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Bitcoin a thing of the past? Nope!Inquirer.net
For the naysayers that can't see past the current system of government controlled currencies, Bitcoin
was nothing more than a fad that didn't catch on with the masses. In some respects this has been true. Due to the complex nature of Bitcoins
' creation ...
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Five major UK fund houses have reportedly partnered on a project to explore blockchain technology's cost saving potential in trading systems.
Posted on 8 February 2016 | 7:40 am
Wall Street veteran Jason Leibowitz answers questions about how bitcoin was created, how it works and why it matters.
Posted on 7 February 2016 | 12:30 pm
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How the Australian Securities Exchange's investment in blockchain startup Digital Asset Holdings could influence the company's offerings.
Posted on 7 February 2016 | 9:00 am
The views of the Bitcoin Core developers are not the only ones that should count when deciding its future, says developer Elliott Olds.
Posted on 7 February 2016 | 6:38 am
In this opinion piece, former ReadWriteWeb editor Richard MacManus talks about how bitcoin could ease difficulties in running an online business.
Posted on 6 February 2016 | 10:00 am
Bailey Reutzel examines how the bitcoin community's reluctant to engage over standards could harm the digital currency in the long term.
Posted on 6 February 2016 | 8:15 am
An advisor to Russian president Vladimir Putin has reportedly spoken out against bitcoin.
Posted on 5 February 2016 | 11:48 am
A UN commission report suggests digital currencies could be beneficial for the Caribbean region.
Posted on 5 February 2016 | 8:30 am
Following Blockstream's $55m funding yesterday, CoinDesk speaks to investors who participated in the round.
Posted on 4 February 2016 | 12:27 pm
Court documents obtained by CoinDesk offer new details about an ongoing legal battle involving digital currency exchange Cryptsy CEO Paul Vernon.
Posted on 4 February 2016 | 10:40 am
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LedgerAssets, developer of an app that timestamps users photos on bitcoin's blockchain, is to launch a similar application for phone calls.
Posted on 4 February 2016 | 8:46 am
Berger Singerman LLP counsel Andrew Hinkes discusses bitcoin's lack of precedent in common law and the problems it may create for users.
Posted on 3 February 2016 | 8:27 pm
The Commonwealth has released a new report that calls on its 53 member countries to speak out on the legality of digital currencies.
Posted on 3 February 2016 | 2:05 pm
CoinDesk speaks with Christopher Fabian, who co-leads the technology innovation efforts for the United Nations Children's Fund (UNICEF).
Posted on 3 February 2016 | 12:16 pm
Post-trade settlement specialist Euroclear has released a new report on how blockchain tech can be adapted for capital markets.
Posted on 3 February 2016 | 9:01 am
The long-lasting block size dispute has catapulted into the center of attention again. One of the most talked about developments is Segregated Witness, of which a public testnet iteration – SegNet – was launched in January. The innovation as recently proposed by Blockstream co-founder and Bitcoin Core developer Dr. Pieter Wuille is a centerpiece of a scalability “roadmap” set out by Bitcoin Core.
To find out where the broader development community stands on Segregated Witness, Bitcoin Magazine reached out to library and wallet developers, those who will need to do the heavy lifting in order to utilize the innovation once rolled out.
In part 8 of this series: NBitcoin developer Nicolas Dorier.
Nicolas Dorier is the CTO of Metaco, an open asset (colored coin) company that helps financial institutions emit fiat currency on the blockchain. Dorier is also lead developer of NBitcoin, the main .NET library for Bitcoin development, and he wrote a free ebook on Blockchain Programming: Blockchain Programming in C#.
Dorier already implemented full Segregated Witness support into NBitcoin, and launched a basic block explorer and transaction parser and checker on Segnet. He also briefly contributed to Segregated Witness development itself.
“Segregated Witness is a net win, there is not any downside to adopt it at all,” Dorier said. “It is one of the two pieces of the puzzle – the other being OP_CSV – to make Bitcoin scale to millions of users, by making LN highly effective. I am also very excited by the new method to sign transactions, which now includes the value of outputs being spent. This is huge from a security perspective for webwallets and hardware wallets, as it prevents [the] user from adding too much fees by mistake. And last but not least, it increases the capacity of Bitcoin. I expect Segregated Witness adoption to follow an ‘S-curve’; wallets will jump on it very quickly.”
While Segregated Witness has been criticized as being a complicated solution, Dorier’s experience suggests otherwise. According to Dorier:
“From an implementation perspective it was relatively easy. I would say it took a little more than two or three days for NBitcoin support. I had to re-factor internal stuff to make it easier for NBitcoin’s users. Once implemented in NBitcoin, adding Segregated Witness to my block explorer was just a matter of updating the relevant package and redeploying it. Smartbit, another block explorer, has already done this as well, and can attest to the simplicity.”
Roll-out of Segregated Witness on the Bitcoin network is currently scheduled for April. Once a super-majority of miners agrees on the solution, Segregated Witness will be activated, and it can be used by wallet and app software.
Among other benefits, this means that anyone using the new possibilities will use only about two-thirds to half the space in the available 1 megabyte blocks. These transactions get to pay a lower fee, and more transactions can be processed on the Bitcoin network.
But this strategy is being contended by the recently launched Bitcoin Core fork Bitcoin Classic. Bitcoin Classic most likely plans to deploy a block size increase to 2 megabyte blocks through a hard fork once 75 percent of hash power agrees, and a four-week “grace period” for all full nodes on the network to switch to the new rules.
Bitcoin Classic’s strategy has not gathered much support among library and wallet developers, however.
“Let’s be clear: Segragated Witness is the fatest way to bump the block size,” Dorier explained. “The migration to Segregated Witness does not need to be synchronized between service and wallet providers. In other words, anyone can receive Segregated Witness transactions even if their wallet did not upgrade – though in that case you’d have to trust on miners for validation.”
Dorier does believe the block size limit will need to be increased through a hard fork a bit further down the road.
“Even with 1 megabyte blocks, Segregated Witness, and the Lightning Network deployed, Bitcoin will only be able to cater some 14 million users,” Dorier said. “Thanks to Segregated Witness, such an increase is not strictly needed for another year. But if there is consensus about raising the block size limit – and it’s clear it won’t hurt the network – it should be done nevertheless.”
But Dorier does hope this change will eventually come from the Bitcoin Core development team, rather than Bitcoin Classic, explaining:
“Core has proven to be reliable over the past years. All of their contributions to Bitcoin reached the highest standard of software development. Their commits speak for themselves. So I don’t support any ‘change of governance.’ In my opinion, Bitcoin Classic was pushed for political reasons; to try to get the power out of Bitcoin Core’s hands by some unproven team for unknown purposes. I will personally only support a 2 megabyte hard fork with 90 percent hash power vote, and a grace period of a year. This would make it clear the goal is not to raise a war against Bitcoin’s best contributors.
Even if Bitcoin Core doesn’t commit to a specific date, saying something like, ‘We will propose to do it sometime next year’ would fix a lot of the drama. It would also prevent a disastrous hard fork which could result into a split. What Bitcoin Classic proposes is the most dangerous thing that can happen to Bitcoin right now.”
For more information on Segregated Witness, see Bitcoin Magazine’s three -part series on the subject, or part 1 , part 2 , part 3 , part 4 , part 5 , part 6 and part 7 of this development series.
The post NBitcoin's Nicolas Dorier: Segregated Witness Fastest Way to Bump Block Size appeared first on Bitcoin Magazine.
In December Bitcoin Magazine reported that IBM and a group of top tech and finance companies are joining forces to develop a new open source blockchain separated from the Bitcoin blockchain. The group will work with the Linux Foundation to create a public network that lets blockchain applications built on top of it communicate with each other.
Digital Asset Holdings, the fintech startup headed by the financial superstar Blythe Masters, is contributing its Hyperledger mark, which will be used as the project name, as well as enterprise grade code and developer resources. Digital Asset Holdings bought San Francisco-based Hyperledger in June.
Now IBM is starting to reveal some details of its blockchain projects and strategy.
In an interview with IT analyst David Strom published in IBM’s online magazine Security Intelligence, John Wolpert, IBM’s blockchain offering director, said that IBM will eventually have hundreds of developers working on various blockchain projects. IBM didn’t invent blockchain technology but plans to take a leading role in its development, with an approach similar to IBM’s Java developments.
“[Java] wasn’t our technology, but we got behind it and put an army against it,” Wolpert said. “At its height, thousands were working on Java-related projects.”
Wolpert is responsible for engineering, products and open source initiatives at IBM. Previously, he was head of products for IBM’s Watson Ecosystem – IBM’s ambitious Artificial Intelligence (AI) project – and a successful entrepreneur before joining IBM.
At the forthcoming Block Chain Conference on February 10 in San Francisco, Wolpert will give a keynote presentation titled “How to Make Block Chain Real for Business.” The address will focus on IBM’s point of view in this space and its contribution to the open source community led by the Linux Foundation. The open source community is aimed at accelerating the maturity of this shared ledger technology, through a collective, open and coordinated approach.
Wolpert said that Hyperledger code will become an open source industry standard, eventually available on Github just like other open-source software, and developers will be able to build applications on top of Hyperledger.
“There are going to be lots of people who will compete on providing solutions,” he said. “We will try to get the best minds across the industry to work together on this code.”
Developers will be able to deploy Hyperledger applications on the IBM Cloud, a collection of fully integrated services to help IBM clients use data across all digital channels to understand their customers and anticipate their needs. According to the company, IBM Cloud is the first full spectrum cloud built on open technologies, with the world’s most advanced analytics and cognitive computing toolbox.
“We intend to be the best place and fastest place to get blockchain technologies running,” said Wolpert. “We are moving assets on a massive scale in ways that we never thought of before and doing so automatically and without any human intervention. It isn’t just the data, but using the transaction log of the data in new and interesting ways.”
The recent U.K. Government Office for Science report ““Distributed Ledger Technology: Beyond Block Chain” noted that the strong association of blockchain technology with Bitcoin represents an important problem when it comes to communicating the potential benefits of distributed ledgers.
Wolpert agrees, and adds that many banks and other traditional financial institutions were hesitant to be associated with blockchains because of Bitcoin. But IBM’s strategy is more focused on non-banking applications of blockchain technology.
“Now people are talking about how they can use blockchains without endorsing any shadow currencies, and everyone is excited,” said Wolpert. “It has gone beyond being a fad.”
Wolpert is persuaded that blockchain technology could have many important non-currency applications, and, in particular, that it could be a solid foundation for more efficient supply chain networks.
Photo Patrick / Flickr(CC)
The post IBM Supports Linux Foundation's Hyperledger Blockchain as Industry Standard, Plans Deployment appeared first on Bitcoin Magazine.
The number of banks experimenting with blockchain technology and looking at their own digital currencies is growing by leaps and bounds, so it’s no surprise that Deutsche Bank is well on its way to having its own blockchain technology.
In a recent statement, the bank was quoted as saying: “Banks must partner with fintech and digital currency businesses or risk disappearing altogether.”
Although Deutsche Bank is a member of the R3CEV consortium of 42 banks that is developing a protocol for blockchain technology for the banking sector, the bank has been quietly running its own blockchain experiments.
Recently, Bank of America JPMorgan, UBS and Bank of England have also said that their respective banks are looking at ways to adapt blockchain technology for their own use.
But unlike some banks, such as Japan’s Bank of Tokyo-Mitsubishi, Citibank and BNY Mellon, Deutsche Bank is not looking at developing its own digital currency. It believes customers are looking for more digitalization and convenience, not necessarily a new currency.
In a forthcoming white paper called FinTech 2.0, Deutsche Bank signals to investors and clients that it is looking at partnering with new fintech startups to accelerate the transition to digital banking, including blockchain technology.
Deutsche Bank’s report is a wake-up call for the banking sector, warning that unless banks learn to partner with fintechs and “digital disruptors” they will begin to disappear altogether from the financial services landscape.
Coming on the heels of Deutsche Bank’s reported record loss for 2015 and a drop in Deutsche Bank’s share price, the report notes that it’s time for the bank to adopt a new business model that recognizes the importance of digital disruption in financial services.
In a wide-ranging interview with Bitcoin Magazine , Deutsche Bank Managing Director Rhomaios Ram said that the bank is more than ready to adopt new payment innovations and considers the adoption of blockchain technology inevitable.
“As the white paper notes, the biggest hurdles to adoption of new technologies and partnerships are regulatory and legal requirements in different jurisdictions around the world,” said Ram.
“Fintechs, and huge digital ecosystems in particular, have entered the market with a bang,” he said, noting that the report calls for a “mindset” adjustment to understand the major change in the marketplace and “that digitalization can become the new differentiator for banks.”
The white paper calls on the banking sector to “modernize the entire financial system infrastructure” andpartner with new digital market forces. including cryptocurrency startups, saying, “Banks must change their attitude to fintech companies in order to survive.”
Fintech startups happy to partner with Deutsche Bank
Ram told Bitcoin Magazine he had met with many fintech startups and was pleasantly surprised that they were more than happy to partner with the bank.
“I’ve discussed the possibility of partnerships with tens of different fintech startups, and they all seem very keen to partner with us,” Ram said. “It’s great that they see the benefits that we can bring to a potential partnership, including a client base, security and regulatory certainty.”
The report lists the following projects as examples of “payment innovators”: PayPal, M-Pesa, Bitcoin, Alipay, Stripe, Payoneer, Samsung Pay, Apple Pay, Square and Google Wallet.
In the spirit of cooperation, JPMorgan Chase already has teamed up with Digital Asset Holdings on a trial blockchain initiative that aims to make the trading process more efficient and cost-effective.
What’s in it for the new fintech company? The white paper notes:
“In order to maintain their position, they must find a way to meet their regulatory, investment and risk needs in order to focus on their core competencies. They may find partnering with a global banking provider to be the most strategic approach in this regard, and many of the developments of coming years will likely evolve within such alliances. Several market leaders have realised that bank alliances are the way forwards.”
Deutsche Bank experiments with three blockchain labs
According to Ram, Deutsche Bank currently operates three innovation labs in Berlin, London and one soon to be launched in Silicon Valley.
Calling blockchain technology “genius,” Ram said they haven’t settled on one version yet of the various technologies being developed.
“We’re blockchain ‘agnostics’ – we’re interested in and studying the benefits of all the various blockchain technologies including Bitcoin, Ethereum, Stellar and others – to ensure we’re adopting the best possible version for our use,” he said.
In early December 2015, Deutsche Bank announced it had successfully tested a corporate bond platform that was based on blockchain technology. Blockchain technology “smart contracts” were used to issue and redeem bonds that paid out coupons automatically.
On bitcoin as a currency, Ram isn’t sure what the future holds for the digital currency, saying:
“As far as bitcoin as a future currency, I’m not sure whether universal adoption is a sure thing. The public seem most interested in the digitalization and convenience of new faster payment methods more than a change in the currency itself.”
Photo Epizentrum / Creative Commons
The post Deutsche Bank: Banks Must Partner with Fintech and Digital Currency Businesses or Risk Disappearing Altogether appeared first on Bitcoin Magazine.
SatoshiPay, an online payments company headquartered in London, announced the launch of a platform for Web publishers, offering a new way to monetize content through frictionless micropayments.
SatoshiPay’s payment technology gives users the ability to transact amounts as small as one cent or less – which the company refers to as “nanopayments” – by leveraging blockchain technology.
“Nanopayments can be fractions of a cent. They are instantly settled and can be executed at high frequency. Imagine a couple of payments per second by a single user,” said SatoshiPay co-founder and CEO Meinhard Benn. “This enables completely new ways of monetizing Web content and digital goods in general. In an increasingly digital society, nanopayments allow for new business models that existing payment technology cannot facilitate due to its fee structure and trust models.”
SatoshiPay Ltd. is headquartered in London and development is done through the Berlin subsidiary SatoshiPay Germany UG, founded by Benn, Henning Peters and Kilian Thalhammer in 2014. In July 2015, the company won second prize at Coinbase Bithack.
“SatoshiPay is a bitcoin nanopayment wall for publishers which allows you to pay for the section of text that really interests you, make metered payments for streaming video, and make paid downloads with a single click,” noted the Coinbase announcement. SatoshiPay recently announced that it closed a €360,000 seed funding round.
“SatoshiPay would like to become a standard for paying for digital goods on the Web,” Benn told Bitcoin Magazine. “It’s widely assumed that micro or nanopayments are one of the applications that could become Bitcoin’s killer-app. We strongly agree and we hope that we built a use case that can prove this.”
Micropayments are difficult to implement with traditional payment systems, because the overhead costs (transaction fees) would be too high. But fast micropayments with the low transaction fees permitted by Bitcoin enable alternative models for paid online content.
We are used to a “free” Internet where nobody has to pay, but, of course, there is no such thing as a free lunch. The price that we pay for free email is spam, and the price that we pay for free content is rampant advertising – often annoying, intrusive, and ugly – or registration to websites that could sell their registered users list to spammers. Needless to say, many users install ad-blockers and don’t register to websites with mandatory sign-up. The company recommends trying the SatoshiPay model as an alternative to ads and registration.
In SatoshiPay there is no registration, and payments are done with one click or tap. The user can also choose to pay for content completely automatically. The balance of the user’s SatoshiPay wallet is displayed in the SatoshiPay’s floating Web widget at the bottom of the publisher’s website (example here). The user’s balance is shared across all websites that integrate with the SatoshiPay widget, and a user interface to manage SatoshiPay wallets is in the works. Publishers can join the SatoshiPay nanopayment network and install a Wordpress plugin, and more options for both publishers and users are expected to be available later on.
“A lot of people are talking about how smart contracts and payment channels can power tomorrow’s applications,” Benn told Bitcoin Magazine. We’ve built something that is already very useful today.”
Florian Glatz, a developer who is also SatoshiPay’s lawyer, wrote an article to explain how SatoshiPay is prototyping innovative uses of smart contracts “to change the Internet economy forever.” The SatoshiPay service is a trustless intermediary that mediates contractual negotiations and performance between buyers and sellers of digital goods, without those parties having to trust the service with their money, by implementing micropayment channels built on 2-of-2 multisig addresses and the nLockTime property.
The SatoshiPay service seems a clever and streamlined way to monetize online content without annoying readers, and the first impression is that it could really change the Internet economy once it achieves a critical mass of users and publishers.
“We automatically generate a Bitcoin wallet for each website visitor – without them even knowing,” Benn told Bitcoin Magazine. “When users that were previously not familiar with Bitcoin realize they have a wallet now, they might be curious to learn more about Bitcoin and its other applications. So besides being an easy-to-use payment tool, our product also helps to spread the word. As someone on Twitter put it: Blockchain is moving into publishing.”
“Go to satoshipay.io and show me your QR code,” is Benn’s message to people that wonder how to get bitcoins. “I will send you some bitcoins right now and you can start using them. There is no on-boarding.”
The post SatoshiPay Launches Bitcoin Nanopayment Network for Online Content appeared first on Bitcoin Magazine.
The long-lasting block size dispute has catapulted into the center of attention again. One of the most talked-about developments is Segregated Witness, of which a public testnet iteration was launched last week. The innovation as recently proposed by Blockstream co-founder and Bitcoin Core developer Dr. Pieter Wuille is a centerpiece of a scalability “roadmap” set out by Bitcoin Core.
To find out where the broader development community stands on Segregated Witness, Bitcoin Magazine reached out to library and wallet developers; those who will need to do the heavy lifting in order to utilize the innovation once rolled out.
In part 6 of this series: Bitcoin Core and Bitcoin C library developer Jonas Schnelli.
Less Than a Week of Work
Jonas Schnelli is an independent Bitcoin Core developer who also develops the libbtc library that runs on iOS, Android, Mac, PC, Linux and MCUs. Schnelli additionally founded digitalbitbox.com, which is in the process of creating a simple and secure hardware wallet.
Like many other wallet and library developers, Schnelli believes the integration of Segregated Witness would significantly benefit the Bitcoin protocol.
“I have read the relevant Bitcoin Improvement Proposals in detail, and have started experimenting with Segregated Witness to get a better feeling for how it works and how long it might take to adapt it for my projects. I think from the wallet perspective – SPV, hardware-wallet, wallet-libraries – integration is pretty simple. Probably less then one week of work, including testing and deploying. This is also evident from looking at the basic Bitcoin Core wallet changes; it’s just a couple of lines of code.”
Schnelli agrees that a roll-out of Segregated Witness is the best first step toward broader Bitcoin scalability.
“I completely agree the added effort for wallet and library developers is worth it, considering the risks of hard forking,” Schnelli explained. “People are often favoring simple infrastructure improvements rather then going into optimizing the software itself. But that’s a common mistake we have seen in the IT industries in the past decades. It’s short-term thinking and will very likely cause bigger problems in the future.”
Soft Fork: Chance for a Better Protocol
Roll-out of Segregated Witness on the Bitcoin network is currently scheduled for April of this year. Once a super-majority of miners agrees on the solution, Segregated Witness will be activated, and can be utilized by wallet software.
The most notable difference between Bitcoin Core and its recently launched competitor Bitcoin Classic is that the former plans to roll out Segregated Witness through a soft fork, while the latter wants to deploy a block-size increase through a hard fork, meaning all full nodes on the network need to switch.
Schnelli considers the choice an obvious one: a Segregated Witness soft fork is preferable for now.
“A 2-megabyte hard fork does not improve the protocol itself, not a tiny bit,” Schnelli said. “With Segregated Witness, we have a chance to get a ‘better,’ more optimized protocol, and reach almost the same amount of transactions per block. And, extremely important, Segregated Witness has almost full consensus.”
“I personally cannot understand why some developers are still thinking that a 2- megabyte hard fork is preferable. The main risks of a hard fork are not technical, but there are huge risks of disrupting the whole Bitcoin economy. The Bitcoin market is extremely fragile, and it fully trusts in developer consensus. Bitcoin is still very young. If we start fighting and disagree on the very deepest technical layer, we hurt Bitcoin in its core and will lose irreplaceable trust from the markets.”
Schnelli noted, however, that he has no fundamental problems with alternative Bitcoin implementations, including Bitcoin Classic. It’s mostly the proposed block size increase prior to consensus that he condemns.
“I’m still hoping there could be a full agreement between Classic and Core on the consensus layer. Code forks are healthy – chain forks not,” he said. “If we go down the road of a ‘Let’s see who will make the race; Classic or Core’ there will only be one winner in the end: other cryptocurrency protocols like Ethereum and Ripple.”
For more information on Segregated Witness, see Bitcoin Magazine’s three-part series on the subject, or part 1, part 2, part 3, part 4 and part 5 of this development series.
The post Core Developer Jonas Schnelli: Segregated Witness Improves and Optimizes Bitcoin Protocol appeared first on Bitcoin Magazine.
Segregated Witness has become the most talked-about breakthrough in Bitcoin development since the concept was presented in early December to the Scaling Bitcoin Workshop in Hong Kong by Bitcoin Core Developer Pieter Wuille. One of the men that Wuille thanked in the last slide of that presentation was Bitcoin Developer and Ciphrex CEO Eric Lombrozo.
Lombrozo gave a presentation on the future of Bitcoin scalability at the recent Blockchain Agenda Conference in San Diego, where he outlined some of the key benefits of Segregated Witness (SegWit). Although much of the Bitcoin community thinks of SegWit in terms of getting more transactions into each block, the reality is that this innovation offers more than that. When first mentioning this concept to the audience at the San Diego Convention Center, Lombrozo stated:
“This is one of those ideas that – in hindsight – once you understand it, you think this is how it always should have been done.”
1. Stuffing More Transactions Into Blocks
Lombrozo first pointed out that most nodes are interested only in the transactions that affect themselves. He explained:
“Scripts take up a lot of space and consume bandwidth. Most nodes are not interested in every single script and every single signature of every transaction on the blockchain. They’re usually mostly interested in the [transactions] that concern them.”
Lombrozo explained that SegWit allows nodes to ignore data that they were unlikely to use anyway. He added that this new feature would essentially free up more space for transactions in each new block:
“Every single time that you have to download blocks and transactions, you download all of this data that most nodes are just going to end up throwing away anyway. This can actually give us about two-thirds or more additional space, so we can put [more transactions] in the blockchain.”
Although the Bitcoin community has focused on an increase in the block size limit to increase transactional capacity, SegWit is able to achieve the same goal through alternative means.
2. Fixing Transaction Malleability
Transaction malleability has been a thorn in the sides of Bitcoin developers for years. During the collapse of Mt. Gox, Mark Karpeles attempted to blame the loss of customer funds on this issue in the Bitcoin protocol. Transaction malleability has also been used to perform DoS attacks on the Bitcoin network.
During his talk, Lombrozo noted that SegWit has the ability to slay the dragon of malleable transactions once and for all:
“It fixes transaction malleability. Now, you can sign transactions independently of transaction identification, so you can construct these very long transaction chains and make it so that the order they get signed in doesn’t matter.”
A fix for transaction malleability is also required for the Lightning Network to function properly, so it’s possible that SegWit will be able to improve Bitcoin’s ability to scale in more ways than one.
3. A Mechanism for Adding New Opcodes
Adding new opcodes to Bitcoin has been a difficult proposition in the past, but SegWit creates a better method of upgrading the scripting language. Lombrozo noted:
“It provides a powerful script upgrade mechanism. Up until now, we really didn’t have a good way to upgrade or add new opcodes to the scripting language.”
Lombrozo then took his statement to another level, saying:
“With this, I believe we can actually replace the scripting language entirely with a soft fork.”
Opcodes are what enable various types of transactions on the Bitcoin network. One of the most recent opcodes added to Bitcoin was OP_CHECKLOCKTIMEVERIFY. As a side note, new opcodes are required to bring sidechains functionality to the Bitcoin blockchain.
4. A More Flexible Security Model
Lombrozo also talked about how SegWit can enable new security models for Bitcoin transactions. He explained:
“It makes it possible to add new, partial proofs for future soft forks. This allows for fraud proofs and other kinds of cryptographic proofs, which would allow us to have more flexibility in the security model, so we can decide how much we want to trust other peers and how much we want to validate for ourselves.”
Validation on some transactions can be much lower than others, so it makes sense to allow users to choose the level of security they need in different situations. For example, someone purchasing their morning coffee does not require the same level of validation as a financial institution settling a day’s worth of transactions with another entity. Transactions with less validation can bring more efficiency and scalability to the Bitcoin blockchain, but it’s important to understand the security tradeoffs.
5. Bandwidth Requirements Are Lowered
Segregated Witness also has the potential to decrease bandwidth requirements for SPV nodes. Lombrozo explained this point during his talk:
“When we separate the effects from the scripts and signatures, now we can download these things from different peers at our own leisure – however we want. This allows us to optimize for the peer-to-peer layer significantly, since now we no longer need to be propagating everything all the time. We only propagate the things that are necessary at that moment for the particular peer.”
There may be some downsides to SegWit, too, but these advantages are hard to ignore. Both Bitcoin Core and Bitcoin Classic have plans for implementing this new concept into their respective software clients.
Correction: A previous version of this article claimed Segregated Witness lowers bandwidth requirements for full nodes. This is not true, and the decreased need for bandwidth availability only applies to SPV nodes.
Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report and many other media outlets. You can follow @kyletorpey on Twitter.
The post Bitcoin Developer Eric Lombrozo on Five Benefits of Segregated Witness appeared first on Bitcoin Magazine.
Bitcoin exchange Kraken announced a multi-million dollar agreement with SBI Investment, one of Japan’s leading and most respected venture capital firms, to invest in and lead the Series B round of financing in Kraken.
SBI Investment is the venture capital arm of SBI Holdings, the world’s first Internet-based financial conglomerate. The terms of the deal were not disclosed.
SBI Investment is a unit of SBI Holdings, an Internet-based financial conglomerate with operating revenues of more than $2 billion in 2015 and operating income of around $570 million. The SBI Group consists of 208 companies operating in approximately 20 countries and regions, in sectors including financial services, asset management and biotechnology.
According to the company’s website, SBI Investment takes many factors into consideration, including market growth potential, uniqueness, differentiation from competitors and feasibility of business model.
A communication issued by SBI Holdings notes that Kraken has a high level of safety and has never been hacked since it has stringent security control measures in place. It has attained a position as a market leader, including the largest global market share in terms of the volume of Bitcoin transactions and liquidity in the European market.
“SBI’s investment means a lot to us,” said Kraken founder and CEO Jesse Powell. “We’re proud to have such a strong strategic partner leading our round. It’s a fantastic first step toward completing Series B, which will ultimately enable us to scale our business worldwide. Kraken will be prepared to meet the fast-increasing demands of an emerging ecosystem of blockchain-enabled assets.”
Speaking to Bitcoin Magazine, an industry insider noted that this announcement was particularly impressive given the “brutal” fundraising climate for bitcoin exchanges. Before this investment round, Kraken had raised $6.5 million from backers such as Hummingbird Ventures, Blockchain Capital and Digital Currency Group.
Founded in 2011, San Francisco-based Kraken was the first Bitcoin exchange to have trading price and volume displayed on the Bloomberg Terminal, and the first to pass a cryptographically verifiable proof-of-reserves audit. According to the company’s website, Kraken is trusted by hundreds of thousands of traders, the Tokyo government’s court-appointed trustee, and Germany’s Fidor Bank. In October 2014, Fidor Bank and Kraken partnered to create the world’s first cryptocurrency bank.
SiliconANGLE notes that the investment from SBI comes at a busy time from Kraken, following the announcement that it had acquired New York-based Bitcoin exchange Coinsetter Inc. and Canadian exchange Cavirtex in mid-January and the launch of new products in 2015, including a dark pool exchange service and a maker-taker fee model.
Buying Coinsetter is just one part of the equation in order to add volume, noted TechCrunch. Kraken also needs to make it easier to deposit U.S. dollars on the platform. The company is partnering with SynapsePay to allow USD deposits in 37 U.S. states and Washington D.C. for just $5.
“We knew that we wanted to invest in Bitcoin and the blockchain,” said SBI Holdings CEO Yoshitaka Kitao. “We wanted a company that would be a wise strategic investment. Kraken has been a leading global Bitcoin exchange for years. They have grown tremendously during that time while building a strong reputation as one of the most innovative, secure, compliant and reliable companies in this emerging financial services area. Kraken was the clear choice.“
Kraken now claims to be the world’s largest Bitcoin exchange by euro volume and transactions, and that in the last two years traders have made more than $1.4 billion in transactions on the platform while trading bitcoin and other digital assets in euros, U.S. dollars, Japanese yen, British pounds and Canadian dollars.
SBI notes that Kraken is developing blockchain-based financial infrastructure that permits reducing system costs significantly, and dramatically shortening payment processing times, which is attracting attention from the many financial institutions that need to process large volumes of data in short times. The investment represents a vote of confidence in the potential of both blockchain fintech and Kraken.
Photo via Kraken
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