The Stage Is Set in Stanford for the Next Scaling Bitcoin Workshops

Scaling Bitcoin Stanford

The Scaling Bitcoin Workshops will land in Stanford come November.

Scaling Bitcoin, the conference where innovations like Segregated Witness and TumbleBit made their public “debut,” has quickly grown to become a central stage for Bitcoin’s global academic and engineering communities. After editions in Montreal, Hong Kong and Milan, Stanford University will host the fourth edition of the Scaling Bitcoin Workshops on the 4th and 5th of November of this year.

“We want to aid the technical consensus-building process, in a domain where performance and security are crucial trade-offs,” Ferdinando M. Ametrano, a Bitcoin and Blockchain Technology professor at Politecnico di Milano and Scaling Bitcoin Planning Committee member, told Bitcoin Magazine.

Born out of the early days of Bitcoin’s very public scaling debate, the first two Scaling Bitcoin conferences or “workshops” were organized shortly after one another in Montreal and Hong Kong in the second half of 2015. It was here that many developers actually met face to face for the first time, and the workshops resulted in the well-known scaling roadmap supported by the Bitcoin Core development team.

A third edition of Scaling Bitcoin was organised in Milan in October 2016. That time around, the workshops increased in scope from scaling-only to also include privacy and fungibility improvements, as well as broader technical development.

This line will be continued in Stanford, where the theme of the event has been dubbed “Scaling the Edge.” While the exact agenda is yet to be established by a dedicated committee, overlapping topics for the Stanford edition should once again include fungibility, and there should also be increased focus on simulations and tests.

Plus, as a relatively new topic of interest, Scaling Bitcoin Stanford will expand its scope once again: this time to also include game theory and governance of the technology.

“This has never gotten much of the spotlight at previous editions of Scaling Bitcoin. But recent events like BIP148, BIP91, user activated soft forks are proving that we are learning more and discovering how Bitcoin’s economic incentives are aligned,” Ametrano said. “Moving forward, we’d like to discuss what might be the process for protocol evolution.”

Notably, with the event taking place in early November, it looks like Scaling Bitcoin Stanford will once again take place against the backdrop of a looming contentious hard fork. Where the first two events were a direct response to Bitcoin XT and its hard fork proposal, BTC1 is scheduled to hard fork an increase in Bitcoin’s block weight limit by late November.

It, therefore, seems likely that this potential hard fork will be part of the discussion in Stanford in one way or another, Ametrano acknowledged.

“Block size proposals are included as topics of interest for Stanford. And of course a potential hard fork will be, implicitly or explicitly, part of the conference debate,” he said. “Looking ahead, many — probably most — agree some on-chain scaling will have to happen. But how and when requires unanimous agreement. Which brings us back to the topic of game theory and governance.”

Scaling Bitcoin is currently accepting technical proposals for improving Bitcoin performance including designs, experimental results and comparisons against other proposals. Submissions must be in by September 25th. Click here for more information.

The post The Stage Is Set in Stanford for the Next Scaling Bitcoin Workshops appeared first on Bitcoin Magazine.

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BIP 91 Has Activated. Here’s What That Means (and What It Does Not)

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It looks as if Bitcoin is getting Segregated Witness.

Bitcoin Improvement Proposal 91 (BIP 91) just locked in. Up to 90 percent of all hash power signaled support for this soft fork, which implies miners intend, in turn, to trigger Segregated Witness (SegWit) activation. By extension, this should make BIP 148 obsolete and August 1 a non-event.

But SegWit is not certain. In fact, on a technical level, SegWit is not any closer to activation at all.

BIP 91

Segregated Witness, defined by BIP 141, locks in if at least 95 percent of miners (by hash power) signal support for the upgrade within a two-week difficulty period. To do so, miners need to embed a piece of data called “bit 1” in the blocks they mine.

Importantly, this is technically the only way for SegWit to activate right now. And this threshold has not yet been met.

But there are alternative strategies to try and reach this threshold “indirectly” — like BIP 91.

BIP 91 is a Bitcoin Improvement Proposal proposed by Bitmain Warranty engineer James Hilliard. It is compatible with the New York Agreement and backed by a number of Bitcoin companies and mining pools. It is also compatible with BIP 148, another strategy to meet the BIP 141 threshold indirectly.

Miners have been signaling support for BIP 91 over the past couple of days through another piece of data, “bit 4.” Once 269 blocks within a 336-block window include bit 4, this BIP 91 soft fork gets locked in. This threshold was just met.

This means that after another 336 blocks, a little over two days from now, all BIP 91–compatible nodes will reject any block that doesn’t include bit 1.

As long as a majority of hash power enforces BIP 91, this majority should eventually control the longest valid chain according to all Bitcoin nodes. And as this chain consists of SegWit-signaling blocks only, it would in turn activate SegWit on all SegWit-ready nodes.

In that case, BIP 141 should lock in by mid-August, and SegWit should be live on the Bitcoin network after a two-week “grace period” by the end of that month.

If all goes well …

What Could Go Wrong?

Although well over 80 percent of hash power has signaled bit 4 for BIP 91 activation, this doesn’t actually guarantee anything. Most importantly, it doesn’t in itself mean that these miners will signal bit 1 for SegWit.

Indeed, so far, most miners don’t. Currently, the proportion of miners signaling bit 1 is still far lower than BIP 91 activation would suggest. Indeed, it is even lower than 50 percent.

Moreover, BIP 91 is probably being enforced by hardly any economically relevant nodes; that is, nodes operated by users that accept bitcoins as payment. Almost no Bitcoin users on the network recognize BIP 91 or its bit 4 signaling at all, and will therefore continue to accept blocks with or without bit 1.

BIP 91 is, therefore, enforced by hash power alone. This in turn means that a majority of miners (by hash power) could back out of BIP 91 with little more than reputational damage. They could continue to mine blocks that do not signal bit 1, even after BIP 91 activates in a few days. As long as these miners are in a majority, they will still control the longest valid chain: valid according to most miners, and valid to most users.

Furthermore, any minority of miners and the few nodes that do enforce the BIP 91 soft fork would then be forked off the Bitcoin network. In a few days from now, these miners would mine (on top of) blocks that almost only they themselves would consider valid, while most of the rest of the entire Bitcoin network would completely ignore them. These miners would be wasting their resources.

With this week’s bit 4 signaling, a majority of miners have effectively made a statement that they intend to start to activate the SegWit soft fork within a couple of days. But for now, that’s really all it is: a very public, blockchain-based statement of intent.

Actual SegWit activation should start next week, if miners stick to their stated intent.

The post BIP 91 Has Activated. Here’s What That Means (and What It Does Not) appeared first on Bitcoin Magazine.

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SegWit or Not, Bitfury is Ready for Lightning With Successful Bitcoin Main Net Test

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While Segregated Witness (SegWit) activation is looking more likely by the hour, Bitfury is getting ready to deploy a version of the Lightning network with or without the protocol upgrade.

The blockchain technology company, perhaps best known for its Bitcoin mining pool of the same name, successfully sent real bitcoins over a test version of the Lightning Network this week. Interestingly, Bitfury’s implementation of the technology is compatible with the current Bitcoin protocol and is therefore functional even without SegWit.

“This is a major accomplishment by our technical team and an important step forward for the Lightning Network and the growth of Bitcoin,” Valery Vavilov, CEO of The Bitfury Group, said in a statement.

Lightning Network

The Lightning Network is a highly anticipated second-layer scaling solution that allows for cheap and instant (micro)payments. Cleverly leveraging Bitcoin’s basic scripting capabilities, Lightning users should be able to make a virtually unlimited number of transactions, where only a minimal proportion of them are recorded on Bitcoin’s blockchain, thereby boosting Bitcoin’s scalability. Meanwhile, all users remain in control of their own bitcoins at all times, maintaining the trustless properties of Bitcoin itself.

“The Lightning Network has the potential to solve Bitcoin’s scalability issue and provide instant payment functionality. By demonstrating that the Lightning Network can function now, Bitfury has cleared the way to increased transaction processing and further adoption of Bitcoin,” Vavilov said.

Bitfury’s Lightning implementation is based on LND, which is being developed by Lightning Labs.

For its demo, the Bitfury software team created two Lightning transactions. One of these is a straight transaction from one Lightning node to the next, effectively simulating a payment channel between two users. Since it was only a test, Bitfury only made one transaction — but it could have made thousands back and forth at no extra cost.

The other test was a single-hop transaction, which better simulates the main purpose of the Lightning Network. Users pay each other through a mutual third party, without requiring any trust in this third party. While the Bitfury software team only made one transaction on this channel as well, it could, once again, have made thousands back and forth between all three parties, at no extra cost.

Since Bitfury’s test took place on the main net, the funding and settlement transactions are recorded on Bitcoin’s blockchain and can be seen by any typical block explorer.

Tests and SegWit

Bitfury’s is not the first successful test of the Lightning Network. Several companies, including Lightning Labs, Blockstream, ACINQ as well as Bitfury itself have experimented with their implementations of the technology. But since most of these companies are working on versions of Lightning that rely on Segregated Witness, these tests were limited to Bitcoin’s testnet and Litecoin. Likewise, major wallet service Blockchain has sent “Thunder” transactions over Bitcoin’s main net. But while Thunder resembles the Lightning protocol, it isn’t quite as trustless or decentralized.

As such, Bitfury is the first company to get a version of the Lightning Network up and running on the current Bitcoin protocol.

“We released this first experimental version of the Lightning Network for Bitcoin because we think the Lightning Network is an essential technology for Bitcoin and would love to see it made available as soon as possible,” Vavilov said. “We are proud that our developers found a way to adopt the Lightning Network for Bitcoin without SegWit. It’s a huge step forward for Bitcoin scalability.”

Regardless, the CEO noted that he is hopeful that SegWit will activate on the Bitcoin network. With BIP91 currently getting close to its activation threshold, it seems increasingly likely that SegWit could be live within a month. This would allow for a version of the Lightning Network that offers an improved user experience.

Vavilov:

“The Lightning Network will be the most effective when used with SegWit, which is why we are fully committed to SegWit’s implementation, and we will continue working on a version of the Lightning Network that is compatible with SegWit.”  

Bitfury, which started out as a Bitcoin miner, has grown to become one of the largest private infrastructure providers in the Blockchain ecosystem. Part of this effort, the company has been supporting the development and implementation of the Lightning Network for well over a year. Bitfury previously also co-designed and successfully tested Flare, a payment-routing solution for the Lightning Network.

Watch the video of Bitfury’s tests here:

The post SegWit or Not, Bitfury is Ready for Lightning With Successful Bitcoin Main Net Test appeared first on Bitcoin Magazine.

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Bitcoin Miners Miss the First BIP 148 “Deadline”

Bitcoin Miners Miss the First BIP 148 “Deadline”

Bitcoin miners at large have missed the first BIP 148 “deadline” to prevent a “split” in Bitcoin’s blockchain.

As Bitcoin’s scaling dispute appears to be heading for a climax, the next couple of weeks could prove pivotal. One scaling solution in particular, Bitcoin Improvement Proposal 148 (“BIP 148”), is scheduled to trigger activation of Segregated Witness (SegWit) on August 1, 00:00 UTC. As a User Activated Soft Fork (UASF), all users that run a BIP 148 node will then start rejecting any and all blocks that do not signal support for SegWit by the “deadline” — or, perhaps more accurately, “ultimatum” — set by BIP 148 users.

BIP 148 and SegWit are backward-compatible protocol upgrades, which means that non-upgraded nodes will still accept SegWit-signaling and SegWit-utilizing blocks. Therefore, if a majority of hash power in one way or another adopts SegWit before August 1, all current Bitcoin nodes would follow the same blockchain.

However, if only a minority of miners activates SegWit through BIP 148, Bitcoin’s blockchain and currency would “split” in two. This would result in two types of “Bitcoin”: one that activated BIP 148 and one that did not, while even more types of “Bitcoin” could emerge as a result. A split split between BIP148-nodes and non-BIP148 nodes would last at least until a majority of hash power joins the BIP 148 chain, or until the BIP 148 chain is abandoned by all users and miners for good.

Miners essentially have three options to avoid such a split. This first option was to lock in SegWit before August 1 through the activation mechanism proposed by Bitcoin Core and implemented in many nodes on the network. This required 95 percent of hash power to signal support for the upgrade within a two-week difficulty period. Specifically, such a difficulty period consists of 2,016 of these sequential blocks, which means that a minimum of 1,916 blocks must signal support. Or, in other words, if more than 100 blocks — at least 101 of them — do not signal support for SegWit within a single difficulty period that ends before August 1, this BIP 148 deadline is missed.

Ignoring extreme statistical deviations or other unexpected events, the final difficulty period to end before August 1 started on Friday (UTC). And out of the first day and a half worth of blocks within this difficulty period, only about half of them signaled support for Segregated Witness. This means that the threshold of 101 blocks not signaling support has now been reached.

With two more BIP 148 deadlines ahead, the first one was probably also the most likely to be missed. Its threshold was the hardest of the three to achieve as it required the highest level of hash rate to succeed. Additionally, a large majority of miners (by hash power) indicates that they will activate SegWit through BIP 91 instead. This is the next BIP 148 deadline.

This next deadline will be on July 29. This is the last day that BIP 91 can activate in time to be compatible with BIP 148. In order to do so, 80 percent of hash power must have signaled support for SegWit2x within 2 1/3 days. As such, miners should at the very latest start signaling support for BIP 91 on the 26th of July. Though like the now-missed BIP141 deadline, which is technically not until August 31, the BIP 91 deadline could actually be either missed or met before July 29 as well.

If this next BIP 91 deadline is missed too, miners will have one more chance to avoid a “split.” A majority of hash power would have to activate SegWit through BIP 148 itself by August 1, 00:00 UTC. Alternatively, a majority of hash power could switch to the BIP 148 chain even after August 1 to reunite both chains, but this will likely cause significant disruption on the Bitcoin network(s), and potentially a loss of funds for users not aware of the risks.

For more information on how to keep your bitcoins safe during a potential coin-split, click here.

The post Bitcoin Miners Miss the First BIP 148 “Deadline” appeared first on Bitcoin Magazine.

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Got a Coinbase Account and an Opinion on Bitcoin Scaling? Be Heard on KYCPoll

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Bitcoin’s ongoing scaling debate is reaching fever pitch. Several scaling proposals are scheduled to activate within the next weeks, which may or may not be adopted by miners and users. This could even lead to segments splitting off from the current Bitcoin protocol, resulting in different types of “Bitcoin.”

One reason the several sides in this dispute have trouble agreeing on a single path forward is that all claim support from users on their preferred scaling solution. And this difference, in turn, results from the fact that it’s difficult to reliably gauge user sentiment.

Bitcoin Core and Bitcoin Knots developer Luke Dashjr launched one potential solution to this problem this week: a scaling poll that requires Coinbase identity verification to participate.

“It’s obviously not perfect, because not everyone uses Coinbase,” the developer noted. “But it’s one more useful source of data.”

KYCPoll is, of course, not the first poll to gauge user sentiment. Twitter and other social media have been splattered with scaling polls over the past couple of months. Reddit and other forums have hosted fierce public debates for years. And there are even some experimental coin-voting schemes, not to mention miners’ hash power signalling.

But user-focused polls, in particular, are often easily gamed or have other reliability issues. One of several problems is that typical internet polls can be manipulated by users that vote with a number fake identities. These “Sybil attacks” can severely skew the outcomes.

To counter this, Dashjr’s initiative utilizes a programming tool (“API”) offered by Coinbase, the major bitcoin exchange and de-facto wallet service that quite possibly holds the biggest database of users in the Bitcoin industry.

“I used Coinbase’s ‘OAuth2 API’, a way for third party websites to interact with other secure sites,” Dashjr said, explaining how he applied the technology for his polling site. “Though I had to use an older version of the API as well as the newer version, which is why users need to login twice.”

Leveraging the API, only users that have proven their identity to the bitcoin exchange are able to vote on KYCPoll. Since Coinbase applies a rigorous Know Your Customer (KYC) process to verify identities, this should exclude any Sybil accounts. As such, anyone should only get a single vote.

With scaling as an overlapping topic, there are several core issues being polled right now. This includes Segregated Witness (SegWit), the protocol upgrade proposed by the Bitcoin Core development team. A closely related topic is BIP148, the user activated soft fork (UASF) scheduled to activate SegWit on August 1. Sentiments on SegWit2x and other proposals to hard fork an increase of the “base block size limit are gauged as well.” Further topics in the poll include questions about soft forks, as well as governance issues and media consumption.

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Screenshot of a few results from KYCPoll – 17:00 EST July 12, 2017

Even though KYCPoll is a clever use of the Coinbase API, it is, of course, in no way binding. Additionally, Dashjr acknowledged it’s not even a definite solution for gauging user sentiment. This is most obviously because only Coinbase users can vote and not everyone has a Coinbase account. At the same time, having a Coinbase account does not necessarily mean someone is a bitcoin user (Coinbase also offers other cryptocurrencies), nor does it reveal how “heavy” of a user it is. Plus, KYCPoll is not as anonymous as some would like: while Coinbase does not get to see what users vote, Dashjr does.

Some of these issues may be improved upon, while it could also be possible to extend KYCPoll to include KYC-registered users from other Bitcoin companies — not only Coinbase.

But Dashjr noted that he’s unlikely to implement these improvements himself, and instead hopes that someone else will pick up on the open source project to further develop it.

“This is a kind of a side project I’m doing only because nobody else had done it yet. I’m not a web developer, which also explains why I explicitly don’t guarantee the data is secure. I hope someone more into web development will take over the project,” he said.

Vote on your preferred scaling solution, or just view the poll results so far, by clicking this link. You can also find more information on KYCPoll in this Reddit thread.

The post Got a Coinbase Account and an Opinion on Bitcoin Scaling? Be Heard on KYCPoll appeared first on Bitcoin Magazine.

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Privacy Project TumbleBit Inches Closer to Release With Tor Integration and New Wallet

Privacy Project TumbleBit Inches Closer to Release With Tor Integration and New Wallet

TumbleBit is one of the most promising privacy-enhancing technologies being built on top of Bitcoin right now. It allows users to mix their coins fully anonymously, without requiring trust in any third party. An advanced version of the technology, which requires Segregated Witness, can even be utilized as a second-layer payment hub to reduce transaction costs and speed up confirmation times.

After TumbleBit was first proposed in an academic paper and subsequently presented at the Scaling Bitcoin workshops in Milan, NBitcoin lead developer Nicolas Dorier built an early version of the technology. Since then, two wallets are being developed to make TumbleBit accessible for everyday use: Breeze and, more recently, HiddenWallet.

HiddenWallet developer Ádám Ficsór, better known online as “nopara73,” also completed Tor integration this week.

“I estimate that TumbleBit will be usable for the general public within a month or two.” — Ádám Ficsór

Tor Integration

TumbleBit lets users connect to a central server, which in turn allows them to establish payment channels that send coins back and forth in such a way that everyone receives as many coins as they sent. Since multiple users can engage at the same time, this allows them to mix their coins, breaking the trail of ownership on Bitcoin’s blockchain.

The key innovation compared to previous mixing models is that TumbleBit uses a combination of nifty cryptographic tricks to make sure that, first off, no one can steal funds. And second, no one — not even the central server — can link any of the sending addresses to any of the receiving addresses.

Yet, one problem remained, as Ficsór explained:

“Users connect to the central server with their own IP address to provide their sending and receiving addresses,” he said. “But this means that the central server could still match sending and receiving addresses based on the IP address that provided them. If one IP address provides both Bitcoin addresses, it’s trivial to link them.”

In other words, the central server could re-establish the traceable chain of coin ownership, defeating the purpose of using TumbleBit in the first place.

Ficsór therefore built a Tor-integration tool for the existing TumbleBit project. With this tool, the sending and receiving addresses of any user are separately provided to the central server through the anonymity network. This removes any link from a user’s IP address to any specific Bitcoin addresses and — importantly — removes the link between sending and receiving addresses as well.

HiddenWallet

At the same time, Ficsór is developing a new wallet specifically designed for TumbleBit, HiddenWallet, which would even offer increased privacy without TumbleBit.

Essentially all lightweight wallets leak address data to the outside world in some way or another. Most web wallets, mobile clients and some desktop wallets leak this info because they rely on a server that tells them about their balances. This server therefore needs to know all addresses in a wallet and can link them together accordingly.

Alternatively, some SPV clients send out a type of cryptographic “puzzle” (Bloom filters) to the network that requests all data relevant for their balance. But this leaks address data to random nodes on the network … and thus to analytics companies that specifically monitor the network for these puzzles.

“Blockstream’s Jonas Nick claimed in 2015 that if someone were to give him one Bitcoin address, he’d be able to figure out 70 percent of your wallet holdings. This was just one smart guy with limited resources, three years ago. You can imagine what well-funded analytics companies in 2017 are capable of,” Ficsór noted.

This linking of addresses is obviously a problem for TumbleBit users. No matter how much these users mix their bitcoins across their Bitcoin addresses, if all these addresses can be linked together anyway, there’s no point.

The only wallets that avoid this problem, so far, are full-node wallets like Bitcoin Core. These wallets download all transaction data on the network, meaning they don’t need to request specific data that reveals their own addresses. However, full nodes can be a bit resource-intensive, which is a barrier to entry for many casual Bitcoin users.

HiddenWallet therefore introduces a clever model in between the lightweight and full-node wallets, specifically designed to improve privacy.

Like a full node, HiddenWallet connects directly to the Bitcoin network, where it likewise requests all transaction data from random nodes. However, where full nodes verify (and typically store) all of this data, HiddenWallet instead immediately discards any data it doesn’t need. It only verifies and stores transaction data that involve the Bitcoin addresses in the wallet itself and doesn’t care about the rest. This requires far fewer resources than a full node does.

“The privacy benefit is obvious,” said Ficsór. “Since HiddenWallet downloads all transaction data, connected nodes have no idea which data is kept by the wallet and what is discarded. They learn nothing about the addresses in HiddenWallet and can’t link any of them together.”

And Ficsór thinks he may be able to trim resource usage down even further in a next release of HiddenWallet. This upcoming version may cut out all transaction data that would, for analytics companies, obviously not be relevant to the wallet anyway, like old transaction data. Such a modification could potentially make HiddenWallet available even on low-bandwidth mobile connections.

With this progress, it looks like TumbleBit may be usable even before the end of this summer, Ficsór estimates.

“We previously thought we might get the system up and running around this time, but it turned out there was a little bit more to it than we thought. That being said, another big hurdle is now taken: the Japanese company United Bitcoiners is running a tumbling server. Combined with Tor integration and wallets, all pieces of the puzzle are coming together.”

Ádám Ficsór works on TumbleBit without compensation, but accepts donations on 186n7me3QKajQZJnUsVsezVhVrSwyFCCZ

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This Is HODL.voting: Voting With Your Bitcoins but Better

This Is HODL.voting: Voting With Your Bitcoins but Better

Bitcoin’s ongoing scaling debate continues to highlight that protocol governance is one of the biggest challenges for this technology.

One of the many solutions that have been proposed to break through the scaling impasse is coin-voting schemes, where Bitcoin users get to “vote” on potential protocol changes with their bitcoins. One implementation of such a solution, Bitcoinocracy, already exists, while several Bitcoin Core developers have been working on alternative schemes.

And recently, Bitrated CEO Nadav Ivgi developed an early implementation of HODL.voting, a coin-voting solution with an interesting twist. To vote, users need to lock up their bitcoins, losing access to them for some time.

“The theory is that by attaching a real cost to voting — loss of liquidity and ability to sell — we can get more reliable signaling,” the Israeli developer thinks.

Sacrifice

The concept behind existing coin-voting schemes like Bitcoinocracy is simple. Anyone who holds bitcoins can use the associated private keys to sign a message. This message acts as a vote, and all votes are added up. This definitively proves that all votes correspond to the ownership of bitcoins, allowing for a one-coin-one-vote type of system.

But this straightforward setup also has its weaknesses, Ivgi argues. Most important, while this type of voting requires access to bitcoins, it still doesn’t actually cost anything to vote.

“This means that custodians — exchanges, hosted wallets, etcetera — get to have disproportional voting power with their customers’ funds. And I don’t think that people currently holding funds at an exchange meant to consent to the exchange voting on their behalf on matters such as this,” Ivgi explained. “And two: cost-free signaling is not very reliable. Someone who’s not informed on a debate has no incentive not to vote however he feels like, even if he knows that the vote is completely uneducated. Alternatively, it would be very cheap to bribe him to vote a certain way, especially if he’s not planning to vote otherwise.”

The solution to this problem, Ivgi thinks, is to add a cost to voting. Referring to the handicap principle, he suggests that whenever there’s an incentive to cheat, requiring a sort of “sacrifice” can make signaling more reliable. Anyone who wants to vote would have to incur a real cost to prove that he really means it.

The cost that HODL.voting imposes on voters is a lack of access to their actual bitcoins, temporarily. And the longer someone is willing to lose this access, the more weight is attributed to the vote.

“HODL.voting uses time locks as a sacrifice to assign votes with weight,” Ivgi explained. “You send bitcoins to a special Bitcoin address that locks your bitcoins up and encodes your vote. The vote is weighted according to the amount of bitcoins locked, multiplied by the lock duration.”

And this also has the benefit, Ivgi pointed out, that custodians can’t vote for their customers; not without effectively running a fractional reserve. Users may want to withdraw their bitcoins at any time, so making them inaccessible shouldn’t be an option for exchanges and wallet providers.

HODL.voting

Ivgi developed an early implementation of HODL.voting at the Tel Aviv Bitcoin Embassy Hackathon last March — and won first prize with it.

The implementation uses CheckSequenceVerify (CSV), a feature that was added to the Bitcoin protocol about a year ago. CSV allows users to essentially “lock” bitcoins into the Bitcoin blockchain itself. A transaction that spends these bitcoins would be considered valid only at some point in the future, relative to when the bitcoins were “locked up.”

Using the HODL.voting website, voters can create a transaction that locks up their bitcoins with CSV. The website also generates a refund transaction, which will only be valid at some point in the future. HODL.voting users can broadcast this transaction when the time lock has passed — or have it broadcast for them. Consequently, the voter will have lost access to his coins for some time, enforced by the Bitcoin protocol itself.

And the transaction that locks up the bitcoins also contains some extra data: the “vote.” The HODL.voting website recognizes the data as a vote, to record it and add it to all other votes to calculate the overall score. That score is then visible on the HODL.voting website itself.

The only real weakness left is that whoever controls the website could fuzz the visible score. While the actual vote cannot be faked — it’s embedded and enforced by the Bitcoin protocol — what visitors see on the website as the result can be. That said, it should be possible for individual voters to verify whether their vote was included in the overall results. And, any interested party can verify that all the votes as displayed on the website are legitimate. This should keep the platform honest, Ivgi thinks.

Lastly, it should be noted that HODL.voting is, of course, not in any way binding for anything — it’s actually more of a polling mechanism. But as a poll that cannot be faked, it could provide useful information that is otherwise hard to come by.

Ivgi:

“I think that as a voting system it’s mostly interesting for gauging community sentiment regarding Bitcoin protocol development issues. It gives the voting power to long-term holders who’re willing to prove that they’re confident in Bitcoin’s long-term value proposition and that they have a stake in Bitcoin. Not just today, but also in the future value of Bitcoin as affected by the protocol development decisions they’re voting on.”

An alpha version of HODL.voting is currently running on Bitcoin’s testnet. Ivgi says there’s still quite a bit of work to be done before the project will be ready for the mainnet. He will complete HODL.voting if he believes there is enough interest for it.

The post This Is HODL.voting: Voting With Your Bitcoins but Better appeared first on Bitcoin Magazine.

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Meeting the Russians Who Hope to Strike It Rich on ICOs

These Are the Russians That Hope to Strike it Rich on ICOs

“7… 00… 9… 0…  183.” I type in the secret code as printed on the flyer that I found at the Blockchain & Bitcoin Conference in Saint Petersburg the day prior. But to no avail. The steel gate to the inner-city courtyard won’t open, and the buttons I’m pressing seem like some kind of doorbell system rather than a lock anyway.

As I’m about to give it a second try — against my better judgement — two more guys show up. They want to enter too and apparently actually know how to do it. Pressing the right buttons, one of them unlocks the gate and lets me in as well. “Are you going to the Crypto Friends ICO Meetup?” I ask. The guys nod.

I try some small talk as we move our way into the courtyard.

“So, what brings you guys here. Are you investing in ICOs?”

One of them answers. His Russian accent is thick, but his English is good. He says he actually works at a company that helps businesses set up ICOs. His job is to get the message out about a new ICO, as far and wide as possible via forums, chat groups, news sites, whatever it takes. PR, basically.

“The return on investment in these ICOs is insane,” he enthuses. “Put in $10,000, and you can end up a millionaire.”

The two lead me around a corner to an inconspicuous door with another lock. Here they type in the code on the flyer: 70090183. The door opens, and we step into a small, somber hallway. A doorman sort of guy is sitting in an even smaller room to the left of us. He doesn’t look up. An elevator waits on the opposite side of the hall. We get in, and one of my companions presses the button with a five on it. It takes us to the top floor.

“Have you heard of EOS?” the other guy now asks me. I have but don’t know much about it. I tell him I know that the founder is supposed to be controversial; but I don’t know the details.

“I think it could be the next big thing,” he tells me. I nod, noncommittally. I don’t usually put money in these things.

On the top floor is another hallway. I notice that the green rubber floor is covered with arrow-shaped stickers. “Crypto friends meetup,” they read. Seems like we made it to the right place indeed. The stickers bring us to the next door. One of the guys knocks, the door opens.

A bit to my surprise, we now step into a luxurious restaurant. The light-filled rooms with big windows are decorated with antique furniture, and large framed paintings hang on the walls. The restaurant itself is relatively empty, but people have gathered in a bar area in the corner.

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The Deal With ICOs

In case you are that one person who hasn’t heard of the phenomenon yet: ICOs — short for Initial Coin Offerings — have been the crypto-rage for most of 2017. They are essentially tradable digital tokens, sold as some type of company stock, but issued on a blockchain. And without most of the legal guarantees that actual company stock provides — assuming these coins can even be considered company stock at all. Maybe they’re more like gift vouchers… or something. Often, no one really knows.

Either way, companies have been issuing these ICOs to raise funds for their venture. Lots of funds. ICOs have become somewhat notorious for selling tens of millions of dollars worth of tokens within minutes, earning startups — often with little more than a whitepaper to show for themselves — valuations more appropriate for C-series funding rounds.

The phenomenon has been catching on in Russia as much as anywhere else. Some of the most successful ICO projects are being developed by Russians — although they are often officially based abroad to avoid legal trouble. MobileGo is one of them, the mobile gaming platform that raised over $50 million. Another is Waves, itself a platform for ICO tokens, which raised over $16 million. It’s Waves, founded by Moscow-based Sasha Ivanov, that is sponsoring today’s event.

Crypto Friends

Mild electronic music fills the bar area, and small groups of people — perhaps two dozen in total — stand scattered throughout, chatting. Most have a drink in their hands: beer, wine and, in particular, cocktails.

I take a seat at one of the two tables that seems reserved for the event. One other fellow is sitting at the table. He’s wearing a hoodie and shorts, even though the Saint Petersburg summer is not all that warm. He has his laptop open, his eyes focused on the screen. He looks up after a couple of minutes, so I once again try to make some small talk. He tells me he works in fintech. “Real fintech,” he emphasizes. He develops trading apps for investing.

“What we’re seeing here is a mania,” he says when I ask him about ICOs. “There is no underlying value in any of these projects. They better resemble multi-level marketing schemes than proper investments.”

He’s clearly not a fan. So I ask him why he showed up at all.

“Maybe in five months or so, it could develop into something useful,” he says. “The concept has potential, but it needs to grow into something more serious. It could potentially be an interesting mix between crowdfunding and Initial Public Offerings. Eventually.”

Another guy joins the table but doesn’t sit down. He seems to be in his thirties, casually dressed as most people are: a landscape architect, he tells me when I ask him. “I invest but only a little. To make some money on the side,” he says. “Mostly in mobile platforms or apps.” His English is a bit shaky. As a friend of his shows up, he bids me goodbye.

I watch the two of them walk away, and it’s only now that I realize that in the back of the bar area, hidden behind curtains next to the bar itself, is another doorway.

The Actual Crypto Friends

Probably at least a hundred people sit around on sofas throughout this next large, round room, filled with the fruity smoke odor of water pipes. The glass ceiling is covered with cloth to keep some of the light out, and Russian finger food is laid out on coffee tables. The walls around us are covered with paintings, books and even some handcrafted art.

Apparently the bar was just for drinks. This is where the actual meetup is. I take a seat on one of the sofas.

There’s no stage. Instead, a guy with a neat, buttoned-up shirt is standing in the middle of the room with a microphone. He’s giving what seems to be an elevator pitch. Within five minutes, the next speaker is up. And the next one some ten minutes after that.

The unofficial MC of the night has a spot on a comfortable chair in the middle of the room. Three others are sitting close him: a sort of literal inner circle. They lead the charge in asking questions after each talk. I don’t understand any of it; it’s all in Russian, of course.

During the smoke break — we’re back in the courtyard — I walk up to the MC, and ask him if he’s the organizer. He quickly turns me over to Daria, a dark-haired girl in her twenties. I had noticed her pacing around the meetup area during the talks. I learn that she has put together today’s event.

“The speakers today cover just about anything there is to know about ICOs,” she explains, when I ask her what the purpose of the meetup is. “The potential, the risks, the legal aspect of it.”

“So why are people here?” I try. “What do you think, if you’re being honest? Is it just to make a quick buck?”

“It differs,” she says. “The crowd is diverse. We’ve got programmers, professional investors, hobbyists and more.”

Though, she clearly agrees that at least some people are here just to make some easy money.

“Sure, some projects are more valid than others. And yes, there’s lots of hype. But it’s a bit like the early days of Kickstarter. Over time the hype will calm down, and this method of fundraising will prove valuable.”

Anton

As the smoke break ends, Daria and the others head back to the big round room. I decide to stick to the bar area this time. At least in there I can chat a bit.

Having bought a beer for some $7— surprisingly expensive by Russian standards — I’m killing some time on my phone when a blond man joins me at the bar. His name is Anton. He has a British accent, picked up from his studies in the U.K., he says.

“I see this as Russia’s chance to take on a leadership role in the technology sector. We’ve been trailing the U.S. and Europe too much,” he tells me, after I ask him my by-now standard question: Why are you here?

Anton is very clearly speaking from a place of passion. He stands close to me, speaking a bit too loudly. He believes in what he says.

“But we’re not just here to make money, man,” he emphasizes after I tell him I work for Bitcoin Magazine. “I don’t want you to see it like that. Blockchains are about much more than that. We’re here to transform society. And that’s important to remember.”

Anton tells me about the potential of blockchains. The typical buzzwords. Transparent. Immutable. Censorship resistant.

I feel almost nostalgic, listening to the way Anton explains himself. I remember a similar vibe from back in 2013, when I visited my first Bitcoin meetups. The air was filled with excitement. Andreas Antonopoulos’ talks were going viral for the first time. Bitcoin was gonna change the world in every imaginable way.

“Blockchain technology has the potential to make an end to corruption,” Anton says. “It can make votes impossible to forge, for example.” He says he believes the Russian political system has been rigged for decades. “Now, we can have provably fair elections.”

It makes me slightly uneasy to watch Anton’s enthusiasm, with the ICO bubble that I’ve witnessed being built up.

The Bubble… and the Potential

And it is a bubble. The valuation of many of these projects is far beyond reason, and the evidence that many of the investors have no idea what they’re putting money into is abundant. And that’s without even getting into some of the outright fraudulent claims.

In addition to that, the legal status of this whole concept is unclear. There are good arguments to be made that ICOs are really just unlicensed securities, specifically designed to skirt existing regulation. As such, regulators are bound to step in at some point — else they may as well close shop and find new careers. And when they do step in, it could mean that the ICO party is over very quickly.

At the same time, some of the genuine enthusiasm I encounter in Saint Petersburg makes me wonder if I’ve just grown cynical over the past couple of years. The cryptocurrency and blockchain space has been exhausted by scams, failures and toxicity. It’s had a bit of a disheartening effect on many, including myself.

But perhaps there’s more to this phenomenon than just scams. Who knows? Maybe the ICO strategy can break down barriers, allowing the common man to access investment markets more easily. Perhaps projects can better raise funds without caring about international borders, restrictions and regulations.

Indeed, perhaps ICOs could at one point be a fruitful “mixture between Kickstarter and IPOs.” If nothing else, the phenomenal valuations suggest that there may be untapped liquidity markets.

“In Russia we have the developers, we have good ideas, and we have the talent,” as one of the meetup attendees tried to explain. “It’s money, funding that’s hard to come by. ICOs are a chance to realize that part of the puzzle.”

Note: Some names have been changed to protect privacy and anonymity.

The post Meeting the Russians Who Hope to Strike It Rich on ICOs appeared first on Bitcoin Magazine.

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Russia’s Crypto-Winter Shows Signs of a Thaw in Saint Petersburg

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A mixed crowd of denim jeans and custom-tailored suits, typical for crypto-events, is standing across the vertical aisle of the the main conference area at the Blockchain & Bitcoin Conference in Saint Petersburg, blocking the line of sight for those lucky enough to have snatched themselves a chair in the back. The hall, while spacious — high ceiling, tall arched windows partly covered with ASIC mining billboards — still isn’t quite large enough to fit all interested visitors.

The speaker on stage works for Alfa Bank, one of the biggest banks in Russia. The financial sector in the former Soviet block is taking as much interest in Bitcoin and, of course, blockchain technology as anywhere else is. Having skipped Russia’s second-biggest city for the past two years, Smile-Expo re-introduced its Eastern European conference tour in Saint Petersburg last Thursday.

“The event had over 600 visitors, 25 exhibitors and some 20 speakers. Four of those work for Russia’s largest financial institutions,” event organizer Pavol Likhomanov told Bitcoin Magazine. “Entrepreneurs and finance professionals are increasingly taking this technology seriously. This is evident from the turnup here in Saint Petersburg; and we’ve seen year-over-year growth in interest at our Moscow event as well.”

This interest is not necessarily self-evident. It was only in 2014 — indeed, around the time of the last Saint Petersburg conference — that Russia seemed to emerge as one of the most crypto-hostile nations on the globe. In an attempt to curb criminal activity, the Putin administration introduced draft legislation that would essentially ban any use of cryptocurrencies. Not much later, access to a number of Bitcoin websites, including bitcoin.org, was blocked in the country.

But so far, the proposed law has never actually been implemented.

“Bitcoin and cryptocurrencies still have no legal status in Russia,” Artem Tolkachev told Bitcoin Magazine. The director of Deloitte Russia’s legal services for technology projects was one of the headline speakers at the event, where the legal implications of blockchain technology represented a big chunk of the morning program.

“The central bank considers cryptocurrency like bitcoin a money surrogate, which is a progressive stance. But the Ministry of Finance is more conservative. They don’t like anything they don’t understand and cannot control,” he said. “And Russian policymakers are not always very open-minded. They prefer to have their own internet … their own currency.”

Needless to say, Bitcoin is not a great fit in such a worldview.

The Thaw

But the initial icy stance on digital currencies seems to be getting a bit less frosty these days.

It was only a couple of weeks ago that Russian president Vladimir Putin met Ethereum creator Vitalik Buterin at the International Economic Forum, also held in Saint Petersburg. In the widely reported event, within the crypto-sphere at least, the president was said to have “supported the idea of establishing ties with possible Russian partners” — referring to Buterin’s technology pitch.

The announcement has been interpreted as a sort of preliminary green light for Russian blockchain entrepreneurs and investors. While not quite an official endorsement from the Kremlin, let alone formal regulation, it’s been a hopeful sign nonetheless.

But until it’s official, Russian cryptocurrency users across the halls in the historic Vedensky Hotel, the site of last week’s event, remain reserved.

“The Russian market is volatile,” Timur, a former forex trader, told Bitcoin Magazine. He offers a platform that allows Russian brokers to trade on behalf of their clients, Russian cryptocurrency speculators. Speaking from his exhibit stand in Saint Petersburg, he explained: “We never know for sure if what’s accepted today will be legal tomorrow. Official policy could change at a whim.”

That’s why his company sets customers up with foreign bank accounts in Switzerland, or Lithuania, or maybe offshore. The coins themselves — bitcoin, litecoin, ether — never leave the exchange where they are traded.

And these exchanges are not in Russia either … at least not officially. Incorporating abroad is a typical strategy for Russians and their cryptocurrency startups.

Mining

It’s not just traders and the finance sector that are taking an interest. Bitcoin mining is growing in Russia too.

This is perhaps most evident from the rise of mining pool BitClub Network over the past months. While officially established outside of Russia, the team works from Kazan, a city to the east of Moscow. Already one of the biggest non-Chinese miners on the Bitcoin network, BitClub Network’s founder — he’s casually wearing a T-shirt emblazoned with an image of Putin — assured Bitcoin Magazine his will be a top-five pool by the end of the year. At least, that’s what one of his employees translated into English, his smartphone showing videos of data centers full of humming ASIC miners.

Russian miners are now setting up data centers such as these in the east of Russia, Alex of mining service provider MyRig told Bitcoin Magazine. “The temperature in Irkoetsk, for example, is ideal for Bitcoin mining: it can be -40 degrees Celsius. Meanwhile, electricity is cheap. There’s a big raw material industry, but with the crisis, some factories are out of use. With energy to spare, miners are starting to fill that void.”

MyRig, a rebranding of Bitmain Warranty (not to be confused with Bitmain), is not the only mining business at the Saint Petersburg conference. The company is vying for attention with several competitors in one of the exhibition rooms. One of them sells entire containers full of equipment, not unlike BitFury’s mobile data centers. Another is re-selling Antminers, the best-selling Bitmain machines.

“But to mine bitcoin in Russia at scale, you do still need to have the right connections,” Alex continues. “If you don’t know your way around local policymakers you risk being shut down.” Though with the increase in profits that the mining sector has seen over the past half year or so, the “big dicks” are entering the space, Alex said. “The guys with lots of money — and lots of connections. I’d expect mining in Russia to continue to grow significantly over the next year.”

And official regulation should be coming too, Deloitte’s Tolkachev said. A draft bill for cryptocurrency should be introduced within a few months, and could be approved by early 2018. This could bring some much-desired regulatory clarity for Russians wanting to open cryptocurrency-related businesses and otherwise openly engage in the industry without needing to work around the existing legal structure.

That is, visitors in the Vedensky Hotel generally seemed to agree, unless Putin changes his mind.

The post Russia’s Crypto-Winter Shows Signs of a Thaw in Saint Petersburg appeared first on Bitcoin Magazine.

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