Tag: Bitcion

Opinion: The Mad World Of ICOs

I don’t think I could’ve picked a better time to give my not-expert opinion around ICOs and what I think to be an insanely over-valued set of companies. EOS managed to raise more than USD 4 Billion during its yearly ICO, continuing the trend of multi-million dollars ICOs, without a stable product or even a widely supported testnet.

The first question I ought to ask everyone is: how are we expecting these projects to be profitable?

If you feel like rating about how it’s normal and for me to look at many other examples, like Tesla, Uber, Facebook and so on, let me give you my view on why I believe this trend can lead to a destructive path of pointless projects and misused funds.

Note: This article shouldn’t be taken as financial advisement as it represents my personal opinion and views. I have savings invested in cryptocurrency so take whatever I write with a grain of salt. Do not invest what you cannot afford to lose and always read as much as possible about a project before investing. Never forget: with great power, comes great responsibility. Being your own bank means you’re always responsible for your own money.

The discrepancy between technology and price

I don’t think I know any market, especially surrounding technology, where the price matches the technology utility. I can pick tons of examples outside the Internet bubble era, like Tesla, Uber, the entire 3d Printing industry or even AI.

The fact is there little connection between price and technology due to speculation. But speculation affects everything, even traditional markets.

remember the disruptive ice tea company? lol, me too

Remember that super disruptive ice tea company? Me too!

What I rather want to focus on, is not the fact price and technology do not walk hand-to-hand, but the rather epic amounts being poured into cryptocurrency related projects.

When you value many of the existing platforms you should ask yourself:

“Do I think this project has the chance to achieve a positive ROI?”

From protocols to platforms, this is what really matters. I don’t care how many of the world problems product X or Y is trying to solve or how many years of experience the team has.

The first thing I ask myself is why a certain project needs X amount of money.

How is the money being spent? What Am i buying and what are the risks? How much are the team and founders risking?

Am I being fairly rewarded for the brutal risk of investing?

When a company like Bitclave or Cardano raised millions of dollars, although I personally invested in them, I always wondered if they could ever achieve a profitable ROI. Because the market is so young, it doesn’t really matter, as people will pour money into brilliant new concepts, usually caring little for a fair return on their investment in the long term.

Why?

Well, because most expect to sell those tokens immediately after the company is listed in some big exchange. This is, a insanely high percentage of investors do not care about product, team, roadmap, or even company values. If you don’t believe me take a look at the many examples on Coinmarketcap. They show what happened immediately after projects hit exchanges.

Something like this.

What you usually see is a pump and dump of those tokens. Meaning, investors were simply speculating and taking advantage of being early. Is there something wrong with that? Of course not, except in the long-term my personal bet is that people will get burned.

To explain why, we need to analyze the anatomy of ICOs.

The reason why I personally invest in any given project is always linked to the medium and long-term expected gains. So I need to worry about how much money Company X is raising, what is their core product and idea, who is leading the project and how good I think the team is, plus how do they expect to spend the funds raised.

Don’t get me wrong, there are many criteria to choose from and this is my personal view. As time goes by it’s always about the survival of the fittest: are the tokens being used properly? How are the company and team values represented? Are they following-up with their roadmap?

More importantly: how are the economic incentives for users being applied? Does the project really need a blockchain?

just kidding

The goal is to learn which projects will actually benefit from blockchain and which won’t. To do that just check if said project uses tokens as a means to distribute rewards among users and if the overall goal  is to decentralize the market in some way.

The discrepancy between tokens utility and user rewards

To me, the really key feature I always try to look at, is how tokens are used. There is no purpose in using blockchain technology if you simply wish to store data in a distributed manner.

Any agent who interacts with your business must be rewarded with tokens or use tokens to make the initial interaction. At a high level there are two different trains of thought regarding token’s utility:

  1. You either need tokens to use a product (like appcoins, upfiring, etc) or,
  2. You get tokens for using a product (like bityond, dock, etc).

The key here is understanding the difference between governance and infrastructure. There are way too many projects focused in great platforms and awesome APIs, without a real need for their intrinsic token (ahem, stable coins I’m talking to you guys). If you do not need to decentralize your business infrastructure, which I completely understand given the lack of scalability so far, then governance is definitely the only way to properly create an incentives system.

If the platform you’re considering investing in doesn’t want to give you back tokens in any way, forget it.

There are exceptions like protocols (ethereum, IOTA, cardano, etc), although I tip my hat to NEO (previously Antshares) for creating an ecosystem where users get rewarded for keeping tokens, while being a protocol. It needs some improvement in terms of decentralization, sure, but at least they’ve figured out a way to incentive token holders to keep tokens. That’s a huge win and more projects should take the same approach.

Don’t do an ICO if you cannot offer anything new with your tokens, like decentralized governance or infrastructure; that’s the underlying message here.

Economic incentives means redistributing rewards for all agents, keep that in mind!

thanks to blockgeeks

The discrepancy between product development and marketing

This is my favorite point as I consider it to be one of the major reasons why ICO projects tend to raise way more money than needed.

Yes, I’m saying it.

Product development and user interface are currently the bottleneck, not marketing and PR.

The reason is quite obvious: if you don’t have a bloody working product, you don’t need hype and awareness. What you need is to make sure whatever “next big thing” you’re building actually works.

Because funds are easier to find and due to the decentralized nature, these companies tend to treat them irresponsibly. Just consider the many examples of crazy events and insane amounts spent on PR stunts while road-maps keep stretching as development cannot keep up with hype and users’ expectations.

thanks to WooBull

If your argument is saying how the important thing is to grow your user-base, let me remind you that we’re talking about people’s hard earned cash. Founders, CEOs and Managers of ICOs should realize this. I don’t think it is OK to pay hundreds or thousands of dollars for weekly marketing campaigns.

No, I really don’t think it’s OK to bluntly accept pricing for most ICO trackers and Advisory teams.

We all want to make money, I get it. However, we must understand decentralization also means white-label corporate bullshit is not the way to go. If you’re investing your personal money on these startups, be demanding.

“It’s your money bro. Be a badger”

Make sure your money is not going to the wrong people, being spent on crappy online marketing campaigns and mailing lists. Pressure ICOs to invest more into product and business development, instead of draining crowdsale funds into beautiful marketing events that generate high social media content engagement.

Demand more transparency on funds allocation and business expenses. Don’t forget any project that raised a couple million during an ICO should answer to you. Not having contractual rights doesn’t mean companies can do whatever they want. There are moral obligations and values to respect.

Decentralization means everything happens at a slower pace and that’s OK. We cannot have both an increased effectiveness and efficiency.

It’s either one or the other.

What I can say is I used to be more positive around ICOs until I really dug deep, met some founders and key advisors, looked-up rates asked by most ICO trackers for PR, reviews or overall exposure and realized most are too accustomed to traditional businesses and don’t really get  the aim of cryptocurrency: to decentralize.

My advice? Forget most YouTube reviewers, ICO trackers, expert advisors and Telegram channels.

 

99% is crap.

Reviews are paid, ICO trackers charge insane amounts to list projects and give priority to the ones who pay more, independently of the underlying project or idea and advisers care more about BTC and ETH pre-payments than doing some actual work.

Good values like giving honest reviews not based on payments (much like the Weiss model) or being transparent about projects you have personally invested in, especially if you’re an influencer, are just two quick fixes that could potentially help out.

The bubble will pop, but good projects will survive!

At this point, this conclusion becomes obvious.

The hard question to ask yourself is which projects will remain, as to me that is not so obvious.

Many smart people say there’s going to be a killer app that will tip the scale.

Except, I already know a killer app doing exactly that: Bitcoin;

We still need better wallet apps that connect every blockchain, I know, however there are many already deployed. The problem now seems to be which one will live.

Maybe adoption hasn’t taken place, not because people can’t spend the coins, but because they cannot earn them. Yes, great UX/UI for wallet apps and ways to spend tokens are important, nonetheless we’ve been going on and on in circles around that point. If you don’t have a way to distribute tokens to people as a reward, for participating in your network, there is no incentive to use tokens.

Having a way to spend tokens is meaningless if I cannot earn them.

My point of view is for you to focus your attention, not only in protocols, but also in any project which aims to distribute tokens to users as a reward for participating in the network.

Any way you can think of: as a miner, as a staker (hodler) or as a user. Projects like Steemit, Bitclave, Neo or Status – which offer an actual incentive to use the network – are great examples because any agent who interacts with the network gets richer for participating.

As you enrich the network, the network enriches you.

This is, to me, the true meaning of decentralization: competition and cooperation come hand-to-hand. It’s not only about your own gains, but also the network gains and how you contribute to its improvement and growth.

The cryptocurrency ecosystem will change how we deal with data, information or even time. Our attention will be the new oil as we now, too, have a way to monetize it.

Do not stop investing in ICOs because some are scams or because they’re too risky. It’s the only way to keep the system running. Be smarter about it and think of ways a business could potentially benefit from distributing rewards to its network of users and put your money into ICOs doing exactly that.

Don’t lose your faith on the market and let it mature; some projects will eventually rise to the top.

The only remaining question is: will you be riding them, or what?

Featured Image from Shutterstock
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Cryptocurrency Games Have Invaded the Most Popular App Stores

Bitcoin and the vast array of cryptocurrencies within the digital asset economy have become extremely popular these days, and one reflection of this metric is how many games can be found trending on the most popular app stores. There are many games available that allow gamers to create their own virtual mining farms, simulate trading cryptocurrencies, and games that even reward people in micropayments.

Cryptocurrency Games: Your Chance to Be a Virtual Mining Tycoon and Bitcoin Billionaire

Have you ever wanted to try testing your luck in the cryptocurrency markets, but don’t want to lose real money? Or maybe you’ve contemplated creating a mining empire, but only have enough coin in the bank for a couple measly machines. Well, now people with some imagination and a love for games can find a wide array of gaming apps at Apple’s App Store and Google Play. Not too long ago, there were only one or two cryptocurrency related games like Bitcoin Millionaire on the app stores, but nowadays there’s a ton of different recreational apps where you can do various bitcoin-related things, and some of them even pay out a few cents in crypto if you play them long enough.

Bitcoin Mining Simulator

One fun game called Bitcoin Mining Simulator (BMS) allows you to become a bitcoin mining tycoon. Basically, the mining simulator allows you to purchase virtual rigs in order to mine bitcoins and profit from selling them at market value. The game starts with a few simple machines until you can get enough coins to purchase your own mega farm. Essentially the game created by the developer Aliaksandr Prakarym allows the player to continuously improve the farm in order to get a return on the investment (ROI). The BMS app is also available on both iOS and Google Play.

Cryptocurrency Games Have Invaded the Most Popular App StoresBitcoin Evolution

Bitcoin Evolution is very much like the classic app Bitcoin Millionaire as it allows a person to become filthy rich by earning bitcoins by tapping — And who doesn’t like incessantly tapping their phone? Again, like the many other games that yearn to be original, Bitcoin Evolution starts you off by running your own virtual bitcoin business where you mine coins from your own farm and gather profit by selling them.     

“Invest your virtual mined income thoughtfully and grow your virtual bitcoin firm — Soon you will be the most popular virtual bitcoin capitalist and earn billions with your smart business,” explains the developer, Romit Dodhia.

But be aware that you will face all the problems that a successful merchant needs to go through. And don’t forget to launder your money!

Cryptocurrency Games Have Invaded the Most Popular App Stores

Bitcoin Miner: Clicker Game

The recreational Bitcoin Miner: Clicker Game (BM) is an iOS mining simulator that allows you to earn bitcoins, obtain more computers and luxury automobiles. The game is very much like the aforementioned bitcoin mining simulators above, but with different graphics. BM allows the person to create their own farm and develop it more to profit. “Interested in mining but afraid to try in real life?” asks the development team 99 Drones B.V. “ Don’t worry — Mine in this game to get a taste for free — It’s time for you to start mining.”

Cryptocurrency Games Have Invaded the Most Popular App Stores

Crypto Rider

Now the game Crypto Rider is funny and original as it’s a two-dimensional racing game where the tracks are the real-life historical price charts of popular cryptocurrencies. The racing app featured on Google Play and created by Superfly Games allows racers to collect blocks to unlock nine crypto-themed vehicles. “Fed up of watching all the price dips? Well, now you can ride them,” the developers’ detail.

Compete for the top spot on global leaderboards! Shill your high score to your friends with the sharing feature.

Cryptocurrency Games Have Invaded the Most Popular App Stores

Bitcoin Flip

The iOS trading simulator Bitcoin Flip teaches gamers how to trade cryptocurrencies. The game is good for investors just learning how to trade digital assets. Bitcoin Flip instructs users on how to trade Bitcoin Cash, Nano, Tron, Vechain, Steem, Ethereum, Litecoin, and Dashcoin. The simulation follows real-time cryptocurrency spot prices with a 0.0005-second accuracy. Further, the platform starts players off with $5,000 (virtual dollars) to invest in and collect or lose virtual gains. Essentially, Bitcoin Flip gives people a chance to learn how to trade but can also be used for pure amusement.

Cryptocurrency Games Have Invaded the Most Popular App StoresBitcoin Bricks

The Android game Bitcoin Bricks created by Joy Soft is a Tetris-like puzzle game that pays BTC micropayments for every game field filled. Joy Soft says instead of rewarding people with “useless points”, Bitcoin Bricks players get 0.00000001 BTC for every filled row and withdrawals are allowed after a certain threshold. After filling rows and collecting a micropayment, the BTC balance is shown above the game board so people can view how many coins they have earned.

Cryptocurrency Games Have Invaded the Most Popular App Stores

The Blockchain Game

The Blockchain Game is another iOS strategy tournament that involves players building the longest blockchain and winning BTC. Just like Bitcoin Bricks, users add their BTC wallet address and they can begin trying to earn micropayments. The basic concept of the game is stacking blocks in order to create the longest chain. Just like in the real world, the virtual blockchain with the longest concession of blocks gives players a higher reward payout.

Cryptocurrency Games Have Invaded the Most Popular App Stores

Games Can Be Fun and Addictive but Remember Time Is Money

There are so many cryptocurrency and blockchain games these days that this post could go on forever. However, lots of them lack originality and are mere copy-cats of games that simulate mining, or allow players to become a virtual bitcoin billionaire tycoon. The games are definitely amusing if you are a crypto-enthusiast, and some of them are educational, and even payout small amounts of cryptocurrency. Even though some games advertise the rewards as ‘free BTC,’ the incentives are not really ‘free.’ 

One reviewer explains how he spent a whole week playing a ‘free bitcoin game’ app for hours and earned a whopping $0.35 cents in BTC. So unless you consider your time as ‘free,’ that description is a bit misleading, but the games can be fun and addicting. So if you want to burn some time, head over to Google Play or Apple’s App Store and search “bitcoin” or “cryptocurrency games,” and you may find yourself losing hours of your life just to earn a 35 cents in crypto. 

What do you think about all the cryptocurrency games in the app stores these days? Have you played any of these games? Are there any fun games we didn’t mention that you like to play? Let us know your thoughts on this subject in the comment section below.


Images via Shutterstock, the App Store, Google Play, Bitcoin Miner Clicker Game, The Blockchain Game, Bitcoin Bricks, Bitcoin Flip, Crypto Rider, Bitcoin Evolution, and Bitcoin Mining Simulator.

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Here Is How Bitcoin (BTC) Will Recover

Recent comments by Ran Neu Ner, founder of OnChain Capital, and host of Cryptotrader on CNBC Africa indicate that we could be headed to Bitcoin (BTC) levels that will be as low as $5,900. Neu Ner was quoted as saying that the problem is not with the recent hacks on Coinrail or the investigations on 4 popular exchanges by US Authorities. He believes that there is simply no demand for Bitcoin right now. Of course, he is just one opinion while other experts have different takes.

Neu Ner would also comment that the current levels of Bitcoin will not matter if the digital asset will be valued at 20 to 80 thousand dollars in a few years. The ones worried about the current value of the King of Crypto are the day traders and those who specialize in scalping.

Scalping is a trading style specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains the trader has worked to obtain.

Away from the comments of Neu Ner and observing the behavior of Bitcoin (BTC) in the month of April, we find that there was a similar decline that bottomed out around the 1st of April. On that same date, Bitcoin was valued at a new low of approximately $6,500. The coin would later bounce back within a month and was valued at $9,600 by April 25th and $9,900 by the 5th of May this year.

Fundstrat CEO, Thomas Lee, has continually stuck to his price prediction of $25,000 per BTC by the end of the year. Mr. Lee is keeping an eye on the institutional investors who will jump into the crypto-markets as soon as regulatory guidance is given by primarily the SEC of the US.

Mr. Lee was quoted as saying:

“I think institutional investors have gained a lot of interest, and they haven’t really come into crypto yet because there is still some regulatory uncertainty. But that sort of ultimate allocation into crypto as an asset class is going to be a powerful reason why bitcoin rallies.”

Recent news indicates that the country of Thailand, through its very own SEC, has officially recognized the seven cryptocurrencies of Bitcoin, Ethereum, Bitcoin Cash, Ethereum Classic, Litecoin, Ripple, and Stellar. The reasons given by the government organization is that these cryptocurrencies have been collectively agreed by the crypto community as being credible and at the same time, the digital assets are highly liquid/available.

This means the time is nigh for regulatory direction in the major countries of the United States, Canada, Russia, United Kingdom, Japan and South Korea. Once these countries give some form of direction, the institutional investors will not mind being part of the crypto-verse. They will, in turn, cause a resurgence of interest in Bitcoin (BTC) that will propel it to greater heights.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency and read our full disclaimer.

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Bitcoin, Blockchain and Smart Contracts: Commercial Law Is About to Be Disrupted

New distributed blockchain technology-enabled systems have been developed—and are rapidly gaining acceptance—that will fundamentally change the way many commercial transactions are conducted. Lawyers, bankers and other professionals must adapt.

Modern commerce depends on a system of centralized record keeping and trusted trading partners.  Over the past century, a robust body of commercial law and commercial norms have developed around this system.

Recently, new distributed blockchain technology-enabled systems have been developed—and are rapidly gaining acceptance—that will fundamentally change the way many commercial transactions are conducted. Commercial lawyers and other professionals who fail to become familiar with these new concepts and the attendant vocabulary—and adapt their practices accordingly—do so at the risk of having their practices disrupted by those that do.

Money and Commerce

To understand Bitcoin, it is helpful to first briefly review the history of money.  In order to overcome the inefficiencies of barter, currency was developed in ancient times as a medium of exchange. Precious metal coins were early examples of currency and satisfied the core characteristics of money: limited supply, portable, divisible units of exchange and widely accepted in commerce.  

Alongside currency developed the concept of credit, where for example one would go to the local general store and have their purchases recorded in the store’s ledger, and they would eventually settle their ledger balances with the store in cash.  

 

Ledger-based commerce developed over time into retail card accounts, passbook savings accounts and credit cards. Of course what all of these systems have in common is that the official ledger of transactions is kept in one central place by one institution—the store or bank—requiring the customer to trust that institution to keep accurate and honest records, and to protect the customer’s funds tracked in that ledger.

Problem of Trust and Advantage of Distributed Systems

The inherent problem with the centralized ledger/trusted institution model of commerce can be summarized in two words:  Lehman Brothers. On Sept. 15, 2008, Lehman Brothers collapsed and filed for bankruptcy, and thousands of people and institutions that had trusted Lehman Brothers to safe-keep and account for their financial assets learned a very hard lesson. Conversely, the inherent advantages of a distributed, interconnected peer-to-peer network model of commerce, where no single member of the network has authority over others or can cause the network to fail, is probably best demonstrated by the internet.

To avoid having to trust a single keeper of a ledger of transactions requires decentralization, so that each institution, customer and other transacting party on the system (let’s call each such party a “node”) keeps their own copy of the mutually agreed-upon ledger.  But how do we make sure that each such ledger will accurately record all transactions and thus be in exact agreement with all of the other ledgers on the system, without a trusted central authority?  And given the absence of trust among nodes, how do we assure that a malicious node cannot change the ledger, and convince other nodes that her version of the ledger is actually the definitive version of the ledger?  Put another way, how does the distributed network of nodes reach “consensus? ”

The consensus problem is often illustrated through the Byzantine Generals Problem.  Imagine the Byzantine army is divided into multiple divisions scattered throughout enemy territory, with each division commanded by a general.  In order to execute on their battle plan the generals must communicate by messengers, who can be intercepted and/or be disloyal traitors.  Furthermore, one or more of the generals themselves could be disloyal. So how do the loyal generals coordinate and successfully execute on their battle plan in the face of possibly disloyal nodes?

Enter Bitcoin

Forty-six days after the collapse of Lehman Brothers, on Oct. 31, 2008, the possibly  pseudonymous author Satoshi Nakamoto released an elegantly simple yet brilliant white paper, “Bitcoin: A Peer-to-Peer Electronic Cash System”, which described a revolutionary combination of existing technologies to create the world’s first genuine peer-to-peer monetary system.  

Bitcoin is a novel way for a network of multiple, dispersed nodes—connected peer-to-peer such that no one node is a central server—to overcome the “Byzantine Generals Problem” and reach consensus on one accurate ledger of transactions. And once such consensus has been reached, each batch of agreed-upon transactions is distributed to and replicated among the ledgers maintained by each of the nodes on the system, after which it becomes infeasible for any node to change or tamper with such record of transactions.

Below is a basic explanation of how Bitcoin works:

Each node—a computer running the Bitcoin software and connected to the internet—is able to execute transactions and broadcast them to the other nodes (e.g., Alice’s node broadcasts: “Alice just paid Bob two Bitcoin.”)

Certain of the nodes, referred to as “miners”, collect each of the broadcast transactions they receive into a pool of transactions not yet recorded on the distributed ledger.

Simultaneously with the collection of unrecorded transactions, the miners are each using their computer power to attempt to solve a difficult, automatically generated math problem.  This is commonly referred to as “Bitcoin mining.”

The first miner to solve this math problem is then able to broadcast its collected pool of unrecorded transactions, together with evidence that it correctly solved the math problem (referred to as “proof-of-work”) to the other nodes, thus proposing that its “block” of new transactions be added as the next block in the “chain” of previously recorded blocks in the distributed ledger.  Because the distributed ledger is actually a chain of such blocks of recorded transactions, it is referred to as the “blockchain.”

Each node that receives the proposed new block can easily verify that the proposing miner has solved the math problem by checking the miner’s proof-of-work, and can easily verify from the existing distributed ledger of recorded transactions, that each of the transactions contained in the newly proposed block is valid (i.e., that Alice has a sufficient balance of Bitcoin recorded on the existing blockchain to cover her two Bitcoin spend).  

Upon such verification by each node, that node adds the proposed block to its existing copy of the blockchain.  When a majority of nodes have verified the proposed block and reached consensus to add it to the blockchain, the proposing miner is awarded new Bitcoin for its efforts (currently 25 Bitcoin per block mined), and all miners are given a new math problem to begin working on.

Novel Technologies – Hashing Algorithms and Proof-of-Work

It was advances in the field of cryptology that made the foregoing “proof-of-work” consensus algorithm possible. What was required was a way to generate math problems that are impossible to solve other than by simply guessing at the solution over and over again, yet once that math problem was solved, the solution would be easy for the other nodes to verify.  Cryptographic “hashing” algorithms made this possible.  

Hashing algorithms generally share the following characteristics:  

The input to the hashing algorithm can be a number of any length (i.e., any number of digits).

The output of the hashing algorithm—the “hash” of the input—is a number of a set length. 

There is no mathematically feasible way to “reverse engineer” a hashed output to figure out the original input.

Any change to the input—even changing one digit—will produce a completely different hash output.  That is, any tampering with a hashed list of transactions, however slight, will be clearly evident in the hash of that list.

So with this hashing technology, the complicated math problem presented to each miner is simply the following:  Find a number (referred to as a “nonce”) that when (i) such nonce is mathematically combined with the prior block and with each of the unrecorded transactions in the currently proposed block and then (ii) that result is passed through the hashing algorithm, it produces a hash that begins with a specified number of zeros (which required number of zeros can be increased to increase puzzle difficulty).  Because of the mathematical principles behind hashing, finding a nonce that generates a winning solution to the puzzle takes a good deal of processing time even with tremendous computing power. Yet verifying that such nonce is indeed the solution to the puzzle takes mere microseconds for even a modest computer.

This proof-of-work consensus mechanism is a clever solution to the Byzantine Generals consensus problem.  Recall that even the tiniest change to the input of a hash function outputs a completely different output. If a rogue node attempted to change a transaction in a prior block of the blockchain, it would change the hash of that block, and thus change the math puzzle to be solved to create the next block, which would then have to be solved in order to move on to the next block, and so on.  

Thus, in order for the rogue node to successfully get this fraudulent transaction into the blockchain, it would have to “catch up” to the currently longest chain of verified blocks, which all other miners would have been working on the whole time. Mathematically, the odds of such rogue node successfully changing a transaction in the blockchain become vanishingly small, unless the rogue node controls a majority of the computing power of all miners.  Given the vast and distributed computing power of Bitcoin miners, this would be highly unlikely. Thus the “immutability” of the blockchain.

Beyond Bitcoin – Ethereum and Smart Contracts

Thus far, the primary function of the Bitcoin distributed ledger is to keep track of who owns each of these mined Bitcoin.  But one can keep track of anything on a blockchain that could otherwise be put into a ledger, such as land records, bank transfers and even computer code. Because no one node controls this distributed ledger and any altering of data on an active blockchain is mathematically infeasible, the use cases in financial transactions are clear.

The Ethereum blockchain platform provides a distributed ledger in which one can program a set of logical contractual instructions, which then function as an immutable “smart contract.” Such a smart contract might, for example, provide that upon receiving the digital signature from two of the three designated signatory nodes, a certain amount of Ethereum—the digital token of the Ethereum network—would be released to a designated digital wallet.  The transaction then settles as soon as it becomes part of the blockchain. Note that Ethereum blocks settle (i.e. a new block is added to the Ethereum blockchain) about once every 15 seconds.  For U.S. financial institutions, securities transactions generally take two to three days to settle.  Thus the potential benefits of blockchain smart contracts in financial settlement transactions are huge.  In fact, many large U.S. banks are actively exploring potential blockchain solutions, such as Ripple.

Consider the possibilities: A blockchain distributed ledger could be maintained regarding the river-to-table supply chain that Alice uses to supply her restaurant.  When Bob catches his batch of sunfish, he broadcasts it to the supply chain nodes and his catch gets recorded in the blockchain in real time.  In addition, a temperature sensor is attached to the catch that broadcasts to the nodes the temperature at which the catch is stored over the course of being shipped.  Then, when the catch is sold to the distributor Carol, Bob and Carol broadcast their hand-off to the nodes, and so on all the way to Alice’s restaurant.

At the moment the delivery truck arrives, Alice can instantly confirm by reviewing the blockchain ledger the exact chain-of-custody of her sunfish, including when they were caught, the identity of the fishermen and whether the sunfish were transported at correct temperatures.  And unless a rogue distributor can summon more computer power than that of the entire supply chain (assuming it uses the proof-of-work consensus protocol), that distributor cannot cover up the fact that her shipment accidentally reached room temperature in transit, or was caught on a different date, etc.

Under current commercial norms and practices, there would be no practical way for Alice to reliably confirm this information to protect the customers of Alice’s restaurant.

Change and Adapt

Most professionals that have a working knowledge of blockchain and smart contracts believe that these technologies will supplant numerous current commercial protocols and practices over time, such as post-trade securities settlement, asset-ownership registration and supply chain management, to name a few.  The law surrounding these protocols and practices will thus need to change and adapt. In the face of these changes, corporate and commercial attorneys and other professionals must achieve a working understanding of blockchain protocols and smart contracts, or risk not being able to adequately advise their clients.  Hopefully those that have read this article now have the awareness and curiosity to look further.

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Visa vs. Cryptocurrency — It’s Only a Matter of Time

The use case for cryptocurrency and decentralized payment networks was reinforced this week as Visa payments throughout Europe were disrupted, leaving thousands of people unable to pay for goods and services.

The BBC reports that people were left stranded — unable to pay for fuel — and in other cases forced to leave restaurants in embarrassment after they couldn’t pay for the meal that they had just eaten.

Visa News Europe tweeted about yesterdays system failure, and the comment thread immediately turned into a discussion about the merits of cryptocurrency.

Visa’s centralized payment processing service usually handles 150 million transactions per day. Like any centralized service, Visa runs on a select group of private servers which provide a single point of failure when compared to a decentralized network like Bitcoin or other cryptocurrencies.

Decentralized systems run on nodes distributed in multiple locations,  often internationally, and the system becomes more secure and in less risk of failure as more nodes join the network. Bitcoin has been 99.99 percent operational since it’s launch in 2009, and blockchain networks theoretically can operate indefinitely without downtime.

The trade-off, of course, is the scaling issue faced by blockchain networks. The network requires all nodes to update for a transaction to be verified, and with more and more transactions to process and often permanently record, things can and do slow down leading to longer waiting times and higher transaction fees.

However, the last few years have seen a surge in adoption of blockchain technology and innovation in the space as well. Twelve out of 26 major Chinese banks adopted blockchain technology last year with many other major financial institutions following suit and low-cost, instant cross-border payments being made successfully between different currencies and nations. Billions of dollars are being raised for industry projects and state-run facilities have been established in many nations for blockchain research and development.

There are also multiple projects with expert blockchain developers working on scaling solutions. Bitcoin forked over a disagreement in scaling solutions in 2017, with BTC developers working on the second-layer off-chain solution called the Lightning Network to allow certain processes to take place outside of the main blockchain to reduce congestion. The BCH developers have increased block size for the same reason, and other projects are working on their own version of scaling technology.

There are many different types of cryptocurrency supporters. Some people are purely in it for the financial rewards, while other advocates believe that cryptocurrency will allow them to live outside of the established systems outlined by their financial and legal authorities to transact freely peer-to-peer without fees or oversight. Others still believe that the technology will eliminate those systems altogether, revolutionizing society by breaking the hold of financial institutions on the personal and financial freedom of the common people.

Regardless of which camp you’re in, it seems clear that as we enter an era in which cryptocurrency is competing with mainstream centralized financial institutions, the new technology should, at the very least, help break the monopoly those institutions have and force them to offer better services with more agreeable terms or risk being left behind in the inevitable march of progress.

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