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Tuesday, January 7, 2014

Bitcoin Privacy Developments, Power Ecology, and Helping the Homeless

Today's blog will briefly cover some recent privacy developments related to bitcoin, as well as developments in what I'll refer to here as "power ecology," and a description of some bitcoin projects to help the homeless.

Bitcoin Privacy Developments

There are several bitcoin privacy developments you should be aware of that are maturing significantly.

1) Peter Todd mentioned on Jan. 5, 2014 to the bitcoin development mailing list that "CoinJoin, CoinSwap and similar technologies improve your privacy by making sure information about what coins you own doesn't make it into the blockchain, but syncing your wallet is a privacy risk in itself and can easily leak that same info."  He additionally stated in part, "It is often advantageous if blockchain queries can be efficiently spread across multiple servers to avoid allowing the attacker to correllate the information into a whole. (...) With bloom filters doing this (it) is extremely costly as the full blockchain data needs to be read from disk to apply the filter; with prefix filters if the nodes have appropriate indexes there is little overhead to splitting the queries and no performance loss. (...) If addresses associated with change txouts are truly one-time-use, we can reduce or eliminate queries associated with them."

2) On Jan. 6, 2014, Peter Todd released an e-mail titled "Stealth Addresses" to the bitcoin development mailing list.  In this e-mail, he stated in part: "A Stealth Address is a new type of Bitcoin address and related scriptPubKey/transaction generation scheme that allowers payees to publish a single, fixed, address that payors can send funds efficiently, privately, reliably and non-interactively. Payors do not learn what other payments have been made to the stealth address, and third-parties learn nothing at all. (both subject to an adjustable anonymity set) (...)
Credit goes to ByteCoin for the original idea. Gregory Maxwell, Adam Back, and others on #bitcoin-wizards contributed valuable input on the implementation. Finally thanks goes to Amir Taaki for input on the
general idea of stealth addresses and use-cases."

3) Also on Jan. 6, 2014, Amir Taaki released new versions of libbitcoin, obelisk, and sx.  These releases are significant not only because these tools were used to develop Dark Wallet (on github in development here), but because they can (independently or jointly) be used for any privacy initiative relating to decentralized protocols.  From his e-mail announcement to the unSYSTEM mailing list (in part):
"This marks the first major release of Obelisk and SX. The version number
of libbitcoin has been bumped to 2.0, and I recommend everyone to
upgrade. This release has important bug fixes and code quality
improvements."
(...)
"These packages will be maintained for some time, with bug fixes
backported. I'll also help with upgrading code to newer versions as the
API changes (just send me a message)."

The sha256sum of tarballs for this project were described in the e-mail as follows.  (The link to the source code on github is shown in hyperlinks provided earlier in this post.)

3dfcf1cbe12c1d04443f1a467302e4a7ddd81a9e5afe16a3eae3bfdfd921e0be
libbitcoin-2.0.tar.bz2
940782033118e65a44a645291bfb5def96b7b423933e4de330c9d9852a4c166d
libwallet-0.4.tar.bz2
8a76e2075f6488bc8bc6487e09d9485986304c939945771102a92859d2bf0f42
obelisk-1.0.tar.bz2
3dc8688a511c9f5d698920ee2d47ae81c7dfd76f80307a1b97a04cbbebb07746
sx-1.0.tar.bz2

Power Ecology, Helping the Homeless

4) 'Power ecology' in the context of bitcoin is simply my way of describing shorthand the desire of many people to see bitcoin energy consumption be addressed in an ecologically sound manner.  While there are arguments that ecological concerns about bitcoin power use are essentially myths, it should be pointed out that there is no reason why we should not seek renewable sources of energy for bitcoin mining and maintenance.  Additionally, open source hardware intended to support production of sufficient renewable energy for bitcoin generation is a technology that already exists, and people have also built systems themselves to support such endeavors.  Such systems (whether offered for sale or built as "DIY") are not very expensive, considering the potential for the value they can produce.

5) Bitcoin Across America is a newly-released joint initiative involving Sean's Outpost and KryptoKit.  This is an effort to raise awareness about homelessness in the USA.  I hope you will support Bitcoin Across America with your donation.

See you next Tuesday.

Recommended Reads:

BitMonet (which was covered in the first post of the EdgedSolo blog) and Coinbase partner to release an Android SDK enabling micropayments within the app.
features (as quoted from the Coinbase blog post on the subject):  
"The new Android SDK allows you to:
  1. Accept bitcoin payments from within Android apps - the customer never needs to leave the app to pay.
  2. Accept payments with zero transaction fees, and just a few taps for seamless checkout.
  3. Perform micro-transactions on mobile with zero fees.
  4. Initiate debit payments in bitcoin, and support other payment flows which weren’t possible previously using bitcoin."
The code for this endeavor is open source, and can be found on github, here.

Developer's Introduction to Bitcoin (very informative!) by Vitalik Buterin


Tuesday, December 17, 2013

Implications of License Approaches for Giving Economy and New Social Good

Well, one thing is certain if you are analyzing licensing options when developing anything that is intended to foster a "giving economy" and a new social good:  Your head is going to hurt.


"It seems to me this is the culmination of three prior digital disruptions... One of which is commerce going digital, the second is peer-to-peer exchange going mainstream... The third is the digitization of social. (...) (This) has started to bring online some of the real-world assets, like reputation, like histories, like social capital, that will be the trust infrastructure for the sharing economy."
(...) "(R)egulation perhaps can be supplanted or supplemented by these digital institutions."
- Arun Sundararajan, professor and NEC Faculty Fellow at New York University's Stern School of Business, speaks about a "sharing economy" and "digital disruption" at Techonomy 2012. 

Based on the record of software development in particular, there is strong evidence that the license approach that you choose, apart from the merits of your proposal, can (in many situations) make or break your project in terms of its potential to be used widely.

For example, Microsoft's NetBSD for eMIPS (which refers to a "dynamically extensible processor" - a mechanism for building and developing a processor or providing machine instructions) has a license which is known as a 2-clause BSD license (see more information on BSD licenses here).  In 2011, the NetBSD project adopted Microsoft's eMIPS port. Such licenses are highly permissive, which enables use of code in almost any way so long as copyright notices are conveyed with it.

Bitcoin, which has the highest market capitalization of any decentralized protocol utilized as a cryptocurrency, is released under what is known as the MIT License. That license is considered to be compatible with the GNU General Public License described below, but what developers want to do with the software they are developing will influence what sort of licenses they choose (in terms of MIT versus GNU General Public License) as well as influencing the circumstances in which the license(s) will be applied.

The GNU General Public license scheme, and some others that are similar, are detailed here.  This license also relies upon the copyright concept, although it utilizes the "copyleft" concepts to help ensure free use of the software regardless of whoever uses it.  This approach is not as permissive as the BSD license, and was successfully used for many software projects, including Linux (GNU/Linux).  In 2008 alone, GNU/Linux was thought to have resulted in revenue that was approximately equivalent to nearly $36 billion USD.  The Linux kernel was used to build Android, which is now used for over 80% of the mobile phone market (by any measure, the market is currently dominated by Android).

Copyright-dependent licensing schemes are not the only options out there.  There are, for example, systems which exist that are intended to coexist with copyright law, while generally rejecting modern notions of intellectual property.  One such example is the Unlicense, which has been used for many projects.

These are just a few examples of licenses used in software development, but further complicating the issue is that multi-licensing or dual-license concepts can also be employed.

The licensing approach has significant implications for modern developers of the giving economy and any new social good.  The terms you use and the licensing approach you choose are significant considerations that must be given serious thought in any endeavor intended to promote a 'sharing' or 'giving' culture.

Recommended reads:

ABIS Protocol on github - a protocol concept to enable decentralization and expansion of a giving economy and a new social good.  (Initially presented using the GPLv3 license.)
Airbnb case (sharing economy related) to be decided by January 18, 2014.
BitMonet, which has just added support for TypePad.
North American Bitcoin Conference to be held at Miami Beach on Jan. 25-26, 2014.
South America: Crowdfunding with Bitcoin.
(Idea.me to receive $2.4 million USD Series A Funding in March 2014)
Sharing Visionaries Unite:
Andreas Antonopoulos, Katie Chin, Chelsea RustrumStanislav Shalunov (of Open Garden), and others speak at Sharers' Talks on Dec. 17, 2013.


Wednesday, December 11, 2013

What, Exactly, does Decentralization Change?

Decentralization in many parts of the world is increasing (see, for example, this recent study published in the Journal of Public Deliberation on the development and politics of subnational decentralization).
Some studies have examined decentralized versus centralized markets, and have shown, for example, that in certain conditions, a decentralized market is more efficient than a centralized marketplace.  Decentralized markets generally produce superior outcomes in the context of surplus when friction is reduced, or exists at a minimal level, and is small.  This raises the question of how "frictions" should be evaluated in the information economy, and suggests that "official attempts to manage economics" should be reduced wherever possible.  Organizations - including governments - that fail to either implement or adapt to decentralization will be absorbed by individuals, associations, and firms that demonstrate capacity to navigate an increasingly decentralized society.

Here I am not speaking of administrative decentralization, but rather a larger view, which includes political, fiscal, economic, and even personal and familial identity decentralization.   In this larger view, individuals and associations are empowered by their new-found realization that they can, merely through collective participation in the decentralization of financial systems (including individuals' and collective choices as to what we will fund in a giving economy), do away with most of what has traditionally been accomplished by government - and either continue it through funding of certain activities, or discontinue it by not funding others.  This also affects how people will in the near future develop the internet itself.  Broken trust in the common Certificate Authority (CA) system means more people will be turning to decentralized and open source solutions (such as TACK) to alter or replace the standard CA system, which until now has been assumed to be "just how things are done on the internet."

Wherever a potentially beneficial result occurs from government policy, such as reducing the potential for economic collapse via implementation of the Volcker rule, there should be maximum flexibility granted to innovators and participants in the new economy.  It should be understood that as part of this process, not only will some governments disappear and be replaced by  new organizations (or be done away with entirely in the transition to a new civil society), but as well, traditional financial institutions will eventually fade.  A good area to examine these developments is in the decline and death of banks as we understand them today.  The transition to a decentralized economy is accelerated by development of privacy enhancements (to the extent that those enhancements also spread in a free, open source, and decentralized fashion, which reduces the previously mentioned frictions).  These enhancements are now beginning to be implemented in not just one, but various decentralized currency protocols, which marks a historic point in what could be described as a revolution of purchasing power imparted to the individual.


"Bitcoin is really that revolution... I call it the seed of the resistance."  - Max Keiser

And that's all for this week, folks.  See you next Tuesday (that's a promise.)

Recommended Reading:

How to use bitcoin anonymously
Thoughts on alt-coins and diversification
FreeBSD moves away from Intel, Via
Cryptabyte - free cryptographic messaging service
KryptoKit -  one method for using bitcoins anywhere, even with places that don't yet accept them
Darkwallet - open source, decentralized wallet supporting bitcoin transaction anonymity, now 200% funded (over 100% of target level of USD donations, over 100% funded from bitcoin donations)
Sparecoins - open source, decentralized bitcoin wallet - in your browser.
The Largest Investment in a Bitcoin Product in known history:
Coinbase to use equivalent of $25 million USD to protect customers' bitcoins offline.
BitPhone - turns decentralized virtual protocol (namecoin) into a phone.  Yep, a phone.
"By using an autonomous, distributed communications network based on BitCoin principles, BitPhones require nothing but a shared network to send & receive messages, make voice and video calls, share photos, transfer files or run applications of all sorts."
BitPremier
BitGive Foundation (Give a Bit This Holiday Season)

Recommended Video Interview (added Thursday, Dec. 12, 2013):



"One of the problems that decentralization solves... is the difficulty of information moving around within centralized systems... Instead of... giving money to a central group of individuals... the best thing is to actually go to the source itself.... Instead of going to a centralized point.... you go to specific points and you've done away with a big part of the knowledge problem...."
"Sometimes peer-to-peer systems are the right approach.... or sometimes you really want both, because both lend themselves to some aspects of the problem."
-- Max Marty,
Co-founder and Chairman of the Board; former CEO, Blueseed.co
Co-founder and CEO of Spotsell (as of Nov. 2013)

Wednesday, December 4, 2013

Crypto Diversification & New Public Good

If you've been watching decentralized virtual currency developments at all over the past week or so, you've run into some interesting news.  Litecoin has shot up again, edging over $37 USD per LTC on the btc-e exchange as of the time I'm writing this post, and is approaching $39 (well over 241 CNY) on the OKC exchange. (Note: by the time this post was finished, litecoin was at over $40 USD on that exchange.)  In the process, jurisdictional arbitrage is providing users of various alt-coins with newly found wealth, even if they are not cashing out to their fiat currency of choice.  Five days ago, news broke in Forbes describing litecoin breaking the billion dollar mark for market capitalization, with namecoin breaking a 100 million dollar mark. Four days ago, the Guardian talked up not one, not two, but nine alt-coins, including quarkcoin -- which has now increased by over 500% in value. (It's also dropped quite a bit in value and has generated controversy over early mining efforts.  You can track what's happening with quarkcoin in real time at Cryptocoincharts.)  That's a coin that can be mined just with your CPU, and word on the street is that in addition to the areas where quarkcoin (and many other alt-coins) can be traded at present (Cryptsy, Coins-e, Bter, and Btc38), it is anticipated that quarkcoin (and other lesser known coin not yet in currency pairs on most exchanges) will be traded on btc-e as well, beginning at some point between December 15 - 20, 2013.
Bill Still (who will film the Dec. 19 Keiser report on Dec. 16, 2013) does a pretty good job of explaining quarkcoin, and covers it in an interview with Kolin, one of the quarkcoin developers.  (Kolin has a perspective on bitcoin (referring to it as "fantastically centralized") that I don't agree with, since bitcoin is a decentralized protocol. However, I've put the video here, so you can decide what you think. In my view, we will see development of many more coin types in the near future, and people who watch these developments closely, enter new markets early, and trade out at the right times, will be well-positioned to benefit.)



You would be right if you are thinking that you should engage in some 'crypto diversification.'  Beyond bitcoin, the march of decentralization has led to a proliferation of protocols, and huge surges of interest in the same.  But what about that new public good and the corresponding protocol development I alluded to in the prior post?  And, what are some ways to easily mine - to produce for yourself - namecoin, quarkcoin, and the like?

Wednesday, November 27, 2013

Living in Interesting Times: Decentralization becomes the rage, something new is released upon the world

At the risk of sounding cliché, I'll say it:  We are living in interesting times.

Decentralization has become the rage.  
The Pope (paradoxically, or not?) has championed decentralization.
People are sending bitcoins to charitable organizations in the Philippines, aiding recovery from Typhoon Haiyan.  Decentralized and open source search, content curation, and operating systems are becoming more popular.  And so on.

What to make of this?  So that you can get a good understanding of the implications of decentralization in today's world (and why many people have been championing it for so long), below is shown a video in which Andreas Antonopolous, founder of RootEleven (and several other bitcoin-based businesses), explains what decentralization is and why it is beneficial:


"In a way, hierarchical systems are a solution to the problem of direct access to information, direct access to each other, and communication scarcity.  When the problem no longer exists, (a) centralization hierarchy is the wrong solution." - A. Antonopolous

Tuesday, November 19, 2013

Day 2, Senate hearings: Bitcoin climbs in use, Congress Fails To Comprehend Bitcoin (Again)

"Bitcoin is an open standard, an open protocol, and an open source payment network.  Nobody owns the network, and nobody controls the network.  All of the users collectively own the network, its rules, and its ledger."- from Statement of BitPay CEO Anthony Gallippi, before the Subcommittee on National Security and International Trade and Finance and the Subcommittee on Economic Policy of The United States Senate Committee on Banking, Housing, and Urban Affairs, during the hearing on 'The Present and Future Impact of Virtual Currency,' November 19, 2013 
"Now we are engaged in a great Civil War, testing whether that nation, or any nation so conceived and so dedicated, can long endure. (...) It is rather for us to be here dedicated to the great task remaining before us (...) that government of the people, by the people, for the people, shall not perish from the earth." - Abraham Lincoln, Gettysburg Address, Nov. 19, 1863 
As today's Senate hearing on virtual currencies began, bitcoin rose to $704 USD, and continued to climb.


Monday, November 18, 2013

Day 1, Senate hearings: Bitcoin jumps from $650 to $750, USD (and Congress) is left in the dust


"What is called the dark web, also known as the deep web... (was) deliberately built to be untraceable, to protect the anonymity of the user." Sen. Tom Carper, Nov. 18, 2013 on CSPAN3, during the introduction to today's hearing on decentralized virtual currency.
As was to be expected, the panel's regulators in government focused on the worst possible imaginable crimes that they could dig up, attempting to connect them to bitcoin and other virtual currencies, in order to try to portray virtual currencies in an unfavorable light.  Interestingly, at no point during the hearing did any of the regulators who gave testimony make reference to decentralized virtual currency - in fact, their testimony completely failed to truly mention it or attempt to put it in a coherent sentence - nor did they acknowledge that such decentralized currencies are already beyond the control of governments.

Time and time again, courts in the United States have ruled to protect the right to anonymity.  One such case, in 1995, cited by Electronic Frontier Foundation in its defense of anonymity, included a decision by the US Supreme Court that "protections for anonymous speech are vital to democratic discourse," asserting that anonymous speech "exemplifies the purpose behind the Bill of Rights, and of the First Amendment in particular:  to protect unpopular individuals from retaliation... at the hand of an intolerant society."  In point of fact, today, Monday Nov. 18, 2013, the Electronic Frontier Foundation scored a significant victory that is now resulting in the release of hundreds of pages of documents from the government about the use of the unconstitutional Patriot Act, the use of which by government is currently being challenged in the courts.
Faced with this fact - and beyond any law on the books or interpretation of any law by the US Supreme Court, the fact that the strongest of decentralized currencies today is now immune to government attack -- the only thing that regulators in the hearing could do was to ignore and evade discussion of the most meaningful financial development to arrive on the scene in the United States since the production of the first US dollar.  Even a strong equilibrium attack run cheaply by governments against the bitcoin network would ultimately fail to do anything other than delay transactions for a day or two -- it would not be able to shut down the distributed, decentralized bitcoin network. And so, with grim faces, the regulators on today's panel did the only thing they could: ignore the decentralized virtual currency issue entirely.  The discussion was not a total loss, though: the second group of panelists (notably, none of whom were regulators) did not fail to take the opportunity to discuss decentralized virtual currency.

Here follow the most notable quotes from first the regulator panel, with the rest of the panelists' remarks shown in the order of the time they appeared:

Jennifer Shasky Calvery, Director of US Treasury's FinCEN:
"We work to achieve (our) mission by implementing the Bank Secrecy Act... Illicit actors might decide to use virtual currency... (it's) relatively anonymous.... does not typically have transaction limits.... may have been created to facilitate money laundering..."
"(This) is not nearly theoretical..." (References Liberty Reserve, Silk Road)
"It is also important to put virtual currency in perspective... Approximately 8 billion dollars in transactions (in virtual currency) over the past year."
"It is in the best interest of virtual currency users to comply with (our) regulations..."

Of course, anyone who is serious about their bottom line will not comply with additional burdensome regulations.  People are at this moment pursuing development of bitcoin anonymity solutions, including but not limited to, CoinJoin and DarkWallet (the latter of which has already exceeded its funding goal). In a day's time, the CoinJoin fund to support the development of strong cryptographic anonymity solutions has jumped from 16 BTC to over 31 BTC - a growth in value, at present prices, roughly equivalent to a collective donation by multiple individuals over a day's time of $10,000 USD (approximately doubling the amount the account already had). Exchanges that might face additional burdensome regulation will simply jump outside of USA borders, or locate on newly developing "offshore business platforms" which are maintained out at sea. If exchanges find that the regulatory environment makes it too tough for them to operate through websites, they can now fully distribute their bitcoin exchanges and related markets, so that no matter where they are in the world, they will never be able to be shut down due to the nature of decentralization.  Thus, it is not in the best interest of virtual currency users to, in the words of Jennifer Shasky Calvery, "comply."
It is in our interest to do what we please, either as individuals or associations, inside or outside the confines of today's 'nation-state of antiquity.'