These Are The Most Popular Digital Currencies Three Years Running

These Are The Most Popular Digital Currencies Three Years Running

In Bitcoin, there is much discussion about alt-coins, as if many of these are actually legitimate. Many alt-coins are pre-mined, causing them to lose much of their legitimacy. If a coin has been pre-mined, it should automatically be crossed off your digital currency investment list.

Further, many fairly simply don’t have the adoption rate to suggest any sort of liquidity or security. Still, inexperienced alt-coins are part of the space, and there are more all the time. They’re also a point of contention for many critics of crypto-currency generally, who point towards how effortless it is to create a crypto-currency these days. Of course, it wasn’t so effortless until Bitcoin demonstrated the model.

From the years 2013-2015, the three largest cryptocurrencies have remained constant: they are, Bitcoin, Ethereum, Ripple and Litecoin, respectively.

Bitcoin is well-publicized, but other options not so much.

A major switch happened in two thousand fourteen as Ripple overtook Litecoin for 2nd largest alt-coin in the market. As of December 2015, Ripple stands at a market cap of $211,089,007. Litecoin’s is $151,006, 662. Bitcoin’s is $6,596, 631,791.

Below these top three catches sight of, there is a lot of turnover. The stable options over the past two years have been Dogecoin, Bitshares, Stellar and Maidsafe coin below the top three alt-coins.

The most publicized of the Bitcoin Two.0 technologies, Ethereum has had an appreciable price increase YTD perhaps thanks to questions surrounding the block size limit in Bitcoin and rendering it the 2nd largest alternative digital currency.

The currency raised almost $20 million in order to ensure the project would get off the ground, and many people believe that Ethereum can achieve what Bitcoin cannot.

Ripple is different than Litecoin and Bitcoin. For one, its pre-mined, meaning its not a very good option for an investor, not to mention its lost more than 90% of its market cap over the past two years.

Ripple considers itself a “real-time gross settlement system”, and functions as a currency exchange and remittance network run by a private company, Ripple. The Ripple Protocol is a distributed open-source protocol with its own currency, called XRP or ripples. It’s likely that Ripple has served as a source of inspiration for many of the private financial institutions looking into Bitcoin.

Ripple All-Time Chart

In latest years, Ripple has turned its concentrate away from the crypto-currency movement to concentrate on the banking market perhaps symbolic of the synergy inbetween the financial industry and the Ripple model. Indeed, American Banker once wrote that “from [a] banks’ perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like bitcoin.”

Litecoin is the well-known crypto-currency designed by Charles Lee, who now works as Director of Engineering at Coinbase. This peer-to-peer internet currency is very much like Bitcoin from the user standpoint.

Open-source and global, Litecoin, like Bitcoin, is also fully decentralized, with mathematics securing the network. Some people point to Litecoin’s quicker transaction times as an improvement over Bitcoin.

Litecoin is one of the most proven crypto-currency experiments on the market and its proof-of-work algorithm uses scrypt, a different form of encryption, than Bitcoin. Charlie Lee envisaged the system as silver to Bitcoin’s gold analogy. He also foresaw that there might be a time when the Bitcoin network could not treat itself as a transaction network after a certain volume, and believed Litecoin could treat the spillover if Bitcoin every reached capacity.

I’m no pro on trading cryptocurrencies, as some are, but, unless you’re an accomplished, it’s most likely best to stay focused on Bitcoin. Until one feels convenient about the nuances of each crypto-currency, there’s no reason to explore other options, albeit Litecoin could be a brainy, inexpensive speculative play, just don’t invest more than you’re ready to lose. Once one does, even then, that doesn’t mean Litecoin and Ripple – or any other options – are a good choice for you.

Photos from Shutterstock, Ethereum, Ripple. Charts from CoinMarketCap.

These Are The Most Popular Digital Currencies Three Years Running

These Are The Most Popular Digital Currencies Three Years Running

In Bitcoin, there is much discussion about alt-coins, as if many of these are actually legitimate. Many alt-coins are pre-mined, causing them to lose much of their legitimacy. If a coin has been pre-mined, it should automatically be crossed off your digital currency investment list.

Further, many fairly simply don’t have the adoption rate to suggest any sort of liquidity or security. Still, fledgling alt-coins are part of the space, and there are more all the time. They’re also a point of contention for many critics of crypto-currency generally, who point towards how effortless it is to create a crypto-currency these days. Of course, it wasn’t so effortless until Bitcoin demonstrated the model.

From the years 2013-2015, the three largest cryptocurrencies have remained constant: they are, Bitcoin, Ethereum, Ripple and Litecoin, respectively.

Bitcoin is well-publicized, but other options not so much.

A major switch happened in two thousand fourteen as Ripple overtook Litecoin for 2nd largest alt-coin in the market. As of December 2015, Ripple stands at a market cap of $211,089,007. Litecoin’s is $151,006, 662. Bitcoin’s is $6,596, 631,791.

Below these top three catches sight of, there is a lot of turnover. The sustained options over the past two years have been Dogecoin, Bitshares, Stellar and Maidsafe coin below the top three alt-coins.

The most publicized of the Bitcoin Two.0 technologies, Ethereum has had an appreciable price increase YTD perhaps thanks to questions surrounding the block size limit in Bitcoin and rendering it the 2nd largest alternative digital currency.

The currency raised almost $20 million in order to ensure the project would get off the ground, and many people believe that Ethereum can achieve what Bitcoin cannot.

Ripple is different than Litecoin and Bitcoin. For one, its pre-mined, meaning its not a very good option for an investor, not to mention its lost more than 90% of its market cap over the past two years.

Ripple considers itself a “real-time gross settlement system”, and functions as a currency exchange and remittance network run by a private company, Ripple. The Ripple Protocol is a distributed open-source protocol with its own currency, called XRP or ripples. It’s likely that Ripple has served as a source of inspiration for many of the private financial institutions looking into Bitcoin.

Ripple All-Time Chart

In latest years, Ripple has turned its concentrate away from the crypto-currency movement to concentrate on the banking market perhaps symbolic of the synergy inbetween the financial industry and the Ripple model. Indeed, American Banker once wrote that “from [a] banks’ perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like bitcoin.”

Litecoin is the well-known crypto-currency designed by Charles Lee, who now works as Director of Engineering at Coinbase. This peer-to-peer internet currency is very much like Bitcoin from the user standpoint.

Open-source and global, Litecoin, like Bitcoin, is also fully decentralized, with mathematics securing the network. Some people point to Litecoin’s swifter transaction times as an improvement over Bitcoin.

Litecoin is one of the most proven crypto-currency experiments on the market and its proof-of-work algorithm uses scrypt, a different form of encryption, than Bitcoin. Charlie Lee envisaged the system as silver to Bitcoin’s gold analogy. He also foresaw that there might be a time when the Bitcoin network could not treat itself as a transaction network after a certain volume, and believed Litecoin could treat the spillover if Bitcoin every reached capacity.

I’m no pro on trading cryptocurrencies, as some are, but, unless you’re an accomplished, it’s very likely best to stay focused on Bitcoin. Until one feels comfy about the nuances of each crypto-currency, there’s no reason to explore other options, albeit Litecoin could be a wise, inexpensive speculative play, just don’t invest more than you’re ready to lose. Once one does, even then, that doesn’t mean Litecoin and Ripple – or any other options – are a good choice for you.

Photos from Shutterstock, Ethereum, Ripple. Charts from CoinMarketCap.

Related video:

The Worst Way to Buy Bitcoin – The Motley Idiot

The Worst Way to Buy Bitcoin

Investing in bitcoin isn’t effortless. It’s an online currency for the tech-savvy, difficult to buy and perhaps even stiffer to store securely. Thus, many investors and speculators have turned to an lighter way to own bitcoin, the Bitcoin Investment Trust (NASDAQOTH:GBTC) .

The Bitcoin Investment Trust was designed to make holding bitcoin as effortless as buying a stock or exchange-traded fund. Traded over the counter, the trust holds about 0.093 bitcoin for each share outstanding. Wielding a share is thus the equivalent to wielding about one-tenth of a bitcoin.

But like anything, shares of the Bitcoin Investment Trust are governed by the laws of supply and request, and impatient speculators are willing to pay more for each share than the trust’s bitcoins are worth. The fund recently traded for $531 per share, or 105% more than the underlying bitcoin is worth, according to my calculations.

Why this happens

It isn’t unusual for closed-end funds to trade at a price that differs from their net asset value. Some funds trade at premiums, while the majority trade at a discount. But what is unusual is the size of the premium — a 105% premium is a massive outlier to the rest of the closed-end fund world. Historically, closed-end funds have traded for a Four.5% discount to their net asset value, on average.

Bitcoin Investment Trust investors could lose money, even if bitcoin prices keep enlargening. Picture source: Getty Pics.

The sponsor of the trust, Grayscale Investments, recently filed to list the trust on the NYSE Arca exchange, where you’ll find most legitimate ETFs. At the same time, it suspended the creation of fresh trust units, which means that there won’t be any fresh shares created, at least not any time soon.

Even when it was actively issuing fresh units, creation wasn’t keeping up with request. Securities and Exchange Commission filings showcase it created only 31,400 shares in two thousand seventeen in the days leading up to its S-1 filing. With no fresh supply and an enlargening amount of request, the premium has widened quickly. Shares have traded at an average premium of 39% to underlying value of the bitcoin, according to my calculations.

Photo source: Author.

A big risk

Speculators who pay a premium to buy shares of the trust are taking a big risk by assuming that the supply and request imbalance is permanent. But things could switch, and quickly: Bitcoin could fall out of favor, or speculators could find lighter ways to buy and sell bitcoin quickly and in quantity. After all, as recently as April 13, shares traded at a mere 8% premium to NAV.

I find the premium difficult to justify. If anything, I’d argue shares should trade at a discount, given the trust’s 2% annual management fee that leisurely licks away at the bitcoin backing each share per year.

Closed-end fund investors often capitalize high management fees at ten times when valuing a fund. A fee of 2% per year capitalized at ten times means shares should theoretically trade at a 20% discount to the market value of the underlying bitcoin. The share price would have to fall by as much as 60% to get to a 20% discount to their net asset value, assuming no switch in the price of bitcoin.

I have no particular insight into where bitcoin will go from here, but I do know one thing: Fund premiums to net asset value have a tendency to revert to the mean. Investors who hold Bitcoin Investment Trust shares could thus stand to lose money even if bitcoin prices keep moving higher. Buyer beware.

Jordan Wathen has no position in any stocks mentioned. The Motley Idiot has no position in any of the stocks mentioned. The Motley Idiot has a disclosure policy.

Related video:

The True Cost of Bitcoin Transactions – Money and State

The True Cost of Bitcoin Transactions

It seems the Bitcoin community is not correctly tallying the true cost of Bitcoin transactions.

The belief is that Cost = Miner Fee. We’ll display why this is wrong, but the fee is of course part of the cost, so let’s examine it first…

Fees are presently averaging in the range of $0.30 to $1.00 per transaction. Here’s an anecdotal sample as I’m writing this:

Block #451871 $1,287 in fees / one thousand three hundred forty seven txs = $0.95 avg fee

Block #451872 $1649 in fees / two thousand one hundred sixty one txs = $0.76 avg fee

Block #451873 $1,497 in fees / one thousand four hundred fifty txs = $1.03 avg fee

Block #451874 $1,209 in fees / one thousand five hundred eighty two txs = $0.76 avg fee

Block #451875 $1,591 in fees / two thousand one hundred eighty txs = $0.73 avg fee

Total: $7,233 fees / eight thousand seven hundred twenty txs = $0.83 avg fee

83 cents per transaction on average…

Is that “too expensive?” That’s a judgement call, and genuine people can disagree about what is “too expensive.” It depends what one uses Bitcoin for.

Some people, indeed, are using Bitcoin to budge “normal” amounts of money around (ie – like a “peer-to-peer cash system”). This doesn’t refer to “micro transactions,” which are fractions of a dollar and have been impractical in Bitcoin for years, rather it refers to casual payments of $1-$50 in value, which make up the vast majority of human economic activity broadly, and a good deal of Bitcoin activity, specifically. An $0.83 fee doesn’t matter for a $Two,500 payment, but it matters if you’re sending $7 to a friend. Indeed, it will actually preclude a $Three daily wage payment.

Consider that a superb way to make Bitcoin centralized is to reduce its utility to only the world’s richest.

And those who imagine such users to be using Bitcoin “wrong” are perhaps not understanding what consequences that sentiment invites: such users, finding less utility in Bitcoin, will be incentivized to go to other platforms or just stick with the status quo: fiat. How tragic that someone would actually choose fiat, but many will if Bitcoin is too expensive to use as a peer-to-peer cash system.

So on the topic of the explicit miner fee, maybe $0.83 is too high, and maybe not. It depends what a user is attempting to accomplish.

But $0.83 isn’t the true cost… and this is a point most observers are missing.

The true cost of a Bitcoin transaction can be better considered as:

Cost = Fee + Time taken to determine fee + Risk of uncertainty. What do I mean by this?

Those people who are using Bitcoin today pay more than a miner fee, they pay in time and uncertainty (risk). As blocks are utter, users often need to switch the fee they add to their transaction (before or after they send it). Some wallets do an okay job of this, but most don’t (and before you vilify wallet creators, realize that “smart fee policy” is nowhere near a science yet, and switches all the time). So, in addition to the $0.83 miner fee, the user presently has to also spend Time to determine that it ought to be $0.83 in the very first place.

A highly-skilled Bitcoiner can figure out an adequate fee in a minute, but Bitcoin cannot be imagined as a platform only for highly-skilled Bitcoiners. If that is the target market, then the project is fated. A normal user (meaning most users) fight with the fee estimation (hell, I’ve been doing Bitcoin for six years and I’m not the most graceful at fee calculation myself).

Many casual (read: normal) users of Bitcoin get horribly confused, and if they even bother attempting to figure it out, they may wander over to /r/bitcoin to ask advice.

Look at this comment on Reddit to a user who was confused about transaction delays and fees:

We should realize how awkward and confusing that is for a normal Bitcoin user (ie – a non-technical person who wants a system that is effortless and convenient).

And at least that comment was attempting to be helpful. Many users get responses more like this:

Jesus. Add in the misery of dealing with people like /u/MinersFolly and it’s amazing Bitcoin is gaining users at all.

So back to our equation, the true cost of a transaction is: $0.83 (maybe?) + time to determine $0.83 + Risk of uncertainty.

What do I mean by uncertainty? Well, even if a user figures out a recommended fee, there is no assure it will be confirmed in the next block. Using a recommended fee gives zero assure of delivery time.

Here’s a depressing real world anecdote: A duo months ago I had some friends over for a Civ six LAN party. One man didn’t have the game, so I suggested to buy it on Steam for him (they accept Bitcoin!). I paid the BitPay invoice for the Steam game, and waited. And waited. And waited. Twenty five minutes later it still hadn’t displayed up. Three blocks had already happened. Everyone is sitting around waiting. Ultimately, I just pulled out a credit card and bought the game (paying again) so that we could all play. A year ago, this would not have happened. What went wrong? Was my fee incorrect? (I paid the high fee option in Jaxx wallet). Was the mempool too utter? We just desired to play, so back to the fifty year old credit card technology I went.

There are some in the community who read the above and actually think, “meh, what’s the big deal?” Or perhaps react, “just wait two years for Lightning!” Cool, tell me that when I’m attempting to buy Civ 7.

Back to the present… because of this uncertainty users are facing, one of two consequences happen:

1) the user gets annoyed at the delay, or actually suffers some kind of economic loss, or

Two) the user can’t use Bitcoin for this tx at all because it is time sensitive and user can’t risk the uncertainty.

And be careful not to discount the utility loss to a Bitcoin user, who was getting excited about making a Bitcoin transaction (the future of money!), only to detect his tx is stuck in the mempool for thirty three hours. We’re fortunate if that user ever gives Bitcoin another chance.

Fee + Time + Risk of uncertainty (F+T+Ru). Since T and Ru are not measureable, it seems most engineers in the industry have been totally oblivious to them. The costs are more apparent to an economist, and are very apparent to anyone in business with actual users (there’s a reason why almost every Bitcoin business with more than ten thousand users is very anxious to see both SegWit and a hardfork blocksize increase… but that’s another topic).

As blocks treatment capacity:

1) Miner fees get more expensive

Two) Time/effort to determine fees rises

Trio) The reliability of transactions falls toward zero (risk of hours-long delay for very first confirmation, even with “good fees”)

Many people have only been considering #1, above.

Those who look at a latest tx fee of $0.30 and obnoxiously proclaim, “transactions are cheap, you can’t expect the system to be free!” are truly missing the point and are harming the prospects of this project. The miner fee is only part of the cost that users are dealing with, and if peoples’ time and sanity are worth anything, it is the lesser part.

And let’s end this bimbo false dichotomy of Bitcoin as a “payment system” vs a “settlement system.” Such distinction is a relic of fiat banking networks and has no place with blockchain-based assets. The reality is this: every payment on a blockchain network is a settlement, and the cheaper these transactions, the more widespread uses the platform will find, meaning greater utility, a broader and more decentralized user-base, higher market capitalization, more liquidity, and therefore more hashpower dedicated to it, and more security derived therefrom.

If Bitcoin transactions are too expensive (considering F+T+Ru), people will use other platforms instead for some or all of their economic activity, period. As I tweeted yesterday, I’ve found myself now holding a modest balance of Ethereum merely for the purpose of puny (not micro) payments to friends. It’s just cheaper and more reliable. And I’m doing that with more allegiance to Bitcoin than almost anyone on Earth, how dedicated will a normal person be to a platform that isn’t helpful to them?

The response of some has been, “so what, good riddance.” Such people are being arrogant, naïve, and suffering from a disease common in the business world: not listening to or respecting customers. Such people are free to have that sentiment, of course, just as they are free to end up on a lonely platform.

Now, obviously a blockchain cannot (and should not) treat all the world’s transactions on-chain, but that doesn’t mean we shouldn’t do all we can to acquire as much transaction marketshare as securely possible. This is a platform about network effects, after all. Just because it’s true that Bitcoin’s blockchain can’t treat Visa-level scale on-chain, doesn’t mean we should be convenient and complacent about a five tx/sec threshold today, especially during Bitcoin’s formative years, while the world is still watching and waiting to see if it catches on as the money protocol of the future (those who think Bitcoin’s dominance is “inevitable” are, again, suffering arrogance).

The community needs to take at- or near-capacity blocks earnestly, and yet many have dismissed the issue, telling stupid things like “well when fees rise it’s just the free market at work.” Sure it is, and when users leave Bitcoin, or never bother a 2nd transaction because their very first was obnoxious and unreliable, their preference of alternatives will also “just be the free market at work.” The objective should be to do everything practical to make Bitcoin cheaper and more efficient, because if we don’t, it leaves a meaty chance for Bitcoin’s successor. Bitcoin is free-market money. It competes, and it must be competitive.

As the true cost of Bitcoin transactions rises, utility at the margin falls, and the platform’s fundamental value as a instrument for human economic interaction declines alongside. Reduce the number of use-cases for which Bitcoin makes sense, and the quantity and quality of people willing to hold a portion of Bitcoin declines.

Related video:

The Top Use Cases For Bitcoin – LibertyLifeTrail by Tone Vays

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The Top Use Cases For Bitcoin

A few weeks ago, CoinTelegraph wrote the article “The seven Uses of Bitcoin and the Best Ways to Buy It” based on comments I made during a Skype talk. There was a lot of information provide that needs extra context as to why these Top seven uses are significant.

Many people see Bitcoin as this amazing payment system that is swifter, cheaper and lighter then traditional payment methods like debit cards, credit cards and Paypal, and while this is certainly true, the Bitcoin Blockchain is much more than that. Let’s face it, instant data transfers are not fresh technology, we all get our emails and text messages within seconds of someone sending them and even money can stir instantly from person to person through the bank. What makes Bitcoin payments special is that they disregard “money transmission” laws by cutting out the middlemen that validates the parties involved on both completes. Because of this property, Bitcoin payments are not only final upon hitting the send button, they are also “permissionless”.

So now let’s talk about which use cases is Bitcoin most valuable for because of the properties mentioned above:

While it is now well know that Bitcoin transactions are not as anonymous as once proclaimed, its use for purchases of good some Governments frown upon remains as strong today as it ever was.

Trio. Gambling : While this use case has already been around and utilized for a few years, it has not yet reached its total potential. It is clearly useful to permit anyone to place bets from anywhere and not having to deal with jurisdictional local currency transfers, but one day bitcoin will permit instant payouts without even creating accounts. There is always counter-party risk associated with these operations until they are fully legalized and perhaps regulated, but bitcoin permits the possibility of placing a bet that pays out to the same address that sent in the funds once the winning outcome is known.

Four. Purchasing Services Government Does Not Approve Of : This Bitcoin use case is fairly fresh and became popular in the same way as WikiLeaks. Once a popular escort site Backpage got cut off from traditonal means to pay for ads like Credit Cards and PayPal, the incident made national news. It introduced this sector of the economy to Bitcoin and this trend is just getting embarked. We have also now seen cam sites operate exclusively on bitcoin as well as more established sites using it as a medium of exchange for more anonymity and privacy.

Five. Hiding Assets from a Soon to be Spouse : This is one of the these use cases few will be willing to admit publicly because it may lead to serious social and family dynamic issues. With the divorce rate being consistently in the 50% area since the late 1970’s, being able to protect some of your assets is a major concern for the shrinking number of people who are thinking about Marriage. It could be awkward to bring up signing a ‘pre-nup’, but if this use case is to be realized, it could make the party with a larger financial stake more open to the idea of Marriage and improve the all time low rates we are watching since the 60’s (and that’s the 1860’s)

6. Hiding Assets from the Government : While an obsessive spouse may think they own you, they do not even come close to how the Government that issues your passport possesses you. This is another one of those use cases few will be talking about publicly. Everyone should see the signs of how the Governments are stepping up Money Laundering Enforcement, and they are now commencing to go after what some used to see as Traditional Tax Havens like Swiss Banks and the Caribbean. The population is already looked upon as Tax Cheats and until we budge to a Voluntary Tax System, people with money will always find ways to protect it from those who will waste it. How big of a use case can it be? Here is one estimate:

7. Transferring Value Cross Borders : While Bitcoin might be used as a way to store & hide your wealth, the real power of the Blockchain will come when large economies rise and fall. This has always happened historically and why the world has had so many global reserve currencies with the USD just the latest one already pushing the bounds of time spent in this position. In the past this value transfer has usually been Gold but in the digital age Gold is becoming much less useful. Additionally there is the difficulty of private citizens moving Gold due to technology like Metal Detectors making it an effortless mark for confiscation, Bitcoin might just find itself very useful.

While the list above may be questionable from a legal perspective, arguments can be made from a moral standpoint that everything mentioned so far should be globally legal and acceptable. This is also the reason why certain other uses for Bitcoin did not make the list. Things like ransom payments for those who’s computer was cryptolockered or accusations of Bitcoin being an enabler of Deep Web Assassination Markets. These use cases are a clear disturbance of property rights or are the initiation of force and therefore should NOT be considered as valid use cases.

The Top Use Cases For Bitcoin – LibertyLifeTrail by Tone Vays

LibertyLifeTrail by Tone Vays

Providing the Devices to live a Free Independent & Healthy Life

Primary Navigation

  • Open
  • Home
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  • Interviews
  • Publications
  • Trading
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  • Investments
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  • Educational Devices
    • Learn Bitcoin
    • Learn Economics
    • Learn Trading
  • Calendar
  • Open

The Top Use Cases For Bitcoin

A few weeks ago, CoinTelegraph wrote the article “The seven Uses of Bitcoin and the Best Ways to Buy It” based on comments I made during a Skype talk. There was a lot of information provide that needs extra context as to why these Top seven uses are significant.

Many people see Bitcoin as this amazing payment system that is swifter, cheaper and lighter then traditional payment methods like debit cards, credit cards and Paypal, and while this is certainly true, the Bitcoin Blockchain is much more than that. Let’s face it, instant data transfers are not fresh technology, we all get our emails and text messages within seconds of someone sending them and even money can stir instantly from person to person through the bank. What makes Bitcoin payments special is that they overlook “money transmission” laws by cutting out the middlemen that validates the parties involved on both completes. Because of this property, Bitcoin payments are not only final upon hitting the send button, they are also “permissionless”.

So now let’s talk about which use cases is Bitcoin most valuable for because of the properties mentioned above:

While it is now well know that Bitcoin transactions are not as anonymous as once proclaimed, its use for purchases of good some Governments frown upon remains as strong today as it ever was.

Three. Gambling : While this use case has already been around and utilized for a few years, it has not yet reached its total potential. It is clearly useful to permit anyone to place bets from anywhere and not having to deal with jurisdictional local currency transfers, but one day bitcoin will permit instant payouts without even creating accounts. There is always counter-party risk associated with these operations until they are fully legalized and perhaps regulated, but bitcoin permits the possibility of placing a bet that pays out to the same address that sent in the funds once the winning outcome is known.

Four. Purchasing Services Government Does Not Approve Of : This Bitcoin use case is fairly fresh and became popular in the same way as WikiLeaks. Once a popular escort site Backpage got cut off from traditonal means to pay for ads like Credit Cards and PayPal, the incident made national news. It introduced this sector of the economy to Bitcoin and this trend is just getting embarked. We have also now seen cam sites operate exclusively on bitcoin as well as more established sites using it as a medium of exchange for more anonymity and privacy.

Five. Hiding Assets from a Soon to be Spouse : This is one of the these use cases few will be willing to admit publicly because it may lead to serious social and family dynamic issues. With the divorce rate being consistently in the 50% area since the late 1970’s, being able to protect some of your assets is a major concern for the shrinking number of people who are thinking about Marriage. It could be awkward to bring up signing a ‘pre-nup’, but if this use case is to be realized, it could make the party with a larger financial stake more open to the idea of Marriage and improve the all time low rates we are eyeing since the 60’s (and that’s the 1860’s)

6. Hiding Assets from the Government : While an obsessive spouse may think they own you, they do not even come close to how the Government that issues your passport wields you. This is another one of those use cases few will be talking about publicly. Everyone should see the signs of how the Governments are stepping up Money Laundering Enforcement, and they are now commencing to go after what some used to see as Traditional Tax Havens like Swiss Banks and the Caribbean. The population is already looked upon as Tax Cheats and until we budge to a Voluntary Tax System, people with money will always find ways to protect it from those who will waste it. How big of a use case can it be? Here is one estimate:

7. Transferring Value Cross Borders : While Bitcoin might be used as a way to store & hide your wealth, the real power of the Blockchain will come when large economies rise and fall. This has always happened historically and why the world has had so many global reserve currencies with the USD just the latest one already pushing the bounds of time spent in this position. In the past this value transfer has usually been Gold but in the digital age Gold is becoming much less useful. Additionally there is the difficulty of private citizens moving Gold due to technology like Metal Detectors making it an effortless mark for confiscation, Bitcoin might just find itself very useful.

While the list above may be questionable from a legal perspective, arguments can be made from a moral standpoint that everything mentioned so far should be globally legal and acceptable. This is also the reason why certain other uses for Bitcoin did not make the list. Things like ransom payments for those who’s computer was cryptolockered or accusations of Bitcoin being an enabler of Deep Web Assassination Markets. These use cases are a clear disturbance of property rights or are the initiation of force and therefore should NOT be considered as valid use cases.

Related video:

The Security and Utility of Blockchain Technology

ACFE Insights

News and analysis on the global fight against fraud

ACFE Insights

FROM THE ARCHIVES

Zach Capers, CFE

Contributing Author, Association of Certified Fraud Examiners

The technology underlying the virtual currency bitcoin has the potential to disrupt several industries while significantly reducing fraud. Known as blockchain, the technology was created to ensure the legitimacy of every bitcoin transaction by tracking them in a distributed public ledger. Bitcoin has suffered a divisive reputation due to its volatile value fluctuations and use in illicit transactions on the Deep Web; however, the security and utility suggested by its blockchain is anything but controversial.

Any addition to bitcoin’s chain of information represents a fresh block that must be validated by every copy of the ledger spread across a worldwide computer network. Because the ledger is permanent, public and decentralized, it is amazingly difficult to defraud. These characteristics have resulted in an influx of investment and research aimed at adapting the blockchain concept to a diverse array of fresh applications.

Illuminating Supply Chains

The information in a blockchain can consist of anything that can be represented digitally. As such, blockchain technology can be used to ensure the authenticity and source of any number of products from organic produce to jewelry. For example, a start-up named Everledger is betting that a diamond’s myriad attributes can be recorded and tracked using an inscribed serial number and a digital blockchain to ensure that the stone being purchased is authentic.

This idea can be applied to a host of high-end goods that have typically relied on paperwork and certificates of authenticity that can be faked far more lightly than a blockchain can be manipulated. Furthermore, stolen goods that are recovered can be re-authenticated to regain their value, which is significant to former owners and insurance companies that have paid claims on stolen goods.

The Rise of Clever Contracts

One of the most heralded potential uses of blockchain technology is its capability to facilitate brainy contracts. Rather than a standard legal contract that must be litigated or otherwise disputed if breached, a clever contract can enforce itself through digital means when preset terms are met, and revoke the contract automatically if the terms are breached.

Ethereum, a crowd-funded wise contract platform, might foretell the future of clever contracts. The network permits users to input virtually any stipulations (e.g., if this, then that) into the brainy contract’s blockchain and exchange value using virtual currency. For example, if one were to purchase an item from an online seller, a wise contract could be employed to hold the payment in escrow until a tracking system confirms that the item has been delivered.

Another example of a wise contract platform applies to the streaming music industry. Renowned English singer-songwriter Imogen Heap recently released a fresh single on Ujo Music, a company that permits artists to register and track their creations on a blockchain using associated wise contracts that permit the listener to stream the song only after specified conditions (e.g., payment, terms of use) have been sated. The idea is to foster an equitable method of music distribution that provides artists with more control over how their music is collective and for how much it is sold.

Influence on Financial Institutions

A key advantage of blockchain is its capability to permit two entities that do not necessarily trust one another to trust one another. Because a blockchain can only be updated when there is consensus among the participants, the need for a third party to mediate a transaction is lessened or eliminated. This can alleviate many factors that complicate financial transactions (e.g., need for collateral, time required for settlements) and automate many banking processes presently requiring human interactions that add time, costs, and opportunities to commit fraud.

Stock exchanges around the world have begun to experiment with blockchains. The Japan Exchange Group announced a collaboration with IBM to test securities trading in a blockchain environment. The Australian Stock Exchange has partnered with Digital Asset Holdings, a blockchain start-up founded by well-known former JP Morgan executive Blythe Masters, to increase efficiencies related to post-trade settlements. To keep rhythm, the Toronto Stock Exchange hired the co-founder of aforementioned clever contract platform Ethereum to serve as the organization’s very first chief digital officer.

While blockchain technology is still in its infancy, it is not too early to see bitcoin as the very first use case of a versatile and potentially revolutionary concept. From proving an asset’s origin to the streamlining of high finance, various fresh uses for blockchain proceed to emerge. And while applications might vary greatly, what they all have in common are enhanced audit trails, enhanced efficiency and improved transparency — each of which is a known foe of fraud.

*For background on bitcoin, I recommend listening to this Fraud Talk podcast by Jacob Parks , J.D., CFE.

**This article was originally published in the ACFE’s members-only monthly newsletter, The Fraud Examiner in April of 2016.

Related video:

http://www.youtube.com/watch?v=t7QGlkAC3xM

The Promise of Blockchain for Electronic Health Records – ACT, The App Association

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The Embarrassing State of EHRs

Congressional advocates intended the Health Information Technology for Economic and Clinical Health (HITECH) Act of two thousand nine to be a catalyst to bring health records into the digital age. While it succeeded in helping many hospitals upgrade from paper records to electronic health records (EHRs), it gravely fragmented the network used to access and transfer health data. While the current system is flawed, blockchain offers an chance to repair the EHR sector.

Healthcare providers across the country have dedicated time and effort to input patient information into digital databases to electronically store records, but many doctors and healthcare providers proceed to fax and snail-mail their medical records to recipients outside of their office walls. In 2015, only had successfully merged information from another practice into their own database. The numbers are worse for patients. Even tho’ we live in a connected, internet-driven society, just sixteen percent of patients can download, view, or send their medical records electronically. Barriers to interoperability inbetween hospital systems remains a critical culprit for these challenges, and it’s no surprise that a latest explore by the American Medical Association and American EHR Fucking partners found that forty three percent of physicians believed EHR software made their jobs more difficult.

Despite these challenges, patients are churning out more digital health data than ever before. Harshly sixty percent of Americans uses mobile apps to track medical conditions and make informed choices about their health, and by 2020, inbetween twenty to thirty billion internet of things connected health devices will be used globally. These shifts are significant to note, especially as utter genome sequencing has become more popular and affordable. However, if the data cannot be integrated into existing systems, doctors are incapable to take total advantage of innovations in health data to make the best decisions about a patient’s health.

The availability and capability to digitize health data are significant factors in the success of electronic health records. Moreover, it is paramount to patients, doctors, and healthcare providers that digitized health records be both private and secure. EHRs should be private in that only authorized parties that have received permission, by the law and the parties involved, may access health records, in various levels of detail. They must also be secure to ensure health records are protected from tampering, as incorrect data can make the difference inbetween life and death.

The Promise of Blockchain

Here’s where blockchain comes into play. Blockchain is a database that leverages cloud storage infrastructure to maintain a secure list of data records or transactions. Albeit it is a technology often associated with cryptocurrencies like Bitcoin and Ether, it has been used for applications like land title registration in the Republic of Georgia and secure digital ID cards in Estonia. Brainy contracts within the blockchain platform permit logic to be programmed into the blockchain and executed when a transaction is made.

Within the EHR industry, blockchain presents a much-needed avenue to upload, store, and transfer files securely and cost-effectively. Rather than requiring health data to be stored in a centralized database, blockchain utilizes secure cloud technologies enabling data to be seamlessly collective and accessed from numerous sources. For example, during annual check-ups, physicians and healthcare providers could review data synced from apps and wearable devices like the Apple Witness or Fitbit, instead of relying on patients to accurately, and honestly, divulge their health and exercise habits. In more urgent situations, a doctor may access blockchain-sourced data to decipher whether the patient is allergic to certain medicines, or gather other critical information necessary for treatment.

Despite the efficiencies blockchain provides, the concerns for maintaining the integrity of healthcare data is legitimate. In the very first half of 2017, there were two hundred thirty three health data breaches, affecting more than three million people, reported in the United States. Over forty one percent of the breaches were insider-caused.

However, the services provided by blockchain help assuage the anxieties of bringing valuable, private healthcare data into the digital world. Blockchain offers particularly strong benefits in three areas: integrity, permission, and decentralization.

  • Blockchain ensures information on the chain is verified by requiring users to provide a signature and time-stamp with a private key to access the data.
  • Blockchain can trace successful, or attempted, hacks and falsified records to an exact user to mitigate data breaches and insurance fraud.
  • Blockchain maintains a permanent ledger, making it much more difficult for records to be lost or misplaced. Instead of relying on photocopies from their doctor’s office or third-party provider, patients have control over their data.
  • Blockchain uses logic that powers wise contracts, permitting users to give permissions, and control with whom their data is collective. Consider consumer genetic testing. Insights about patients’ DNA could help physicians make life-saving decisions, but they could also be used to raise the costs of life insurance. While the Genetic Information Nondiscrimination Act of two thousand eight protects consumers from genetic-based discrimination in health insurance and employment decisions, it does not cover deeds of actuaries or decision-makers in other fields. Therefore, the logic built into blockchain permits consumers to have the best of both worlds, providing access to doctors when they need it, while at the same time protecting data from unauthorized users.
  • Blockchain does not require data to be centrally maintained. Healthcare information can be stored in cloud databases and devices around the globe, ultimately providing patients with the power to control and share their data. By removing the requirement for doctors, hospitals, and other care providers to be siloed into a single health data system, patients are empowered to determine when, how, and to what extent their information may be collective with those who provide care.

Related video:

The Ico – Shadow of the Colossus Collection Game Review

The Ico & Shadow of the Colossus Collection

  • PlayStation Trio
  • $39.99
  • 2011

Kids say

Witness or buy this game:

Common Sense is a nonprofit organization. Your purchase helps us remain independent and ad-free.

Get it now on:

See or buy this game:

Common Sense is a nonprofit organization. Your purchase helps us remain independent and ad-free.

A lot or a little?

Parents’ guide to what’s in this game.

The primary theme in both of these games is that wits, ingenuity, and perseverance can help even the smallest of heroes overcome the greatest of obstacles, be it a Byzantine puzzle or a skyscraper-sized monster. Violence plays a notable role in Shadow of the Colossus, but it’s fantastical and directed toward utterly inhuman monsters.

Our heroes are paragons of nobleness. The youthful boy in Ico strives to protect a doll, while the warrior in Shadow of the Colossus is a David-and-Goliath style archetype. However, the dame in Ico shows up all but vulnerable next to the boy, who does virtually all of the physical work and fighting.

Tho’ the controls will feel slightly dated to modern players, navigation and fighting both remain fairly intuitive. The real difficulty comes in recognizing and piecing together the clues and patterns that will permit players to solve puzzles and defeat monsters. Both games are true head-scratchers. Don’t be astonished by the occasional need to consult an online play guide.

In Ico, shadowy monsters attempt to kidnap a pallid doll, dragging her into inky pools of black. Players fend them off by hitting them with a stick. In Shadow of the Colossus, players take on a series of towering animals, attacking them by plunging a sword into their powerless catches sight of. Blood can be seen in puny bursts.

What parents need to know

Parents need to know that The Ico & Shadow of the Colossus Collection bundles together a pair of PlayStation two games that have been remastered for PlayStation Trio. These games are identical to the originals, save that they now show up in high-definition and can be played in stereoscopic 3-D (assuming you have a television that supports this feature). Both games distinguish themselves based on their clever puzzles, which require close examination of environments and monsters and hefty amounts of both logical and lateral thinking. Parents should note that Shadow of the Colossus is the more violent of the two, with players going up against tower-sized monsters into which they must periodically plunge their swords, resulting in some blood. Ico is much less violent, but the game’s female hero plays a passive role, relying time and again on her boy companion to rescue her and perform the physical work involved in solving puzzles.

Stay up to date on fresh reviews.

User Reviews

A mistake CommonSenseMedia made

A classic game and one that stands the test of time as a fight that games are art.

A beautiful practice

What’s it about?

The latest in a series of multi-game bundles for PlayStation Three, THE ICO & SHADOW OF THE COLOSSUS COLLECTION combines two of the most artistic, innovative, and critically acclaimed games originally released for PlayStation Two, both made by the Japanese studio Team Ico. Ico, which debuted in 2001, starlets a boy who leads a strange, pallid chick through a mostly deserted castle by the forearm. He must from time to time use his stick to ward off shadowy creatures who want to kidnap the doll while solving sophisticated environmental puzzles.

Shadow of the Colossus, which originally arrived in 2006, features a lone youthful warrior who travels fine distances in a lonely world to fight skyscraper-sized brutes that he must climb in order to reach their feeble catches sight of. Both have been remastered for display on high definition screens, and can now be played for the very first time in stereoscopic 3-D on supporting televisions.

Is it any good?

Games typically don’t age as well as other media, but these two titles stand the test of time. Tho’ their controls feel a smidgeon dated, both remain remarkably atmospheric thanks to their large, lonely worlds and sparse but beautiful ambient sound effects. The puzzles in Ico are just as challenging as they were a decade ago, and the towering, lumbering monsters in Shadow of the Colossus have lost none of their awe or spectacle.

More than that, they proceed to stand out as works of art in a medium known for its graphic sensationalism and snarky protagonists. The youthful but clearly stoic heroes are almost inscrutable in their muteness, and their long treks through evocatively Spartan settings are often as moving as the games’ more action-packed sequences. There’s a reason why so many critics have drawn comparisons to both games over the last decade, and it’s wonderful that these unique interactive adventures are now available to a fresh generation of players.

The Ico – Shadow of the Colossus Collection Game Review

The Ico & Shadow of the Colossus Collection

  • PlayStation Trio
  • $39.99
  • 2011

Kids say

See or buy this game:

Common Sense is a nonprofit organization. Your purchase helps us remain independent and ad-free.

Get it now on:

See or buy this game:

Common Sense is a nonprofit organization. Your purchase helps us remain independent and ad-free.

A lot or a little?

Parents’ guide to what’s in this game.

The primary theme in both of these games is that wits, ingenuity, and perseverance can help even the smallest of heroes overcome the greatest of obstacles, be it a Byzantine puzzle or a skyscraper-sized monster. Violence plays a notable role in Shadow of the Colossus, but it’s fantastical and directed toward utterly inhuman monsters.

Our heroes are paragons of nobleness. The youthfull boy in Ico strives to protect a lady, while the warrior in Shadow of the Colossus is a David-and-Goliath style archetype. However, the chick in Ico emerges all but defenseless next to the boy, who does virtually all of the physical work and fighting.

Tho’ the controls will feel slightly dated to modern players, navigation and fighting both remain fairly intuitive. The real difficulty comes in recognizing and piecing together the clues and patterns that will permit players to solve puzzles and defeat monsters. Both games are true head-scratchers. Don’t be astonished by the occasional need to consult an online play guide.

In Ico, shadowy monsters attempt to kidnap a pallid damsel, dragging her into inky pools of black. Players fend them off by hitting them with a stick. In Shadow of the Colossus, players take on a series of towering animals, attacking them by plunging a sword into their powerless catches sight of. Blood can be seen in petite bursts.

What parents need to know

Parents need to know that The Ico & Shadow of the Colossus Collection bundles together a pair of PlayStation two games that have been remastered for PlayStation Three. These games are identical to the originals, save that they now show up in high-definition and can be played in stereoscopic 3-D (assuming you have a television that supports this feature). Both games distinguish themselves based on their clever puzzles, which require close examination of environments and monsters and hefty amounts of both logical and lateral thinking. Parents should note that Shadow of the Colossus is the more violent of the two, with players going up against tower-sized monsters into which they must at times plunge their swords, resulting in some blood. Ico is much less violent, but the game’s female hero plays a passive role, relying time and again on her boy companion to rescue her and perform the physical work involved in solving puzzles.

Stay up to date on fresh reviews.

User Reviews

A mistake CommonSenseMedia made

A classic game and one that stands the test of time as a fight that games are art.

A beautiful practice

What’s it about?

The latest in a series of multi-game bundles for PlayStation Three, THE ICO & SHADOW OF THE COLOSSUS COLLECTION combines two of the most artistic, innovative, and critically acclaimed games originally released for PlayStation Two, both made by the Japanese studio Team Ico. Ico, which debuted in 2001, starlets a boy who leads a strange, pallid female through a mostly deserted castle by the arm. He must from time to time use his stick to ward off shadowy creatures who want to kidnap the dame while solving complicated environmental puzzles.

Shadow of the Colossus, which originally arrived in 2006, features a lone youthfull warrior who travels good distances in a lonely world to fight skyscraper-sized animals that he must climb in order to reach their powerless catches sight of. Both have been remastered for display on high definition screens, and can now be played for the very first time in stereoscopic 3-D on supporting televisions.

Is it any good?

Games typically don’t age as well as other media, but these two titles stand the test of time. Tho’ their controls feel a smidgeon dated, both remain remarkably atmospheric thanks to their large, lonely worlds and sparse but beautiful ambient sound effects. The puzzles in Ico are just as challenging as they were a decade ago, and the towering, lumbering monsters in Shadow of the Colossus have lost none of their awe or spectacle.

More than that, they proceed to stand out as works of art in a medium known for its graphic sensationalism and snarky protagonists. The youthful but clearly stoic heroes are almost inscrutable in their muteness, and their long treks through evocatively Spartan settings are often as moving as the games’ more action-packed sequences. There’s a reason why so many critics have drawn comparisons to both games over the last decade, and it’s wonderful that these unique interactive adventures are now available to a fresh generation of players.

Related video:

The Easiest Way to Buy Bitcoin Instantly Online for Investment

The Easiest Way to Buy Bitcoin Instantly Online for Investment

After all this while, Bitcoin has been one of the most amazing currencies to witness in the history of mankind. Bitcoin has outperformed the US dollar, gold, silver, and other fiat currencies. The presence of Bitcoin has also made a few millionaires along the way. It is never too late to buy Bitcoin if it is for long-term investment. If you are totally fresh to the world of Bitcoin, MYF is going to display you the easiest way to buy Bitcoin, almost instantly online.

The Easiest Way to Buy Bitcoin Instantly Online for Investment

There are many ways to buy Bitcoin such as via credit card, bank transfer, cash, and PayPal. Each of them has both their advantages and disadvantages.

#1 Speedy Transaction – Credit Card

The easiest and fastest way to buy Bitcoin instantly is with a credit card or debit card. For example, Coinbase supports credit or debit card purchases provided your card supports ‘3D Secure’. Some banks will require various security steps to authorize a purchase using 3D Secure. Some of the methods you may see will be a text message, a bank provided security code, or security questions.

Once you confirm a purchase with your card on Coinbase, you may be redirected to your bank’s website to verify the transfer. While Coinbase performs testing to ensure compatibility with major browsers, there may be situations where you are not correctly redirected to your bank’s website. If you are incapable to confirm your purchase with your bank because of this, Coinbase will not be able to finish your order.

This is also why purchasing Bitcoin via credit card is one of the safest ways as exchanges like Coinbase requires verification from both the bank and you.

However, you should be aware that buying Bitcoin instantly with a debit or credit card will usually result in higher fees because there are higher transaction and processing fees. Therefore, if you are buying just a puny amount of Bitcoin, using credit cards may be the best choice if you want it quick and effortless.

#Two Big Transaction – Bank Transfer

For buying large amounts of Bitcoin, you should choose to buy with a bank transfer on a reputable exchange such as Bitfinex, Poloniex, GDAX, GEMINI, Kraken, EXMO, YOBIT, and etc.

Fees are always lowest when you choose to transfer funds directly via SEPA (Europe), Wire (US), Rapid (Asia).

In my practice, Kraken is one of my dearest Bitcoin exchanges as it offers the best service for a bank transfer (wire SEPA) deposits. For the time being this is the only deposit method available. Deposit currencies include

Deposit currencies include Euros, US dollars, and KRW (Korean Won). It is super cheap to deposit, withdraw, and trade on Kraken. Daily volumes are always high, and an excellent fee transparency assures low commissions and that you get the cheapest coins.

My 2nd choice will still be Coinbase if you want to buy Bitcoin with a bank account in the US.

Coinbase permits you to connect your bank account via ACH bank transfer and can be connected with twenty six different banks.

Once you supply your bank credentials on Coinbase’s website you can lightly buy Bitcoins through your bank account. The fee for buying Bitcoins with your bank account is %1.49. The good thing about Coinbase is that the site has very high liquidity and won’t “run out of Bitcoins”. It’s also pretty intuitive for beginners.

I would like to emphasize here again that bank transfer is much slower than credit card purchases and it can take up to five days to ultimately see your money in the exchanges. If you’re inwards the Eurozone, Coinbase will also permit you to buy Bitcoins with a SEPA transfer. Fees are basically the same as buying within the US.

It is noted that every Bitcoin exchange is obliged by law to do utter KYC (know your customer). This is to prevent cybercrime and money laundering and some say the government worries that you might be gaining too much economic freedom.

Just realize that this is the fresh age where your ID is scattered all over the internet. For this reason, I would recommend choosing the safest sites only. If you indeed need to stay anonymous when buying, this is possible but the cost per bitcoin will be significantly higher.

#Three Reliable and Favorable Method – PayPal

Albeit buying Bitcoin via credit card is the easiest way, PayPal has also been very favorable of Bitcoin. If you are a big fan of PayPal, there are several platforms you can purchase your Bitcoin such as Virwox and AvaTrade.

VirWox is an exchange of virtual currency, you can buy there Lindens, Bitcoins, and more. It has more than 400,000 registered users and is a 2nd Life Lindens authorized reseller.

AvaTrade is a forex broker that is committed to providing a safe trading environment and is fully regulated and licensed in the EU and BVI, with extra regulation in Australia, South Africa, and Japan.

Inbetween the two, I choose AvaTrade over Virwox as it is more straightforward and it is lighter for beginners to navigate around.

The minimum initial deposit requirement of AvaTrade is $100. In addition to the possibility of instantaneous deposits through PayPal, they accept wire transfers and also facilitates funding through credit cards, NeTeller, Moneybookers, and WebMoney.

The advantages of buying or trading Bitcoin with AvaTrade is that there are attractive promotion and bonuses suggested that can reach up to $Ten,00 in some cases. On top of that, they suggest comprehensive educational resources that even beginners can learn as they go along.

One good thing about AvaTrade is that you can attempt out their free demo account so you can practice before putting your money on the line. If you are an inexperienced trader, AvaTrade provides market analysis to assist you in Bitcoin trading too.

I also would like to highlight that AvaTrade offers zero commissions on Bitcoin trading and no bank fees charged on transactions, making it far more profitable.

Conclusion

Depending on your preference, there are several “easiest” way to buy Bitcoin online and most of them can be done almost instantly. If you are not familiar with any of them, the easiest to buy Bitcoin is of course by credit card. However, please bear in mind that it has the highest transaction fee involves.

Most people that are brand-new to Bitcoin find it much safer & more familiar to buy via a Bitcoin ATM (especially if they just want to attempt out Bitcoin), rather than pouring through Reddit threads to determine which site is safest to buy from. There has been a drastic rise in the number of Bitcoin ATMs all over the world. While the normal trading process (usually through online exchanges) takes up to few days to accomplish, Bitcoin ATMs do that instantly and in a matter of seconds. However, Bitcoin atm is not available in most countries.

As you become more familiar with Bitcoin, you may opt to set up an online trading account, which generally has lower fees such as AvaTrade. If you are certain in trading, you may as well use this platform to make extra profit from it.

Related video:

The Cryptocurrency Trading Bible – Hacker Noon

The Cryptocurrency Trading Bible

So you want to trade cryptocurrency?

You’ve seen those eye-popping 3000% comebacks and you want in.

You don’t want some measly little 10% ROI after a year in the plain old stock market. That’s for grandpas and old people. You want quit-your-job with a middle finger, fuck you money! Am I right or am I right?

Or maybe your wanna be a baller, shot-caller? You want a gold-plated house, a yacht and rap movie supermodels jiggling around one of your six infinity pools in string swimsuits.

Well have no fear because the Buddha of Wall Street is here to help you with your wishes of crypto glory! Here’s my story: I was living in a one-room apartment and sleeping in my bathtub and now I fly my helicopter to work just because I hate traffic.

All of this, and MORE, can be yours!

Come closer and I’ll tell you the ultimate, super-secret ingredient to lightning swift crypto riches!

The secret ingredient is…nothing.

There is no secret ingredient to getting rich. Anyone who tells you different is selling something.

Oh yeah and I don’t truly have a helicopter…yet.

Of course, cryptocurrencies do have some of the best ROIs in history. And you do have a shot at making some good money. So let’s talk about investing in cryptos the right way.

I don’t hide the fact that I’m a long-term bull on cryptos. I believe they’re a game switching technology that will ripple across the entire world, remaking every aspect of society. Like my friend Chris Dixon, I believe Bitcoin could lightly be worth $100,000 a coin one day, albeit I’m not fairly there with perennial Dennis Hopper impersonator John McAfee’s prediction of Bitcoin going to $500K a coin, at least not in the next three years. It may take a little longer. I’ve talked about why in my articles Why Everyone Missed the Most Significant Invention in the Last five hundred Years and Reflections on the Best Blockchain Tweets Ever Written so I won’t rehash those reasons again.

Here we’re going to talk about cash money, y’all. Unlike many folks in this space, trading is not my primary interest, but like everyone I do love making money.

How do you make money with cryptocurrencies?

Questions, Questions

The very very first question you need to ask yourself is, do you have enough extra money to invest?

What does extra money mean?

Remarkably, the SEC has some good guidance here. Even tho’ they let Bernie Madoff get away with a massive pyramid scheme for a decade, despite someone telling them about it every year, they’re from time to time good for something! While, I’m not a big fan of the nanny-state accredited investor rules of the SEC that let’s only rich people invest as they see fit, nor of the “pattern day trader” rule that requires to you to have $25,000 minimum in order to day trade the traditional markets (which, by the way, does not apply to crypto markets…yet), there is some merit to the rules. Those numbers are arbitrary bullshit but I do agree with the sentiment that led to the creation of those laws.

They’re attempting to protect people from losing money they don’t have to lose.

And since the nanny-state is not here to protect you in the crypto markets you will just have to go ahead and take private responsibility and protect yourself.

While stories like I Invested All My Spending Money In Ethereum (And so Did All My Friends) are funny on some level (college kids can afford to take some risks because they have a lot of life left to recover later if they lose everything) they’re also utterly horrifying on another level. What if that damsel lost all her food money for the year? Not awesome.

I can’t find the tweet now, but just the other day I spotted a boy posting about how he mortgaged his car, lost it all trading cryptos and his wifey kicked him out. He was looking to get in on a “shit coin pump” aka where traders get together and buy like crazy to pump a penny-stock equivalent to the moon before dumping it on idiots. Not good. Do not be that fellow.

Only invest what you can afford to lose.

If you don’t have a lot of money, embark puny. Don’t go maxing out your credit cards or getting a “loan” from that dude your bother knows who sits on the corner outside the bodega on 156th and Broadway. You’ll only get burned.

The 2nd question you have to ask yourself is:

These are two very, very different things.

By a broad margin, the right strategy for most people is to just buy and hold. Get some well know cryptocurrencies like Bitcoin, Ethereum, Dash, or Litecoin, put them in cold storage, stick them in the sock drawer and leave behind about them. Don’t read the news. Don’t worry about the wild swings or the predictions of doom from the popular press. Just buy, hold and leave behind. In a year or two, dig them out and sell some of them and buy a little more with the proceeds. Wash, rinse and repeat until retirement.

If you want to trade however, that is a different animal all together. That means you’re looking to get in and out of the market. The rules of the game are plain:

Buy low, sell high.

Lighter said than done however.

There are two parts to this game:

Most people crash and burn on the 2nd part. Everyone makes money in a bull market and then most give it right back afterwards.

So does that mean you shouldn’t trade? No way. I love trading!

On the days you win, it’s the ultimate rush. You’re a Viking raider, swooping in on unsuspicious villagers and mowing them down with glee.

On bad days tho’, it’s brutal. You’ll lose sleep, hair, friends and money. You’ll be depressed, angry, and scattered brained.

So why play at all?

Because trading is the ultimate game.

You’re playing against other people, with incomplete information, on an occluded battlefield, as well as against the maniacal and sadomasochistic “mind” of the market, and against yourself. Your mental strength, emotions and belief systems are all working against you. That business school bullshit they trained you about rational actors with ideally distributed information making rational decisions in the marketplace is just that, utter and accomplish bullshit.

Anyone who spends five fucking minutes trading knows it’s crap.

The markets are not rational. Nor are people. We are fear based, emotional creatures.

Only an ivory tower academic economist would ever think something so utterly ridiculous.

Very first of all, the information is not even close to evenly distributed. We’re all playing with partial information and a fog of war. Even worse, we all have varying degrees of capability to process that information. Meaning all of us are kind of stupid. If you’re not that bright, it doesn’t matter how much info you have, you won’t be able to do shit with it. Go directly to Dunning-Kruger and do not pass go.

And most of us are not that bright.

If you ask a group of people how many of them are “above average” drivers, almost everyone will raise their mitts. This is unlikely. We can’t all be above average but we all believe we are.

Even if you’re a good trader, you’re not immune to this kind of mental insanity. If you think you are, that’s another magical belief. As I wrote this article, I made not one but two stupid BTC trades and busted out attempting to catch today’s insane $600 a coin rally late.

I knew this was a terrible idea.

I did it anyway.

I was writing this article (not focused) and I was late to the party, a dual whammy of stupid. Rule number one: If you miss a trade, stay the hell out of the market. Get ’em next time.

But did I listen? Nope. Because I am an emotional fear based creature just like everyone else. FOMO (Fear of missing out) got me. The force is strong with FOMO and not you or anyone else is immune to it. No matter how good you get, you’ll regularly and repeatedly shoot yourself in the foot.

When I used to trade the regular markets, I can’t tell you how often I witnessed good, professional traders (I’m looking at you Slope of Hope) telling “this makes no sense, the market is wrong.”

No, the market is always right.

You’re either in line with it and making money or you’re losing money and bitching about how the market should be more rational.

The problem is most of us are watching a movie in our goes about life, instead of what’s actually right in front of our noses. To the degree that reality doesn’t match up with what we want to think about it, we go with what we want to think about it. For most humans providing up their belief systems is the same thing as death. They would rather die, literally, than switch their mind.

That doesn’t work for the market. The markets are a lesson in humility. You will learn to see things as they actually are versus how you imagine them to be or you will get taken out to the woodshed and hammered with a rubber hosepipe. In other words you will lose all your money just like that idiot who sold his car to play the markets. The markets are economic Darwinism and they have no grace.

Let me give you an example of how your belief systems work against you in the game of coins.

One of the traders I go after closely is the Wolf of Poloniex. In utter disclosure, I am not a member of his “Wolf Pack” presently, which is his paid private trading signals group. I just go after the big market moves he posts about on Twitter. That’s because, in general, I choose to do my own research, trust my own eyes and live with my own calls, right or wrong.

The Wolf is a swift, aggressive trader and that matches nicely with my private style. His calls regularly make me tons of money. A question you have to ask of all traders is “are they right?” Nobody is right all the time. In fact, even the best of the best are wrong more than they’re right. The greatest traders make their money on 20% of their trades. The rest of our trades make only modest gains or loses.

So how can we know whether someone is right or wrong, objectively?

Either my bank account is going up or its going down.

It’s a ideal system. Binary. You win or lose. There is no in inbetween.

If my bank account is going up, and I’m following his calls closely, then he’s right. If I keep losing money on his calls, he’s wrong.

But most people don’t see it that way. Lots of folks think the guy’s calls are absolute shit. Why is that?

Because the Wolf has an in-your-face persona that massages many people the wrong way. He loves to stick it to people who say he’s wrong. Any time he posts a call, people are quick to pounce on him and call him an idiot, a douchebag and a shill hucking trading calls. They want him to fail.

The reason is because they’re incapable to disconnect his calls from his persona. They conflate two unrelated things. Whether he’s likable or not is utterly irrelevant. Personally I like the dude but that’s irrelevant too. Except people can’t and won’t see it that way.

People get very linked to their opinions. Burn your opinions! Your opinions mean nothing to the market.

If you thought a bull market was kicking off and it turns into a bear, your opinion was wrong. Period. Let it go! Budge on! But people love their opinions. They cling to them despairingly.

We’re just wired that way.

Our brains are littered with mental pitfalls.

Being “right” when you’re wrong is good way to lose money.

Do you know that at times as much as 38% of the population can’t tell you which party is more conservative in America. 38%! In fact, most people don’t vote based on actual politics at all. They pick who they like the most and then project their viewpoints onto that person, even if that person has diametrically opposed ideas to their own.

How fucking stupid is that?

Welcome to the human race.

We’re prone to all kinds of crazy-ass mental nonsense.

So with that kind of cracked grey matter, how the hell can we expect to get good at trading?

Is there any hope?

Getting Good at Trading

To begin with, you better commence reading.

We all have a lot to learn and the sooner we commence doing it, the better we get. Your aim is to learn something every day for the rest of your life.

My current dearest book on trading is the super plain Top ten Trading Setups: How to Find them, When to Trade Them, How to Make Money with Them. Like all trading books, I choose the paper copy, as opposed to the Kindle edition, as the chart pictures are lighter to see.

This book is brief and to the point. There are no stories of the author’s trading glory, or links to his special, ultra secret system that you can have for a mere thousand dollars more. It concentrates on plain, practical advise, for numerous market trends. Everyone makes money when it’s all going up but how do you deal with trades going sideways or down? It’s in there.

While the book is focused on traditional markets, most of the rules he puts forward can lightly be applied to the crypto markets. His reasons for why fresh traders lose money on the very very first page is worth the price of the entire book.

Fresh traders lose because they:

* Trade too big * Trade without an edge, or in other words — gamble * Over trade * Trade low price junk stocks * Use excessive leverage.

Trading with leverage in the cryptos is like bouncing Cobras. Don’t fucking do it if you’re not a professional trader. The crypto markets stir too swift and you can lightly lose someone else’s money that you don’t have to pay back. Not good.

That brings us to the one major difference inbetween the regular and the crypto markets.

Crypto markets stir at movie game speed.

When he talks about how a market might take weeks or months to play out, in the parallel universe of crypto trading, that could play out in days. We literally just witnessed the market crash out 40%, going total bear, and then recover in two days to fresh heights. That’s how prompt it moves.

This is one of the reasons the popular press does not understand cryptos. They regularly report that Bitcoin is over and dead for good. It’s hilarious. Check out this article from ninety nine Bitcoins. Someone writes Bitcoin’s obituary every day.

The problem is the pop-press is used to playing the game at slower speeds. It’s as if they were good football players in college only to go to the pros and have guys suck right past them. It’s a totally different level. This is the e-Sports universe.

Cryptos are the computer generation’s stock market.

It’s run by kids who never lived life without the Internet. To them it’s just like a tree, it was always there. The NYSE come from the days of ink and wood pulp. When Forbes or CNN or FOX reports on bear markets in the traditional stock world, they’re usually right for a reasonable period. That market will go cold for months. In crypto it could go nova hot tomorrow.

To keep up your need an edge. That brings us to book number two:

This book is a monster. It’s mighty and dense and packed with information. After reading it you’ll likely commence watching patterns everywhere, even when they don’t exist. Don’t worry. Probe them anyway. You’ll regularly see people drawing random lines on the chart on Twitter and calling it “technical analysis” but this book is much more disciplined and serious.

Technical Analysis (aka studying the chart patterns) works pretty damn well in crypto trading. My gut tells me it’s because most of the folks trading cryptos are geeks and we’re prone to liking TA because it makes sense to the engineer brain. That makes them a self-fulfilling prophesy. It also works because there’s lots of machine trading going on. You’ll be trading against bots regularly on the exchanges and they have no choice but to make decisions based on moving averages, pull backs, breakouts and all the other things that TA aficionados love.

The other reason it works is because TA is all about psychology. People want to take gains and cut losses. After a certain amount of rise, it’s going to fall. It’s just natural.

The markets are truly nothing but the collective hallucination of our collective unconscious, the projection of our hopes, desires and fears.

Recall however, TA is not a magic eight ball.

It does not work all the time. It’s often just junk voodoo. It’s hard to do right, effortless to do wrong and prone to all kinds of false signals. Still, it’s a useful device. It’s saved me a number of times and helped me avoid big crashes.

The last book on my list is one I’ve always loved: One Up on Wall Street, by legendary investor Peter Lynch. Yeah that Lynch, the one with his name on the marquee. He hammer the market for fifteen years. Statistically most traders bust out after ten years. A lot of the advice in the book, like making sure you buy a home before investing in stocks, is outdated. Homes are regularly a hefty money pit of debt for today’s youthfull people. But his investing advice is timeless and applies to any market.

How did he make his mulah? Like Warren Buffet, he focused on “value investing.” What’s that you ask? Excellent question, youthfull Padawan.

He invested in what he knew and understood. When his wifey or kids came home with a shopping bag from a fresh store, he’d research that company and buy it. He figured if people were buying from it, it was a good company.

Investing in what you know is a fine mental heuristic. Warren Buffet regularly turns down to invest in all kinds of companies, like the tech starlets everyone loves, because he doesn’t understand tech. Because he doesn’t understand it he can’t make a good call ahead of time, so he stays out. If you don’t understand the purpose of a coin, stay out. Don’t buy it because it’s going to the moon and some jackass in a Slack forum told you it’s killer.

In crypto, value investing means not buying a bunch of shit coins. ICOs happen all the time and fresh coins pop onto the market, promising excellent comebacks. Some of them will produce one day. But most of those coins will go to nothing in the next few years.

Personally, I tend to invest in “infrastructure” coins or coins that have a chance to be multifaceted and serve lots of purposes. I have a background in building systems because I was a systems administrator for more than a decade. I’m looking for the folks building the railroad tracks of tomorrow.

Ethereum, Bitcoin, QTUM, and Tezos have numerous purposes. Pot Coin does not.

Over the years, like all good traders, Peter Lynch made all his money on 20% of his “home run” trades and lost or made modest comebacks on 80% of his trades.

80/20 is the formula.

You will never do better than that, even if you manage it for a number of years. Eventually you’ll revert to the mean. That’s statistics baby. And math is God. It runs things around here and everywhere else.

And of course, even after you read all these books, attempt to reminisce:

There is no secret ingredient.

Actually, there is.

The secret ingredient is you.

It’s cheesy but it’s true.

The way to get better is to get in the game. There is no substitute for private practice. There’s an old telling in the ancient game of Go.

“To learn Go, very first lose one hundred games quick.”

This is true of everything in life.

You have to get into the arena. You’ve got to play the game. Without skin in the game you won’t learn a damn thing.

It’s one thing to read about something in a book, and another thing entirely to do it.

When the pressure is on and your emotions are against you and you’re watching thousands of dollars vaporizing in minutes and you’re fighting with your significant other and absurdly blaming her for taking you to dinner and “causing” you to lose money (magical belief) because you weren’t watching the trading screen like a hawk, then you’ll understand.

This ain’t no joke.

This is not hypothetical. This happened to me last week.

But every day I learn.

Oh and I did make money. I was just mad I didn’t make more. That’s when I knew I needed to take a break and do nothing for a day. I got up late, took a walk, ate a nice breakfast and apologized for being a jack to my beautiful lady.

You have to recharge. You don’t need to catch every damn run. Go out. See the trees, listen to the birds, play with your kids and your pets. In brief, do the things that matter in life. The markets will be waiting for you when you come back.

Here’s the deal: You’ll make mistakes. And you’ll learn. That’s the only way.

But if you let this amazing and legendary quote by the excellent Teddy Roosevelt be your guide to trading and to life and if you’re fortunate, you just might do OK in the world:

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes brief again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows superb enthusiasms, the fine devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

If you loved this article, I’d love it if you could hit the little heart to recommend it to others. After that please feel free email the article off to a friend! Thanks much.

BONUS Trading Books that I like:

If you love the crypto space as much as I do, come on over and join DecStack, the Virtual Co-Working Spot for CryptoCurrency and Decentralized App Projects, where you can paw elbows with numerous projects in the space. It’s totally free forever. Just come on in and socialize, work together, share code and ideas. Make your ideas better through feedback. Find fresh friends. Meet your fresh family.

However, please know that DecStack is NOT a trading troll box. Most forums in this space quickly degenerate into dick measuring and meme sharing contests. We DO have a trading and investing channel and we ask that talk about trading go there. Other than that, come on in and dangle out.

Also, if you’re looking for a more trading focused forum, join the Coin Sheet Discord, which is run by the awesome Coin Sheet team, the only crypto mailing list I subscribe to presently.

DISCLAIMER: Be a big boy or doll and make your own decisions about where to put your hard earned money. I am not a financial adviser and this is not financial advice and if I indeed need to tell you this then it’s best to keep your money in your pocket anyway.

Here’s the list of traders I go after on Twitter. It’s a petite list. Your list should be petite too or else you will just get lots of conflicting signals.

A bit about me: I’m an author, engineer and serial entrepreneur. During the last two decades, I’ve covered a broad range of tech from Linux to virtualization and containers.

You can check out my latest novel,an epic Chinese sci-fi civil war saga where China throws off the chains of communism and becomes the world’s very first direct democracy, running a very advanced, artificially intelligent decentralized app platform with no leaders.

Related video:

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, showcase actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains indeed are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To assure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a giant number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immobilized time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immovable despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing mechanisms that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a big amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other arm, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a immobilized amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electric current into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a brainy contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This liquidates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, very likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner denies to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Brainy contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to possessor
  • cancellation by the holder: transfer $500 from proprietor to loaner
  • end of the rental period: transfer $500 from loaner to holder
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to holder

Upload this brainy contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the proprietor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on wise contracts are called Decentralized Apps, or DApps.

Brainy contracts naturally extend to clever property, and a lot more wise things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow commence and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t swift, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, witness this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These wise people have seen a large potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and translucent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of intense disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-built network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Instruments helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a good beginning point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and titillating. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a superb way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, demonstrate actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains indeed are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent harshly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a gigantic number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a stationary time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration stationary despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing mechanisms that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a thick amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other forearm, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a motionless amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-therapy into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a clever contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This eliminates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, very likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner turns down to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Wise contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to holder
  • cancellation by the proprietor: transfer $500 from possessor to loaner
  • end of the rental period: transfer $500 from loaner to possessor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to possessor

Upload this brainy contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the possessor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to brainy property, and a lot more brainy things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow begin and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t rapid, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a meaty potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and semi-transparent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to liquidate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of mighty disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-built network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Contraptions helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a excellent embarking point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a excellent way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, display actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains truly are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should show up in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent harshly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a clever trick to order facts in a network of non-trusted peers. The idea is elementary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a yam-sized number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immobile time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration stationary despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a gigantic amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other forearm, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a petite fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a petite fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a immobile amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-stimulation into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a wise contract. A contract is a promise that signing parties agree to make legally-enforceable. A clever contract is the same, except with the word “technically-“ instead of “legally-“. This eliminates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, most likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner denies to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Clever contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to possessor
  • cancellation by the proprietor: transfer $500 from proprietor to loaner
  • end of the rental period: transfer $500 from loaner to proprietor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to proprietor

Upload this wise contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the holder can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Brainy contracts naturally extend to clever property, and a lot more brainy things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow begin and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These clever people have seen a meaty potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and semitransparent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of mighty disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-made network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Instruments helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a excellent embarking point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value budge too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a fine way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it indeed, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, demonstrate actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains truly are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should show up in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To response this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent harshly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To assure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They rival to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a phat number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user possesses more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a motionless time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immovable despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technics that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a thick amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other mitt, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a petite fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a motionless amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-therapy into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this directive is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a wise contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This eliminates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, very likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner turns down to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Brainy contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to possessor
  • cancellation by the proprietor: transfer $500 from proprietor to loaner
  • end of the rental period: transfer $500 from loaner to holder
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to possessor

Upload this wise contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the proprietor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to wise property, and a lot more brainy things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow commence and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a fat potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and semi-transparent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to liquidate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of mighty disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-built network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Contraptions helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a excellent beginning point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value budge too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a fine way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you most likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it indeed, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, display actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains truly are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is plain: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a gigantic number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immovable time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immobilized despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a thick amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other mitt, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a motionless amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-therapy into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a clever contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This liquidates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, most likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner denies to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Brainy contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to proprietor
  • cancellation by the proprietor: transfer $500 from holder to loaner
  • end of the rental period: transfer $500 from loaner to possessor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to proprietor

Upload this brainy contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the holder can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on wise contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to clever property, and a lot more brainy things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain liquidates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow commence and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a meaty potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and translucent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of intense disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-made network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Devices helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a good beginning point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value budge too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a excellent way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you very likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, showcase actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains indeed are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To assure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They rival to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a phat number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user possesses more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immovable time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immobile despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a gigantic amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other mitt, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a petite fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a motionless amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electrical play into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this directive is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a brainy contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This liquidates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, very likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner rejects to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Brainy contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to holder
  • cancellation by the proprietor: transfer $500 from possessor to loaner
  • end of the rental period: transfer $500 from loaner to possessor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to holder

Upload this brainy contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the proprietor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to wise property, and a lot more wise things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain eliminates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow commence and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, observe this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a giant potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and see-through database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of strenuous disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-made network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Implements helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a superb commencing point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a superb way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you very likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it truly, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, display actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains truly are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should show up in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To response this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a wise trick to order facts in a network of non-trusted peers. The idea is elementary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They contest to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a yam-sized number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a motionless time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immobilized despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a enormous amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other mitt, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a petite fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a petite fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a stationary amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn tens unit into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this instruction is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a wise contract. A contract is a promise that signing parties agree to make legally-enforceable. A wise contract is the same, except with the word “technically-“ instead of “legally-“. This eliminates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, most likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner denies to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Wise contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to proprietor
  • cancellation by the possessor: transfer $500 from possessor to loaner
  • end of the rental period: transfer $500 from loaner to possessor
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to holder

Upload this clever contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the possessor can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on clever contracts are called Decentralized Apps, or DApps.

Wise contracts naturally extend to brainy property, and a lot more wise things. The thing to recall is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain eliminates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow begin and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t rapid, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, see this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These clever people have seen a enormous potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and semitransparent database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to liquidate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of mighty disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-built network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Devices helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a excellent kicking off point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and titillating. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a fine way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

The Blockchain Explained to Web Developers, Part 1: The Theory

The marmelab blog

The blockchain is the fresh hot technology. If you haven’t heard about it, you very likely know Bitcoin. Well, the blockchain is the underlying technology that powers Bitcoin. Experts say the blockchain will cause a revolution similar to what Internet provoked. But what is it indeed, and how can it be used to build apps today? This post is the very first in a series of three, explaining the blockchain phenomenon to web developers. We’ll discuss the theory, display actual code, and share our learnings, based on a real world project.

To begin, let’s attempt to understand what blockchains indeed are.

What Is A Blockchain, Take One

Albeit the blockchain was created to support Bitcoin, the blockchain concept can be defined regardless of the Bitcoin ecosystem. The literature usually defines a blockchain as goes after:

A blockchain is a ledger of facts, replicated across several computers assembled in a peer-to-peer network. Facts can be anything from monetary transactions to content signature. Members of the network are anonymous individuals called knots. All communication inwards the network takes advantage of cryptography to securely identify the sender and the receiver. When a knot wants to add a fact to the ledger, a consensus forms in the network to determine where this fact should emerge in the ledger; this consensus is called a block.

I don’t know about you, but after reading these definitions, I still had troubles figuring out what this is all about. Let’s get a bit deeper.

Ordering Facts

Decentralized peer-to-peer networks aren’t fresh. Napster and BitTorrent are P2P networks. Instead of exchanging movies, members of the blockchain network exchange facts. Then what’s the real deal about blockchains?

P2P networks, like other distributed systems, have to solve a very difficult computer science problem: the resolution of conflicts, or reconciliation. Relational databases suggest referential integrity, but there is no such thing in distributed system. If two incompatible facts arrive at the same time, the system must have rules to determine which fact is considered valid.

Take for example the dual spend problem: Alice has Ten$, and she sends twice Ten$ to Bob and Charlie. Who will have the Ten$ eventually? To reaction this question, the best way is to order the facts. If two incompatible facts arrive in the network, the very first one to be recorded wins.

In a P2P network, two facts sent toughly at the same time may arrive in different orders in distant knots. Then how can the entire network agree on the very first fact? To ensure integrity over a P2P network, you need a way to make everyone agree on the ordering of facts. You need a consensus system.

Consensus algorithms for distributed systems are a very active research field. You may have heard of Paxos or Raft algorithms. The blockchain implements another algorithm, the proof-of-work consensus, using blocks.

Blocks

Blocks are a clever trick to order facts in a network of non-trusted peers. The idea is ordinary: facts are grouped in blocks, and there is only a single chain of blocks, replicated in the entire network. Each block references the previous one. So if fact F is in block 21, and fact E is in block 22, then fact E is considered by the entire network to be posterior to fact F. Before being added to a block, facts are pending, i.e. unconfirmed.

Mining

Some knots in the chain create a fresh local block with pending facts. They challenge to see if their local block is going to become the next block in the chain for the entire network, by rolling dice. If a knot makes a dual six, then it earns the capability to publish their local block, and all facts in this block become confirmed. This block is sent to all other knots in the network. All knots check that the block is correct, add it to their copy of the chain, and attempt to build a fresh block with fresh pending facts.

But knots don’t just roll a duo dice. Blockchain challenges imply rolling a thick number of dice. Finding the random key to validate a block is very unlikely, by design. This prevents fraud, and makes the network safe (unless a malicious user wields more than half of the knots in the network). As a consequence, fresh blocks gets published to the chain at a immobile time interval. In Bitcoin, blocks are published every ten minutes on average.

In Bitcoin, the challenge involves a dual SHA-256 hash of a string made of the pending facts, the identifier of the previous block, and a random string. A knot wins if their hash contains at least n leading zeroes.

Number n is adjusted every once in a while to keep block duration immobile despite variations in the number of knots. This number is called the difficulty. Other blockchain implementations use special hashing technologies that discourage the usage of GPUs (e.g. by requiring large memory transfers).

The process of looking for blocks is called mining. This is because, just like gold mining, block mining brings an economical prize – some form of money. That’s the reason why people who run knots in a blockchain are also called miners.

Note: By default, a knot doesn’t mine – it just receives blocks mined by other knots. It’s a voluntary process to turn a knot into a miner knot.

Money and Cryptocurrencies

Every 2nd, each miner knot in a blockchain tests thousands of random strings to attempt and form a fresh block. So running a miner in the blockchain pumps a giant amount of computer resources (storage and CPU). That’s why you must pay to store facts in a blockchain. Reading facts, on the other forearm, is free: you just need to run your own knot, and you’ll recuperate the entire history of facts issued by all the other knots. So to summarize:

  • Reading data is free
  • Adding facts costs a puny fee
  • Mining a block brings in the money of all the fees of the facts included in the block

We’re not talking about real money here. In fact, each blockchain has its own (crypto-)currency. It’s called Bitcoin (BTC) in the Bitcoin network, Ether (ETH) on the Ethereum network, etc. To make a payment in the Bitcoin network, you must pay a puny fee in Bitcoins – just like you would pay a fee to a bank. But then, where do the very first coins come from?

Miners receive a gratification for keeping the network working and safe. Each time they successfully mine a block, they receive a immobile amount of cryptocurrency. In Bitcoin this gratification is twenty five BTC per block, in Ethereum it’s five ETH per block. That way, the blockchain generates its own money.

Lastly, cryptocurrencies rapidly became convertible to real money. Their facial value is only determined by suggest and request, so it’s subject to speculation. At the time of writing, mining Bitcoins still costs slightly less in energy and hardware than you can earn by selling the coins you discovered in the process. That’s why people add fresh miners every day, hoping to turn electro-therapy into money. But fluctuations in the BTC value make it less and less profitable.

Contracts

So far we’ve mostly mentioned facts storage, but a blockchain can also execute programs. Some blockchains permit each fact to contain a mini program. Such programs are replicated together with the facts, and every knot executes them when receiving the facts. In bitcoin, this can be used to make a transaction conditional: Bob will receive one hundred BTC from Alice if and only if today is February 29th.

Other blockchains permit for more sophisticated contracts. In Ethereum for example, each contract carries a mini-database, and exposes methods to modify the data. As contracts are replicated across all knots, so are their database. Each time a user calls a method on the contract and therefore updates the underlying data, this guideline is replicated and replayed by the entire network. This permits for a distributed consensus on the execution of a promise.

This idea of pre-programed conditions, interfaced with the real world, and broadcasted to everyone, is called a brainy contract. A contract is a promise that signing parties agree to make legally-enforceable. A brainy contract is the same, except with the word “technically-“ instead of “legally-“. This liquidates the need for a judge, or any authority acknowledged by both parties.

Imagine that you want to rent your house for a week and $1,000, with a 50% upfront payment. You and the loaner sign a contract, most likely written by a lawyer. You also need a bank to receive the payment. At the beginning of the week, you ask for a $Five,000 deposit; the loaner writes a check for it. At the end of the week, the loaner turns down to pay the remaining 50%. You also realize that they broke a window, and that the deposit check refers to an empty account. You’ll need a lawyer to help you enforce the rental contract in a court.

Clever contracts in a blockchain permit you to get rid of the bank, the lawyer, and the court. Just write a program that defines how much money should be transferred in response to certain conditions:

  • two weeks before beginning of rental: transfer $500 from loaner to proprietor
  • cancellation by the proprietor: transfer $500 from holder to loaner
  • end of the rental period: transfer $500 from loaner to holder
  • proof of physical degradation after the rental period: transfer $Five,000 from loaner to proprietor

Upload this clever contract to the blockchain, and you’re all set. At the time defined in the contract, the money transfers will occur. And if the holder can bring a predefined proof of physical degradation, they get the $Five,000 automatically (without any need for a deposit).

You might wonder how to build a proof of physical degradation. That’s where the Internet of Things (IoT) kicks in. In order to interact with the real world, blockchains need sensors and actuators. The Blockchain revolution won’t happen unless the IoT revolution comes very first.

Such applications relying on brainy contracts are called Decentralized Apps, or DApps.

Brainy contracts naturally extend to brainy property, and a lot more wise things. The thing to reminisce is that “smart” means “no intermediaries”, or “technically-enforced”. Blockchains are a fresh way to disintermediate businesses – just like the Internet disintermediated music distribution.

What Is A Blockchain, Take Two

In my opinion, the best way to understand the blockchain is to look at it from various angles.

What it does A blockchain permits to securely share and/or process data inbetween numerous parties over a network on non-trusted peers. Data can be anything, but most interesting uses concern information that presently require a trusted third-party to exchange. Examples include money (requires a bank), a proof or property (requires a lawyer), a loan certificate, etc. In essence, the blockchain eliminates the need for a trusted third party.

How it works From a technical point of view, the blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of there concepts are fresh. It’s their combination that permits a breakthrough in computing. If you don’t understand it all, don’t worry: very few people know enough to be able to develop a blockchain on their own (which is a problem). But not understanding the blockchain doesn’t prevent you from using it, just like you can build web apps without knowing about TCP slow embark and Certificate Authorities.

What it compares to See the blockchain as a database replicated as many times as there are knots and (loosely) synchronized, or as a supercomputer formed by the combination of the CPUs/GPUs of all its knots. You can use this supercomputer to store and process data, just like you would with a remote API. Except you don’t need to own the backend, and you can be sure the data is safe and processed decently by the network.

Practical Implications

Facts stored in the blockchain can’t be lost. They are there forever, replicated as many times as there are knots. Even more, the blockchain doesn’t simply store a final state, it stores the history of all passed states, so that everyone can check the correctness of the final state by replaying the facts from the beginning.

Facts in the blockchain can be trusted, as they are verified by a technically enforceable consensus. Even if the network contains black sheeps, you can trust its judgement as a entire.

Storing data in the blockchain isn’t prompt, as it requires a distributed consensus.

Peak: If you have twenty spare minutes to get a deeper understanding, witness this excellent introduction movie about Bitcoin, which also explains the blockchain:

Why It’s a Big deal

«The Blockchain is the most disruptive technology I have ever seen.» Salim Ismail

«The most interesting intellectual development on the Internet in the last five years.» Julian Assange

«I think the fact that within the Bitcoin universe an algorithm substitutes the functions of [the government] … is actually pretty cool.» Al Gore

These brainy people have seen a big potential in the blockchain. It concerns disintermediation. The blockchain can potentially substitute all the intermediaries required to build trust. Let’s see a few example applications, most of which are just proof-of-concepts for now:

  • Monegraph lets authors claim their work, and set their rules (and fares) for use
  • La Zooz is a decentralized Uber. Share your car, find a seat, without Uber taking a fee.
  • Augur is an online bookmaker. Bet on outcomes, and get paid.
  • Storj.io is a peer-to-peer storage system. Rent your unused disk space, or find ultra cheap online storage.
  • Muse is a distributed, open, and see-through database tailored for the music industry
  • Ripple enables low cost cross-border payments for banks

Many successful businesses on the Internet today are intermediaries. Think about Google for a minute: Google managed to become the intermediary inbetween you and the entire Internet. Think about Amazon: they became the intermediary inbetween sellers and buyers for any type of good. That’s why a technology that permits to eliminate intermediaries can potentially disrupt the entire Internet.

Will it benefit to end users, who won’t need third parties to exchange goods and services anymore? It’s far from certain. Internet had the same promise of intense disintermediation. Yet Google built the very first market capitalization worldwide as an intermediary. That’s why it’s crucial to invest in the blockchain quickly, because the winners and losers of the next decade are being born right now.

You Won’t Build Your Own Blockchain

The technology behind the blockchain uses advanced cryptography, custom-made network protocols, and spectacle optimizations. This is all too sophisticated to be redeveloped each time a project needs a blockchain. Fortunately, aside of Bitcoin, there are several open-source blockchain implementations. Here are the most advanced:

  • Ethereum: an open-source blockchain platform by the Ethereum Foundation
  • Hyperledger: another open-source implementation, this time by the Linux Foundation. The very first proposal was published very recently.
  • Eris Industries: Devices helping to manipulate Ethereum, Bitcoin or totally independent blockchains, mostly to build private networks. Their tutorials and explainers are a superb commencing point for an overview of the blockchain technology.

The maturity of these implementations varies a lot. If you have to build an application now, we’d advise:

  • Eris for a closed Blockchain, or to detect and play with the technology
  • Ethereum for a collective Blockchain

Also, Bitcoin isn’t a good choice to build an application upon. It was designed for money transactions and nothing else, albeit you can program pseudo-smart contracts (but you have to love assembly). The network presently suffers a serious growth crisis, transactions wait in line for up to one hour to get inserted in a block. Miners often select transactions with the highest fees, so money transfers in Bitcoin become more expensive than they are in a Bank. The developer community is at war, and the speculation on the cryptocurrency makes the face value stir too much.

Numbers

How big are blockchains today? Let’s see some numbers.

Conclusion

The blockchain technology is both intriguing and arousing. Could it be the revolution that gurus predict? Or is it just a speculative bubble based on an impractical idea? After reading a lot on the matter, we couldn’t form a definitive opinion.

When we face uncertainty, we know a superb way to lift it: attempting. That’s what we determined to do. Read the next post in this series to see what we’ve learned by building a real world app running on the blockchain.

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