature data into a new data structure. Pair is skeptical, however, that Segregated Witness should be considered a short-term scaling solution.

“Segregated Witness would completely change the structure of a Bitcoin transaction, and shouldn't be rushed,” Pair said. “It needs a lot of time to be tested and widely supported. I'm not certain how contorted the implementation has to be to deploy it as a soft fork, but this is code we'll have to live with for a long time. The more complex the Bitcoin validation code becomes, the more vulnerable it will be to various types of attack. A cleaner implementation done as a hard fork might be preferable.”

On Hard Forks

Pair himself initially signed an industry letter in support of BIP 101, the proposal by former Bitcoin Core lead developer Gavin Andresen intended to increase the block size limit to 8 megabytes, then doubling every other year for the next 20 years. He later said he preferred Blockstream president Adam Back's “BIP 248,” an informal proposal to raise the limit to 8 megabytes over four years. And more recently, Pair pitched his own solution: a dynamic block size cap to automatically re-adjust based on recent transaction volume. Additionally, the BitPay CEO is willing to accept a one-time block size increase, such as a hard fork block size limit increase as proposed by Bitcoin Classic.

Pair did add, however, that a hard fork shouldn't be thought of too lightly:

“The big risk of a hard fork is that non-upgraded nodes would go off on a defunct fork and they would be vulnerable to double-spend attacks. With a hard fork, you need to make sure people have plenty of time to upgrade. There is a need to come up with good engineering solutions to managing either type of fork; Version Bits as described in BIP-9 is a good start.”

On Firm Forks

An alternative proposal to increase the block size limit is sometimes referred to as a “firm fork” or a “soft hardfork.” This could allow a majority of miners to change any consensus rules, including those that would typically require a hard fork. But as opposed to both hard forks and soft forks, it would render non-upgraded nodes completely unable to detect any new transactions.

“While the additional complexity of implementing it may not be worth the effort, you could perform a hard fork where miners effectively DOS old nodes by merge mining empty blocks under the old consensus rules,” Pair explained. “I think that would make hard forks a lot safer. People will still have to upgrade, but for those that neglect to upgrade, it will be immediately apparent as it will seem that no transactions are being included in their chain.”

This proposal has itself sparked some controversy, to the point where some dubbed it an “evil soft fork.” Since users would no longer be able to opt-out of a change, they'd have to follow the rules as decided on by miners – or create a new chain.

Pair is not too worried about these consequences, however:

“A user would either want to follow the longest chain, or explicitly go off on a weaker fork. Either way, he would need to upgrade. A firm fork would ensure that the old chain is no longer functional. But whether it's hard forks or soft forks or firm forks... the important thing is that we, as a community, need to become proficient at managing changes of consensus rules.”

The post BitPay's Stephen Pair: Community Needs to Become Proficient at Managing Bitcoin Forks appeared first on Bitcoin Magazine.

Posted on

Slush Pool Introduces Provably Fair Bitcoin Mining

Bitcoin mining today is dominated by mining pools. These mining pools arguably have a strong hold on the Bitcoin network, but also on their own participants. Since mining pools typically operate with little transparency, participants must issue a lot of trust in pool operators not to cheat them out of Bitcoin.

Czech Republic-basedSlush Pool – accounting for some4 percent of total hash power on the Bitcoin network – now believes it has solved this problem. Its “provably fair” mining should take away any mistrust – plus introduce some added benefits.

A Quick Recap on Mining

Miners are the entities on the Bitcoin network that confirm transactions and secure the network with hash power by finding Bitcoin blocks. These blocks include several types of data, most importantly transactions, but also the previous block header (linking blocks together), a timestamp and a random number called a “nonce.”

Using a mathematical trick called hashing, miners combine and scramble all of this data into an unpredictable random number called a hash, which is the “block header,” identifying the block. The same data will always result in the exact same block header, but if even a tiny alteration is made to any of the data, it will result into a completely new hash.

If a miner hashes data ten times, odds are that one of these hashes starts with a zero. If a miner does it a hundred times, odds are one of them starts with two zeros. The Bitcoin network requires a valid block header to start with a certain amount of zeros: the difficulty factor.

Miners essentially keep hashing potential blocks until they find a valid block, or one that meets the required difficulty.

A Quick Recap on Pools

Mining pools – the first of which was Slush Pool back in 2010 – divide the work required to find blocks among all participants. A pool operator constructs a block, minus the nonce, and sends this block to all participants, called “hashers.” (“Hashers” are sometimes simply referred to as “miners” – but they don't do everything typical [solo] miners do.)

Hashers take the block as provided by the pool operator, and simply add a nonce to hash the bundle together. If any of the hashers finds a valid block, it sends this block to the pool operator, after which the pool redistributes the block reward among all connected hashers. (A hasher cannot keep the profit of the block for himself, as the coinbase transaction in the block is already attributed to the Bitcoin address controlled by the pool operator.)

The part of the block reward attributed to each hasher is based on his or her share of hash power contributed to the pool. This share, in turn, is calculated using “almost valid” blocks. If Bitcoin's difficulty requires valid blocks to start with 10 zeros, an “almost valid” block might start with nine zeros, or eight, or seven. Since hashers find these “almost valid” blocks more often, pool operators have a good idea of how much hash power each hasher contributes.

(There is always a slight element of variance – luck – involved, as some hashers might randomly find a bit more almost-valid blocks than others. But as more almost-valid blocks are taken into account, this variance increasingly cancels out.)

The Problem: Pool Operator Control

The problem is that no one but the pool operator knows what percentage of hash power each hasher contributes. While hashers provide the pool operator with a certain amount of almost-valid blocks, they have no way of knowing how many “of the blocks all other hashers found. They have to trust the mining pool to tell them what their share is.

Well, almost. Hashers do know how much hash power they contributed to a pool, they can see how many blocks a pool found, and they can estimate how much total hash power is connected to the Bitcoin network based on how often blocks are found. As such, they can also estimate how much their mining pool contributes to the network, and therefore whether the pool is being honest.

But since pools – and smaller pools in particular – find only a certain number of blocks, it can take a long time to gather enough data to reliably draw a conclusion.

This uncertainty can be abused by dishonest pool operators. A pool operator could claim the total hash power is a bit higher than it really is, and that the pool is on an unlucky streak. He could then issue hashers too little share and skim some profit of the top for himself.

Likewise, if an honest pool operator really does have an unlucky streak, hashers might falsely conclude the total hash power of their mining pool is lower than it really is -- and falsely conclude their share is bigger than the pool operator claims it is.

The Solution: Publish the Blocks

The solution as introduced by Slush Pool is straightforward. Rather than keeping the almost- valid blocks for themselves, Slush Pool will publish them for anyone to see.

Since it's easy to check whether these almost-valid blocks are indeed almost valid (meaning they did require hash power to produce), and due to the much lower impact of variance, it's impossible to fake the public list. And it becomes impossible for a pool operator to pretend the total hash power is more than it really is.

(If hashers keep track of the almost-valid blocks they submit, they could also check whether these are included in the public list – though this shouldn't even be necessary.)

As an added benefit, this solution also offers more transparency, perhaps most interestingly regarding miner votes. With the introduction of Bitcoin XT, soon to be followed by Bitcoin Classic, Slush Pool was the only mining pool to allow individual hashers to vote on their preferred block size limit. But while hashers – and any other interested party – had to trust Slush Pool to actually attribute the right amount of hash power to the preference hashers desired, Slush Pool can now prove that it does.

The post Slush Pool Introduces Provably Fair Bitcoin Mining appeared first on Bitcoin Magazine.

Posted on

Advertise with Anonymous Ads

Hyperledger Project Looks at Options to Build Blockchain Technology with IBM, DTCC, SWIFT, and Others

Earlier this week Bitcoin Magazine reported that the Linux Foundation announced technical updates to the new Hyperledger Project, a formal open governance structure, as well as new members from across the industry.

The Hyperledger Project wants to develop a new open source blockchain separated from the Bitcoin blockchain. Digital Asset Holdings, the fintech startup headed by the financial superstar Blythe Masters, contributed its Hyperledger mark, which it had acquired in June with the purchase of San Francisco-based digital fintech company Hyperledger.

The Hyperledger team, now part of Digital Asset Holdings, developed distributed ledger technology for private blockchains, without a built-in digital currency, to allow financial operators to clear and settle transactions in real time, using a proven consensus algorithm capable of thousands of transactions per second.

The placeholder domain hyperledger.com now redirects to the official Hyperledger website hyperledger.org.

The updated list of Hyperledger founding members consists of 28 top companies in the technology and financial services space. It appears that the Linux Foundation’s Hyperledger Project is moving very fast and is on its way to becoming a leading force in the blockchain technology development space.

Founded in 2000, the Linux Foundation wants to be the organization of choice for the world's top developers and companies to build ecosystems that accelerate open technology development and commercial adoption.

The technology of the original Hyperledger team is independent of Bitcoin, and many companies in the new Hyperledger Project support radical alternatives to Bitcoin. For example, Accenture and Digital Asset Holdings CEO Masters, among others, expressed support for private, “permissioned” non-Bitcoin blockchains.

“To be used by financial institutions, including capital markets firms and insurers, blockchains must supplant the costly methods introduced by Bitcoin with a mechanism that guarantees security, privacy and speed without paying for anonymous consensus,” said two Accenture executives in July.

In other words, Bitcoin should disappear and be replaced by a closed blockchain. So is Hyperledger a first step in that direction?

Bitcoin Magazine reached out to the Linux Foundation for clarifications and further explanations.

"The Linux Foundation believes a shared infrastructure that is open to critical inspection and collaboration will be pivotal in driving global adoption of blockchain for distributed ledgers," Linux Foundation executive director Jim Zemlin told Bitcoin Magazine. "I’m extremely bullish about how the developers involved in Hyperledger Project are openly looking at various architectures, concepts and technologies, aiming to integrate code from a variety of sources to build a neutral technology that can work for all."

Zemlin also answered some specific burning questions about the nature, plans and policies of the Hyperledger Project.

Bitcoin Magazine: Does the Hyperledger Project support a specific (existing or planned) digital currency for payments and financial applications?

Zemlin: No, the scope of the Hyperledger Project is limited to the development of the underlying blockchain fabric that can support a broad range of use cases. Applications and domain-specific frameworks are outside the scope of the project, but will obviously be encouraged to leverage the project's deliverables.

Bitcoin Magazine:Is the Hyperledger Project a replacement for Bitcoin and/or other existing cryptocurrencies?

Zemlin:This project’s mission will be to build and advance a general purpose blockchain framework that can be used across industry sectors, from financial services to retail to manufacturing and more. There is ample room in the market for cryptocurrencies and even multiple implementations of the blockchain, but everyone stands to lose if these don’t interoperate and work together. The hope would be that the fabric produced by the Hyperledger Project can satisfy a broad set of use case ranging from cryptocurrencies, supply-chain visibility, asset transfer, IoT, business contracts and so much more. We'll see thousands of applications and many uses cases, but open source and industry-wide collaboration are essential to realizing the full potential of distributed ledger technology.

Bitcoin Magazine:Do you plan to implement full programmability with a Turing-Complete scripting language to support transactions and smart contracts of arbitrary complexity?

Zemlin: One of the proposals on the table in the technical community supports execution of code written in any language. However, the community has not yet reached consensus on this point.

Bitcoin Magazine: What's your position on the privacy issue?

Zemlin: It is important to realize that the Hyperledger Project is hosted by the Linux Foundation, but the community that has gathered to support and lend their resource and expertise to develop this key technology is just now coalescing and does not yet have a singular point of view.

The Hyperledger Project continues to unfold. Bitcoin Magazine will follow further developments.

The post Hyperledger Project Looks at Options to Build Blockchain Technology with IBM, DTCC, SWIFT, and Others appeared first on Bitcoin Magazine.

Posted on

Blockchain Startups Take Aim at Counterfeiting of Luxury Products

This post is by Krystle Vermes​.

The cryptocurrency industry has delivered new technology to the world of luxury commerce, and it’s helping weed out the fakes.

It may seem like a frivolous concern, but counterfeit goods are big business. Stopping them is a significant business cost for manufacturers of the real thing. And for consumers who pride themselves on owning luxury goods, getting the real thing is essential to a way of life.

That's where Bitcoin comes in.

“By linking digital certificates to purchased goods, we are able to provide a much higher degree of confidence to buyers, especially when purchasing from online or second-hand retailers,” says Guy Halford-Thompson, founder of Blockchain Tech Ltd.

The company uses blockchain technology to create a secure registry, tracking who owns designer products. In turn, the database has everything a consumer needs to determine whether the product in hand is actually what it’s supposed to be.

With blockchain technology, individuals can track the entire journey of the item from assembly to vendor.

“While some consumers may be looking to purchase more affordable 'look-alikes,’ the concern comes from consumers who are looking to purchase genuine items, but because of the advances in manufacturing processes, it can be very difficult to distinguish between real and look-alike,” Halford-Thompson continued. “This is not a large concern when purchasing from known high-street stores, but it becomes a huge issue when consumers are looking to purchase new or second-hand items off online marketplaces.”

Although obtaining luxury goods is seemingly easier than ever before thanks to the Internet, not every seller is playing by the rules. Halford-Thompson says that watches, handbags and sunglasses are the most counterfeited items he’s seen on the market. However, he has confidence in blockchain and “smart tagging.”

“Smart tagging will provide consumers with a better brand experience, and a higher degree of confidence in the items they are buying,” Halford-Thompson adds.

And he isn’t the only one who feels this way.

“In five years, encrypted chips will be in all of your luxury consumer goods,” says Ryan Orr, CEO of Chronicled. “It’s not ‘if,’ but ‘when.’”

Similar to Blockchain Tech Ltd., Chronicled is a company that uses smart tags to track authentic sneakers that hit the market. With the Chronicled mobile app, shoe shoppers can scan the smart tag of the product and get all of the information about its authenticity in a matter of seconds.

As of right now, Orr claims that Air Jordan 11s and Yeezys are the most commonly counterfeited shoes. He adds, however, that his company is raising the stakes for counterfeiters by providing even more security to consumers.

“By combining blockchain technology and smart tags, undetectable forgery becomes impossible, and wearing fakes becomes socially risky,” Orr said.

But is doing the “uncool” thing by counterfeiting goods going to be enough to persuade people to stop? In the end, the answer may be “yes” for a majority of consumers.

“Trusted sneaker sellers earn at least a 20 percent premium, and it’s not just the ‘buy’ side of the transaction that affects consumers,” Orr points out. “Most of us don’t even consider trying to sell our authentic used luxury goods on the Internet because we know we won’t get fair value.”

However, there’s no doubt that counterfeiters are getting better.

“Wait until they start 3-D printing,” Orr warns.

Counterfeiters might always have a new trick, but blockchain technology will now be chasing the bad guys. Maybe, in the foreseeable future, it can even get ahead of them.

The post Blockchain Startups Take Aim at Counterfeiting of Luxury Products appeared first on Bitcoin Magazine.

Posted on

The Rise of User-Monetized Actions: Bitcoin's Killer Application

This article is an op-ed by Andrew DeSantis and the views expressed are those of the author.

On January 9th, 2007 the world as we know it was forever changed. Apple Computer CEO Steve Jobs took the stage at the Moscone Center in San Francisco and introduced the world to the iPhone.

Nine years later, many have trouble remembering what life was like before the rise of mobile. The average smartphone today is more than one million times smaller, one million times more affordable and one thousand times more powerful than a $60 million supercomputer was 40 years ago. As a result of successive radical innovation, we have truly changed the world, but more important, the world has forever changed us.

In 1998, when asked what keeps him up at night, Bill Gates had a surprising answer. As the CEO of Microsoft, one might have expected him to say Apple, Oracle or even Netscape. Instead he stated: “I worry about someone in a garage inventing something that I haven’t thought of.” Unbeknownst to Gates, at that very moment Larry Page and Sergey Brin were hard at work in a garage in Menlo Park. The fruit of their labor would go on to become Google.

Gates, like many of us, has accepted that change, particularly technological change, is one of the few constants in life and even the smartest among us can be caught by surprise.

Bitcoin Is Born

On January 3rd, 2009, less than two years after Jobs unveiled the iPhone, Satoshi Nakamoto sent an email to the renowned “Cryptography Mailing List” titled “Bitcoin v0.1 released.” The email contained a SourceForge link to the first Bitcoin reference client and the following statement:

“Announcing the first release of Bitcoin, a new electronic cash system that uses a peer-to-peer network to prevent double spending. It’s completely decentralized with no server of central authority.”

Nakamoto then went on to give a brief summary of Bitcoin’s implementation and explicitly add a disclaimer stating that the included software was still alpha and experimental.

When Jobs introduced the iPhone he had the attention of the entire tech world. Everyone knew the device would be a game changer, but no one could have predicted that five years later the iPhone would catalyze the creation of a ride-hailing application called Uber. Today Uber has an estimated worth of $62.5 billion, higher than that of car makers GM, Ford and Honda, and could very well go on to become the world’s first trillion-dollar company.

Nakamoto’s announcement on the other hand went relatively unnoticed by the public, but a handful of dreamers immediately realized the ramifications of Satoshi’s vision. The first to respond to Nakamoto’s email was cypherpunk legend Hal Finney. Three days later on January 12, Nakamoto executed the first Bitcoin transaction, in block 170, sending 10 bitcoins to Finney.

In May of 2010, roughly a year and a half after Bitcoin’s genesis block was mined by Nakamoto, two members of the BitcoinTalk community forum executed the first real-world purchase. 10,000 BTC for a $25 pizza. Five and a half years have since passed and with a near six-billion dollar market capitalization, it is safe to say that Bitcoin come a long way. But there is still a ways to go.

Bitcoin Grows Up

Since 2013 the Bitcoin industry has to a degree operated in stealth mode. Companies like 21 Inc, BitGo and Blockstream have been hard at work in collaboration with the Bitcoin Core developers to ready Bitcoin for the next and brightest stage of its life thus far. In the words of software legend Joel Spolsky, “Good software takes 10 years. Get used to it.”

21 Inc’s CEO, Dr. Balaji S. Srinivasan, stated the following in a lecture at Stanford Universityprior to founding 21:

“A good founder is capable of anticipating which turns lead to treasure and which lead to certain death. A bad founder is just running to the entrance of (say) the ‘movies/music/filesharing/P2P’ maze or the ‘photo sharing’ maze without any sense for the history of the industry, the players in the maze, the casualties of the past, and the technologies that are likely to move walls and change assumptions.”

So what about Bitcoin is likely to “move walls” and “change assumptions?” While user-monetizable data is of significant importance to Bitcoin’s future, the concept of “user-monetizable actions” is of far greater importance.

The DARPA Network Challenge

At 10 a.m. EST on December 5th, 2009 (this date was picked to commemorate the 40th anniversary of the Internet) the Defense Advanced Research Projects Agency (DARPA), known for creating the ARPANET, a precursor to the Internet and contributing to the onion protocol used by the Tor network, launched 10 red balloons in undisclosed locations across the continental United States. A month earlier DARPA proposed an open challenge to teams across the nation. The first team to locate all 10 balloons and report their findings to DARPA would receive a $40,000 reward. What happened next exceeded the researchers’ wildest expectations.

Less than nine hours after DARPA launched the balloons a team from MIT won the competition. How did they do it? By embracing the concept of user-monetizable actions.

In 2005, Jon Kleinberg, of the Department of Computer Science at Cornell University, and Prabhakar Raghaven of Yahoo! Research published a paper titled “Query Incentive Networks.” In it they state:

“The concurrent growth of online communities exhibiting large-scale social structure, and of large decentralized peer-to-peer file-sharing systems, has stimulated new interest in understanding networks of interacting agents as economic systems. Here we formulate a model for query incentive networks, motivated by such systems: users seeking information or services can pose queries, together with incentives for answering them, that are propagated along paths in a network. This type of information-seeking process can be formulated as a game among the nodes in the network, and this game has a natural Nash equilibrium. In such systems, it is a fundamental question to understand how much incentive is needed in order for a node to achieve a reasonable probability of obtaining an answer to a query from the network.”

Building off the ideas presented in Kleinburg and Raghavan’s research, the team from MIT came up with the following strategy:

“We’re giving $2000 per balloon to the first person to send us the correct coordinates, but that’s not all – we’re also giving $1000 to the person who invited them. Then we’re giving $500 to whoever invited the inviter, and $250 to whoever invited them, and so on.

It might play out like this. Alice joins the team, and we give her an invite link like http://balloon.media.mit.edu/alice. Alice then e-mails her link to Bob, who uses it to join the team as well. We make a http://balloon.media.mit.edu/bob link for Bob, who posts it to Facebook. His friend Carol sees it, signs up, then twitters about http://balloon.media.mit.edu/carol. Dave uses Carol’s link to join … then spots one of the DARPA balloons! Dave is the first person to report the balloon’s location to us, and the MIT Red Balloon Challenge Team is the first to find all 10. Once that happens, we send Dave $2000 for finding the balloon. Carol gets $1000 for inviting Dave, Bob gets $500 for inviting Carol, and Alice gets $250 for inviting Bob. The remaining $250 is donated to charity.”

In essence the MIT team designed a recursive algorithm executed by willing participants by redistributing the prize money to the participants in such a way that a power incentive structure came to life.

While the MIT team’s accomplishment is significant, particularly from the perspective of academia, it wasn’t the only major insight derived from the DARPA Network Challenge. Hacker George Hotz, known as geohot, in 2007 was the first person to carrier-unlock an iPhone. Hotz later went on to jailbreak Sony’s PlayStation 3. Hotz recently made headlines when he and a writer from Bloomberg Businessweek took a drive around the San Francisco Bay area in a self-driving car he built alone in just a month. An hour prior to the start of the DARPA Network Challenge, Hotz tweeted to his then roughly 50,000 followers asking for their assistance in locating the balloons. Through his network Hotz located four ballons; he was then able to trade information with other teams ultimately bringing his balloon count to eight.

The approach taken by the MIT team displays the raw power that a properly designed algorithm can have outside as well as inside the confines of Silicon. Hotz’s approach, on the other hand, allows us to contrast the academic perspective with that of a single hacker wielding influence over a network of individuals.

If one combines the two approaches, by using Bitcoin to send microtransactions to their own network of followers, what you end up with is a variant of Kleinberg and Raghavan’s Query Incentive Network model that allows one to execute MapReduce-like operations over a large network of willing participants.

The Power of End-User Monetization

We can change our perspective, yet again, and view things through the eyes of an end user performing tasks on behalf of another individual. While this sounds like a new concept it really isn’t. Celebrities have monetized their actions on Twitter and Facebook for years. The musician Jared Leto and socialite Kim Kardashian have reportedly received payments as high as $13,000 per tweet for promoting products that fall in line with their personal brand.

Until now, it hasn’t financially made sense for a user with a few thousand followers to receive payments for endorsements. Additionally, most celebrities tend to rely on agents who cut deals with sponsors on their behalf. Even if the average user put in the effort to build a network of sponsors, it is highly unlikely that a sponsor would want to deal with a user whose follower count is below 100,000. As with most scenarios that rely on the ability to perform microtransactions, the pre-Bitcoin banking system isn’t designed to handle small, fast, international transactions.

Earlier this week Srinivasan presented his thoughts on the future of user-monetizable actions. After presenting scenarios such as the Twitter covered above and derivatives such as a Bitcoin-based, decentralized version of Fiverr, he left two questions to ponder:

  • What would life be like if even while you were asleep an autonomous agent handled requests that earned Bitcoin on your behalf?

  • What would you do with your own personal army of willing, waiting, able and ready individuals?

Final Thoughts

The Bitcoin Engineering class at Stanford University has gone tremendously well. Likely because a majority of the students enrolled in the course have little to no previous knowledge about Bitcoin, they will be able to leverage the abstractions provided by the 21 Bitcoin Computer’s two1 Python3 library and quickly rhapsodize applications into existence without the burden of knowledge (fatigue) many of us have accumulated over the years.

A computer science student named Axel Ericsson hacked together his own tunneling protocol allowing him to securely communicate with his 21 Bitcoin Computer from a web browser. While a future release of the two1 library will likely support browser-to-machine BitTransfers triggered by 402 requests, today the 21 Bitcoin Computer is being used for machine-to-machine transactions. Most likely, Axel executed one of the world’s first 402 request transactions initiated from a web browser in exchange for user-monetizable data.

The post The Rise of User-Monetized Actions: Bitcoin's Killer Application appeared first on Bitcoin Magazine.

Posted on

World's First Bitcoin Mining IPO Misses Target by AUD $14 Million

This post is by Benjamin Roussey

The first fundraising in the world for an initial public offering of a Bitcoin mining company has raised 5.9 million Australian dollars, (USD $4.2 million) – falling short of its target of AUD $20 million.

Based in Melbourne, the Bitcoin Group announced last week that it had raised AUD $5,927,168.40 in a bookbuild of its Australian Stock Exchange (ASX) listing. The company also announced that it was still progressing though the listing process with ASX.

Even though the amount raised was less than a third of the amount it tried for, CEO of Bitcoin Group Sam Lee called it a “solid result.”

During an interview on CNBC on Tuesday, Lee said the amount raised is sufficient for the company to execute its current strategy of acquiring new mining equipment to expand its footprint.

Although it was scheduled to take place on Tuesday, Bitcoin Group has not yet announced its quote on the ASX. It is expected that the company will trade under the ticker BCG.

The price of shares was at AUD $0.20, with AUD $2,000 as the minimum subscription. There is no maximum subscription. According to the Australian Taxation Office, Bitcoin is an asset for capital gains tax purposes.

This is the first time a publicly listed entity has been led by the Bitcoin Group Management since its incorporation in September 2014. Lee, the CEO, has a background in financial services and digital media.

On CNBC, Nicolas Debock, a venture capitalist at Balderton Capital in London, said he would need to think twice before investing in a Bitcoin mining firm, as it has a number of risks. He added that many venture capitalists have invested in Bitcoin in the last three years, but there still has been no money coming out.

Bitcoin Group produces approximately 1.2 percent of the world’s Bitcoin mining output, with six mining sites in Iceland and China. Due to the affordability of electric supply in China, a large percentage of its operations are conducted in China. However, since it is significantly lacking in diversification, the company could be left vulnerable to changes in regulations resulting from the Chinese stance on Bitcoin.

If the company had raised the AUD $20 million it had hoped for, the plan was to use AUD $18 million as an investment in equipment and facilities for Bitcoin mining. The remaining AUD $2 million was to be used for general corporate purposes, including costs for listing.

On CNBC, Debock said that a large number of people still believe in Bitcoin in the long term, whether it is the technology or the asset.

The post World's First Bitcoin Mining IPO Misses Target by AUD $14 Million appeared first on Bitcoin Magazine.

Posted on

On the Detriments of Segregated Witness for Bitcoin

Segregated Witness has been the center of Bitcoin’s long-lasting scaling debate since it was first introduced by Blockstream co-founder and Bitcoin Core developer Dr. Pieter Wuille two months ago.

A nifty method to move signature data from typical transactions into “add-on blocks,” Segregated Witness is set to improve the Bitcoin protocol in several ways . Moreover, the solution can be rolled out as a soft fork, meaning that only miners need to upgrade their software; all other nodes can do so if and when they please.

The innovation is positioned as the first step of a scalability “roadmap ” as set out by Bitcoin Core, and is supported by a large segment of Bitcoin's development community.

But Segregated Witness is not free of controversy. Rather than a Segregated Witness soft fork, the recently launched alternative Bitcoin implementation Bitcoin Classic plans to increase Bitcoin's block size limit to 2 megabytes through a hard fork, meaning all full nodes on the network need to upgrade synchronously.

These are the arguments against a Segregated Witness soft fork – and their counterarguments.

It Requires 'Ugly' Code

A purist argument against Wuille's proposal is that a Segregated Witness soft fork constitutes an “ugly” workaround of code. Most important, it uses parts of the miner-generated coinbase transaction for purposes they were not originally intended for. The added complexity could potentially cause new problems as the protocol keeps evolving.

The counterarguments

While most developers agree a hard fork would be a cleaner solution, this does not necessarily mean a Segregated Witness soft fork is unsafe. The Bitcoin Core development team has rolled out several similar soft forks in the past, and maintains that this one would not carry any more risk.

A hard fork, meanwhile, renders all existing full node software incompatible with newer full node software, which is, arguably, not very graceful either.

It Burdens Developers Too Much

A Segregated Witness soft fork workaround imposes an added burden on developers -- both now and in the future. This is particularly true for Bitcoin library and wallet developers, as they will need to adapt their software to integrate Segregated Witness. This will require more effort than a hard fork block size increase would.

The counterargument

Most current library and wallet developers don't seem to consider the added burden a big problem. Many are even quite excited about the innovation, and they typically consider the added benefits worth the effort. (See Bitcoin Magazine 's development series, as linked below in this article.)

Growth of Added Block Space Will Be Slow

Like Bitcoin Classic’s proposed hard fork, Segregated Witness theoretically offers up to 1 megabyte of added block space, for a total of 2 megabytes. But this optimal added capacity is based on multisig transactions, as these get an accounting “discount.” Yet most transactions are currently not multisig transactions. A more realistic capacity increase could therefore be closer to .6 megabytes of added space, for a total of 1.6 megabytes.

Additionally, this added space might not be fully utilized right away. It can be used only after wallets and other apps have upgraded. In reality, it could take a while before even 1.6 megabytes is reached.

And while the Segregated Witness soft fork is scheduled for April, it remains to be seen if this can be achieved. The solution requires much coding and testing before it can be rolled out, as well as approval by miners.

The counterarguments

A public testnet version of Segregated Witness – SegNet – is already available for experimention. This suggests that development is on schedule.

Many library and wallet developers, moreover, estimate that it would take anywhere between a couple of days to several weeks to integrate Segregated Witness. An April release should, therefore, provide enough time for the bulk of wallet and app software to upgrade.

As soon as Segregated Witness is activated, all wallet and app software can utilize the benefits – such as lower fees – immediately. Whether other users utilize the added space as well does not not really matter for them. (And if the added block space is not used, it might just suggest that the need for extra block space was never that great in the first place.)

It should also be noted that multisig transactions might find increasing use as innovation and development of the Bitcoin protocol progresses, because added layers on top of Bitcoin – such as payment channels and the Lightning Network – typically use such transactions. The effective capacity could, therefore, come closer to 2 megabytes later on.

And while the Bitcoin Classic team maintains that a hard fork can be rolled out before April, this is considered overtly aggressive and outright risky by many within the development community. The need for all full node operators to both review and adopt the upgrade, they think, requires at least six months to a year.

It Skews Incentives

Removal of signatures from the original 1-megabyte blocks can effectively increase Bitcoin’s block size. But Segregated Witness does introduce a new type of maximum block size. Roughly: A block without the witness, plus one quarter of the witness size, must not exceed 1 megabyte. As such, upgraded nodes will see blocks that exceed 1 megabyte, since the actual size of the Segregated Witness is larger than the quarter accounted for.

This means that multisig transactions, which include more signature data, get a greater discount. And since multisig transactions are used to establish layers on top of Bitcoin, Segregated Witness artificially skews incentives toward these added layers.

Long-term consequences of such layers – such as the effect on mining fees – are controversial.

The counterarguments

Discounting signature data is how Segregated Witness allows for added block space without requiring a hard fork. While this is indeed accomplished through an accounting measure, it is a useful one.

Additionally, witness data can be reasonably considered expendable after a certain amount of time, decreasing the need for full nodes to store it in perpetuity. It, therefore, has a lower cost to the network, making it reasonable to charge a lower fee.

Furthermore, the only way Bitcoin can reach millions of users while also remaining decentralized, secure and censorship-resistant is through the use of added layers. Incentivizing development and use of these added layers is not a bad thing.

It Doesn't Hold Well Under Adversarial Conditions

One argument in favor of a block size limit concerns block propagation and latency. In short: Bigger blocks tend to increase orphan rates, as more miners build on old blocks while newer blocks are still making their way through the network. This, in turn, favors larger miners (or pools): They find more blocks themselves, and start building on these right away, meaning they waste fewer resources.

This also means that large miners could have an incentive to actually create artificially large blocks, specifically designed to increase the orphan rate of competitors.

The current Segregated Witness proposal allows blocks up to about 2 megabytes – though a bit less is more likely. But due to the specific accounting measure to be employed, so-called “selfish miners” could create synthetic transactions designed to stuff up to 4 megabytes of data into a single block. As such, big miners could “attack” competitors with valid 4 megabyte blocks.

Segregated Witness, therefore, requires miners and full nodes to deploy hardware with 4-megabyte safety headroom, while getting significantly less real transaction capacity in return. And if the original block size limit is increased through a hard fork at some point in the future, this risk multiplyer will probably remain.

The counterarguments

If 4 megabytes is indeed large enough to successfully pull off an attack – which is unclear – this attack would require the attacking miner to discard all real transactions. The resulting loss of fees serves as a slight disincentive to carrying out such an attack, and it would be obvious to the rest of the network that an attack is going on.

And while the risk multiplier will probably indeed remain even if a hard fork is rolled out later on, it could potentially be decreased through a soft fork as well.

It Degrades Security of Non-upgraded Nodes

A fifth concern is that a Segregated Witness soft fork would degrade the security of all non-upgraded full nodes. These nodes could still accept Segregated Witness transactions, or transactions that depend on a previous Segregated Witness transaction, but be unable to verify whether the signature data is valid. As such, they'd have to rely on validation by miners.

Unconfirmed Segregated Witness transactions would, therefore, be insecure, as these are not yet verified by miners at all.

But even confirmed Segregated Witness transactions would be less secure, as miners could purposely mine invalid transactions into blocks with the intention to double-spend non-upgraded nodes. A non-upgraded node would believe these blocks to be valid until the miners switch their hash power back to the valid chain. If a non-upgraded node accepted transactions from the invalid blocks, he might have lost money.

The costs of such a double-spend would resemble the cost of any other 51-percent-attack, but with added leverage. Attacking miners could potentially leverage hash power from “SPV-miners,” who wouldn't know what's going on themselves, since they don't validate transactions either. And the attacker could leverage funds to double-spend, as he could use any Segregated Witness-protected bitcoin that never belonged to him in the first place.

The counterarguments

A Segregated Witness soft fork will be publicly announced far in advance, and transparently voted on by miners. As such, any user running a full node will have plenty of time to take the necessary precautions.

Users running a non-upgraded node should not trust zero-confirmation transactions. But zero-confirmation transactions were always unsafe. Anyone who wants to pull off a double-spend attack with unconfirmed transactions can do so with or without Segregated Witness.

The added risk of confirmed transactions, meanwhile, can be offset by waiting for some additional number of confirmations. (For exact figures of the added risks, see these calculations by Bitcoin developer Oleg Andreev.)

A user who does not want to upgrade to the newest full node status at all, furthermore, could patch his non-upgraded full node with software that flags suspicious transactions – and potentially even reject such transactions completely.

Last, it should be noted that hard forks pose a much greater risk of double-spend transactions. Any non-upgraded node could, in the case of a hard fork, receive completely invalid transactions while potentially never realizing it at all.

It Will Be Deployed without Explicit User Consent

Though arguably small, the security degradation as described above does exist. And what's perhaps more important: This security degradation would be enforced without explicit consent from users. Even if users strongly oppose Segregated Witness, and prefer not to upgrade, a majority of miners could push the change through regardless.

This is at odds with Bitcoin’s promise of personal autonomy; the idea that operators of a full node should always have the possibility to opt-out of any change.

The counterarguments

Soft forks cannot be prevented. Miners controlling a majority of hash power can always decide to enforce new rules, as long as they do not break the existing consensus rules. This is inherent to the Bitcoin protocol, and will be possible after a hard fork just as well.

As such, users running full nodes must always bear some responsibility. Either the responsibility to upgrade to the latest version of the software, or the responsibility to wait for an added number of confirmations, or perhaps even the responsibility to not accept any transactions after a soft fork is detected.

And while it’s technically true that users don’t need to change their software after a (contentious) hard fork, and can choose to “stay behind” on the original network, this will almost certainly not be the option in practice. Besides the risk of double-spend attacks, decreased hash power could ensure that transactions never confirm – or confirm very slowly.

An alternate scenario is that the minority chain by hash power introduces its own hard fork to change the proof-of-work algorithm. Bitcoin would then split up into two separate networks, and all users would have to upgrade their software to support one of the options – or both.

Thanks to Jonathan Toomim and Ciphrex CEO, Bitcoin Core, and Segregated Witness developer Eric Lombrozo for proofreading and added feedback.

For more information on Segregated Witness, see Bitcoin Magazine's series on the subject, or part 1, part 2, part 3, part 4, part 5, part 6, part 7 and part 8 of Bitcoin Magazine's development series.

The post On the Detriments of Segregated Witness for Bitcoin appeared first on Bitcoin Magazine.

Posted on

February 12, 2016 -
Real Time Analytics