VIDEO: The Bitcoin Blockchain Explained – IEEE Spectrum

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  1. Tomi Engdahl says:

    Big Trouble for Bitcoin

    A blog post by ex-Bitcoin developer Mike Hearn has highlighted dysfunctional management right at the top of Bitcoin development. He says it is clear Bitcoin is on the verge of collapse, and lays out several compelling reasons why. Quoting: “What was meant to be a new, decentralized form of money that lacked ‘systemically important institutions’ and ‘too big to fail’ has become something even worse: a system completely controlled by just a handful of people. Worse still, the network is on the brink of technical collapse.”

    The resolution of the Bitcoin experiment

    I’ve spent more than 5 years being a Bitcoin developer. The software I’ve written has been used by millions of users, hundreds of developers, and the talks I’ve given have led directly to the creation of several startups. I’ve talked about Bitcoin on Sky TV and BBC News. I have been repeatedly cited by the Economist as a Bitcoin expert and prominent developer. I have explained Bitcoin to the SEC, to bankers and to ordinary people I met at cafes.

    From the start, I’ve always said the same thing: Bitcoin is an experiment and like all experiments, it can fail. So don’t invest what you can’t afford to lose. I’ve said this in interviews, on stage at conferences, and over email. So have other well known developers like Gavin Andresen and Jeff Garzik.

    But despite knowing that Bitcoin could fail all along, the now inescapable conclusion that it has failed still saddens me greatly. The fundamentals are broken and whatever happens to the price in the short term, the long term trend should probably be downwards. I will no longer be taking part in Bitcoin development and have sold all my coins.

    Why has Bitcoin failed? It has failed because the community has failed.

    Deadlock on the blocks

    In case you haven’t been keeping up with Bitcoin, here is how the network looks as of January 2016.

    The block chain is full. You may wonder how it is possible for what is essentially a series of files to be “full”. The answer is that an entirely artificial capacity cap of one megabyte per block, put in place as a temporary kludge a long time ago, has not been removed and as a result the network’s capacity is now almost completely exhausted.

    The peak level in July was reached during a denial-of-service attack in which someone flooded the network with transactions in an attempt to break things, calling it a “stress test”. So that level, about 700 kilobytes of transactions (or less than 3 payments per second), is probably about the limit of what Bitcoin can actually achieve in practice

    So the average is nearly at the peak of what can be done. Not surprisingly then, there are frequent periods in which Bitcoin can’t keep up with the transaction load being placed upon it

    When networks run out of capacity, they get really unreliable. That’s why so many online attacks are based around simply flooding a target computer with traffic. Sure enough, just before Christmas payments started to become unreliable and at peak times backlogs are now becoming common.

    Bitcoin is supposed to respond to this situation with automatic fee rises to try and get rid of some users, and although the mechanisms behind it are barely functional that’s still sort of happening: it is rapidly becoming more and more expensive to use the Bitcoin network. Once upon a time, Bitcoin had the killer advantage of low and even zero fees, but it’s now common to be asked to pay more to miners than a credit card would charge.

    Why has the capacity limit not been raised? Because the block chain is controlled by Chinese miners, just two of whom control more than 50% of the hash power. At a recent conference over 95% of hashing power was controlled by a handful of guys sitting on a single stage. The miners are not allowing the block chain to grow.

    Why are they not allowing it to grow? Several reasons. One is that the developers of the “Bitcoin Core” software that they run have refused to implement the necessary changes.

    And the final reason is that the Chinese internet is so broken by their government’s firewall that moving data across the border barely works at all, with speeds routinely worse than what mobile phones provide.

    Many Bitcoin users and observers have been assuming up until very recently that somehow these problems would all sort themselves out

    Nobody knows what’s going on

    If you haven’t heard much about this, you aren’t alone. One of the most disturbing things that took place over the course of 2015 is that the flow of information to investors and users has dried up.

    Bitcoin is not intended to be an investment and has always been advertised pretty accurately: as an experimental currency which you shouldn’t buy more of than you can afford to lose.

    Most people who own Bitcoin learn about it through the mainstream media. Whenever a story goes mainstream the Bitcoin price goes crazy, then the media report on the price rises and a bubble happens.

    Stories about Bitcoin reach newspapers and magazines through a simple process: the news starts in a community forum, then it’s picked up by a more specialised community/tech news website, then journalists at general media outlets see the story on those sites and write their own versions. I’ve seen this happen over and over again, and frequently taken part in it by discussing stories with journalists.

    In August 2015 it became clear that due to severe mismanagement, the “Bitcoin Core” project that maintains the program that runs the peer-to-peer network wasn’t going to release a version that raised the block size limit.

    Why is Bitcoin Core keeping the limit?

    People problems.

    When Satoshi left, he handed over the reins of the program we now call Bitcoin Core to Gavin Andresen, an early contributor. Gavin is a solid and experienced leader who can see the big picture.

    Only one tiny problem: Satoshi never actually asked Gavin if he wanted the job, and in fact he didn’t. So the first thing Gavin did was grant four other developers access to the code as well. These developers were chosen quickly

  2. Tomi Engdahl says:

    Mary Jo Foley / ZDNet:
    Microsoft partners with the R3 banking consortium to develop and deploy blockchain technologies on the Azure Blockchain-as-a-Service cloud platform — Microsoft solidifies its blockchain-as-a-service work with new banking partnership — Microsoft is making its Azure blockchain …

    Microsoft solidifies its blockchain-as-a-service work with new banking partnership

    Microsoft is making its Azure blockchain-as-a-service offering the backbone of a new partnership with the R3 banking consortium.

    Microsoft has formed a “strategic partnership” with the R3 banking consortium to develop, test and deploy blockchain technologies.

    Microsoft officials announced the new arrangement on April 4, the first day of the company’s Envision 2016 business-decisionmaker conference in New Orleans. Envision is focused on the digital transformation of existing businesses using Microsoft technologies.

  3. Tomi Engdahl says:

    Craig Wright revealed as Bitcoin creator Satoshi Nakamoto

    Australian entrepreneur Craig Wright has publicly identified himself as Bitcoin creator Satoshi Nakamoto.

    His admission ends years of speculation about who came up with the original ideas underlying the digital cash system.

    Mr Wright has provided technical proof to back up his claim using coins known to be owned by Bitcoin’s creator.

    Prominent members of the Bitcoin community and its core development team have also confirmed Mr Wright’s claim.

    Mr Wright has revealed his identity to three media organisations – the BBC, the Economist and GQ.

    At the meeting with the BBC, Mr Wright digitally signed messages using cryptographic keys created during the early days of Bitcoin’s development. The keys are inextricably linked to blocks of bitcoins known to have been created or “mined” by Satoshi Nakamoto.

    Renowned cryptographer Hal Finney was one of the engineers who helped turn Mr Wright’s ideas into the Bitcoin protocol, he said.

  4. Tomi Engdahl says:

    Is the Blockchain Prepared for Enterprise?

    It’s not just for Bitcoins. Everyone’s trying to understand the blockchain and some are already using it. But is the database technology really ready for enterprise?

    In recent months various companies representing the oil and gas, finance, and software industries have formed the Enterprise Ethereum Alliance , dedicated to creating an enterprise-grade blockchain using a blockchain app platform called Ethereum. It boasts companies like Microsoft, BP, Intel, and JP Morgan among its ranks.

    But for all the excitement building around it, the blockchain has yet to answer one crucial question: Is it really ready for enterprise?

    So what is blockchain exactly? In short, it’s a means of creating distributed databases.

    Whenever that information is transferred it needs to be verified to make sure it isn’t fake or has been tampered with. In a typical network this is handled by a central database, much in the way that a bank handles money.

    Blockchain distributes this entire process. Rather than one or a few central servers, blockchain utilizes a network of what could be thousands of computers, all sharing a system-wide “ledger” that verifies the transaction across the entire large-scale network. Each computer holds bundles of information (blocks) that are chained together using cryptography to form the ledger.

    To trick the system you’d have to trick every single machine that holds a copy of the ledger, (which would be an extremely difficult task)

    The advantages of blockchain for enterprise applications is that it offers: decentralization, since no one entity holds ownership of the data; both public openness and pseudo-anonymity simultaneously; the ability to create token currencies that can be used to track ownership of data (i.e. who owns what piece of information along a supply chain); and, arguably most attractive, the ability to create smart contracts.

    What smart contacts allow is an ability to embed logic into a blockchain for easier process automation. In an IoT context smart contracts can be used to script automated transactions between different connected systems, but in a highly secured way. Information transacted to one device could automatically trigger transactions in other devices, and so on. Imagine being able to automatically and securely pay a supplier as a product moves along the manufacturing process – all without a centralized IT infrastructure.

    There are already some emerging use cases in the enterprise space.


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