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Scotland’s Capital to Hold Blockchain Tech Conference

Edinburgh is set to host its own global blockchain conference with over 200 attendees next month to discuss blockchain technology development, reports The Scotsman.

With global leaders signing up to the ScotChain16 conference on 11 November, this will be the first blockchain conference for Scotland, which is being held at the Royal Bank of Scotland’s Gogarburn headquarters.

Michael Young, chief executive of Glasgow-based MBN Solutions, one of the organizers of the event, said that this is a first for so many leading blockchain companies to congregate in Scotland to help people understand the blockchain technology.

He said:

We hope this event illustrates how Scotland is blazing a trail in this important technology area.

 

Other organizers of the conference include Spiritus Partners, RBS, Deloitte, R3 CEV, BigchainDB and Blockstream.

Tapping into the Market

Scotland understands the potential that this new technology can have on its economy, which is one of the reasons why it is putting together this conference.

Not only that, but according to the Scotsman, academics at the University of Strathclyde, a leading public research university in Glasgow, found that if Scotland fails to adopt new inventions they could lose out on providing 14,000 jobs and £635 million in wages.

Over the next ten years it is predicted that around 15,000 jobs can be created in Scotland by tapping into the FinTech sector, states Daniel Broby, director of the University of Strathclyde’s Centre of Financial Regulation & Innovation.

For many this event will help to stimulate business interest in blockchain technology and how they can implement it to further their business.

At the ScotChain16 conference, topics to be discussed will include financial services, healthcare, insurance, supply chain management, and digital rights. It is expected that this conference will be the platform to catapult Scotland’s potential of becoming a blockchain powerhouse.

Scotland Embraces a New Technology

When it comes to innovative technologies, Scotland is not afraid of embracing them.

Last year, a Scottish MP was calling for a national digital currency, the ScotPound, to be experimented within the country, in a bid to break away from the British pound.

Not only that, but the country went so far as to show its openness toward digital currency that a Glasgow pub was reported to start accepting the digital currency Scotcoin as a form of payment.

Yet, despite the enthusiasm behind the Scotcoin, if Scotland were to break away from the U.K., supporters of the digital currency would need to increase its value to reverse its low value that would make the cost of everyday living increase.

However, while the Scotcoin may, at present, have a low value, the upcoming ScotChain16 conference may help turn its this around as Scotland works at becoming the next blockchain powerhouse.

Images from Shutterstock.

Walt Disney Company Goes Big On Blockchain With Dragonchain P. H. Madore on 30/10/2016

The Walt Disney Company is #71 of the top 2000 companies in the world ranked by Forbes. It has an annual revenue in the tens of billions of dollars, assets near 100 billion dollars, and recently developed a keen interest in blockchain technology for use within its massive organization, which includes online retail, television endeavors, and, of course, their world-famous theme parks.

The most obvious benefit of a blockchain system is easier tracking of inventories, sales, shipments, and even people in the case of the parks, but Dragonchain innovates on existing blockchain implementations. According to their design document, they introduce something called “context-based verification.” Their blockchain will have various types of nodes, and a “level 5” of these nodes will interact with an existing public blockchain like Bitcoin, notably providing a “public checkpoint” or “proof of existence” for the blocks within the permissioned ledger.

The other levels of the Dragonchain should be noted for understanding. The first level is the business node, which will process transactions and be able to determine whether a transaction is approved or declined. Level two is an enterprise verification node, which can determine the validity of data submitted by level one nodes. The purpose of the level three nodes is to ensure requisite diversity of sources of information – it acts as a check against errant nodes which may be compromised, for one thing. Dragonchain also calls for a third-party verification/“independent witness” of data at its level 4 nodes, to whit:

Hosted by an external partner, a level 4 node would cryptographically sign any level 3  verification records that it receives. This function allows the Level 4 node to act as an  independent witness to level 3 verifications. 

After level 5, which was described earlier, a business may implement other forms of verification for its own purposes.

Another feature of the Dragonchain is that it will not have a singular currency at its heart in the way that Bitcoin does. Instead, they believe that if a base currency were to be required within an organization, then a separate node should manage it. For the purpose of the Dragonchain, though, a multitude of currencies should be considered. Quoting page 10 of the design document [PDF]:

[…] this architecture should not define a “base” currency, or one that the system itself runs upon. If such a use case arises (as indeed it is very likely to see value in the availability of a currency whereby nodes may pay each other for verifications), it is the philosophy of this architecture that a node should be configured to create and maintain that currency. This will allow a more flexible development of marketplaces than any attempt to define that early in the development of the platform.

 

1-10-16-dragonchain

And most interesting about this is that the Dragonchain will apparently support multiple cryptocurrencies inside a private blockchain transaction, using their transaction class header field. At least at the outset, the network will use Bitcoin-based cryptographic addressing and cryptography. Part of the logic behind this is to make use of existing infrastructure, including Counterparty and hardware wallets for verification purposes within the organization.

Blockchain of Blockchains

Different organizations will have different purposes for Dragonchain, but one thing that may make it very useful is its ability to act as a “blockchain of blockchains.” In this way, various third-party providers can bring to market solutions based on Dragonchain or to integrate competitively with existing Dragonchain implementations. Or, perhaps easier to imagine, third-party vendors can come up with interesting applications, such as methods of tracking inventory, event attendance, line congestion at theme park attractions, and more.

[…] each business concern will generally have its own node to do this work, each with its own blockchain. It is where these blockchains become combined that consensus is reached. 

So it would seem that while Dragonchain will have immediate use within the company that commissioned and designed it, it will also, inevitably, open up new business opportunities for blockchain companies within Disney and other firms which integrate the system.

Dragonchain aims to have “simple architecture” and to be accessible to those who lack “Blockchain expertise.” While banks and other large financial institutions have been going on about the value of the blockchain and their perceived lack of necessity for Bitcoin, Dragonchain seems right at home with the idea of integrating various cryptocurrencies, and even with the idea of enterprises using a system such as Counterparty to instantiate their own tokens. This, to say the least, is refreshing from the perspective of a cryptocurrency enthusiast.

The code currently available in Dragonchain’s G6ithub repository is functional, well-documented, and includes the ability to transact on the Dragonchain, query the Dragonchain, and process the blockchain. A full Dragonchain implementation would require a clarity of purpose as well as the technical prowess to modify each level of node accordingly. Its largest requirements are Python and Postgres, both of which are cross-platform.

It would seem that the currently available setup is best suited to large-scale operations like Disney, but that a “lite” version could eventually come about as a result of the software being open source.

Images from Shutterstock and Dragonchain.

Bitcoin is a Highly Centralized Network, Says Harvard Researcher

Primavera De Filippi, a Hacker and Blockchain researcher at Harvard, together with Benjamin Loveluck, Associate professor at Télécom ParisTech and research associate at CERSA, argue in a new paper that bitcoin has evolved into a highly centralized network under the technocratic governance of a small number of individuals.

After providing a brief history, the researchers analyze bitcoin’s governance in a first paper of its kind, stating that the aim of “Satoshi Nakamoto and the early Bitcoin developers was to create a decentralised payment system that is both self-sufficient and self-contained.” However, they argue that they, perhaps naively, “thought it was possible to create a new technological infrastructure that would be able to govern itself – through its own protocols and rules – and that would not require any third-party intervention in order to sustain itself. And yet, in spite of the mathematical elegance of the overall system, once introduced in a particular socio-economic context, technological systems often evolve in unforeseen ways and may fall prey to unexpected power relations.”

After analyzing the overall open source ecosystem, the researchers state that open source projects largely fall into two types of governance, “democratic-organic” or “autocratic-mechanistic”. As the name implies, the former is a “meritocratic governance system”. The latter, instead, has no formal governance structure, only implicit, with the project often relying on a “benevolent dictator.” Bitcoin, the researchers say, “definitely falls into the second category.”

Elaborating further, the paper states:

[T]here is a discrepancy between those who can provide input to the project (the community at large) and those who have the ultimate call as to where the project is going. Indeed, while anyone is entitled to submit changes to the software (such as bug fixes, incremental improvements, etc.), only a small number of individuals (the core developers) have the power to decide which changes shall be incorporated into the main branch of the software.

 

More correctly, it is only one individual in Bitcoin who ultimately makes such decision, the maintainer, currently Wladimir van der Laan, described as “a programmer from the Netherlands” without any detail regarding his previous work experience or any indication as to why he is in any way qualified to hold such position. In any event, his statement on May the 6th 2015 that he was “This email address is being protected from spambots. You need JavaScript enabled to view it./msg07472.html" target="_blank">weakly against a block size increase in the near future,” may have well determined the outcome of the debate.

Bitcoin Governance

The researchers argue that Bitcoin does have some formalized process for “consensus formation among the Bitcoin core developers,” but they maintain that “the final call as to whether a change will be implemented ultimately relies on the core developers assessing the degree of public support which a proposal has built, and finding a consensus among themselves.”

Others, including miners, are relegated to only “vetoing power” by refusing to run the code, with any conflict management “to avoid both paralysing deadlocks and divisive fights,” as good as nonexistent, according to the researchers, as shown by the “recent crisis” which “revealed the limits of consensus formation between individuals driven by sometimes diverging political and commercial interests, and underlined the discrepancies between the overall goals of the project (a self-regulating decentralised virtual currency and payment system) and the excessively centralised and technocratic elites who are in charge of the project.”

The paper argues that the bitcoin community was mistaken to believe technical governance makes “government institutions and centralised organisations” unnecessary as “one cannot get rid of politics through technology alone, because the governance of a technology is – itself – inherently tied to a wide range of power dynamics.”

The most potent paragraph in the paper argues that there is a conflict between the libertarian vision of bitcoin and its governance structure which is highly centralized and undemocratic:

“Implicit in the governance structure of Bitcoin is the idea that the Bitcoin core developers (together with a small number of technical experts) are – by virtue of their technical expertise – the most likely to come up with the right decision as to the specific set of technical features that should be implemented in the platform. Such a “technocratic” approach to governance is problematic in that it goes counter to the original conception of the Bitcoin project. There exists, therefore, an obvious discrepancy between the libertarian vision of Bitcoin as a decentralised infrastructure that cannot be regulated by any third party institution, and the actual governance structure that dictates the technological development of Bitcoin – which, in spite of its open source nature, is highly centralised and undemocratic. While the (a)political dimension of the former has been praised or at least acknowledged by many, the latter has remained, for a long time, invisible to the public: the technical decisions to be taken by the Bitcoin developers were not presented as political decisions, and were therefore never debated as such.”

While in its early days bitcoin was closely associated with anarcho-capitalism, that subreddit has removed r/bitcoin from its sidebar, arguing that certain decisions and actions made by Michael Marquardt, the top moderator of r/bitcoin, go against ancap’s general principles as the use of metaphorical force through banning and censorship violates the non-aggression principle. Marquardt has argued that he owns the subreddit, therefore he is free to make any decision he pleases, but he has no legal title to r/bitcoin nor can one say his moderation amounts to ownership, rather than a fiduciary relationship where power is meant to be exercised for the beneficial owners – the subreddit contributors. There does, therefore, seem to be a contradiction between bitcoin’s libertarian principles and the current highly centralized governance structure.

Should Bitcoin Have Formalized Governance?

The paper closes by arguing that “a proper governance structure for Bitcoin can only be achieved by publicly acknowledging its political dimensions, and replacing the current technocratic power structure of the Bitcoin project with an institutional framework capable of understanding (and accommodating) the politics inherent in each of its technical features.”

That seems to argue that the relationship between the five core developers, the maintainer and the rest of the ecosystem should be formalized so that there are methods of holding them to account, rather than maintaining the current non-transparent and arbitrary granting and removing of such power which has already arguably been abused when Gavin Andresen’s Git commits rights were removed without any public discussion.

Learning from Bitcoin’s experience, Ethereum has set up a foundation funded by the ICO sale and tends to make decisions in a democratic way while Zec’s foundation is funded by 10% of all coins mined, formally tying up developer’s financial interests with the interests of the wider community, allowing public opinion to directly influence decisions by reducing the price and, therefore, developer’s earnings.

Bitcoin largely lacks any such formalized tie-in between developer’s financial interests and those of the wider ecosystem. An attempt early on to create a Bitcoin Foundation funded by the wider ecosystem faced a yearlong smearing campaign by Peter Todd and others, who often loudly argued it was a centralizing force. However, he has failed to apply the same argument to Blockstream, a for profit company that employs 12 or more bitcoin developers and, unlike Ethereum or Zec’s foundation or even, arguably, the Bitcoin Foundation, lacks any formalized or publicly proven structure to financially align the developer’s interests with those of the wider ecosystem.

A Fiduciary Duty for Developers?

Although one can fork a currency, the way decisions within a digital currency are made, especially when controversial or affect certain parts at the expense/benefit of other parts, has become subject of much debate with Angela Walch, Associate Professor at St. Mary’s University School of Law, arguing that developers are in a position of trust, therefore burdened with a fiduciary duty towards digital currency users and ecosystem participants, an opinion shared by Andrew Hinkes, a lawyer at Berger Singerman, who stated during the OnChainScalingconference that he believes, regardless of whether public blockchain developers should or should not have a fiduciary duty, “they do” have such obligation.

I argued in an editorial that the imposition of such duty is far too early as it pertains democratically governed digital currencies such as Eth and, perhaps, Zec, but for highly centralized currencies governed in an arbitrary method and, apparently, through “agreements” with miners, any counter-argument to Walch is necessarily weaker as one cannot raise the legitimization of any decision through tokenholders voting.

The implications are, however, both practically and principally, not quite well understood as the governance of digital currencies has only recently become subject of debate. In furthering the conversation, the published paper is very much timely and, if its conclusions find further academic support, may well tilt the debate towards how a governance system should operate, rather than whether there should be one at all.

Image from Shutterstock.

Bitcoin Price Breaks Beyond $700 in Biggest Rally Since June

Bitcoin price is surging. The price of the cryptocurrency has scaled the $700 milestone in a formidable October rally.

The current rally, the likes of which hasn’t been seen since June 2016 when bitcoin price jumped from $578 on June 10 to $794 to $766 on June 16, in less than a week. At the time, demand for bitcoin rose significantly with investors turning to the cryptocurrency in anticipation of the UK’s EU referendum which saw Britain exit the European Union.

The latest jump in a near month-long sustained price swell began early this weekend. The Bitstamp Price Index (BPI) registered BTC to USD price at $687.21 at 01:45 UTC before stepping up a gear to trade at $696.52 at 02:05. A steady trading period followed before bitcoin price struck $700 at 07:45, a number unseen since June and one brief trading period on July 2. At the time of publishing, the BPI shows bitcoin price at $713.71.
The Usual Suspect

Market observers point to Chinese investors as the driving force behind the surging demand for bitcoin, in an economic climate that sees the yuan falling for its fourth week against the dollar, while already trading at a near six-year low, as reported by Bloomberg.

Fundamentally, bitcoin buying is a way to hedge against the depreciating yuan for Chinese investors.

Furthermore, the yuan is to seeing its biggest monthly drop since the unexpected devaluation of the currency by China’s central bank in August 2015. At the time, global markets watched on in disbelief as the People’s Bank of China weakened its exchange rate by 4.4% in three days. So far, the yuan has fallen 1.6 percent this month, down to 6.780 to the dollar. A weakening yuan equals increased demand for bitcoin among Chinese buyers in a country that makes up for a significant majority of the world’s bitcoin trades.

 

The lack of intervention by Chinese regulators and authorities is adding to the uncertainty and gloom surrounding the yuan. Speaking to Bloomberg, one market expert from Hong Kong stated:

We keep hearing that there’s no basis for it to decline, and it keeps declining. If they [the Chinese central bank] don’t want it to decline, then raise interest rates, or intervene. Otherwise, markets will decide on value.

And so it shows, with investors turning to bitcoin instead as a store of value, all through October.

Other macroeconomic factors including any scenario of a Federal rate hike and even the upcoming US elections could render traditional markets volatile, spurring even more demand for bitcoin which could propel its value further in the final months of 2016.

Image from Shutterstock. Chart from BitcoinWisdom.

Japanese Financial Institution Set to Launch a Digital Currency Exchange

apanese financial services group SBI is set to launch a platform that enables the trading and exchange of virtual currencies, citing increasing interest in virtual currencies like bitcoin which is proving popular among everyday investors.

An announcement reveals the new company to be aptly titled SBI Virtual Currencies Co., Ltd., and will be established tomorrow, November 1, 2016, in Tokyo, Japan. At the time of its publishing, the company had raised 300 million yen (approx. $2.85 million USD) in capital.

An excerpt from SBI’s press release revealed the factors behind the traditional financial institution’s endeavor to open a virtual currency exchange. Loosely translated, it read:

In recent years, virtual currencies, like bitcoin, have attracted plenty of interest and have been covered in major media. It [virtual currencies] are also being traded actively.

 

Details about the exchange are currently scarce and more updates are expected to come next month. SBI Holdings has already shown notable interest in the virtual currency space, having led a record round of funding for investments in bitFlyer, a leading Japanese bitcoin exchange. Through its investment arm, SBI helped raise a total of $27 million in new capital for the bitcoin exchange, earlier this year.

Furthermore, SBI has also collaborated with Fintech firm Ripple to create a subsidiary called SBI Ripple Asia, as a means to providing blockchain-enabled remittance solutions for users in the region.

Japanese interest and investment in the Fintech industry, particularly with bitcoin- and blockchain-centric companies, has made notable strides following relaxed regulations by authorities in the country. Earlier this year, Japanese regulators were said to be discussing proposals that would treat bitcoin and other virtual currencies as the equivalent of any fiat or traditional currency. That notion came true when the Japanese cabinet passed a bill to officially recognize digital currencies as real money in March 2016.

Since then, calls were made for the regulation of the bitcoin industry in Japan, which also came to pass in May 2016. Pointing to such regulatory measures which marks the acknowledgment of virtual currencies by authorities, SBI sees the current climate as one wherein it “is becoming a clear policy of the government authorities on the handling of virtual currencies.”

SBI added:

[With] such environmental changes as a background, we meet the diverse needs of investors by providing an investment opportunity of a new value asset. [As a result], we have decided to enter the business of virtual currency exchanges.

 Images from Shutterstock.

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