The meteoric rise of Bitcoin has led to heightened investment, academic, commercial, numismatic, transactional, and practitioner interest in that cryptocurrency, as well as in the growing array of such instruments worldwide. This leads to an accentuated need for an examination of the historical evolution of Bitcoin as the seminal instrument in the development of cryptocurrencies, and this discussion paper seeks to address that gap.
An estimated $US280 million ($AU365 million) worth of the cryptocurrency ethereum is now locked up after a user accidentally deleted the code necessary to access the digital wallets hosted by the company Parity Technologies.The vulnerability impacted the “multi-sig” digital wallets launched through Parity since July 20.Multi-sig wallets usually contain large sums of money since they are primarily used by startups or large groups looking to prevent any one member of the group from running off with the money.
P2P Models is a large research project to build Blockchain-powered organizations which are decentralized, democratic and distribute their profits, in order to boost a new type of Collaborative Economy. The project has three legs:Infrastructure: Provide a software framework to build decentralized infrastructure for Collaborative Economy organizations that do not depend on central authorities.Governance: Enable democratic-by-design models of governance for communities, whose rules are, at least partially, encoded in the software to ensure higher levels of equality.Economy: Enable value distribution models which are interoperable across organizations, improving the economic sustainability of both contributors and organizations.
The recent spike in the price of bitcoin to over $7,600 has delighted cryptocurrency speculators and early investors the world over. Many consider the windfalls as vindication of their belief that bitcoin is not just an experimental currency but a viable asset class in its own right.Adding credence to that view was the decision last week by one of the world’s top derivatives exchanges, CME Group, to launch bitcoin futures in the fourth quarter of 2017.Yet there is an irony here. The further bitcoin mutates into a price-defying asset class, the less useful it becomes as a medium of exchange and, worse still, the more expensive and energy intensive it becomes to maintain. This is an awkward situation for investors who are supposedly becoming more aware of the implications for environmental, social and corporate governance (ESG) when making allocation decisions. When I recently asked a room of approximately 50 students how many had heard of bitcoin, almost all raised their hands. Asked how many had bought bitcoin, about a third of them raised their hands. But when I asked how many had used bitcoin actually to buy something, only one raised a hand.That people would prefer to hang on to their bitcoin than spend it is not surprising given its soaring value. This clingy behaviour is an instance of Gresham’s law, which states that bad money always drives out the good, and that if there are two forms of commodity money in circulation, the more valuable one will disappear as it is hoarded. But these days there are other reasons to hang on to your bitcoin. The era of costless bitcoin transactions is long gone. For some time, fees have ranged from $3 to $6 per transaction, depending on the network’s available capacity. The situation makes small, day-to-day payments from coffee purchases to bus ticket sales increasingly impractical.In energy terms, meanwhile, a recent analysis by Motherboard estimated that a single bitcoin transaction requires 215 kilowatt-hours of electricity to process. That is the equivalent of what an average American household consumes in one week.Add this energy wastage to the reputation bitcoin already has for opaque governance, cyber crime and dark market trade, and you can see how, from an ESG perspective, bitcoin proves an even more controversial investment than a holding in a developing world commodity-extracting company. In that light, CME’s plans to list bitcoin futures might not be enough to dissuade responsible investment managers from shunning the asset class in ESG-friendly indices in the long term. Remy Briand, head of ESG for index creator MSCI, says: “If we assume that consumption will continue to increase roughly in line with the bitcoin price . . . then we could end up in a situation within a few years where the electricity consumption of bitcoin mining would be equivalent to a country like the Netherlands or Switzerland.”In Mr Briand’s opinion that would make a lot of the efforts to reduce emissions in the context of the Paris Climate Agreement entirely pointless. Bitcoin enthusiasts retort that the energy consumption is justified if it amounts to less than all that of existing processors and banks combined. But for this to be true, incumbents would have to be eliminated by competitive forces — a big ask for a system which already charges well in excess of rivals, implying relative inefficiency. Moreover, for bitcoin — which is capital intensive, decentralised and opaque by design — to become more sustainable, powerful vested interests who have an incentive in keeping the system inefficient would have to be taken onAnd even if all that were possible, none of it changes the fact that if bitcoin’s primary use is for speculation rather than transaction, the energy wastage serves very little constructive social purpose at all.
The first phase of Blockchange will seek to test the hypothesis that by applying blockchain attributes to identity management, a trusted digital ID can be created that can benefit, for instance:The estimated 1.1 billion people who are unable to prove their identity to the satisfaction of authorities and other organizations – often excluding them from property ownership, free movement, and social protection as a result;The 1.3 million refugees that are trying to relocate around the world but can’t be identified; andAll the women and girls, who disproportionately struggle to obtain IDs, often the result of barriers related to: freedom of travel, distance, financial costs, time constraints, illiteracy, lack of information and awareness, and lack of support from family members.To become smarter about the application of blockchain technologies for identity, Blockchange will initially seek to:Map, and provide a taxonomy of blockchain technologies that seeks to provide identity;Develop a primer on the potential and challenges of blockchain technologies across the identity life-cycle (such as creation; verification; authentication; and authorization);Map the actual use of identity provided through blockchain technologies for a variety of social good purposes through case studies; andCo-develop a set of (evidence-based) design principles that can guide the further development and use of blockchain for social change.
Experiments in Algorithmic GovernanceThe following is an excerpt of an academic article [PDF] I wrote detailing why The DAO failed, and why other DAOs and blockchain technologies might also fail. In a nutshell, lack of an appropriate governance structure and plan, and insufficient recognition of the challenges of building new social models doomed The DAO. When building new blockchain platforms, one ought to plan for these eventualities.
That the first forays into state-backed cryptocurrency comes from two countries with a history of restricting a free and open internet is not surprising. While Bitcoin originated as a way to opt out of government control of money supply, increasingly governments see the underlying technology as a way to increase their control of the economy.As Xiong Yue explained:For example, if the government plans to subsidize certain farms, say some corn farms, to support this sector of agriculture, they can directly add a certain amount of money to the wallets of some farms, for instance 100 million dollars and program this money to be sent to certain fertilizer merchants at a certain time, and that each can only spend maximum of 10 million dollars per year, and in this way, they can make sure that the farmers won’t squander the windfalls, and that this money won’t flow to other sectors, for instance, the stock market or real estate market.Even though this kind of monetary policy is bound to fail, from the perspective of government officials, CBDC provides them a better tool. For them, with the help of the CBDC, they can plan and manage the economy better.
assets serve decentralized applicationsDecentralized applications are a new form of organization and a new form of software. They’re a new model for creating, financing, and operating software services in a way that is decentralized top-to-bottom. That doesn’t make them better or worse than existing software models or the corporate entities that create them. As we’ll see later, there are major trade-offs. What we can say is simply that they are radically different from software as we know it today and radically different from the forms of organization we are used to.
Source: A Letter to Jamie Dimon – Chain
Ramya Rathan Kumar George Mason University, Antonin Scalia Law School, A blue paper on Blockchain Technology and its impact on the Internet age. Keywords: Blockchain, Bitcoin, Internet, Privacy, Future, Cyber-attacks Source: Impact of Blockchain Technology on Internet Privacy by Ramya Rathan Kumar :: SSRN
With the continuing collapse in online advertising revenues, websites are turning to other methods to pay their hosting bills – including using visitors’ computers and phones to mine cryptocurrency.It’s a controversial practice, with some likening it to running malware on visitor’s computers, but it is a potentially lucrative endeavour for websites. The downside is that at best it slows down visitors’ machines, and at worst it can also drain their batteries or send their electricity bills soaring.BitTorrent search engine The Pirate Bay, and US video streaming service Showtime, are two sites that were discovered to be sending mining code to users. The former owned up, posting in mid-September that the code was “just a test” and that the experiment was being done with a view to removing all adverts from the site.