By AVC / Joel Monegro: “The bitcoin blockchain is not just going to change the way money works on the Internet (and off). It’s going to change the way Internet applications are built.”
The most important things to understand about this blockchain stack are the overlay networks (most of which are still emerging), and the shared data layer and the shared protocol layer. Please read Joel’s post which describes each of these in some detail.
What is most important about this emerging stack is, in Joel’s words,
This imposes a very interesting set of challenges for developers, entrepreneurs, and investors as so much of the value in the current Internet stack will be commoditized by this architecture.
Differentiation and defensibility and network effects will be much harder to obtain with this architecture. Most things will work like email. Take your keys from one app to another and all your data and relationships come with it.
Fun times are ahead. Time to put your seat belt on.
The basic idea is that everything inside the gray rectangles is decentralized and open source. For now I’m calling these the Shared Data and Protocol Layers. Nobody controls these parts of the system, and they’re accessible by any person or company. If we use Bitcoin as an example, the Blockchain is the shared data layer and the Bitcoin protocol is a Decentralized Protocol that’s part of the Shared Protocol Layer.
You’ll notice that each layer gets thinner the higher up you go. You’ll also notice that the Shared Data and Protocol Layers cover about 80% of the entire stack. Internet applications today are built on top of open, decentralized technologies like TCP/IP and HTTP, but if you were to graph the current internet application stack like above, those open, decentralized protocols would probably only make up about 15% with everything on top being private and centralized.
Read more at http://joel.mn/post/103546215249/the-blockchain-application-stack
Blockstream has officially announced $21m in seed funding to continue the development of its much-anticipated blockchain technology proposal, ‘sidechains’.
Announced on the Blockstream website, the round was led by LinkedIn co-founder and Airbnb board member Reid Hoffman; Khosla Ventures, which has previously invested in bitcoin API developer Chain; and Canada-based seed fund Real Ventures. In total, Blockstream indicated 40 investors took part in the round.
Blockstream CEO Austin Hill positioned the funding as proof that the wider tech industry is increasingly acknowledging the disruptive potential of the technological innovations first introduced by bitcoin through its underlying ledger.
“Blockstream is the first company extending the capabilities at the protocol level to support massive scaling of bitcoin and blockchain technology to a broad range of asset types. Put another way, the extension mechanism of sidechains, the company’s initial area of focus, allows any number of so far unthought of developments to happen in an open and interoperable way.
Additional investment firms that contributed to the round included Crypto Currency Partners, Google chairman Eric Schmidt’s Innovation Endeavors, Future\Perfect Ventures, Mosaic Ventures, Ribbit Capital and Yahoo co-founder Jerry Yang’s AME Cloud Ventures.
Read the full story at:
Spanish bank Bankinter has made an investment in Coinffeine, a bitcoin startup launched in June by four engineers aiming to create a new distributed exchange platform.
The investment, made through the Bankinter Innovation Foundation, is one of the first in the bitcoin ecosystem, according to the bank.
Coinffeine is developing a distributed platform for the exchange of fiat money by cryptocurrencies in a secure and anonymous environment. It is designed to let users send fiat money and transfer bitcoins outside banks in a peer-to-peer (P2P) fashion.
BitTorrent for your bitcoins
The Coinffeine desktop app, which the company likens to “BitTorrent for your bitcoins”, is scheduled to launch next January.
“The big innovation here is the Coinffeine protocol, a mathematical model based on Game Theory. This protocol ensures the safety of the fiat-bitcoin exchange without a trusted third party and in an automated way, offering the same experience as a traditional exchange even though the transactions are really P2P,” the company said in a statement.
Coinffeine co-founder Sebastián Ortega told CoinDesk the platform will provide customers with a service that combines the existing financial infrastructure with a distributed exchange.
“Coinffeine lets you keep ownership of your bitcoins in a way that only a distributed exchange can provide. You don’t need to trust anyone, not even us, for the safeguard of your coins and you can reuse the existing financial infrastructure for handling the fiat payments.”
Read the full story at: http://www.coindesk.com/spanish-bank-backs-decentralized-bitcoin-exchange-coinffeine/
Digital signature company DocuSign might have little to do with bitcoin at first glance. The firm’s business is replacing ink signatures on paper with its own electronic version.
Read the full article at: http://www.coindesk.com/docusign-founder-sees-blockchain-tech-potential-identity-management/
But the audience listening to DocuSign founder Tom Gonser at Web Summit in Dublin last week might have been forgiven for thinking they’d stumbled onto a sermon about the benefits of the blockchain.
Gonser ran through the complexities of identity and contract management in a digital age, pointing out that different jurisdictions had very different ideas of what constituted a valid contract. He stood on stage in Dublin and waved a $5 bill at the audience, saying:
“This is a contract … I’ll give this bill to whoever wants it. But you have to go to a pub and try to buy a beer with it. You’ll have a hard time, because they’ll say no, I need to take euros.”
In a bitcoin sermon, this is where the blockchain and decentralisation comes in. Instead, Gonser’s talk continued with the credit card companies – Visa, and MasterCard – solving the problem of converting cash in different jurisdictions by “hiding” the transactions behind a single credit card, which they issued.
Blockchain a ‘sea change’
Gonser, who serves as chief strategy officer at DocuSign, isn’t touting the bitcoin protocol and its open ledger as a solution for his company – but it may only be a matter of time.
He told CoinDesk that his firm’s research labs are experimenting with the technology underpinning bitcoin, because of the chance that it might uncover ways of working on digital identity that are “fundamentally better”.
“Bitcoin is definitely something to watch … it does represent something that’s a sea change in how transactions can be tracked and audited,” Gonser said.
Gonser also extolled the decentralised nature of distributed ledgers in identity management systems of the future. He gave the example of personal medical records, which are held by a number of different institutions, depending on the jurisdiction a patient is located in.
“No one actually owns their [records]. I have probably 10, but I’ve never seen mine. It’s the hospital – I don’t know where it is. But it needs to be mine, it needs to be something I store,” he said.
Gonser said distributed networks that make use of the blockchain, then, could be the solution for digital identity systems of the future, explaining:
“The notion of empowered individuals in the digital world, creating a strong identity to make their life have less friction … to the extent bitcoin represents this decentralised framework, it’s very much in line with my thinking of how identity evolves.”
Article by Jonathan Levin at: https://medium.com/@jony_levin/i-love-the-blockchain-just-not-bitcoin-354c511ad3e5
In an age of microblogging and relentless conferencing, zeitgeist is not written in novels but in phrases shorter than 140 characters. One cannot leave a financial technology, innovation or even digital currency conference without hearing the words in the title of this blogpost. However, as with most clichés, the phrase actually goes to the core of the issue. It begs for a defence of Blockchains and the Bitcoin blockchain as the best in class.
A Blockchain is a data structure that has two distinct features:They have native tokens that form the basis of all recorded information and economic incentives for using the system. The tokens are native as they are governed by the protocol that governs the data structure and have no external dependencies like central banks or financial institutions.They contain a chain of cryptographic proofs that ensure that the data has not been tampered with, lest the chain of proofs would not be able to be reconstructed. The chain of proofs has the nice property that it reveals the amount of work it took to construct the chain. This enables the network to converge on one chain as the true chain, the one with the most work done, and discard all but one.The title of this post poses the challenge: Do we need to have only one native token with a fixed supply in our data structure or could we have none or many? To miss the value of these native tokens would be to also miss the value of the data structures that store them. I would like to push for blockchains with native tokens rather than just blockchains (innovative, probabilistically immutable databases) which have far lower utility if any.
Security and integrityWithout going into the technical details of how blockchains are secured, it is important to understand the native token as incentive mechanism for security and integrity of the blockchain (for those that want a technical overview of the security model see the dynamic-membership multi-party signatures explained in the recent Sidechains whitepaper). At the base level the blockchain technology is a data structure that contains within it a chain of proofs that must hold true. This structure allows us to verify that the history of transactions or information that is being presented has not been altered or tampered with, ensuring data integrity. The reliability of the proofs is directly dependent on the economic incentives provided to the people or organisations that supply the proofs. In Bitcoin, a miner that earns the right to publish a block on the main chain is currently paid 25 BTC (~$8500 at current prices). This provides adequate incentives to have highly specialised hardware running in datacentres across the world. If the reward halved, as it is set to do in 2016, the incentive to provide these proofs would halve and we could likely see a scenario where the proofs would now be far less reliable (partly due to the excess hardware that could be bought on the cheap). In other words without a high token value on a blockchain there is little security or integrity of the data contained within.
Model for innovationThe underlying blockchain technology relies on universal financial coverage and distributed computing to achieve its value as one of the first databases with provable integrity. Centralised services may operate on top of the Bitcoin protocol but will always face high competition due to the relatively low barriers to entry (open source software) and low switching costs (installing apps on my smart phone). We are still early in our understanding of blockchain technology. The excitement around the integrity of the ledger, its openness and its potential to unlock global financial inclusion must be embraced in a holistic framework. The blockchain’s security and utility depends on its native token. Currently the most secure and reliable blockchain is clearly our dear friend Bitcoin but this does not have to be the case forever.
Read the full article at: https://medium.com/@jony_levin/i-love-the-blockchain-just-not-bitcoin-354c511ad3e5
Paying employees and externally sourced IT professionals in bitcoin may give CIOs a leg up in the war for tech talent.
Hailed as the first significant innovation to money since the credit card, bitcoin—a protocol for exchanging value over the Internet without an intermediary like a bank or a credit card company—is being championed by a small but growing, passionate base of users and advocates. The bitcoin ecosystem is maturing exponentially: merchants big and small are testing the waters; investment capital is flowing to an ever-growing list of startups; wallets and mobile apps are becoming more user-friendly; regulators are inserting themselves into the ecosystem; and 2.0 technologies that take advantage of the programmable nature of bitcoin are enabling developers to build constraints, logic, and the like into bitcoin transactions.
Media coverage has largely focused on bitcoin’s applicability as a form of payment for consumer goods and services. But the value of this cryptocurrency may extend to the corporate payroll function. Employers can now pay employees a portion of their net earnings in bitcoin by collaborating with niche payroll solution providers such as Bitwage, Wagepoint, or Bitpay, who manage the back-end mechanics, eliminate exposure to price volatility, and reduce compliance and governance risks. Some forward thinkers in the community have even called for the formation of an “InstaWage” business: a payday lending killer, designed to compensate employees the moment they punch out.
Perhaps encouraged by press accounts citing enthusiasm among technology professionals for remuneration in bitcoin, a number of start-ups have products in various stages of release that allow employees to opt in to what may be the first passive means of cryptocurrency acquisition. Passive acquisition will be an important development given that today’s options for obtaining digital money are considered onerous by many.
Meanwhile, injecting an innovative payment method into a historically stagnant enterprise function may help CIOs by sending a clear message to prospective tech employees that the company embraces innovation. In an era dominated by social media, brand perception becomes more important than ever. According to a key finding in Deloitte’s 2013 Global Human Capital Trends Report: “Social media has erased whatever lines used to exist between the corporate brand and the talent brand. They’re two sides of the same coin.” A finding from this year’s report takes this concept further: “Employees with high-demand skills have choices, and a company’s employment brand is easy to ascertain without even stepping into the office.” Bitcoin payroll or even “lighter” variations, such as bitcoin bonuses, expense reimbursements, or ad hoc awards, may help attract a new generation of talent to companies seeking change agents.
Moreover, bitcoin and similar cryptocurrencies could help businesses more effectively tap into the open talent economy, where individual contributors may be drawn to business partners that offer payout features only cryptocurrency makes possible: fast peer-to-peer payments across country borders with minimal friction (or total freedom) from traditional banking systems.
To be sure, bitcoin and related cryptocurrencies are still in their infancy. Domestic and international tax laws governing payouts and compensation need to be clarified. Companies must trust that those managing their payroll are complying with “Know Your Customer” (KYC) and anti-money laundering (AML) regulations, among others. And consumers still have much to learn to get comfortable using, storing, and buying bitcoin. Given the warp speed at which the cryptocurrency ecosystem is evolving, these issues may be solved sooner than we think, bringing positive disruption to CIOs tasked with finding—and paying—top tech talent.
http://deloitte.wsj.com/cio/2014/11/05/an-honest-days-wages-in-bitcoin/by Eric Piscini, a principal with Deloitte Consulting LLP’s Technology, Strategy & Architecture practice; Tiffany Wan, a senior consultant with Strategy & Operations Consulting; and David Bernardi, a senior consultant with Human Capital Consulting. All three are members of the firm’s global cryptocurrency community of practice.
Christopher Ellis, a hacker with a penchant for decentralized security created a platform using off-the-shelf PGP encryption and a blockchain similar to Bitcoin’s to create what he calls “the World Citizenship Passport.” Pretty Good Privacy (PGP) provides end to end encryption and the blockchain provides Identification registry internet wide.
Fake passports are the bane of every immigration and customs office in the world. The most secure passports come from the United States but even with several layers of security, including laser imprinting and RFID chips they are hardly fool proof, especially when used outside the United States.
This new idea however, if adopted worldwide, would make it nearly impossible to fake because it does away with one of the main problems with the current system: Hundreds of different countries, all operating under different guidelines, issuing passports, i.e. decentralization gone wrong.
These new passports would certainly be decentralized in much the same way that Bitcoin is decentralized and they would not be controlled by any one country or issuing authority. The idea is that if things like large crowdsourcing operations can work smoothly using this type of technology, this model can be applied to the identification of individuals.
The problem will of course be getting nation-states to accept an idea like this. Issuing passports through a blockchain would take this control away from governments, which is something they are unlikely to relinquish.
Ellis said about this problem:
“I wanted to create a voluntary ID system in which my proof of existence could be backed by a social network of my choosing. I expect everyone who plays by the rules to reject this out of hand because it doesn’t conform.”
Read the full story: http://cointelegraph.com/news/112859/world-citizenship-passports-with-bitcoin-like-blockchain
Boost VC announced today that it has closed a $6.6m funding round to accelerate 200 companies over three years, half of which will be focused on bitcoin.
Marc Andreessen, Ben Davenport, former American Online CEO Barry Schuler, Rothenberg Ventures, Maven II, Kilowatt Capital are among those that invested in the fund.
Boost founder and chief Adam Draper told CoinDesk that the fund’s investors are evidence of a trend of quality investors becoming drawn to the bitcoin space.
“Our goal is always to provide the companies with the best network to make their company the best it can be,” he said. “Our investors are keeping with that vision, and can provide experience and guidance and brand recognition for the startups.”
“Our focus over the past three years has been to find the most innovative people starting world changing companies. We are interested in everything from enterprise to rockets, 3D printing to bitcoin.”
“Other than that, companies that are focused on the block chain are high on our list, and then services surrounding bitcoin that support the ecosystem, but can also translate to other industries – these companies mostly are based in compliance.”
Read the full story at: http://www.coindesk.com/bitcoin-friendly-accelerator-boost-vc-raises-6-6-million-funding/
From:HM Treasury and Andrea Leadsom MP
First published: 3 November 2014
Part of policy: Making it easier for people to access and use financial services and Financial services
The UK HM Treasury asks the public for information on digital currencies and Bitcoin.
“Bitcoin, Litecoin…why we’re calling for information on the benefits and risks of digital currencies.”
1. We want to promote innovation and competition in the banking sector
2. New types of digital currency are being developed and digital currency businesses are setting up in the UK
3. We want wants to hear about the benefits of digital currencies for the people that use them and the wider economy
4. As well as the benefits, we also want to hear about the risks that might come with using digital currencies
5. We also want to hear your views on whether regulation of digital currencies is required
According to Oliver Bussmann, CIO of Swiss bank UBS UBSN.VX +0.12%, the biggest disrupting force is the blockchain – the underlying technology behind Bitcoin, the electronic-only currency which is created on computers and isn’t controlled by any government or centralized authority.
The blockchain is the open, decentralized online ledger which verifies transactions in the digital currency.
Almost any document can be digitized, codified and inserted into the blockchain, a record that is indelible, cannot be tampered with, and whose authenticity is verified by the consensus of a community of computer users rather than by the discretionary order of a centralized authority.
It is slowly making its way into international financial debate, with many embracing the idea that it can be adapted to verify and record a wide range of real-world financial transactions, such as transmitting international payments and other assets or clearing securities, all using a database that is distributed across the internet yet still held secure.
The Bank of England recognized the technology’s potential in a report in September, describing it as a “significant innovation” that could have “far-reaching implications.”
“I believe – and this is my personal view – that blockchain technology will not only change the way we do payments but it will change the whole trading and settlement topic,” said Mr. Bussmann.
He believes that blockchain technology has potential to trigger “massive” simplification of banking processes and cost structure.
He said: “When somebody with a strong brand and security level establishes it as a reliable service, then the whole industry will follow. That is my personal prediction.”