The Devils Playground: Bitcoin’s Role in the End of the World

I’m not a particularly paranoid person but I understand many of the concerns shared by technology visionaries with regards to artificial intelligence. Elon Musk and Sam Harris have been some of the great minds speaking out on this topic with Musk warning that we are “summoning the demon.”

I believe there is one technological development adding even greater credence to their forewarnings that is yet to be considered. Blockchain protocols like Bitcoin and MineFilecoin are creating the perfect AI incubator. They might provide a secure location for the demon to hide and secure itself; something I’ll refer to here as the Devil’s Playground.

 

Blockchains are AI-Friendly

In a future where censorship-resistant storage is a reality AI would find the perfect place to secure itself without the concern of being “disconnected”. It would seem rational for an AI to secure itself (and create backups of itself) on distributed & encrypted blockchains where it could learn and grow over time.

Bitcoin is the first example of a decentralized autonomous organization. Various participants are incentivized by the mechanisms of mining, speculating and transacting to contribute to the blockchain. The past 8 years have proven these incentives are capable of establishing secure anti-fragile systems free from the control of any central entity.

Filecoin is a similar blockchain protocol currently in development. The key differentiator Filecoin has from Bitcoin is that it’s backing is not proof-of-work mining (mine using electricity) but rather storage space (file storage capacity). Oops! — looks like we just created a digital realm we can’t control. Well, maybe we can turn it off!?!

We Can’t Unplug It!

Some might be tempted to say “just turn off the blockchain”. While this would seem a rational solution it is the very thing blockchains are designed to resist. The moment an AI inhabited an establish blockchain it would likely go about distributing itself further (establishing additional nodes, increasing the hash rate, gaining more storage, etc). Furthermore, if there were ever a time where a threatening AI were to inhabit a blockchain it would likely already be too late (listen to Sam Harris discuss the potential rate at which an AI might learn in minute 7 of his TedTalk).

Sadly, human greed is also an impediment. Humanity has a long history of being selfish and failing to act in the collective best interest of our species (take fossil fuels and climate change for example — the USA backing out the of Paris climate agreement). While many might unite to try and intervene it would likely be futile – too many miners are making great profits!

The End is Nigh!

The premise of most science fiction works related to AI often revolves around the “breakout” moment for AI itself, the moment it finally escapes the grasp of humanity and goes out into the world. While great minds are currently developing technologies many fear may someday grow capable enough to become self-aware, many may not realize that in parallel the world of distributed censorship-resistant blockchains is expanding at a rabid pace creating the perfect playground for these demons to hide.

Anyhoo… just something I was thinking about. Sleep tight!

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Cryptocurrency isn’t Mainstream. It’s for the 0.0135%

Cryptocurrency is for the 0.0135% but I don’t mean this in the sense of the elitist 0.0135%.

There are likely only a few million people with any stake in any blockchain whatsoever. Setting aside the developing world (often referred to as the ‘Other 7 Billion’) the population of the developed world is estimated to be 1.2 billion people. According to the website BitcoinRichList there are roughly 4 million on-chain bitcoin addresses with 0.01 (equivalent to $5.75) or more worth of Bitcoin in existence.

Let’s do some simple math with a generous estimate that 10 million people own bitcoin (or any other kind of cryptocurrency):

10,000,000 / 1,200,000,000 = 1/1,200 = 0.8%

So… generous estimates say that less than 1 out of every 100 people in the developed world might own any amount of on-chain cryptocurrency. If you consider the entire world population (7.4 billion) the calculation goes as follows:

 10,000,000 / 7,400,000,000 = 1/7,400 = 0.0135%

Comparisons to the Internet

In 1997 the developing world’s internet utilization percentage was roughly 0% and the developed world was roughly 11%. (Source: International Telecommunications Union). Today these figures are estimated to be 32% and 78%.

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Internet users per 100 inhabitants.

So What Classifies Mainstream?

From my own qualitative experience, I would portend that the arrival of AOL & instant messaging began the true mainstream internet boom in the late 90’s. At that  time (1998) the developed world had a utilization percentage of roughly 17% and the developing world was at only 1%.

Given the utility of bitcoin as a store of value, we may find the technology leapfrogs traditional banking infrastructures and finds more initial utility in the developing world. Could it be that the utilization percentage in the developing world eventually outpaces that of the developed world? And at what percentage would we characterize this adoption as ‘mainstream’?

If we look to the growth of the internet as a benchmark one could assume 15% of either the developing or the developed world would be a meaningful benchmark. If this is the case, bitcoin still has a long way to go. Till then, it will be great to see it continue to innovate, improve and become more anti-fragile.

Securing Your Bitcoin for Dummies

An unfortunate predicament for newcomers to Bitcoin is most do not hold PhD’s in cryptography or computer science. The idea of being responsible for the security of a technically intimidating and poorly understood asset is terrifying. Too often individuals defer this challenge and choose to leave their coins on exchanges as “surely they know how to better secure these things”. Here I will summarize what newcomers need to know, why securing your own bitcoin is important and the easiest ways for a newcomer to secure their bitcoin & take personal responsibility for their assets.


 

No More “Forgot Password?” Button

Bitcoin’s greatest strength comes from the fact that it is censorship-resistant. If you own the private keys (bitcoin speak for password) to your bitcoins you can send them to whomever you want whenever you want. You alone control your wallet (bitcoin speak for account) and no organization, business, bank or government can stop you.

Historically for many a password has always been something you can easily recover by clicking the “Forgot Password?” button, right? This has been an option with online accounts because the service providers (Google, Facebook, PokemonGO, etc.) have record of your password. You don’t always think about it this way but you are trusting them with your account access and information.

This is not the case with Bitcoin. In Bitcoin you have the option to own your own private keys (password) giving you sole control and responsibility of maintaining access to your funds. A scary but empowering new possibility.

Why Securing Your Own Private Keys is Important

The recent hack of crypto-currency exchange Bitfinex of nearly 120,000 bitcoin (worth over $60 million at the time of the hack) has brought the issue of security back into mainstream discussion; an issue the industry is all too familiar with as displayed by the following tweet:

It is important to note these instances were never a hack on the bitcoin network itself. Rather they were instances where 3rd party service providers were robbed. (akin to your local bank branch being held up). When this occurs it is typically the customers of the exchanges (you) that end up holding the bag with no recourse. Imagine if your bank was robbed and they told you; “Sorry, we got robbed and it was your money. Nothing we can do!” This is what has happened time and time again to the customers of Bitcoin exchanges.

hack

If you own Bitcoin there are literally scary ghost hackers in hoodies trying to rob you.

Ultimately, the takeaway for a newcomer should be this; Bitcoin has value. If something has value people will likely try and steal it — especially if it can be stolen easily and with little risk. Bitcoin exchanges have shown they get robbed pretty regularly (at least one major hack per year) and when they do their customers lose there money.

If you don’t want to end up like these people you should learn the simple ways to secure your own Bitcoin that also don’t involve becoming a master cryptographer. Here I share the easiest & most secure known options for newcomers.

Important Tip Before You Read On

  • Creating Backups of Your Wallets: Each of the options below encourages you to create “backups” of your private keys. This is a good idea. Create backups and store them in a secure location(s)

Easiest Ways to Secure Your Own Bitcoin

  1. Phone a Friend: First and foremost if you have a friend or know an expert in the space get their support in navigating your options. Ask them questions.
  2. Buy a Hardware Wallet: Think of a hardware wallet like a really secure USB drive. They come with fairly simple instructions that will walk you through setup. You need to treat these as you would a wallet full of cash or a brick of gold. If someone physically steals them they can now control the funds stored on them. Here are the websites of two reputable brands:
  3. Print a Paper Wallet: Think of paper wallets as a unique account with it’s very own password printed out on a sheet of paper. Generate a new one, print it out, send bitcoin to it, and store it in a secure & safe place. Here’s a trusted site: Bitcoin Paper Wallet. You can take this to the next level by buying a device called Mycelium Entropy which will generate secure paper wallets offline and allow you to easily print them on a offline print. Link here: https://mycelium.com/mycelium-entropy.html
  4. Create a Coinbase Multi-Sig Vault: A little more complex then the previous options but Coinbase’s instructions walk you through the process of setting up a secure “vault” that only you can access. If you have 2 secure e-mail addresses this shouldn’t be too hard to learn to do yourself. Here’s a link: Coinbase Multi-Sig Vault

Getting More Secure

The Bitcoin protocol and its peripheral service providers continue to innovate and increase the ease of security over time. This list will get you started for now but if you find yourself getting more into Bitcoin you should make it your own priority to stay on top of the trends in security. If owning your own keys is still something you are not comfortable with be sure to investigate a service provider that has insurance. I believe Coinbase and Xapo currently offer more secure “vault” storage that provides this.

On Hard Forks: They’re Getting Harder

Since the Ethereum hard fork on July 20th Ethereum Classic (ETC) (the original blockchain which includes the DAO heist) has found increasing support beyond just banter on twitter and crypto forums. It has grown substantially in terms of hash rate, price and trade volume. (It even surpassed Ethereum trade volume on 7/26/2016 at over $105 million).

At the time of the hard fork the new chain established almost instant separation in terms of hash rate leading many to declare the hard fork a success (Ethereum Blog Post). Many are beginning to realize that the fight may not be over. This is the first sign that in the maturing cryptocurrency ecosystem hard-forking a mature protocol provides challenges beyond hashing power — including the hearts, minds, and incentives of speculators and exchanges. With it’s own hard fork in the pipeline it may be a good idea for bitcoin to take note.


 

A Blockchain Street Fight

Anyone remember Double Dragon II for NES? No, just me? Well, in this game there was a point where the character is forced to fight his own shadow — a near mirror image of himself. In the most basic of analogies this is what is playing out before our eyes with Ethereum. We now find the two versions of the protocol battling it out.

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If I had to decide which was which I would call the hard-forked version of Ethereum the “shadow” chain. After all, it’s fair to say it is a less pure.

 

From what I see, this battle is being fought on several fronts. The historical elements of a hard fork include the following:

  • Mining Hash Rate: On one front, miners driven by profit motive are finding that rewards for mining Ethereum Classic in the immidiate time after the hard fork are greater than those of Ethereum leading to increased competition for hash rate between the protocols. This can be seen here: What to Mine
  • Perception & Social Media: Sadly this is a reality which I don’t care to discuss — but if you follow this stuff online the infighting is laughable and makes me slightly ashamed to associate myself with this industry.

A New Layer of Complexity

The new challenge facing open-source protocol forks is the maturing infrastructure surrounding them. Some of the new fronts include the following:

  • Exchanges Enabling Trade Volume & Price: Within days Poloniex exchange made ETC available to trade. Since then Kraken, Bitfinex and Shapeshift have either gone live with ETC trading or shared their intentions to do so. As a result ETC’s 24-hour trade volume now exceeds that of ETH. Its price has also increased substantially with a market capitalization ranking ETC a top 10 cryptocurrency. Where as a less mature ecosystem wouldn’t be able to support the previous chain the industry can now almost instantly get the previous asset on exchanges.

Ultimately, this new layer of complexity may indicate that as the ecosystem becomes more robust future hard forks could face new challenges not faced by previous forks.

So What’s Next?

I do not pretend to know enough to accurately predict how this battle will play out but that won’t stop me from speculating. It would seem the final stage would lie with the developers and companies building upon the blockchain(s) themselves.

If both chains can establish effective hash rates, mining incentives, communities, trade volume, and price it will come down to adoption by developers and companies.

  • Developer and Startup Preference: We’ve seen this play out with other blockchains (example: Onename moving from Namecoin to Bitcoin) where it became clear that one blockchain was favored over another. In this case it likely sealed the fate of Namecoin. The adoption of these companies can make or break a blockchain.

The ultimate deciders may be the developer and entrepreneurial community. Will they choose ETC, ETH … or will the division rendered by competing chains stagnate Ethereum sentiment and give Bitcoin maximalists more time to time to mature their more expansive projects built to compete with Ethereum with a proof-of-work backing. (Examples include YoursNetwork, Sidechains, Lightning Network, Rootstock, etc.)

One thing is certain … there will be more hard forks on open source blockchains and the Ethereum civil war will provided a number of great lessons for these projects. Hard forks are getting harder but with careful planning and attention it may still be possible to mitigate the risks and pull them off smoothly. Only time will tell.

 

On Consensus: The Good, Bad & Ugly of ‘Consensus Maximalism’ for Open-Source Blockchains

When first introduced to bitcoin I experienced an epiphany of sorts in realizing I didn’t understand what money was. One of my first assignments was to educate myself on what makes money money. This gave me a new understanding and appreciation for bitcoin and blockchain technology as a whole.

I believe the Bitcoin, Ethereum, and open-source blockchain communities are collectively suffering from a similar ignorance revolving around the idea of consensus. I call this affliction ‘consensus maximalism’ and hope this post can help shed light on this issue and share a different perspective on this concept.

Beating-Corruption-by-Building-Consensus-459x240

Only known photo of the world’s earliest blockchain.


 

Defining the Term

Merriam-Webster provides 2 variations of the primary definition for the term consensus. They are as follows:

consensus:

a :  general agreement

b :  the judgment arrived at by most of those concerned

Most notable about these definitions is neither includes any reference to absolute agreement. In lieu of absolute, total, or complete the definitions contain the terms general and most. This is a common oversight. I’ve observed this misunderstanding frequently in the Bitcoin and Ethereum space … I call it ‘consensus maximalism’.

Consensus Maximalism vs. Consensus in the Real World

I would define ‘consensus maximalism’ as the belief that to reach consensus there must be absolute agreement by all parties as to the best path forward. The fallacy is this level of rigidity would make any real-world consensus relatively impossible. Real progress requires a real-world definition of consensus.

Dr. John Toussaint, a former doctor & CEO, leadership guru and author famous for his contributions to organizational transformation work in the healthcare space was the first to bring to my attention that consensus is most often never about reaching full agreement. It is best described by the following excerpt:

…synthesizing the wisdom of all the participants into the best decision possible at the time. When you consent to a decision, you are giving your permission to the group to go ahead with the decision. You may disagree with the decision, but based on listening to everyone else’s input, all the individuals agree to let the decision go forward, because the decision is the best one the entire group can achieve at the current time.

After all, the term is rooted by the word ‘consent’. Very few systems, organizations, or communities have ever reached unanimous agreement on any decision. They always require a minority to ‘consent’ to moving forward in spite of their views for the benefit of the majority. Participants often have the option to ‘exit’ should their convictions be strong enough.

The Irony of Consensus Algorithms

The reality is that even in distributed systems consensus is never 100% at any time. This is displayed by orphaned blocks, alternatives cryptocurrencies, and of course hard forks. It is the great irony of this space that the communities supporting these systems struggle so greatly to achieve consensus in their effort to innovate upon consensus-mechanisms (blockchains).

The Good

In my view, as with many things in life, there is likely a smaller minority of ‘consensus maximalists’ who act as the squeaky wheels. This is not to say that this is all bad. In fact I believe it has some great benefits including:

  1. Increasing the difficulty to change highly distributed protocols with larger consensus pools (Bitcoin Core’s relative conservatism as an example)
  2. Encouraging outliers & dissenters with great conviction to ‘exit’ or support minority forks for communities & protocols. This drives creativity & innovation. (Every alt-coin ever)

The Bad

It stagnates progress to the limits of acceptance encouraging participants to ‘exit’. Nothing is more painful then being in the deadlocked state of consensus failure. Be it the decision as to where to go to dinner…

You: “I want to eat out … where would you like to go?”

Partner: “I don’t know, nothing sounds good.”

You: “Ugh… I don’t even want to bother.”

…or the debate on how to scale the world’s most promising blockchain.

The Ugly

The failure to reach consensus often blinds the minority participants from the shared purpose/goal of the entire population. Gun controls a good example of this. Nobody wants mass shootings but many people have strongly held opinions as to how to impact the problem… The ugly reality is as a result many of these camps end up fighting one another rather than focussing on actual experiments/solutions.

This unfortunate reality has reared its ugly head several times in recent years … examples including the bitcoin blocksize debate and the DAO / Ethereum hard fork.

The Good News

One benefit that blockchains have is the almost instant ability for those that do not consent with the path forward to fork. Ultimately anyone supporting or interacting with the longest chain should have nothing to complain about… by doing so they are ‘consenting‘ to the decisions of the majority of hashpower.

 

The Bitcoin Triangle

This is the most basic way I could describe the dynamics of the blocksize debate. Here are the rules….Pick any two sides of the triangle. You can have those two things but they come at the expense of the 3rd.

 

bitcointriangle

The Bitcoin Triangle. Pick any 2 sides at the expense of the 3rd.

For example, you can keep scale bitcoin and do so in a relatively short amount of time (increase blocksize) but inso-doing you sacrifice decentralization. Similarly, you can make bitcoin super-decentralized (smaller blocks) quickly as well, but inso-doing you sacrifice scale.

Fortunately, I believe the way things will play out for bitcoin is the best of the three possibilities. I believe we will see a scenario where we focus on scale and decentralization at the acceptable expense of time. I don’t know about you but I’m willing to wait on a sound solution… even if it takes some a couple more months, that’s all.

HELP WANTED: Non-Developer Seeks Experts to Make Informed Blocksize Decision

Recent events and bitcoin volatility appear to have sparked momentum in the blocksize debate. Despite following the proposals and on-going debate I have yet to formally support a proposed path forward. Here I want to lay out a very succinct account of the issues and pose some questions that will help me finalize my decision to support (or not support) Bitcoin Classic. I welcome comments and feedback from anyone in the community to help me gain a better understanding and make an informed decision.


The Fundamentals of the Debate

I understand the foundation of the debate to be based on two fundamental objectives shared by many in the community.

  1. Scale Bitcoin to Compete as a Global Transaction Network & Clearing Rail
  2. Maintain Strong Degree of Decentralization of the Bitcoin Blockchain

The irony in the debate is that all parties would likely agree that they want to achieve both of these. The challenge is that in many ways these objectives are at odds with one another, at least in the short term. To scale bitcoin in the near term means increasing the blocksize but increasing the blocksize means weakening the degree to which bitcoin is decentralized. Thus the need for compromise.

helpwanted
Where is the fair ground between scaling bitcoin for short term utility while not losing what makes bitcoin bitcoin in the process? In my humble opinion I believe this point falls where objective #2 (maintaining decentralization) has been prioritized while allowing for objective #1 (scaling bitcoin by increasing blocksize) to be achieved in a way that reasonably maintains decentralization.

Resources Informing my Decision

I’ve laid out my concerns. My stance could be summarized as follows:

Decentralization should be maintained as a priority and scaling bitcoin should be attempted where possible as long as it doesn’t jeopardize the decentralized nature of the protocol itself.

With this understanding I’ve referred to a number of resources to become more informed on the immediate proposals and considerations. Here are some of the resources for your reference:

  • Charles Hoskinson’s recent blog post has a section at the end called “My Proposal to Solve the Debate”. I respect his opinions based on his past & current contributions to Bitcoin and Ethereum. In it he shares a number of potential solutions (both technical and political) as well as a number of foreseeable innovations worth taking into account. This post does a good job of painting the big picture for bitcoin in the long run.
  • In the latest episode of the Lets Talk Bitcoin! podcast Andreas Antonopoulos spends the final minutes discussing the greater implications of Segregated Witness (Dr. Peter Wuille’s proposal that could reduce blockchain bloat by 75%). Beyond it’s immediate implications for bitcoin blocksize and transaction capacity Andreas describes a number of other benefits that may have even greater implications for scaling Bitcoin over time.
  • Overall growing momentum and support of Gavin Andressen’s Bitcoin Classic proposal.

While my greater understanding of the issues is based on a host of other information from the past 3 years these are the primary sources I’m considering at the moment.

My Own Conclusions

Based on this I’ve come to the following conclusions:

  • Decentralization must be maintained and protected as a priority — aggressive blocksize increases are not worth the risk but minor ones may be acceptable.
  • The benefits of Segregated Witness as a soft-fork are significant and this should be considered for immediate testing & implementation.
  • Bitcoin Classic is gaining momentum, is supported by leaders in the space, is proposed by one of Bitcoin’s most trusted core developers. It’s 2 MB blocksize increase appears modest and does not immediately threaten decentralization to any significant degree.

Essentially, if Bitcoin Classic maintains the tenants described above (prioritizes decentralization and allows for scaling at modest levels when appropriate) and allows for Segregated Witness I am inclined to support it and see bitcoin move on to it’s next great challenges.

Questions to the Community

What am I getting wrong here? Have at it!