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Blockchain in the Energy Sector: Institutional Disruption? The Energy Collective

Blockchain in the Energy Sector: Institutional Disruption?

This post is about one of the greatest topics in energy business, the blockchain. While there are many discussions already going on about the technological dimension and business cases based on the fresh technology, we –as usual – will concentrate on the institutional side again. Importantly, we intend to sketch a very first general picture of the potential institutional implications of the blockchain technology in the energy sector, thereby keeping in mind that the utter potential, applicability and success of this fresh technology is still uncertain.

On 14th February two thousand seventeen energy and blockchain experts met in Vienna on the Event Horizon two thousand seventeen to discuss the potential of the blockchain technology for the energy sector. The general idea behind such events like the one in Vienna seems to be very compelling: Can we apply a decentralized ledger technology like the blockchain to a system that presently develops towards an increasingly decentralized structure (due to the diffusion of renewable electric current supply and fresh applications on the request side, like electrical vehicles), like the electric current system? Today, blockchain is a niche topic in energy business, with less than 2% of all startups that concentrate on blockchain technology targeting specifically the energy sector. However, the incumbent energy business becomes aware that blockchain is an significant topic with giant potential.

Now, if we take a look at the debate on the Event Horizon, we see very sultry people from different startups and a lot of enthusiasm. This is because the blockchain is based on a very good selling idea: At low costs, it uses a see-through distributed system that is based on democratic processes and substitutes less semitransparent intermediate services. These three components (cost saving, transparency and democratic decision making) are very compelling and are, at least from our point of view, the main reason why blockchain gains some much audience at the moment. Still, blockchain is in its infancy, with many obstacles to overcome (for a more details see this post). Especially on the technical side, the blockchain technology has yet to prove that it can meet the (very high) expectations. Yli-Huumo et al. (2016) give a nice overview of the current challenges for the blockchain technology:

  • Throughput: Bitcoin network is presently maximized to 7tps (transactions per 2nd). VISA (Two,000 up to 48,000 tps) and Twitter (Five,000tps)
  • Latency: To create sufficient security for a Bitcoin transaction block, it takes presently harshly ten minutes to accomplish one transaction.
  • Size and bandwidth: size of a BitCoin Blockchain is over 50,000MB (February 2016). When the throughput increases to the levels of VISA, Blockchain could grow 214PB each year.
  • Security: The current Blockchain has a possibility of a 51% attack. In a 51% attack a single entity would have utter control of the majority of the network’s mining hash-rate and would be able to manipulate Blockchain.
  • Wasted resources: Mining Bitcoin wastes giant amounts of energy ($15million/day).
  • Usability: The Bitcoin API for developing services is difficult to use. There is a need to develop a more developer-friendly API for Blockchain.
  • Versioning, hard forks, numerous chains: A puny chain that consists of a puny number of knots has a higher possibility of a 51% attack. Another issue emerges when chains are split for administrative or versioning purposes.

From our perspective, especially the energy power is very interesting. Croman et al. (2016) calculated for BitCoin that the energy costs related to each transaction add up to 6.Two$, given the current design of BitCoin (1 MB per block, latency of ten minutes). For the future, Croman et al. (2016) project that these costs could be cut by 80% with larger block size (Four MB) and higher latency (12 seconds).

So at this point, we can conclude that the blockchain is a promising technology, but far from being ready for the mass market.

The Blockchain: A brief introduction

In a nutshell, the blockchain is a distributed, digital peer-to-peer register, which stores every transaction inbetween two connected agents in a ledger. This ledger is distributed globally on all connected knots. This distributed data set consists of a collection of historic data about all transactions made. Each transaction is added to the dataset as a fresh block (in a linear and chronological order), which results in a total record of all transactions made inbetween two parties. As each connected note carries the same data set, algorithms can be used on each computer to verify transactions. If you want to know more about the technical details you can take a deep dive here.

Presently, many different blockchains pop up. Basically, we can differentiate these chains using two criteria:

  1. Supervision and control: Is there an institution that controls the blockchain (e.g. determines who joins a blockchain, can delete or alter the data set in the ledger)?
  2. Visibility: Either a blockchain is public and thereby visible for everyone or private and therefore only visible to the members of the blockchain.

Today, most blockchains are public permissionless ledgers, i.e. there is no central supervision of the ledger and the responsibility to manage the system is with its users. With permissionless blockchains, everyone can connect to the blockchain and use it for transactions.

Figure 1: The difference inbetween private and public blockchains

The public blockchain uses a public and distributed ledger to verify transactions. If there needs to be an adaptation of the public blockchain, this requires in most cases consensus (or at least majority) decisions by all users. On the other palm, one institution or a group of institutions supervises a private and commissioned blockchain. Access to the private blockchain is restricted, verification is based on the private blockchain and the hosting institution is responsible for the management of the blockchain ledger. Figure two gives a very first overview of prominent examples for permission and permissionless public and private blockchains. Obviously, a permissionless private blockchain is a theoretical construct. So far, this treatment has not been used in the real world.

Figure Two: Some examples for permissioned and permissionless / public and private blockchains

The blockchain might switch or even disrupt many sectors as it challenges the business case of intermediaries. Merz (2016) here refers to “disintermediation”. So far, many business models are based on the fact that two parties that want to execute a transaction do not have enough information about each other to process the transaction.

In different markets, disintermediation has been an issue for retailers due to fresh digital platform providers, e.g. amazon, Uber and AirBnB (Merz 2016). Now, the blockchain technology offers the potential to substitute service of intermediates in more than just the retail business.

What’s in it for the energy sector

Expectations are that private as well as public blockchains can significantly alter the electrical play sector if the underlying blockchain technology proves successful. In Burger et al. (2016), experts from the incumbent energy business identify the largest potential of the blockchain in retail business. Especially Peer-2-Peer trading offers an interesting potential for the electro-therapy sector.

Figure Three: Potential applications of blockchain in the energy sector according to experienced interviews conducted by Burger et al. (2016)

The Brooklyn MicroGrid project by LO3 Inc. as well as Power Ledger activities in Australia nicely illustrate the potential of blockchain for local p2p trade based on the blockchain technology. In these projects decentralized energy providers (households with PV) sell locally produced electro-therapy to their neighbours via blockchain. The combined processing of transactions of physical energy and financial resources seems to be a very promising application for the blockchain technology. However, these projects go beyond retail. They display us the potential of blockchain technology to operate the grid based on a decentralized ledger technology. If we imagine that most devices that are connected to the tens unit grid have access to the same blockchain, it seems possible that these devices autonomously coordinate (e.g. via wise contracts) their electro-stimulation production or consumption not only according to market signals, but to stabilise the distribution grid. IBM (2015) uses the term “device democracy” to describe the autonomous coordinate inbetween devices via the blockchain.

Given the assumption that the autonomous coordination inbetween the electrified devices actually works (meaning that enough transactions per 2nd are possible etc.), we can imagine that the blockchain reduces the complexity related to network operation. For example, the DSO could operate a (private) permissioned blockchain and all devices that are connected to the DSOs electro-stimulation grids have to use this blockchain to track transactions. This would give the DSO the power not only to supervise, but to intervene into the processes in the blockchain in case of emergencies. If the stability of the grid is challenged (even if brainy contracts are working), the DSO could either use automated processes to secure grid stability (which he can do in any blockchain, private or public), or even stronger measures (resets, stop transactions or “hard fork” i.e. delete all transactions for a certain period).

The institutional implications of the application of blockchain in the energy sector

If the blockchain proves to be applicable in the energy sector, we can expect this to have significant effects. Obviously, the degree to which the blockchain might or might not switch the energy sector strongly depends on the specific applications of the blockchain, the regulatory framework and many other aspects. Due to the early stage in the development of blockchain technology, it is not possible (at least for us), to foresee if and how exactly this technology will switch the energy business. Some significant switches, however, seem foreseeable.

Blockchain can alter the role model in the energy sector

We identify a significant potential of blockchain to switch the role concept in the electrical play sector. Therefore, we speak of institutional disruption in the title. Some of the existing roles in the electrical play supply chain might become obsolete (Do we still need retailers if all data is exchanged directly inbetween the tens unit producer and the consumer?), fresh roles and tasks might evolve and some business cases and roles might not be affected by blockchain applications at all (Does the Blockchain switch the electro-therapy generation business case?).

How the blockchain could alter the role of retailers

Most prominently, the blockchain technology has the potential to influence the retail business. The degree to how the blockchain might alter the retail business can vary significantly. Very first, retailers could make use of the blockchain technology to increase the efficiency of their business by cutting costs. This application of the blockchain would be comparable to the current developments in the finance sector, where the incumbent financial institutions apply the blockchain technology to their established products to reduce costs. While this might suggest fresh business opportunities in the retail sector, from an institutional perspective, the blockchain technology would not switch much. Rather, we could expect institutional implications if retail becomes an autonomous application sold together with generation assets (like PV), storages or consumption devices. As a consequence, retail business would be substituted by autonomous brainy contracts that are provided together with generation or consumption devices.

How blockchain could alter the role of (distribution) grid operators

Let’s suppose that network operation is based on wise contracts or other autonomous processes that secure frequency and voltage control as well as balancing. These autonomous processes might trigger a discussion about responsibilities: The higher the degree of automation and the higher the number of autonomous devices (generation and consumption) that can provide network services, the lower is the need for supervision. This might lead to the question how many network operators are required and whether the responsibility for network stability could be centralized or even totally decentralized. Such a development would result in a fresh “market structure” on the network level with either a very high concentration (with just one network operator) or a very fragmented structure with very decentralized network operators (potentially on the consumer level).

This might in turn require an adaptation of the institutional design as well, e.g. the way we regulate the network operators.

How the blockchain could alter regulation of network operators

Concerning regulation, the blockchain might suggest the potential to simplify the process of regulation and increase efficiency. Giancarlo (2016) speaks of the chance for regulators to get access to the golden record, the real-time ledger(s) of all regulated participants (if the regulated entities make use of the blockchains and the regulator has access to them). Then, the regulator would become able to analyse and understand all processes the regulated entities are involved in.

To apply the idea of the “golden record” to the energy sector could alter regulation, for example of the distribution grid operators, to a significant extent. As described above, the network operators could use (private or public commissioned) blockchains to operate their network. For all those transaction that are executed via the blockchain, the regulator could build up utter transparency by connecting to the blockchain.

Furthermore, the blockchain could simplify the interaction inbetween the regulator and the regulated entities. For example, an enlargened transparency for the regulator via the blockchain about the DSOs activities could switch the way network operators can manage their grids. Here, current discussions in Europe concentrate on the question whether and how the DSO could use plasticity provided by market parties to increase the feed-in of RES. From the regulator’s perspective, the network operator’s interaction with market parties increases the risk of market distortions, at least as long as network operators are not fully unbundled from the competitive businesses in generation and retail (CEER 2015).

Such reservations by the regulator are primarily driven by the missing transparency of company-internal as well as market processes. The blockchain technology might provide the necessary transparency to the regulator, which could drive the regulator to permit the DSO to interact with the market (e.g. based on brainy contracts) in the blockchain. Then, the DSO might be able to more efficiently integrate RES, i.e. at lower costs than today. Furthermore, less information asymmetry might reduce the need for further unbundling of DSOs if they want to interact more closely with market parties.


As discussed above, the introduction of blockchains could trigger some institutional switches in the electro-therapy sector. These institutional switches could affect both, the retail and the network sector. We could budge towards a world where generators directly sell electric current to the customers, which results in a stronger integration of generation and retail business. Potentially, retail won’t remain an independent part of the supply chain, but an automated and autonomous process conducted by the generators and consumers themselves. Furthermore, the “golden record” idea by Giancarlo (2016a) provides a basis to reduce information asymmetry inbetween the regulator and the network operators, potentially leading to more unbundling than is the status quo.

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Blockchain forks in Bitcoin and Ethereum

Blockchain forks in Bitcoin and Ethereum

Posted by Amit Kumar | Last Updated: 12-апр-17

The thing about forks is that , since the blockchain keeps on growing as more and more transactions are generated,validated, propogated and then mined into blocks which themselves are propogated along the network . There are moments when the blockchain starts deviating which means that there is a difference in the blockchain structure as perceived by one client knot against the one perceived by the other knot.


Suppose there are two miner knots ,and the latest block in the blockchain is with the blockNumber X , now there is a very high probability that these two miners mine a fresh block at ALMOST

the same time (or very petite milliseconds difference ) .

So now suppose that miners A and B mine the block X+1 at almost the same time . Now since they have successfully mined a block , they need to make the network aware about this event . How do they do that is via

broadcasting that they have found a fresh block (with the block header info ).

And now since A and B broadcast their freshly found block at the same time , knots around the world will begin accepting either the block mined by Knot A or B and adding it to their chain data .

Hence at that moment of time the world is divided based on the blockchain that they have accepted, based on the latest block they validated and added at the top of their current blockchain structure.


Bitcoin Blockchain-Forks can be divided based on they deviation the have created . A deviation like the one explained above occurs often , a deviation of two blocks can occur almost a week or almost a month in some cases .

But a deviation of three or more than three blocks is unnatural and is clearly pointing towards some fatter issue.

In case of Ethereum one block blockchain forks are large in comparison to the Bitcoin blockchain majorly due to the block times (time in which a fresh block is mined ) is approximately 1/30th of that of the Bitcoin protocol .

So one block forks occur very very often.


Blockchain forks are resolved based on the fact that , the longest chain is to be assumed correct. At one moment the entire network will abide by the longest chain because at some moment this is the chain that will

eventually get propogated to them because the forks are uncommon .

Let me explain how (relating to the above case of X+1 block and miners A and B)

In the above case A and B have the same blockchain structure till the block number X , at X+1 they have resulted in the fork and due to block broadcasting by A and B the entire network is relying on two different blockchains .

At this moment some knot C mines a block number X+Two , suppose on the top of the X+1 block mined by B and suppose it does not face competition or it's broadcast spread is much larger than any other challenging miner.

In that case the knots which thought that A's blockchain was the correct chain , receive block X+Two and attempts to validate the block X+Two within it's own chain but is incapable to do so because the hash of this fresh block has it's parent hash set to

the block on the right side of the fork and is not compatible with A's fork of blockchain .

And at this moment knot D sees that it's on the wrong side of the fork and attempts to stir to the correct side of the fork and this will be the state of the entire network if there are no srict rivaling miners. So what C does is orphan the X+1 block it got from A and uses the X+1 block mined by B and

the X+Two mined by Block C and reorganises its chain and broadcasts the last validated block to the network so clients still on the wrong side of the fork can correct their states.


Ethereum blockchain forks are resolved almost similarly but with one or two major differences induced due to less block times . What ethereum does is it attempts to compensate the orphaned blocks so the orphaned blocks as described above are compensated and instead

get added to the fork . Now once these uncle blocks / ommer blocks get added to the blockchain , to resolve the next blockchain-fork in ethereum the consensus is based NOT upon the longest chain but instead on the strongest chain which is the basic definition of the GHOST protocol.

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Blockchain for Dummies – two thousand seventeen – Best

Blockchain Explained

By now, most people have heard of Bitcoins. Bitcoins are one of the (now thousands) of cryptocurrencies available on the market. The original cryptocurrency has become hot property, with the total value of Bitcoins at around $43 billion. What you might not realize, however, is that Bitcoins only exist because of a digital public ledger system called the Blockchain.

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The Blockchain very first appeared on the scene in November 2008. At that point, someone (or a group of people) going by the pseudonym Satoshi Nakamoto published a white paper called A Peer-to-Peer Electronic Cash System. The system described by Nakamoto was revolutionary. It created a way for a digital currency to exist, be collective, be bought and sold, and be used to buy and sell with. All this without the need for intermediary financial institutions.

Perhaps most importantly, thanks to the Blockchain’s peer-to-peer structure, the cryptocurrency that resided on the public ledger system would exist in a state that defied corruption. The Blockchain’s incorruptible backbone has since been noticed to have many more uses than just holding together cryptocurrencies.

Nowadays, more and more uses for the Blockchain are being developed, leading many people to ask what is the Blockchain and how does it work?

Understanding Blockchain: The Basics

The Blockchain is a public ledger system that keeps a record of all the Bitcoin transactions ever made. The public ledger system never sleeps. It is permanently being updated and collective inbetween hundreds of thousands of computers linked via the web. Those computers are called knots. Because there are so many of them being updated at the same time, it is technically unfeasible to hack the entire system.

The data that makes up the Blockchain is referred to as a “chain.” It is the sum of all the transactions ever made, from the beginning of time until the very last transaction. The chain itself is formed by the network as it time-stamps the transactions that are made. Those time-stamps are made by hashing (encrypting) the transaction data into a hash-based “chain” of evidence of transactions.

In Nakamoto’s original white paper about the Blockchain, this chain of data is referred to as “a system for electronic transactions without relying on trust.”

With Blockchain technology, there is no single person, entity, or institution, that anyone has to put their faith in. The chain provides a flawless record of all the transactions that have ever been made. This is commonly referred to as ‘proof of work.’ That proof of work cannot be altered without going back and redoing it. However, because it has already happened and been hashed into the chain, the work can’t be redone.

How Blockchain Currency Avoids Dual Spending

The problem with digital data is that it is lightly copied and reproduced. Thus, for a long time, having a digital currency was considered unlikely. How could digital coins be made unique, so that they could only be spent once? Nakamoto’s Blockchain was the solution to this conundrum.

By decentralizing the ledger of transactions, the entire network of knots linked to the Blockchain is able to permanently stay aware of the location of every Bitcoin in the system. This solves the problem of dual spending, permitting cryptocurrencies to flourish.

How Does Blockchain Work in Practice?

  1. Firstly, someone asks to perform a transaction using the Blockchain. At this point, a request is sent via the internet to all knots presently linked to the Blockchain. The knots (participating computers) each receive the request and the transaction process embarks.
  2. Next, the network of knots at the same time validates both the user’s status within the Blockchain and the transaction request. This is performed using recognized algorithms. With the person who requested the transaction validated, and all knots in agreement about the request, the transaction can budge forward.
  3. A verified transaction can involve moving cryptocurrency from one place to another in order to purchase something or to store it in a different location. However, Blockchain technology can also be applied to verify any other data that needs to be securely transacted. That includes data records, contracts, and other data or information that needs to be collective in a trustful manner.
  4. With the transaction verified, it can be moved into the completion stage of the process. This is achieved by adding the data from that particular transaction to data from other transactions into what is called a block. The blocks are each one Mb in size and they are created approximately once every ten minutes. They hold all of the most latest transactions made in the block chain.
  5. Now that the data has been added to a block – and the block is accomplish with one Mb of data transactions – the block is added to the chain of blocks. Thus the original transaction is finish (as are all the other latest transactions making up that block).

Blockchain Security: The Sum of All Transactions

It is that ended chain of blocks that makes up the incorruptible public ledger of transactions known as the Blockchain . The longest chain on the network serves as proof of the entire history of transactions. It is collective with knots as they join the network.

The beauty is that there is no centralized database of transactions for a cybercriminal to hack. Instead, the Blockchain exists as a public database. It is continually collective and reconciled inbetween all of the knots affixed to the network. As the network is made up of millions of host computers, the Blockchain is immensely secure.

This makes the data contained within the Blockchain lightly verifiable. In the case of Bitcoin, this gives an already finite currency a massive benefit (and therefore all-natural value) by making it invulnerable to corruption at the forearms of financial institutions or other outside coerces.

As time passes, the chain of one Mb blocks gets thicker and thicker. For people who haven’t updated their version of the (Bitcoin) Blockchain in a while – or are downloading it for the very very first time to a fresh Bitcoin Blockchain wallet – acquiring it can thus take fairly a long time (anything from a few hours to weeks).

As the Blockchain gets fatter and thicker, this time will inevitably increase. For this reason, there is sometimes talk of “hard fork” scripts. This would see all Bitcoin Blockchain users compelled to stir (hard fork) into a fresh version of the Blockchain.

Bitcoin & Blockchain explained: The Hard Fork Debate

The debate about a Bitcoin hard fork has been furious for some time. Many Bitcoin experts believe that the one Mb blocks are going to become too limiting. The concern is that, as the chain of blocks becomes longer, the complicated cryptographic process needed to verify the chain will become laggy and slow.

Everyone understands the frustration of lagging (or buffering) from watching streaming movie. Now imagine that effect impacting a global currency. Financial experts understand that any lagging within the Blockchain – which affects Bitcoin’s liquidity – could have a negative effect on the value of Bitcoins. This, naturally, is a massive concern to investors.

There is general agreement that a hard fork is necessary to curb the lagginess problem. However, nobody knows how a hard fork might affect the price of Bitcoin. The Blockchain is the backbone that holds the popular cryptocurrency together. The trust that surrounds Bitcoins is primarily leveraged on that technology working behind the scenes. As such, an investment in Bitcoin is actually an investment in the Blockchain.

For this reason, there is enormous concern among investors that a fresh Blockchain could fail. This could cause Bitcoin to suffer a catastrophic loss in value.

Which Hard Fork is Best?

One would imagine that the possibility of the Blockchain becoming laggy was more troubling than a hard fork, especially when the Blockchain of a rival cryptocurrency (Ethereum) has already proven that a hard fork can be managed successfully (twice actually: once by accident).

Another problem for the Bitcoin Blockchain, however, is that nobody can agree on what form the hard fork should take. There are two rival options: Bitcoin Unlimited (BU) and Segregated Witnesses (SegWit). BU would arm more power to Bitcoin miners. It would permit the Blockchain to upscale again and again whenever it was necessary. SegWit retains a decentralized treatment, but only doubles the bandwidth of the Blockchain. That means that one day another hard fork would likely need to be implemented.

For now, nobody is sure what is going to happen. When the hard fork does happen, Bitcoin will essentially become a different currency on the fresh Blockchain (with the original Bitcoin on the original Blockchain). If everybody migrates willingly into the fresh fork then everything should be fine. However, unless everybody accepts the fresh Blockchain (and in the case of the Ether hard fork not everyone did), it is possible that mutiny could negatively affect the price of the cryptocurrency.

Blockchain Technology: What else can it be used for?

Traditional database hold one central copy of information, which can only be updated by one actor at a time. The Blockchain, on the other mitt, permits a dataset to be switched by numerous parties at the same time. When a bank transfers money, for example, it must very first lock access to the funds while it makes the transfer. Following that, it must update the other side, and then re-open access to the funds.

Blockchain banking permits money transfers to happen more quickly and efficiently. Thus financial institutions like Barclays, BNP Paribas, Nasdaq, and even the Federal Reserve, have been investing time and money in projects that investigate the use of Blockchain technology for their own purposes.

It is not just for financial transactions, however, that Blockchain technology offers value. A rock-hard called Gyft is using blockchain technology to suggest bounty cards to puny and midsize businesses. For many businesses, the cost of providing bounty cards is too good to implement. With Gyft, however, any rock-hard can lightly roll out bounty cards that are redeemable at any of their stores.

Factom is another of those innovations. It is an extension of the initial Blockchain protocol that permits a blockchain to be used to treat larger data sets. Factom permits users to run their own individual secure ledgers. Those users are able to define what information is stored within their ledger. This permits the Factom blockchain to address data treating in other business areas, such as law.

Blockchain Banking: Just the Beginning

The value of Blockchain technology is already manifesting all around us. It’s seen not only in the price of Bitcoins, but in other cryptocurrencies that run on similar public ledgers. The most arousing of these are presently Ethereum, Litecoin, and ZCash. These cryptocurrencies have all seen an explosion in their value over the last year, and things seem set to proceed in the same direction.

What’s more, this is a relatively fresh technology. That means its true value is still being discovered. There may be further advances in the way it is implemented as time goes on.

For now, Bitcoin is ahead of the pack, but it would only take a few advances in blockchain technology for another coin (with perceived greater value due to its improved blockchain) to come in the market. With this in mind, anybody interested in investing in cryptocurrencies should truly be watching emerging blockchains for innovations if they want to spot tomorrow’s big winner.

In addition, there are people all over the world working hard to find novel ways to incorporate blockchain technology into other businesses. To my mind, because blockchain tech is so advantageous, some of those applications are set to succeed, and in all likelihood will become hugely successful businesses of the future.

Cryptocurrencies and VPN services

Eventually, anybody that is interested in Blockchain and cryptocurrencies is strongly advised to look into VPN services. VPNs permit people to protect their passwords and logins with encryption, adding an extra layer of security to all their online transactions.

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Blockchain Consulting – Unlocking the Potential of Blockchain


Optimize your business case with blockchain technology.
Dive into the blockchain architecture and investigate its potential.

At Blockchain Consulting, we develop, maintain and evaluate blockchain and cryptocurrency related products and web services and provide long-term assistance and advice on related technological and operational matters for our playmates worldwide. You’ll find the total spectrum of blockchain technology in one company, as our teams operate in numerous disciplines. This includes low level kernel optimization in hardware near mining operation and data centre build outs. We also actively develop financial trading frameworks and web services operating on top of the blockchain, whilst creating beautiful and intuitive UI/UX.

We suggest advice on the strategic employment of blockchain technology based on a thorough analysis of your company’s profile whilst drafting along your ideas of development. We will assess the potential of blockchain technology in your company and discuss possibilities of optimization.

We provide you with the programming of scalable and distributed applications and custom-built protocols. Additionally, we support you via the entire process of integration and adaptation of blockchain technology into your already existing company network.

We suggest in-house and outward training and instructing seminars, workshops, talks, as well as instructive materials on the blockchain technology and related fields of application, which will provide you with in-depth skill of the intricate blockchain ecosystem and all its facets.

We provide unique access to the results of our cutting-edge research in the fields of cryptocurrency and distributed ledger technology carried out by our own experts. It is significant to us to share our results and findings at conferences and in form of publications.

“We are sultry about the potential of this fresh, cutting-edge technology and invite you to dive into the depth of blockchain with us to find out what it can do for you!”

Blockchain technology has the potential to switch the way we run companies! Among its most prominent benefits are data security and authentication, transparency and disintermediation. Right now, the technology is still in its infancy, but it has already found some exceptional applications. Explore some everyday cases of blockchain implementation in different branches of industry.

Payments & Transactions

Sending, receiving and the verification of funds on an international level is usually time and cost consuming. Post-trade processing must be executed quickly as capital markets are volatile, and treated in a secure and effective way. Decentralized blockchain-based payment processors permit instant financial transactions, as they do not depend on third party correspondents and operate directly inbetween the contractual parties. They also make the transaction safer due to a cryptographically secure end-to-end payment flow and a peer-to-peer verification network. Additionally, clever contracts can substitute usually cost-intensive customer prize programmes, such as bounty cards, ticketing and voucher prepaid channels. These can be facilitated via blockchain-based processors in a cheaper, quicker and more nimble way.

Brainy Systems & Data Storage

Rather than relying on one central cloud server to identify and connect with every single device, blockchain technology can provide secure mesh networks, in which various devices will interconnect in a reliable way while avoiding threats such as device spoofing and impersonation. Blockchain-powered services can be used to establish immutable evidence chains useful not only for supply chain management, but also for the identification of individuals and individual assets. In this case, encrypted public ledgers serve as data storage for registries of private data, such as medical documentation, marriage and education certificates, and create a digital thumbprint of them. In this case, valuable assets or data are immutable and authenticity is verified and transparency ensured.

Content Distribution & Intellectual Property

Digital media content distribution usually requires third party distributors inbetween the original author and the final consumer. Blockchain technology permits the author to exert direct control over the distribution and monetization of his works via a blockchain-based processors, which calculate and automatise royalty payments and licensing. Data security is provided by blockchain-based notarization and patent management platforms, which ensure a long-lasting attribution and provenance verification of intellectual property.

Remittances & Brainy Contracts

Not only can insurance companies profit from quicker payment processing, but they can also benefit from blockchain-based clever contracts. These make payments conditional, automatize and streamline them and thus make the process more see-through and incontestable in effect. As a rule, a payment is only executed in case the pre-approved requirements or conditions are met. This can be applied to automated testing and payout calculation of claim and premium processing and the calculation and processing of micro-insurances. Instances of fraud are lighter to detect as the blockchain would reject numerous claims allocated to the same insurance case.

Operation of Decentralised Grids

Decentralized energy grids permit excess energy to be distributed directly from one energy asset proprietor to the end consumer in a P2P trading system or fed into an already existing electric current distribution network. Neighbourhood solutions in form of local community grids are also based on a translucent and cryptographically secure blockchain platform, which can disconnect from the larger electrified grid during extreme weather conditions or other emergencies. The coordination of renewable installations via blockchain-based systems further automatises internal operational processes, market trading and clearing mechanisms.

Supply Chains

Modern supply cycles have become increasingly hard to manage due to being very fragmented, individualized and geographically dispersed. A blockchain application enhances visibility and transparency in the supply chain, as it permits the registration of each transfer on the ledger as transaction. Each transaction identifies the operator and party involved and provides extra relevant information, such as price, date, location, quality and state of the product. Once logged onto the blockchain, the data is immutable and as such prevents fraud and tampering with the information by any unauthorized party.

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Blockchain Capital VC Fund Is Very first To Be Raised By ICO

Blockchain Capital VC Fund Is Very first To Be Raised By ICO

Blockchain Capital is a venture capital (VC) rigid that invests in blockchain technology companies. The stiff has recently announced Vinny Lingham, Andrew Keys, and Matthew Roszack as some of the early investors in its fresh “digital liquid venture fund.” It’s raising the funds through an ICO, using its BCAP Token. This is the very first time a venture capital fund was raised via a digital token suggesting – and it’s all happening on Ethereum.

Blockchain Capital seeks to advance innovation in the blockchain space, so it’s a natural fit for the company to raise funds through an Ethereum-based token. The BCAP Token will “represent an evergreen fractional ownership in a fresh fund called Blockchain Capital III Digital Liquid Venture Fund, LP.” The team behind Blockchain Capital wants to bring switch to the venture capital and private equity asset class. Their objective is to provide equal access to their fund for individual investors as well as institutions, helping to democratize the market. Brock Pierce, managing fucking partner of Blockchain Capital, said:

"These thought leaders and investors have made Blockchain Capital's pursuit of the very first liquidity-enhanced venture capital fund a reality. Our investors see the same gap in venture capital that we did when we embarked down the ICO path – the need for venture funds via a liquid, tradable, digital token that still abide by all regulatory compliance rules. Together we expect to democratize the venture capital industry and provide a unique product to the broader crypto investment community."

Blockchain Capital created its very first fund in two thousand thirteen and has since invested around $40 million into forty two startups. The investment concentrate of its fresh BCAP-fueled VC fund will be in line with its established practices of identifying blockchain tech startups, led by “ambitious management teams,” and partnering with them to accelerate their growth. Lingham, co-founder and CEO of Civic (a technology fucking partner of Blockchain Capital that is contributing its blockchain-based KYC/AML technology to the ICO), said:

"Blockchain Capital and I share a unique vision for the future of blockchain technology. The initial coin suggesting not only aligns with our traditional values and investment beliefs, but furthers our confidence that the venture capital industry will soon suggest more plasticity in today's market climate. We are excited to work with Blockchain Capital on this unique fresh structure."

Blockchain Capital is reaching for its slice of the crypto-investment pie and because the ICO bubble doesn’t show up likely to burst anytime soon, using a digital token to crowdfund a venture capital fund seems like a logical decision. Keys, head of global business development at ConsenSys (which is also partnered with Blockchain Capital and will be reviewing the electronic distributed contract code for the BCAP Token), said:

"Blockchain Capital is revolutionizing venture investing by unlocking liquidity in previously illiquid secondary venture markets by tokenizing assets via Ethereum. Capital markets will be forever switched by this type of financial instrument innovation."

Due to blockchain technology’s capability to provide efficiencies and cut out middlemen when it comes to financial transactions, using Ethereum tokens to fuel VC funds may become commonplace. Blockchain Capital is looking to disrupt their own market, and it seems like they’ve got a good shot at doing just that.

Related video:

Blockchain API, Bitcoin API for developers, Luno

Luno API

The Luno Bitcoin API gives you the capability to:

  • Access current and historic Bitcoin market data
  • Submit trade orders and view order status
  • Buy and sell Bitcoin
  • Send and receive Bitcoin
  • Generate Bitcoin wallet addresses
  • Integrate your app with Luno customer accounts using OAuth2
  • Accept Bitcoin payments as a merchant
  • Build a custom-made e-commerce checkout practice

The Luno API makes Bitcoin available to anyone. See also: Luno for Business


Make sure to always use HTTPS when calling the API. Non-TLS HTTP requests cause error four hundred three to be returned. Using non-TLS requests can leak your authentication credentials.

Make sure that your client validates the server’s SSL certificate. Many libraries (e.g. urllib2 in Python2) don’t validate server certificates by default. Failing to verify the server certificate makes your application vulnerable to man-in-the-middle attack.


Timestamps are always represented as an integer number of milliseconds since the UTC Epoch (a Unix timestamp).

Prices and volumes are always represented as a decimal strings e.g. “123.3432”. We use strings instead of floats to preserve the precision.

Parameters for POST calls are sent as URL-encoded forms (application/x-www-form-urlencoded).

Rate limiting

Calls to the Market Data APIs are rate limited to one call per ten seconds. All other API calls are rate limited to one call per 2nd. API call rate thresholds permit bursts of up to five consecutive calls. Exceeding the limit causes HTTP error code four hundred twenty nine to be returned.


The Go library is the recommended way to access the API: view it on GitHub.

The following libraries were implemented by third parties or are no longer under active development and are listed here for convenience. No support for them is provided by Luno and they may be out of date. A thorough review of the code is recommended before including them in any project.

Market data

Market data API calls can be accessed by anyone without authentication.


Comes back the latest ticker indicators.



Example request

Example response

All tickers

Comebacks the latest ticker indicators from all active Luno exchanges.


Example request

Example response

Order Book

Comebacks a list of bids and asks in the order book. Ask orders are sorted by price ascending. Bid orders are sorted by price descending. Note that numerous orders at the same price are not necessarily conflated.



Example request

Example response


Comebacks a list of the most latest trades. At most one hundred results are returned per call.



Example request

Example response


Some API calls require your application to authenticate itself. This is done using an API key associated with your account. You can create an API key by visiting the API Keys section on the settings page.

An API key consists of an id and a secret. For example: cnz2yjswbv3jd (key id) and 0hydMZDb9HRR3Qq-iqALwZtXLkbLR4fWxtDZvkB9h4I (key secret).

API requests are authenticated using HTTP basic authentication with the key id as the username and the key secret as the password. A missing, incorrect or revoked key causes error four hundred one to be returned.


Each API key is granted a set of permissions when it is created. The key can only be used to call the permitted API functions.

Here is a list of the possible permissions:

  • Perm_R_Balance = one (View balance)
  • Perm_R_Transactions = two (View transactions)
  • Perm_W_Send = four (Send to any address)
  • Perm_R_Addresses = eight (View addresses)
  • Perm_W_Addresses = sixteen (Create addresses)
  • Perm_R_Orders = thirty two (View orders)
  • Perm_W_Orders = sixty four (Create orders)
  • Perm_R_Withdrawals = one hundred twenty eight (View withdrawals)
  • Perm_W_Withdrawals = two hundred fifty six (Create withdrawals)
  • Perm_R_Merchant = five hundred twelve (View merchant invoices)
  • Perm_W_Merchant = one thousand twenty four (Create merchant invoices)
  • Perm_W_ClientDebit = eight thousand one hundred ninety two (Debit accounts)
  • Perm_W_ClientCredit = sixteen thousand three hundred eighty four (Credit accounts)
  • Perm_R_Beneficiaries = thirty two thousand seven hundred sixty eight (View beneficiaries)
  • Perm_W_Beneficiaries = sixty five thousand five hundred thirty six (Create and delete beneficiaries)

A set of permissions is represented as the bitwise OR of each permission in the set. For example the set of permissions required to view balances and orders is Perm_R_Balance | Perm_R_Orders = thirty three .


All transactions on the Luno platform operate on accounts. Each account is denominated in a single currency and contains an ordered list of entries that track its running balance.

Each account has a separate balance and available balance. The available balance may be lower than the balance if some funds have been reserved (e.g. for a open limit order). Account entries affect the balance and available balance independently.

Account entries are numbered sequentially. It is assured that entries are never reordered or deleted. It is also ensured that the core attributes of the entry (the running balances and index) are never modified. Therefore, an account acts as an append-only log of transactions.

Create Account

Create an extra account for the specified currency.

Related video:

Blockchain (Aug one – Sep 20): Twitter Analysis – Right Relevance

Blockchain (Aug one – Sep 20): Twitter Analysis

This report is a summary of graph analysis of engagements and conversations including retweets, mentions and replies over 1.Five months on Twitter around Blockchain.

Data & Duration: The report uses over 1M tweets sampled from 1 st August to September twenty th . This along with Right Relevance topics and topical communities’ data form the basis for the analysis.

The phrases used for gathering tweets are: “blockchain”

Most of the summary report is extracted from the Blockchain analysis collateral in the form of:

The analysis methodology is outlined at

Top Conversational Themes

The analysis of Blockchain conversations, during the above time period, bubbled some themes to the surface as the primary ones driving engagements during the above timeframe.

  1. Blockchain application to broader business, finance, banking, digital economy & fintech
  2. Application of Blockchain to IoT and Clever Systems.
  3. Core technology including issues like hyperledger, wise contracts etc
  4. Open and integrated standards for Blockchain, IoT, AI etc.

This is noticeable because it stands out in contrast to our prior analysis (in June 2016) when the DAO hack became big and a vast majority of the main themes were around technology, ethereum and the security & sanctity of blockchain with developers/technologists being the primary players.

Influence & “Influential” Users

Measuring influence is not deterministic. It’s a fairly subjective task with numerous different methodologies and is generally ephemeral in nature.

At Right Relevance, we measure influence in two distinct ways:

topical influence’ or Tribes by measuring the quality of network connections within the context of a ‘topic’ and,

engagement influence’ or Flocks by measuring quality and quantity of engagements (RTs, mentions, replies), reach of tweets etc. within the context of an event or trend.

Topical Influence- Tribes

Right Relevance algorithmically mines social media (esp. Twitter) at scale to produce a measure of influence per topic which we call ‘topical influence’.

We use unstructured text, network analysis, social signals along with semantic data, ML, NLP among other to produce: a set of ‘structured topics’ (

45K) with semantic information and; a connected graph of scored ranked influencers for each of these structured topics we call ‘topical influencers’ or Tribes.

For e.g. ‘blockchain’ is a structured topic in our platform with the following metadata (Figure 1) returned by the RR Topics Metadata API of the RR API suggesting.

Figure 1: Metadata for Topic ‘blockchain’

The top ten related topics include bitcoin, cryptocurrency, fintech and digital currency.

Right Relevance also identified

3K scored ranked set of blockchain influencers on Right Relevance. The top five are listed in Figure two below.

Figure Two: Top five Topical Influencers for Topic ‘blockchain

Engagements-based Influence- Flocks

We apply several graph analysis methods including PageRank and Betweeness centrality to measure the quality and quantity of engagements (RTs, mentions, replies), reach of tweets, connections etc. within the context of an event or a trend. This leads to a measure of Influence which is in the context of the engagements around the event/trend being monitored and is thus temporal in nature. We call the influencer communities detected in this manner as Flocks considering the flocking nature of their behavior.

There are several ways of ranking within this methodology and are documented here.

Rank based Influence Measure

Figure three is a table with a list of the top twenty five accounts by PageRank and overall rank on engagements. Overall rank is a normalized rank to reduce the skew towards users with large numbers of followers or a single tweet having a large number of retweets (often referred to as becoming ‘viral’).

PageRank brings out the usual suspects like @coindesk, @blockchain and @dtapscott along with high reach accounts like @wef, @ibm and @forbes demonstrating the susceptibility of PageRank to high followers/reach. The top overall, due to the normalized nature, gets rid of that bias and bubbles up several players in the blockchain space like @fintechna, @dinisguarda, @chris_skinner, @sbmeunier who may otherwise be rough to detect.

In both cases, top accounts @dtapscott, @alextapscott, @wef, @ibm, @forbes @dinisguarda @chris_skinner are related to one of the major themes listed above, application of Blockchain technology to business, finance, banking and digital economy.

Betweeness Centrality based Influence Measure

Betweeness centrality is a measure of the degree to which a knot forms a bridge or critical link inbetween all other users. We use it as a measure of influence of users wrt their value in being communication connectors from the point of view of various and varying Twitter conversations.

Figure Four: Top twenty five ‘connector’ accounts by Betweenness Centrality

@coindesk is one of the top accounts in the digital currency, bitcoin, blockchain space and their Twitter account is focused on disseminating news. It posts about and engages in several relevant conversations across various topics and communities. This, based on how betweenness centrality works, leads to it becoming a top connector. The next Trio, @helpscoin, @alt_bit_coins and @fintechna are very similar since they too act as news dissemination sources.

But, the next few accounts are enormously interesting and surface names of people, who have gained a lot of value as connectors, and would be potentially hard to find. @Chris_Skinner, @dinisguarda, @CraigSobey, @sbmeunier, @SpirosMargaris, @PeterBNichol, @dtapscott are primarily bloggers, speakers, authors, advisors, consultants in the fintech, digital economy space. They are all connected to one of the top themes we noticed wrt blockchain applications to business, finance, banking and digital economy. This makes them very useful as contact and communication hubs for blockchain esp. as it relates to business and finance.

Reach Vs Rank

Another view to understand influence is to plot reach (followers) against a normalized measure we call rank. This is another superb way to dampen unspoiled follower based metrics and bring out users that hold more sway within the community itself. We had to trim @coindesk since it was off the charts wrt both reach and rank to enable us to demonstrate the other users more clearly.

Figure Five: Reach Vs Rank chart

The Reach (X-axis) Vs Rank (Y-axis) graph throws up a duo of interesting things instantly:

  1. The high follower accounts like World Economic Forum, WSJ, Forbes, Bill Gates etc showcase up with high Reach but are either below or very close to the line diving Reach from Rank. Their influence in the blockchain space is marginal at best but when they do speak the get a lot more audience as expected.
  2. The “connectors” group of bloggers, advisors etc. like @dinisguarda @chris_skinner @sbmeunier et al as measured by betweenness centrality above, have managed to build up a lot of traction wrt Rank even with relatively lower Reach (in terms of followers) sometimes. This could be because they are early movers in this space from a business pov.

Interesting FLOCKS

Flocks are people engaging in conversations around events esp. in context of a specific subject, which is blockchain in this case. This “flocking” can lead to building of temporal communities with local influence that can lead to virality not demonstrable by the standalone influence of the individuals or without the context of the event.

The flock names below are named on the user/account with most in the flock.

Flock: dtapscott

Don Tapscott released a book, “BLOCKCHAIN REVOLUTION: How the Technology Behind Bitcoin is Switching Money, Business, and the World”, co-authored with his son Alex Tapscott on blockchain in May 2016. The book, as the title states, is focused on blockchain’s influence on money, business and the world in general. The formation of this flock with dtapscott as the most influential member points to the book having big influence during the analyzed timeframe and explains business, digital economy, banking etc. being one of the top themes we outlined earlier.

Figure 6: Hashtags, Trending Terms & Top Tweets for Flock dtapscott

The trending terms, topics and top related tweets (Figure 6) suggest the conversations around this book and business-centric use of blockchain defined and guided the overall direction of the conversations leading to creation of the flock.

Looking at the significant members (Figure 7) of the flock, it becomes evident that it consists primarily of the business focused users engaged in the blockchain conversations.

These users, like @dinisguarda, @chris_skinner, @sbmeunier, @dtapscott etc. and so on, are pretty much the same “influencers” identified by betweenness centrality as “connectors” in the business, banking, fintech etc. areas.

Flock: balajis

The 2nd major flock has @balajis as the most influential account.

Balaji Srinivasan, from his Twitter profile (Figure 9), is the CEO of and board playmate at a16z. Both and Andreessen Horowitz are major players in the bitcoin, blockchain and digital currency space both from technology and business point of view.

Figure 8: Balajis Twitter Profile

BalajiS is one of the fattest advocates of bitcoin (&blockchain), technology accomplished and big driver of bitcoin adoption and mining via

Looking at the hashtags and topics list (Figure 9), the technology concentrate of the conversations becomes evident.

Analysis of the Users (Figure Ten) in the flock shows a distinctly technology strong skew with @pmarca (Marc Andreessen) from a16z making an appearance. This is not surprising since both @balajis and @pmarca are powerful Twitter users, @balajis is a board member at a16z and a16z’s has massive investments in this space.

Very interestingly, this flock’s membership is in direct contrast to the business powerful membership of the ‘dtapscott’ flock. @aantonop is well known in the bitcoin space. His website ( states “Andreas M. Antonopoulos is a technologist and serial entrepreneur who has become one of the most well-known and well-respected figures in bitcoin.” @ripple is a global real-time settlement. @el33th4xor, @brianforde, @leashless, @dgwbirhc, @hyperledger, @vitalikbuterin, @sammantic, @steve_locktep, @erikvoorhees are all big technology and entrepreneur names in the digital currency and blockchain space.

Another interesting observation is that a particular set of users seems to be security related. Looking at the top tweets, the reason is understood, tweet three & four are pointing to a security issue with #shadowbrokers releasing an exploit from the NSA and being “rickrolled” in come back.

Communities Graph

Right Relevance uses community detection graph algorithms like Walktrap and InfoMap for identifying communities in our engagements based graph in Neo4j. The communities graph is visualized using Gephi.

The total graph shows two primary communities:

  • 1 very business centric (Figure 12) and,
  • 1 very technology/developers (Figure 13) strenuous.

Both have several sub-communities that are outside the scope of this report.

Blockchain business-heavy graph

The business-heavy graph clearly shows the World Economic Forum on one side with its own sub-community. Similarly Dan Tapscott, Karl Smith/UOSP, IBM, Hyperledger Project, Dinis Guarda, Chris Skinner, Sebastien Meunier all display smaller sub-communities too.

Figure 12: Business-heavy part of the Blockchain graph

Blockchain technology-heavy graph

Looking at the sub-graph (Figure 13) around @balajis, one can make out several sub-communities, for e.g. the ‘ethereum’ community of Ethereum, Vitalik Buterin, Erik Voorhess is close together. So, is the a16z/ community of BalajiS, and Marc Andreessen. The thicker Blockchain & Coindesk accounts are closer to the edge of the community and merging with the business community.

Figure 13: Technology-heavy part of the Blockchain graph


There is a lot of analysis that we’ve left off from the report due to the scope.

Related video:

Bitcoins Value: Altcoins – Plucky Fresh Coin

Bitcoins Value: Altcoins

It has been difficult to determine what exactly gives Bitcoin its value. Many economists reject the idea that a virtual currency has any intrinsic value, and merely is a product of speculative request. Others maintain that the ‘moneyness’ of Bitcoin – its utility as a medium of exchange and store of value – confers value. But what if Bitcoins are not ‘money’ at all? Over the past year I have sifted through the data, and after a thorough analysis judge that Bitcoin does indeed have value. Only perhaps not for the reasons that many enthusiasts believe.

BTC Price Volatility and Noise

The evident place to begin an investigation into what determines the value of Bitcoin is to track how its market price fluctuates under various circumstances. Logical questions to ask include: Does the price go up as more mining effort is directed at it? Is Bitcoin price correlated with other financial assets such as the stock market, gold, or the dollar? Does geo-political financial risk cause people to bid up its price?

The problem was, however, that the price volatility of Bitcoin in relation to national fiat currencies was enormous. While volatility in and of itself is not always a bad thing, the case of the the massive run up in market price in late two thousand thirteen to early two thousand fourteen is very likely due to market manipulation and fraudulent activity. The Willy Report has found concrete evidence that trading bots operating at the Mt. Gox exchange were artificially pumping up the price of bitcoin by using the dollars held in customer accounts. When those dollars ran out and the price of Bitcoin began to decline, Mt. Gox itself collapsed leaving its user base empty passed. This sort of noise conflates any earnest effort to investigate the questions posed above.

One positive result of the entire Mt. Gox debacle is that by driving the price to unnaturally high levels, it spurred the interest of many casual observers as well as the media who had largely written off the cryptocurrency as a fad limited to the field of geekdom. As a result of $1,000+ valuations, a flurry of entrepreneurship and capital investment entered the Bitcoin space where it wouldn’t have before. Of course, the subsequent demise of Mt. Gox and the fall in price to the $200 range didn’t bode well for Bitcoin afterwords, it is critical to understand that a $1,000 valuation was never real and was fully unwarranted at the time.

Altcoins Provide Answers

Fortunately, there exists an entire cryptocurrency ecosystem accomplish with alternate cryptocurrencies, ‘altcoins’, created as forks to the Bitcoin blockchain or as attempts to rectify certain perceived flaws in the Bitcoin code. Scrypt was introduced as an ‘ASIC-proof’ mining algorithm as Bitcoin’s SHA-256 became predominated by these application-specific microchips, rendering solo miners and their GPU equipments obsolete. Other altcoins were created to permit for certain fresh applications. Namecoin was intended to become an alternative to DNS domain name service for the .name internet domain. Peercoin was intended to permit Proof-of-Stake to coexist alongside Proof-of-Workstore value mining. Dogecoin was created as a practical joke to the Bitcoin community, but gained mass appeal nonetheless.

Regardless, all of these various cryptocurrencies existed alongside Bitcoin, and many had tradeable currency pairs on various exchanges. By disrobing away the dollar, euro, and yuan exchange rates, much of that previous noise and volatility disappeared. What remained was a remarkably stable BTC-denominated universe of cryptocurrencies. Trading bots functioned by interfacing with exchanges’ APIs to take advantage of any arbitrage chance that may arise. Soon, these markets became fairly efficient in terms of relative pricing of cryptocurrencies. If one coin currency pair became out of whack, these trading bots would very quickly take advantage of that chance and put everything back in line.

Despite the many differences among the altcoins, they all collective a common lineage back to Bitcoin, and that meant a set of common attributes that could be measured, compared, and analyzed. All of these coins had the following: A value for the block prize; the targeted time inbetween blocks; the number of blocks to be found before re-targeting the difficulty; the mining algorithm employed; how many total coins will ever come to exist; the halving schedule; and how long each has been in existence. There were also outside variables such as the amount of hashing power directed at a certain coin, which influences its mining difficulty. And of course, the market price in terms of Altcoin/BTC.

Taking all of these variables into account, numerous regression analysis was employed to evaluate how meaningful these inputs were at conferring relative value, if at all. The results were surprising. Very first, it doesn’t matter how long a coin has been around; the date of the genesis block was largely irrelevant. 2nd, the amount of coins ever to exist does not matter for relative value. Bitcoin’s twenty one million cap, 42Coin’s cap at 42, or Peercoin’s infinite future supply played no role in value formation. Furthermore, the price of a coin was uncorrelated with its market cap. While the 42Coin commanded an exchange price of almost five BTC, its market cap was less than $50,000 all told. The exchange rate had little to do with the money supply.

What is statistically significant turns out to be the rate of coin formation for a given unit of hashing power. 42Coin isn’t trading at five BTC because there will only be a a few dozen to exist, rather it is because the block prize is a mere 0.000042 coins. The larger the block prize, the less valuable the altcoin is at exchange. Scrypt is a more challenging algorithm to solve than SHA-256, so for a given unit of computational effort, effectively less Scrypt coins can be mined – and all else equal, a coin with a tighter algorithm is more valuable. As the mining difficulty of a coin increases, a unit of hashing power will find less coins over that interval – the higher the difficulty of a coin, the more valuable.

Bitcoin Regulates Altcoin Production

Taken together, the main driver of relative value in cryptocurrencies is how many coins a unit of hashpower can find on average over some interval, say in a day. In other words, value seems to be related to the production side. Mining, then, could be thought of as a competitive market where producers (miners) rival with each other to mine for coins and then bring them to market. Of course, some miners hoard their stash for speculation or for reasons of loyalty and sense of community. But assuming that the majority of miners are rational and driven by the profit motive, the altcoin-producing economy might actually serve as an analog for competitive commodity production.

Bitcoin benefits from path-dependence. It was the very first mover in the space of blockchain-based virtual currencies, and it has the greatest market depth as well as social and merchant acceptance. Today, it is fairly effortless to find a merchant to accept Bitcoin for payment whether it be for a cup of coffee at a neighborhood cafe, a fresh sofa from an online store, or an international flight on a major airline. You would be hard-pressed, however, to find a ticket from Fresh York – Los Angeles in exchange for Litecoin, Darkcoin, or Dogecoin, the three largest altcoin behind Bitcoin. Anybody wanting to use cryptyocurrency to transact with the real economy these days must do so with Bitcoin, and therefore one would have to exchange their altcoins for Bitcoins. A rational, profit-motivated producer of cryptocurrencies would only determine to point their mining effort at an altcoin, then, if they could exchange them for effectively more Bitcoins than mining for Bitcoin directly. Otherwise they will elect to mine for Bitcoin instead by default. Multi-pools that steer a miner’s effort automatically to the most profitable coin is an example of this in practice.

This point cannot be understated: The only reason to mine for an altcoin is because it provides the chance to exchange them for more Bitcoin than mining for Bitcoin directly. Take for example the choice to mine inbetween Bitcoin and some hypothetical altcoin, XYZCoin, and my mining equipment can produce an expected one BTC/day. The same mining equipment can produce an expected 33,000 XYZ/day. If the market bid is 0.00003996, I can exchange my XYZ and get 33,000 x 0.00003996 = 1.32 BTC/day, making XYZCoin mining 32% more profitable than BTC.

Two coerces will act on XYZCoin to eliminate this chance for excess profits. Very first, I will keep producing XYZCoin and selling them in the market, driving down its price until it reaches 0.00003030 in our example. At the same time, the extra mining power coming in XYZCoin mining will drive up its difficulty, reducing the amount of XYZCoin expected given the hashpower in my mining equipment. Because the market price can adjust continuously, but the difficulty adjustment happens only incrementally, there is a probability that when the difficulty adjustment will overshoot rendering XYZ not identically as profitable to mine as Bitcoin (which economic theory would suggest), but less profitable.

This doesn’t mean that Bitcoin is the optimal technical achievement of the blockchain. Bitcoin has flaws and limitations, and there are certainly altcoins out there that address and resolve many of those problems. History does not always prize the best, however. The VHS won out over the technologically superior BetaMax. USB over Firewire. TCP/IP over ISO/OSI. QWERTY Keyboards. Internal combustion engines. History is littered with sub-optimal technologies becoming the most widely accepted stable equilibrium – and these equilibria are amazingly difficult to dis-entrench.

The implications are significant. When altcoins are produced they are done so, on average, in order to sell them in comeback for Bitcoin. This means that altcoins are always for sale, and their market price over time should decline relative to Bitcoin. In fact, this downward trend has been the observable case for the majority of altcoins to date.

Related video:

Are Blockchains Key to the Future of Web Encryption?

blockchain encryption

May 7, two thousand seventeen at 11:50 UTC by Joshua Oliver

Encrypted websites now treat more than half the world’s web traffic, but the way the keys for those connections are exchanged and verified hasn’t switched much in twenty years.

The current system relies on a global network of certificate authorities (CAs) to verify the public key and the holder of each secure website. It has long been criticized for creating central points of failure. And those central points, the CAs, have actually failed in some cases.

Some think blockchains – the technology that manages key exchange for the $25bn bitcoin network – could be the basis for a secure alternative.

The initial idea

Like blockchains, CAs began as a way to facilitate connected commerce. Veteran developer Christopher Allen – who helped set up the very first certificate authority, VeriSign – said he imagined a system with several CAs where users would pick which ones to trust.

As the system has scaled, however, it’s become impractical for everyday users to actively manage their trust in different authorities. Most now rely on their browser’s default settings instead. It’s now the browser companies that effectively control trust, providing them big clout within the certificate industry.

“We’ve got a fresh centrality, which is the big browser companies,” said Allen.

Today’s risks

While control over trust has centralized, the number of certificate authorities has grown. There are now hundreds of authorities in countries around the world, and a failure at any one of them undermines the entire system.

The worst incident to date was the collapse of the Dutch authority DigiNotar in 2011. Hacking DigiNotar permitted attackers to spy on around 300,000 Iranian Gmail accounts, and compelled a improvised shut down of many of the Dutch government’s online services.

Since then, there have been dozens of cases where CAs were caught issuing unverified certificates, using substandard security, or even attempting to deceive browser companies. None of these had the same effects as DigiNotar, and the industry has raised security standards many times since 2011, but there are still those who think it’s time to look for a long-term alternative to CAs.

One of those alternatives was outlined in a two thousand fifteen white paper, written at a workshop Allen hosted called “Rebooting Web of Trust”. The paper set out goals for a decentralized public key infrastructure (dpki) to substitute the current, centralized system.

“The objective of dpki is to ensure that . no single third-party can compromise the integrity and security of the system as as entire.”

In place of the current system, where domain ownership is recorded in the DNS and key are verified by CAs, Rebooting Web of Trust envisioned a secure namespace where domain registration and the key for each domain would be recorded on a blockchain.

A fresh namespace

The Ethereum Name System (ENS) is attempting to create the same kind of secure namespace for the ethereum community. It gives us a very first look at the challenges and opportunities of making these ideas work in practice.

Developer Alex Van de Sande said his team often uses the analogy of a sandwich to explain how ENS is designed. The ‘bread’ in the ENS sandwich are two plain contracts. One stipulates that if you own the domain, you’re entitled to its subdomains. The other treats payments.

Like in a sandwich, the complicated part of ENS is in the middle. That’s the contract that sets the rules for name registration. ENS wants to avoid the problem of domain squatting, which was common during the initial internet domain name boom.

They’re also pursuing the ‘principle of least surprise’, the idea that people shouldn’t be too astonished by who actually wields a name. It might seem like common sense that Bank of America should have very first dibs on bankofamerica.eth. But Van de Sande said that designing a system to implement that principle is very challenging, maybe even impractical.

He added that ENS will take the very first year after the relaunch as an chance to learn how to improve the registration rules. If the rules switch, he said, name owners will have a choice to upgrade or capitulate their names for a refund.

Van de Sande said he hopes ENS will be a model for a broader use of similar ideas, adding:

“ENS reflects the way we wish the internet would be. It doesn’t mean that it’s actually going to be that way.”

Blockstack’s model

Another way to decentralize the infrastructure behind secure online communication is to ensure that users can verify the actual information they receive, rather than attempting to secure the server-client connection.

Engineer Jude Nelson, who collaborated on the two thousand fifteen “Rebooting Web of Trust” white paper, told CoinDesk this is the purpose of his startup, Fresh York-based Blockstack.

Blockstack’s system, which is presently in an alpha release, permits users to record their unique name and key on the bitcoin blockchain, and then lookup another user in order to verify the information they receive.

“With Blockstack, we’re attempting to make it so that developers can build server-less, decentralized, applications where users own their own data,” said Nelson. “There are no passwords and developers don’t have to host either of them.”

This could, one day, reduce the need for the website encryption altogether.

Sovereign identity and its hurdles

Each of these projects reflects the same overarching objective: to reduce the role of third parties and give users more control.

Allen, who has convened the Rebooting Web of Trust group every six months since 2015, said he is working towards technologies that give users true sovereignty.

The many strings of letters and numbers that represent individuals online today are all registered with third parties. “You’re not truly buying it, you’re renting it. You don’t have true sovereignty,” said Allen.

But Allen also sees many challenges ahead. One is usability. Systems that work for technically adept users may not scale to applications where most users will rely on defaults and won’t be ready to make choices about who to trust.

“We’ve learned in technology that providing users choice often doesn’t work.”

Meantime, the centralized system is also switching. Google is in the middle of rolling out its own solution to the pitfalls of the CA system — a plan called Certificate Transparency, which requires CAs to log all trusted certificates in public view.

Google said it can verify log-inclusion and the log’s honesty with Merkle trees, and the system has already permitted researchers to catch some bad certificates.

Google’s idea is to keep the third party, but liquidate the trust. And this treatment may prove to be a long-term competitor to blockchain-based projects which want to get rid of both.

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a stringent set of editorial policies. Interested in suggesting your expertise or insights to our reporting? Contact us at [email protected] .

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Adjoint – When Blockchain? When Database?

blockchain database

Blockchains are a particularly interesting topic right now in financial technology for a broad multiplicity of applications. But despite all the noise there is a significant amount of noise and misdirected interest in a technology, that while revolutionary for some applications, is not suited for every and all use cases.

What is a blockchain?

A blockchain is effectively a puny variant on top of the same distributed database technology and algorithms that have existed for twenty five years. A blockchain is a very simplistic database that is a append-only immutable store that can be written to by a collection of agents who sign their transactions and engage in confirming other agents transactions through a distributed consensus protocol based on cryptographic hashing. There are many implementations of these ideas but in some form they all share these common features.

The blockchain is a specialized use case rather than a finish divergence from traditional database technology. In many cases, blockchain technology is not suitable to use. In most cases, the question of whether blockchain is adequate to use can best be answered by the question: What do I need that my traditional database is not providing me?

  1. Do you need a database in the very first place?
  2. Does your application depend on extreme fault-tolerance?
  3. Does my application depend on a collective writes from parties with potentially unaligned interests?
  4. What time horizon do I need writes and reads to be consistent?
  5. What groups of parties (agents) need to be responsible for consensus?
  6. Is a trusted third party needed to audit transactions?

Do I need a database in the very first place?

Very first and foremost, we must ask the question: do I need a database in the very first place. Typically the criterion for the need of a traditional database is having large amounts of data that does not fit in memory (or an Excel file), and requires that data to be queried and manipulated by automated business processes. Often times, the size and complexity of the data has reached a point where manual processes and manual human labor cannot keep the data internally consistent (accurately up-to-date) across all entities who need to read from it.

A fairly large amount of companies simply have not even moved many core data processes into traditional databases at all. The budge over to a blockchain storage and processing system is a much more drastic migration. The process of turning an Excel file into a traditional relational database is the best very first step to integrating modern database technology.

Blockchain is not a silver bullet that will instantaneously convert a company run on an overgrown Excel spreadsheet to running their business on a scalable globally consistent database.

Does my application depend on extreme fault-tolerance?

In particular, is it necessary that the state of all transactions over the data needs to be replicated across every client, queryable across history and verified independently for it’s consistency? Certain blockchain implementations predominate at this task of extreme fault-tolerance, but it does so at a very high cost of data movement and write times.

The primary tradeoff of a massively replicated datastore is that each entity involved in the confirmation process must have a utter copy of every transaction. For some applications (financial, healthcare, privacy sensitive, etc.) this is a non-starter. While data can be encrypted on-chain, the metadata about the specific sender and receiver of information is still eternally stored and visible to all entities. If sharing this metadata is infeasible or illegal, blockchain may not a suitable solution. Instead, a centralized store managed by a single legally accountable entity is the right solution.

Does my application depend on a collective writes from parties with potentially misaligned interests?

The killer application of many blockchain datastores is the capability for potentially misaligned entities to transact information without the capability for any single party to disrupt or manipulate the exchange of information. Different systems achieve this through different means and those systems have different tradeoffs. Yet, systems like Bitcoin have demonstrated extreme resilience to attacks while routinely permitting large networks of self-interested parties to securely and securely exchange value and data.

What time horizon do I need writes and reads to be consistent?

Different points in the design space of distributed databases make different compromises inbetween the throughput and consistency of read and write protocols to interface with the underlying storage engine. Some systems are eventually consistent having strong probabilistic bounds on the time for the system to converge on consensus. Distributed databases are therefore more likely to be data consistent. That being said, if your requirements pertain to necessity of speed and throughput rather than data consistency and reliability, then a traditional database is a better fit for you.

What groups of agents need to be responsible for consensus and are transactions public or private??

In other words, which parties need to be responsible for determining the correctness of data reads and writes? And, how private do the transactions need to be? If the reaction is: a puny number of trusted private parties e, then it is recommended to have a private blockchain. If the response is: a large number of agents and I do not need to know them (public) but still trust them, then a public blockchain is a better fit.

The reasoning behind this is related to the number of parties, the degree of privacy of the transaction, and the trust factor of those parties. Private blockchains require authority on who determines what data will be read/written to the single source of truth. Public blockchains tend to permit anyone who interacts with it to participate in consensus, therefore a number of them may be compromised actors attempting to pass incorrect information to the blockchain. Through consensus, trustless parties can still be trustful due to the consensus protocol filtering out incorrect writes at scale.

Is a trusted third party needed to audit transactions?

There are a number of institutions and parties that exist in the world today to dual check, audit, and reconcile data. For clarity, regulatory bods are an example, but mostly, if these cases are post transactional they are a better case for blockchain usage. If there are internal based third parties, the term disintermediation comes to mind as the involved use case of blockchain wise contracts would eliminate their need to exist if at all. It is very much a “do not use blockchain for now”.

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