Blockstream Adds to All-Star Blockchain Developer Team
#Bitcoin startup #Blockstream has announced a slew of new hires that serve to further boost the firm’s already impressive development #team.
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Is Blockchain Adoption Gaining Momentum in the Enterprise?
This article covers #blockchain, a distributed ledger #technology, its perception and the ambivalent (for now) adoption by corporate enterprises. Co-authored Converge VP investors Maia Heymann and Ash Egan.
Most Fortune 500 companies are having extensive conversations, in CIO suites or in innovation labs, on whether the blockchain technology is right for them, and their peers – discussions on how their primary business lines might be affected by the technology, current solutions, and the areas (or consortia) to invest in. Distributed ledger standardization is far from reality, and although there are promising developments in #Bitcoin adoption and corporate blockchain experimentation, it’s still not clear when (or how) enterprises will ramp-up pilots and accelerate commercial-grade adoption. Some sectors like financial services are far ahead in exploration and testing, but general skepticism and even a misunderstanding are slowing blockchain’s future as a widely-adopted disruptive technology.
After attending Consensus 2016 in NYC, and a few blockchain enthusiast dinners at MIT, it’s clear that established corporate players are exploring and investing in both forms of blockchain: permissioned and public. The Consensus conference, hosted by Coindesk was packed with #fintech executives as well as Bitcoin and blockchain vendors and voyeurs—our term for IT buyers looking and not buying. Theories and opinions regarding the direction of blockchain technology are as varied as the attendees.
A corporate IT buyer’s reticence regarding blockchain is understandable. First, it’s challenging to explain the blockchain to senior management; it is a technology that no one owns, no single party is accountable for, and it’s based everywhere and nowhere. Second, Bitcoin’s rocky road is perceived as a cautionary prelude to what could go wrong with a distributed governing body. A recent New York Times article publicized that over 70% of the transactions on the Bitcoin network were going through just four Chinese companies (data assembled by Chainalysis [1]). In short, there is apprehension around limited to zero control, or too much control in the wrong hands, for a corporate IT buyer to join an open, permission-less system.
Despite doubts around practicality, security and utility within blockchain’s open, permissionless system, start-ups, new consortia, and corporate players are advancing the technology through ‘closed’ experiments to test blockchain’s potential applicability. These early tests are being supported by venture capitalists globally, and Olga Kharif says $1.1B has been invested to date in startups commercializing blockchain in “Blockchain Goes Beyond Crypto-Currency”.
Corporate business use-cases have the potential to generate improved margins and provide customer/client benefits in transaction-based industries: peer-to-peer payments, identity management, cross-boarder trade, and solutions within commercial payments and finance. One large insurance firm commented: “Broadly, the use-cases of Blockchain in transaction processing are most likely to be implemented early across the industry – the range of solutions that exist today are quite rich, from faster international transfers to more efficient settlements on exchanges, this is the area that appears to be the most promising in the near term.”
Backing-Up, What Is Blockchain? Bitcoin to Blockchain
Blockchain, born out of Satoshi Nakamoto’s 2008 whitepaper “Bitcoin: A Peer-to-Peer Electronic Cash System” is a distributed database, a decentralized and shared public ledger of time-stamped transactions within a network, open for review by anyone within the network. “The Business Blockchain” by William Mougayer uses a three prong approach to defining the blockchain: technical: back-end database that maintains a distributed ledger, openly; business: exchange network for moving value between peers; legal: a transaction validation mechanism, not requiring intermediary assistance (pg 4).
Bitcoin, powered by the blockchain, is a virtual crypto-currency allowing peer-to-peer payments for network members – becoming the first manifestation and widespread adoption of the technology. The crypto-currency began as an open source project, and requires the network to confirm transactions – a key component of its decentralized nature. Currently, Bitcoin is maintained by a small group of developers called theBitcoin core. This group is responsible for pushing updates and progressing the network, while Bitcoin network members (miners) power transactions.
Each participant (or node) puts the transactions into blocks and blocks into a single chain, and stores a complete record (or ‘proof’ system), protecting the integrity and veracity of all transactions in the chain. The system is anonymous, and through its mathematical proofing system eliminates the need for an intermediary or for third-party verification. The network resolves the conflicts so all nodes have the exact same copy of the distributed ledger. The collective effort of Bitcoin’s network made up of computers and servers all over the world, provides the compute power.
While millions of Bitcoin transactions have occurred (surpassing $10B in market value), corporations and financial institutions remain skeptical due to the absence of regulation, the perception of proximity to criminal activity, a slow moving ‘governing’ body from Bitcoin core, and the concentration of power and control of miners (presently with four Chinese companies). These issues among others compound to call into question Bitcoin’s independence and decentralization. The skepticism, however, is evolving into recognition of the underlying technology’s potential, and as Goldman Sachs’ Robert Boroujerdi said, “Bitcoin was just the opening act.”
In line with Boroujerdi’s comments, William Mougayar points to the blockchain technology, as being as innovative as the Internet in ‘The Business Blockchain’: “the blockchain is part of the history of the Internet. It is at the same level as the World Wide Web in terms of importance and arguably might give us back the Internet, in the way it was supposed to be: more decentralized, more open, more secure, more private, more equitable, and more accessible”.
Why The #Enterprise Cares About Blockchain
Disruption. FOMO (fear of missing out).
Applications of blockchain technology include (but are certainly not limited to) stock issuance, provenance, smart contracts, streamlining of loan underwriting, and payment transfers. Many industries will be impacted by both private distributed ledgers and crpytocurrency — agriculture, insurance, financial services, and even entertainment—almost all industries could find use-cases for the adoption of blockchain technology.
As mentioned earlier, financial services companies are far ahead in exploration and testing blockchain technology. What became apparent via multiple conversations at Consensus 2016 is many corporates are exploring blockchain for fear of missing out (FOMO). Enterprises are opportunistically exploring and experimenting with side projects (via pilots), simultaneously suspect of relinquishing control and fearful of losing revenue associated with their intermediary or third-party verification business lines. As upstarts and even competitors adopt the technology and attest to its financial efficacy and cross-departmental value, the lure of not being left behind is strong. We’re seeing corporate buyers framing why and how the blockchain can theoretically and practically serve their companies’ needs. One large institution on the east coast said, “we are pursuing multiple ways to understand and leverage the technology – for instance [our] Ventures team looks at startups that leverage Blockchain and other cutting edge technologies. We are exploring multiple fronts in a coordinated manner.”
The extent to which crypto-currency, public blockchain, and private blockchain applications are accepted and scaled by corporates remains unclear, but the signals are encouraging. A report from Santander anticipates cost savings up to $20B annually by 2022.
Balancing Risk with Potential
It’s no walk in the park to replace current infrastructure (mainframes), with a new system, whether that is blockchain or an alternative. The headache of adopting blockchain technology and connecting to legacy systems is not to be underestimated. Beyond understanding the potential cost savings of using blockchain’s system, buyers need to include the cost of migration in their calculus – evidence of this expense are the consulting firms who have set up entire blockchain practices. The Rubix Team at Deloitte, offers a “one stop blockchain software platform” and is an example of consultants being at-the-ready to contract with their clients to re-architect legacy technology and processes.
For all of blockchain’s benefits, corporations are aware of the risks of Bitcoin and blockchain technology: a limited governing body; powerful and growing Chinese mining presence; executing transactions at scale in a decentralized manner; inherent security risks from new technology; the rise of hackers targeting sensitive data; and growing pain risks like the recent attack on The DAO. Government regulation will provide both challenges and benefits for corporations. As is often the case with new technologies in regulated industries, the regulatory agencies have to catch-up. The United States’ regulatory bodies are learning, and their stance on permission-less distributed ledgers (like Bitcoin) it is not yet clear. For instance, the Office of Foreign Asset Controls (OFAC) and Financial Crimes Enforcement Network (FinCEN) have the right to blacklist companies interacting with cryptocurrencies (Coincenter). Jamie Smith of BitFury commented at Consensus 2016 that engaging with regulators is necessary and even advised because “the regulators can either help you or hurt you” with respect to crypto-currency and blockchain adoption.
Despite the risks, blockchain technology has the potential to radically change countless industries and give rise to new ones. Indeed, this technology is evolving from the obscure framework behind a crypto-currency to the newest technological frontier, and we are excited to continue to watch and see how corporates invest, participate, and innovate the world as we know it.
[linkedinbadge URL=”https://www.linkedin.com/in/maiaheymann” connections=”off” mode=”icon” liname=”Maia Heymann“] is Investor at Converge Venture Partners, an enterprise focused early-stage tech VC with investments in Chainalysis, Podium Data, SmartVid.io, Talla, Wade & Wendy and other emerging technology companies.
[1] Chainalysis is a Converge VP investment.
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Bitcoin Security is More than Multisig
“How did multisig fail? Why did people lose their money? I thought multisig was secure.” Through the Bitfinex hack it’s become apparent that people don’t really understand #bitcoin’s multisig feature. There seems to be a lot of confusion over what multisig is and isn’t, what it inherently does or does not do. This article aims to clarify some of the most common misconceptions, explain how multisig actually works today, why policy controls aren’t a substitute for organizational #security, and what you can do to protect yourself.
Multisig is a tool. Just like any other tool, it can be used to achieve a number of different results. This tool can be used to distribute and dilute risk of key compromise or loss, for redundancy as a backup, and to create joint-accounts where each party can spend from the same pool, or to separate duties within an organization.
Multisig is not a security plan. It can be a powerful component of a well designed security plan, but it is only ever one component. To simply say “multisig” without exploring the implementation, how it’s being used, and what goals are trying to be achieved, is meaningless. It’s not a security incantation, though it would be so much easier if it was.
In order to understand what it can and cannot do, we need to understand a bit about how it works. Don’t worry if you’re not a techie, this isn’t written for them — it’s written for everyone else. 1
Creating a multisig address. In order to create a multisig address, you simply need more than one public key. Let’s look at an example. Alice, Bob, and Charlie are all organizers of a local bitcoin and open #blockchain meetup. They want to collect funds to support the meetup but don’t want any one of them, alone, to control the funds. They set up a multisignature address, using CoPay software, that allows them to select a 2-of-3 configuration, meaning two of the three of them must authorize the transaction before it will be valid. In this instance the possible signing combinations can be A&B, B&C, A&C.
What’s actually happening behind the scenes? Their software is constructing two things: a script that contains the instructions of how many signatures are required and what public keys correspond to private keys that are authorized to sign (m-of-n), and a hash which is the bitcoin address, starting with the number 3, corresponding to the script. The script is often called the “redeem script” because it contains the requirements to redeem or spend payments from the multisig address. 2
You can think of a redeem script as a set of permanent, unchangeable access controls. These limited access controls are embedded into the bitcoin address itself. Meaning when funds are sent to the corresponding address, the redeem script must be satisfied in order to move funds. The rules are set when the address is created and can never be changed. The rules are, literally, part of the address itself. This one of the most powerful parts of multisig, this is why many believe it is more secure than a traditional single-signer bitcoin address. When multisig is used as part of an overall security plan, it can provide additional protection against embezzlement, mistake, loss, fraud, single point of failure, by requiring multiple parties or multiple devices (multi-factor multi-sig) to approve a transaction.
But notice what it does not do.
- There are no spending limits; you can withdraw all funds with one, properly signed, transaction.
- There are no time limits; you can withdraw funds immediately with a properly signed transaction.
- There are no daily transaction limits: you can create thousands of transactions per minute.
- There are no notifications; you will not receive an email or text notification when funds are spent.
Policy controls are not inherently part of multisig today. At this point you may be confused because many wallets provide these types of added services. They’re advertised as additional security measures, as additional controls. What’s not so clear is that these services are implemented by the company’s software and internal policies — not by the bitcoin protocol. That’s important because it means the controls can be bypassed, the limits can be changed. While Bitcoin’s scripting language continues to evolve, and some protocol based policy controls, like lock-time, are available, they haven’t been widely implemented yet.
The take away: today’s policy controls aren’t as secure as they may seem. In fact, they’re only as secure as the system controlling policy changes. Unfortunately, that’s less secure than most people believe.
Sometimes keyholders automate signing, based on policy controls.Many multisignature wallets (but not all) now include automated transaction signing based upon policy controls as a feature of their wallets. In these implementations, the wallet company controls one of the keys used to create a multisignature address. That key, and it’s related signing functions, are controlled by software written by the company — the software is often called an oracle or signing oracle. At the time the address is created, in addition to the public keys, the wallet company collects the user defined policy controls. For example, a user might set a maximum daily limit of $1,000.00 USD withdraw. The address is created and the signing parameters of the signing oracle are set.
The signing process usually looks something like this — the user creates a transaction (say for $500.00 USD), signs it, and sends it to the wallet provider for countersigning. The oracle sees the transaction, checks for policy controls (here the $500 is less than $1000.00), countersigns and broadcasts the transaction to the bitcoin network. Speedy, convenient, efficient. Secure? Maybe. Maybe not. Maybe it seems more secure than it actually is.
Security depends on a lot of factors — not just how many keys are required to sign a transaction. It depends on processes and policies defining the policy controls: Who can change spending limits? Time limits? Notifications? When can they be changed? Is there a cooling-off period after they’re changed when no transactions will be signed? It also depends on the company’s internal security: Who has access to the oracle or signing keys? Where are the backups and who has access to those? Who writes the oracle software and is it open-source? These are just some examples of security concerns that aren’t addressed by multisig. Multisig means more than one key was used to create the address. Nothing more. It is not a euphemism for security. Alone, it’s not enough to keep our funds secure.
Security cannot be outsourced. As an industry, we need to stop confusing outsourcing signing keys with outsourcing security. Simply turning over signing keys and process controls to a third party will not protect you or your customers from theft. We need opt-in security standards, like CCSS, and annual security audits. Most importantly, we need to focus on understanding the risks and accurately explaining them to users.
Finally, always remember: “Not your keys, not your money.”
Footnotes: 1. If you’re reading this article, I assume you understand the basics of bitcoin. Bitcoin is secured by public key cryptography, seehttps://en.wikipedia.org/wiki/Public-key_cryptography. 2. Technically, this feature is called P2SH or pay-to-script-hash, not multisig. However one of the most common implementations of P2SH is to achieve multisig and the term multisig has become widely used to reference this specific P2SH implementation.
Original post: https://medium.com/@pamelawjd/bitcoin-security-is-more-than-multisig-1b55768582f3#.zh74f3cxm
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FinTech DACH News Rückblick der Woche 31
Fintech.Li präsentiert hier wöchentlich die wichtigsten #News rund um #Fintech in der Schweiz, Liechtenstein, Deutschland und Österreich.
Fintech #DACH Top News
Was geht da mit der Allianz und Rocket Internet?
In einem gemeinsamen Interview geben Rocket-Chef Samwer und der Allianz-Vorstandschef ihre Zusammenarbeit bekannt. Rocket soll die Versicherung schneller machen. Mehr erfahren
Immer mehr Konkurrenz für Banken aus dem Internet.
Immer mehr Online-Unternehmen bieten Finanzdienstleistungen an. Konstruktive Diskussion bei der Unternehmertafel der Morgenpost. Mehr erfahren
“Geld braucht keine Bank” – oder etwa doch?
Das Crowdlending-Unternehmen Lendico brilliert nicht mit Transparenz. Dass man in Deutschland aber ein komplexes Geschäftsmodell betreibt, ist am Ende auch der Regulierung geschuldet. Mehr erfahren
Die Spar-App mit Totalkontrolle
Die Smartphone-App Savedroid will alles über ihre Nutzer wissen. Das könnte der Tod sein für den Datenschutz &8211; oder seine Rettung. Mehr erfahren
FinTech Knip und die Barmenia bieten die erste Pokémon-Go-Gamer-Pol
Der Hype um das Handyspiel “Pokémon Go” bringt die Versicherer auf den Plan. Auf der Jagd nach den Pokémon-Monstern erleiden abgelenkte Spieler immer häufiger Unfälle und Verletzungen. Mehr erfahren
Verbraucherzentrale rät Kleinsparern von N26-Anlageprodukt ab
Das Banking-Startup N26 verspricht ein faires und transparentes Anlageprodukt. In Wahrheit aber lohnen sich die Konditionen vor allem für Kleinsparer nicht. Verbraucherzentralen warnen. Mehr erfahren
Graubündner Kantonalbank öffnet auch Apple Pay die Türe
Neben der helvetischen Bezahl-Lösung Twint bietet die Graubündner Kantonalbank neu auch die Bezahl-App von Apple an. Apple Pay ist hierzulande nicht unumstritten. Mehr erfahren
Fintech Avuba wagt Neustart: Neue App für Banking mit “Spaßfaktor”, MasterCard und Social-Funktionen
Avuba lege den Fokus auf “hohe Produktqualität, einen ehrlichen Umgang mit Nutzern”, heißt es. Mehr erfahren
Wien als neue FinTech Hauptstadt
Corporates und international agierende Finanzinstitute können die Innovationskraft von Start-ups und Fintechs nicht länger ungenutzt vorbeiziehen lassen. Start-up-Expertin Marie-Hélenè Ametsreiter und Erste Group-Vorstand Peter Bosek kennen die Bedürfnisse beider Seiten genau. Mehr erfahren
FinTech Influencer Social Media Ranking in Deutschland
Fintechnews präsentiert heute eine Liste von Fintech Influencern in Deutschland. Dies sind Personen die regelmässig und relevant die Fintech Community über Soziale Netzwerke auf dem Laufenden halten. Mehr erfahren
Paydirekt: Deutsche Paypal-Konkurrenz kommt nicht in Fahrt
Eigentlich sollte der Online-Bezahlservice Paydirekt der ganz große Wurf der deutschen Banken werden. Schließlich machen nahezu alle großen Geldhäuser im Bankenverband sowie seit Frühjahr auch die Sparkassen mit. Doch so richtig gut kommt der Service bei deutschen Nutzern noch nicht an. Mehr erfahren
VERSICHERIX – der erste P2P-Versicherer aus der Schweiz
Die Funktionsweise wird auf der Website simpel mit folgenden Worten erklärt: „Versicherung auswählen, Freunde finden, Geld sparen, VERSICHERIX lieben!“. Mehr erfahren
Ex-Promi-Berater Moritz Hunzinger bei Notverkauf erwischt
Eines hat sich in der Zwischenzeit allerdings kaum geändert: Auch auf dem neuen Posten agiert Hunzinger offenbar mit nicht allzu viel Fortune. Mehr erfahren#BITCOIN / #BLOCKCHAIN News
Zurich, Emerging Fintech and Blockchain Hub For Startups
Switzerland, Zurich in particular, is a home to many of the digital currency industry’s leading startups and organizations including Xapo, Ethereum, Metaco, and Lykke. Mehr erfahrenCoinbase CEO Admits There Could Be Bugs in Ethereum Hard fork, Celebrates Combined Value of ETH and ETC
“My hope is to see hard forks as an elegant upgrade/voting mechanism, not something to be feared that results in multiple coins,” Brian Armstrong, founder and CEO of Coinbase, wrote on the popular social media platform. Mehr erfahren
The Three Value Propositions of Ethereum ClassicA small group of miners continued to use the original blockchain as a protest for what they depicted as a bailout of the defunct project.This movement picked up steam when exchanges began listing the #cryptocurrency, known as ethereum classic (ETC). Mehr erfahren
Bitcoin-Hack: 70 Mio. $ einfach weg
Nach dem neuerlichen Raub von einer Bitcoin-Börse büsst die digitale Währung massiv an Wert ein. Es wird gerätselt, wie der Hack zustande kam. Mehr erfahrenÜBERSICHTEN / INFOGRAFIKEN / STUDIEN
Blockchain #Technology Is Changing The Digital World As We Know It
Bitcoin opened the door using blockchains for the first cryptocurrency, and now Ethereum is broadening the horizon of blockchain technology with what it’s calling Smart Contracts. Mehr erfahren
Viel Lärm um Nichts? Studie zu Gewinnern und Verlierern unter den InsurTechs
InsurTechs werden die Versicherungswirtschaft verändern. Doch wie laut ist der Weckruf der InsurTechs wirklich? Mehr erfahrenFintech EVENT Hinweis
Zum Abschluss noch Informationen in eigener Sache von Fintech.LI.
Das Early-Bird Angebot für die Fintech Liechtenstein Konferenz ist mittlerweile ausgelaufen und die Tickets sind ab Anfang August für den regulären Preis von CHF 149,99 für Startups und CHF 249,99 für alle weiteren Kategorien erhältlich. Ausserdem steht das komplette Programm mittlerweile fest und der Ablaufplan wird zu Beginn der nächsten #Woche auf der Homepage zu finden sein Fintech.
Fintechnews Leser erhalten einen exclusiven Discount von 20% mit dem Code &8220;fintechnews20&8221;.
The post FinTech DACH News Rückblick der Woche 31 appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
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15 Fintech Bücher die man (in den Sommerferien) lesen könnte
Fintech Bücher für die Sommerferien
#Sommerferien bieten viel freie Zeit, die man nutzen kann um mal wieder ein Buch in die Hand zu nehmen. Insbesondere, wenn man sich ein Basiswissen aufbauen will und sich mit den neuesten Trends und Entwicklungen basierend auf breit ausgelegten Forschungen und Interviews auseinander setzen möchte, sind #Bücher die erste Wahl.
Im Folgenden werden 3 #Fintech Bücher vorgestellt, die sich perfekt als wissenserweiternde Sommerlektüre eignen. Wer mehr braucht dem stehen 12 weitere Fintech Lektüren am Schluss zur Verfügung.
Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do –Brett King
Brett King, Autor und Gründer von Moven, der im Jahr 2010 „Bank 2.0“ herausbrachte kam bereits zwei Jahre später mit „Bank 3.0: Why Banking is No Longer Somewhere You Go But Something You Do“ zurück.In diesem Buch betrachtet King die neuesten Trends, welche zukünftig die Finanzdienstleistungen und den Zahlungsverkehr neu definieren sollen. Themen, die unter anderem angesprochen werden sind mobile Geldbörsen, HTML 5, Tablets, Cloud Computing und der „bankenlose“ Verbraucher. In „Bank 3.0” bietet King Lösungen für alltägliche Bank-Probleme und zeigt die immer größer werdende Lücke zwischen Kunden und Finanzdienstleister und damit auch verbunden die vielen Möglichkeiten für neue Nicht-Bank Konkurrenten.
Digital Bank: Strategies to Launch or Become a Digital Bank &8211; Chris Skinner
“Digital Bank” beschreibt die Innovationen im Bereich Banking und wie das mobile Internet die Dynamik zwischen Kunden und Unternehmen mit ihren Banken verändert. Die Aussage ist, dass Banken digitalisiert werden müssen. Dies stellt aber eine Herausforderung dar, da eine Digital Bank auf neue Services zugreifen muss, die sich auf Technologien des 21. Jahrhunderts spezialisieren.&8220;Digital Bank&8221; enthält nicht nur umfassende Anleitungen und Hintergrundinformationen über die digitale Revolution im Bankensektor, sondern auch eine gründliche Analyse der Aktivitäten etablierter Banken wie Barclays in Großbritannien und mBank in Polen, als auch Start-Ups wie Metro Bank und neue disruptive Bankenmodelle wie die FIDOR Bank in Deutschland.
The Fintech Book – edited by Susanne Chishti und Janos Barberis
&8220;The Fintech Book“ bietet einen primären Leitfaden für die Finanztechnologie-Revolution beziehungsweise Disruption und den damit verbundenen Möglichkeiten die sich dadurch ergeben. Geschrieben von weltweiten Führern im Bereich FinTech fasst dieses Buch die kritischen Erkenntnisse und Informationen aus erster Hand in einem einzigen Band zusammen und gibt Unternehmern, Bankern und Investoren die Antworten, die sie benötigen um von diesem lukrativen Markt zu profitieren.Durch die vielen verschiedenen Themen, die analysiert werden, wie beispielsweise B2B-Transaktionen, Identitätsdiebstahl, Crowdfunding oder #Robo Advisors, stellt dieses Buch eine gute Basis für jeden dar, der sich mit FinTech auseinander setzen möchte.
12 weitere lesenswerte Bücher im Bereich Fintech sind:
- The Fourth Industrial Revolution &8211; Klaus Schwab
- The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology &8211; William Mougayar
- Breaking Banks: The Innovators, Rogues, and Strategists Rebooting Banking &8211; Brett King
- ValueWeb: How Fintech Firms are Using Bitcoin Blockchain and Mobile Technologies to Create the Internet of Value &8211; Chris Skinner
- Innovation Wars: Driving Successful Corporative Innovation Programs &8211; Scott Bales
- The End of Banking: Money, Credit, and the Digital Revolution &8211; Jonathan McMillan
- The Power of Mobile Banking: How to Profit from the Revolution in Retail Financial Services &8211; Sankar Krishnan
- Virtual Banking: A Guide to Innovation and Partnering &8211; Dan Schat
- Bye Bye Banks? How Retail Banks are Being Displaced, Diminished and Disintermediated by Tech Startups and What They Can Do to Survive &8211; James Haycock, Shane Richmond
- Smarter Bank: Why Money Management is More Important Than Money Movement to Banks and Credit Union &8211; Ron Shevlin
- Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money &8211; Nathaniel Popper
Weitere Fintech Bücher finden Sie hier
Für genauere Informationen zu diesen und auch weiteren Büchern siehe &8220;The 10 Best Fintech Books To Have In Your Library&8221; und &8220;9 (More) Fintech and Blockchain Books To Have On Your Bookshelf&8221;.
The post 15 Fintech Bücher die man (in den Sommerferien) lesen könnte appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
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Another Day, Another Bitcoin: After the Bitfinex Hack
It’s been just about a week since the #bitcoin exchange #Bitfinex was hacked, with a loss of 119, 756 BTC, or about $ 80 million in boring old, traditional currency. The #hack remains a hot-button topic in the bitcoin world, with many calling for the need of increased oversight of bitcoin exchanges.Read More
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The Ethereum fork: emergence of a social framework for consensus.
George Orwell once said “He who controls the past controls the future. He who controls the present controls the past…” and when it comes to #blockchain, as in life, it is the writers that control the past, the present and the future. The consensus mechanism, the process of validation, verification, calculation and propagation of transactional state changing data that breathes life into our #ethereum world computer, is intended to serve one primary purpose, to rid the function of writing of any human interference, and in so doing to reduce the ability of anyone to exercise control over others. In every sense, a good philosophy. Of course it doesn’t instantly cleanse the world of corruption, or for that matter many other forms of systemic or economic failure, but it’s a step in the right direction.
The principle of immutability, the mathematical infeasibility of interference with data once written, which enables disparate parties to securely interact with one another in the knowledge that actions and agreements once recorded cannot be undone or reneged upon, is a core principle of any public blockchain protocol. The challenge to, and subsequent overruling of this principle during the recent DAO events and subsequent hard #fork has driven a wedge into the Ethereum community over a question that has been much debated and continues to remain divisive amongst wider communities:
“When is a hard fork ok?”
And so the debate must be had. Opinions and reasoning shared and disputed. Somewhere, from all of this, will come the future, it is up to us all to shape it.
I have set out my thoughts below, generally the running order is less contentious to more contentious [he assumed, naively].
Firstly, some context and a couple of points regarding the maturity of the Ethereum platform.
- Ethereum can be thought of as a virtual machine within which applications run, the DAO was an example of an application. This leads us to two distinct classes of vulnerability, those associated with the user driven application scripting language (Solidity) which may affect one or more applications but do not threaten the integrity of the underlying platform, and vulnerabilities within the Ethereum virtual machine itself (i.e. the github controlled source code), which could represent a much greater systemic threat. Prior to the DAO hard fork, I am not aware of any other time a hard for has been considered to address a user created vulnerability.
- Ethereum is still in it’s infancy. It is only one release on from a version which included the phrase “expect dragons” in the disclaimer. Additionally, Ethereum is more complex than most traditional blockchains, the Ethereum Virtual Machine is more akin to an operating system than a #bitcoin style accounting ledger (excellent that it is). Whilst the Ethereum core development community may hold itself to higher security standards than the likes of Microsoft, all experience should tell us the probability of a zero day exploit within the core Ethereum protocol at some point in the future is high. That further – and possibly fork inducing – core protocol modifications will be proposed (or worse, required) in future should be a working assumption, not a black swan armageddon scenario.
- Beyond the core virtual machine, when considering the power now available to any platform user through the Solidity application scripting language, it is highly likely that future ‘smart contract’ applications will fail or be compromised resulting in damage. It is very, very unlikely – but not impossible – that a hard fork will be the appropriate action when such events occur (for example, to prevent massive loss of life). However, there is a point of greater relevance here, future autonomous contracts may actually decide to harm us. They may employ maliciously constructed code, or even artificial intelligence to execute decisions which violate laws, and harm people. Consider a DAO set up by a hostile nation state to offer bounty payments for acts of sabotage or violence against an adversary. Unlikely? Yes. Possible? Yes. By considering extreme scenarios, we test our fundamental principles.
- The Ethereum development roadmap already includes plans to migrate from Proof of work to a Proof of Stake consensus mechanism (Casper) intended to establish a less energy intensive platform overhead, and to further reduce the risk of majority collusion by miners attempting to control what is written to the ledger. This requires a significant protocol update that will almost certainly involve a hard fork.
A reasonable conclusion from the above may be that future hard forks are certainly possible, possibly probbable, and in the right circumstances, appropriate.
Now, in relation to the DAO hard fork, I first wanted to touch on the the format of the decision making process and it’s subsequent execution.
- Following discovery of the attack the Ethereum community erupted with activity and opinion. It’s leaders (insomuch as a decentralised platform can have leaders) were not silent, and received both praise and criticism for opinions expressed and actions taken. I have a couple of views on this, firstly, Vitalik is considered leader of the ethereum community not because he owns ethereum, quite the opposite, because the community ask it of him. Vitalik’s flavour of leadership is a decentralised, unenforcable leadership, that’s the good kind. I read much commentary describing the recommendations of Vitalik and others towards various options as ‘centralised control’, and I disagree. Leaders such as Vitalik should express their opinions, the community needs them, they, more than anyone understand the problems, the solutions, and the risks. If Vitalik’s influence was decisive, that is a measure of the respect he has amongst the community. As long as those we look to for guidance are transparent in their communication, it is invaluable, and long may it continue.
- The Ethereum community responded to a number of polling mechanisms in the aftermath of the DAO attack, and whilst questions have been raised over the representation and composition of voters, the measures taken appeared to demonstrate an overwhelming preference toward hard forking (this was further evidenced by the subsequent shift of approx 95% hashpower to the forked chain, note for latest stats check here).
- Ultimately the decision to fork was taken by the community, first through a number of polls facilitated by mining pools, but ultimately, and more importantly through the action of the network participants who updated software, and shifted their network participation to an updated codebase. In so doing the community collectively crossed out a paragraph in it’s own history book, not rendering the words illegible, but irrelevant, replaced by a new paragraph, a new database state, agreed and enforced by the same decentralised and voluntary community consensus mechanism that secures the network itself.
Next, some points on the external context to all of this.
- The hard fork outcome will likely provide a reduced disincentive to future attackers. It also deprives the attacker of $50m (ETC revival notwithstanding).
- Linked to the proposed future switch to Proof of Stake, allowing a known attacker to control more than 10 percent of the available currency supply presents additional systemic risks to the network, though it is likely these risks would be surmountable.
- Rightly or wrongly, the prevailing wisdom at the time of the decision to hard fork, was that the losing fork would quickly become obsolete. I think we need to defer judgement on this point. However, there are two relevant related points worth calling out here:
- The publicised promotion of the ‘old’ chain (ETC) by prominent investors such as bitcoin advocate Barry Silbert have had a significant effect in bringing speculative capital inflow toward the ‘old’ chain, thereby raising it’s value and creating a self-reinfocing momentum which has ultimately fuelled division and tested the community. Whether there was an intentional element to any of this we will never know. In any case, the test was likely inevitable.
- The subsequent shift of hashpower back to the ETC chain (ETC hashrate is currently approx 10% of the ETH chain) appears to have followed the increase in value of ETC, indicating it may be attributable to simple mining economics, with a small proportion of ambivalent miners happy to mine whichever chain offers the highest return. Whilst this contributes to the self-fulfilling momentum described above I suspect it will also produce a downward pressure on ETC prices as miners seek to cash out as fast as possible (possibly producing a reverse effect on the ETH chain).
Finally, I wanted to break down a couple of the core elements of the decision itself, and to explore what may be an emerging pecking order amongst core blockchain principles, specifically immutability and consensus.
- We must understand that immutability itself is a means to an end. Blockchain immutability exists to ensure the preservation of truth across a community. It provides an auditable proof that events have occurred exactly as prescribed and expected, but rather than immutability for the sake of immutability, it is the resulting predictability and assurance that is so valuable to the community. When $50 million worth of Ether began to slip from the control of an autonomous program operating on behalf of a large group of investors something rare happened. The protocol, operating exactly as prescribed, deviated from what was expected, and a community watched in horror as an enormous heist was played out in slow motion, with the inherent security of the ethereum platform itself suddenly forming the greatest obstacle to any sort of restorative action (Vitalik even recommended a form of spam-attack against the network to try to slow the attack). The community, and the world at large, was exposed the dark side of immutability.
- Consensus on the other hand, is the control mechanism, there is a difference between centralised control, and consensus driven control, with the shift from the former to the latter being arguably the reason we are all here. The events of the past month have raise one key question in relation to Consensus:
Are we subscribed to machine consensus, or social consensus?
- The hard fork has provided an example of social consensus overriding machine consensus. This effectively places machine consensus, and therefore immutability (in it’s technical sense) as subordinate to social consensus. Whilst this has been cited by some as an about-turn from all that blockchain stands for, I see it as the opposite, an evolution beyond fundamental ideals toward a more pragmatic understanding of reality in which we recognise and leverage all the value blockchain architecture can offer, but retain (as do all blockchain communities) a measure of power over the underlying ‘hard rules’.
- Two further arguments against this approach that I have read and considered are 1) that by setting this precedent we will usher in an era of hard forks every time a smart contract fails, and 2) that legislators may now see the opportunity to exert political influence and compel users to implement updated features. In response to 1) There is little I can offer other than, ‘I disagree’, time will tell. In response to 2) there is no new threat now which was not present before the hard fork, regulators (or others) can at any time attempt to compel users to implement protocol changes, this remains a threat, but carries an extremely low probability of success given the geographically distributed nature of the Ethereum community.
In conclusion, I recognise there is much debate about how truly representative current voting and consensus mechanisms are (that is a topic for another day), but in principle a community driven social consensus decision which reflects the totality of truth is fine by me, I am not tied to a protocol version, I subscribe to a wider social framework of decentralised control governed by social consensus within which an agreed dataset exists, and agreed code (which includes a technical consensus mechanism) operates. If that chain of community consensus holds and on rare occasions exerts the power to override the human-written rules governing 99.999 percent of the platforms’ successful operation, then frankly, I feel assured and empowered by that, not threatened. That is not centralised control, it is exactly the opposite. We are the community. We are the control. We are the writers of history.
[linkedinbadge URL=”https://www.linkedin.com/in/tyler-welmans-b339326″ connections=”off” mode=”icon” liname=”Tyler Welmans“] is Blockchain Specialist at Deloitte Digital and this post was originally published on linkedin.
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