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Citi Launches Blockchain-Based Payments Service With Nasdaq for Private Equity – IEEE Spectrum

Citi Launches Blockchain-Based Payments Service With Nasdaq for Private Equity

A major U.S. bank and financial exchange have married two blockchain-based systems to enable clients who are raising funds or interchanging private shares through Nasdaq to take advantage of payment services provided by Citi.

The Citi-Nasdaq partnership is one of the very first examples of an enterprise blockchain system to inject production. Citi says the project went live on Monday in an announcement at the annual Consensus conference in Fresh York City.

Over the past year, many banks and financial institutions have ended proofs of concept for projects that rely on blockchain or distributed ledger technology. But so far, few of those projects have graduated into functioning systems.

Nasdaq launched a blockchain-based platform called Linq in two thousand fifteen designed for private equity, but the system lacks the capability to process payments—it is mainly used to record ownership of shares. Investors or issuers had to leave the system and initiate a wire transfer to pay for shares once they were traded on Linq.

With Monday’s announcement, Nasdaq integrated Linq with Citi’s WorldLink Payment Services through a fresh suggesting that Citi c CitiConnect for Blockchain. The suggesting permits Nasdaq to transfer a payment request from Linq to Citi as soon as a share is bought or sold. The bank then automatically processes that request through WorldLink, which Citi clients primarily use to make payments that require foreign currency exchange.

To make the integration work, Citi and Nasdaq developers had to create several fresh features, including a way for Linq to automatically retrieve an exchange rate request from Citi in a customer’s local currency, share that rate with the customer, permit the customer to accept the rate, and share the customer’s wiring instructions with Citi. (Individual investors need not hold a Citi bank account in order to participate.)

At very first, the Citi-Nasdaq collaboration will concentrate on structured liquidity programs. The popularity of these programs has grown in step with a broader trend: Increasingly, U.S. companies are staying private for longer. As a result, early investors and employees who hold equity in a company must also wait longer to access the cash that their shares represent. Structured liquidity programs permit a group of early investors or employees to sell their shares for cash to fresh investors long before the company goes public.

Within Linq, a record of those shares will be preserved on a distributed ledger to which only the parties involved in the trade have access. Similarly, through CitiConnect for Blockchain, a record of payment is also added to the same ledger as soon as it is processed. On both sides of the system, this creates a “golden record” of the transaction and payment that either party can refer back to in case of disputes.

The Citi and Nasdaq systems are built on a unified code base called Chain Core provided by Chain, a company that specializes in applying blockchain technology to financial services. Chain Core includes application program interfaces and software development kits to permit customers to adapt it for their own purposes. Nasdaq and Citi Venture have both invested in Chain.

“Nasdaq Linq, which we built on top of Chain Core, is downright different from the CitiConnect for Blockchain product,” says Adam Ludwin, CEO of Chain. “Both connect into a Chain Core underneath, those Chain Cores talk to each other on a collective ledger, they form a network, but they have their own separate IP.”

Chain, Citi, and Nasdaq began working on the project in April of 2016. Private equity has become popular concentrate area for those interested in finance and blockchain technology, because it has a low volume of trades. Fund managers and entrepreneurs may spend weeks or months completing a single deal.

Some blockchains have shown a limited capability to scale, which raises concerns for the technology’s capability to treat much larger volumes of transactions within seconds. To stress test Chain’s technology, Nasdaq required the company to run an entire day’s worth of trades from the public exchange through their system—which Ludwin says consists of more transactions than the Bitcoin blockchain treats in a year.

“Nasdaq knew there’s no way you bring this type of infrastructure to run the public equities business very first,” Ludwin says. “You don’t begin there. You begin in an area where you have more control over the end-to-end process.”

For decades, Nasdaq has provided a central clearinghouse for investors to trade shares of public companies through the Nasdaq Stock Exchange. Nasdaq’s Private Market, launched just four years ago, was Nasdaq’s attempt to permit private funds and companies to exchange options and shares with investors and employees.

With its two thousand fifteen debut, Linq provided private parties operating in Nasdaq’s Private Market with the capability to issue or receive a digital record of ownership linked to a blockchain. For a private company, these digital records could theoretically substitute paper stock certificates. With the fresh payment service integration, a company or fund manager could potentially raise a round of investments entirely through Linq.

Since its launch, it’s not clear how many of Nasdaq’s clients have opted to use Linq. Neither Nasdaq nor Citi were willing to share projections for the volume of trades they expect to pass from Nasdaq to CitiConnect for Blockchain in the project’s very first year.

At the height of activity, there could be hundreds to thousands of transactions flowing through Linq, according to someone familiar with the platform who wished to remain anonymous because they were not authorized to speak about it publicly.

Nelson Griggs of Nasdaq said during the announcement on Monday at Consensus that a puny transaction on the broader Nasdaq Private Market would hold a value of $50 million, and a large one would consist of hundreds of millions of dollars.

Related video:

BlockCypher Developer Portal – Blockchain 101

blockchain 101

You’re excited. So excited. The hum has eventually caught you; everywhere you go you hear “blockchain” this, “distributed ledger” that. You’re ready to make your mark in Switching the World Through Blockchains (tm pending). You turn on your computer, your beloved text editor springs into activity. Except. you are drawing a blank as copiously empty as the improvised file you haven’t yet created.

You don’t have the faintest idea how to use a blockchain. Or what a blockchain is, indeed.

Don’t worry. Almost everybody who uses “blockchain” in a sentence is as confused as you are. They’re just in too deep to admit it. But never fear, we’re here to help! Below is a high-level, 30-minutes-or-less crash course on public blockchains, geared toward inquisitive developers who don’t have a cryptography background. We use Bitcoin as the blueprint, but with a few differences it can extend to other public blockchains.

General Byzantine’s Distributed Pizzeria

A long time ago, there was a General of grand pomp and import, who garnered fairly a reputation for pizazz in his station. Upon retirement, he transformed his panache for pizazz into something more palatable: pizza. Thus was General Byzantine’s Distributed Pizzeria born. It was a bit old-fashioned, but it was the best pizza in antiquity. if you could get it.

Sadly, the General’s pizza venture was short-lived, primarily owing to his archaic method of delivery and accounting. The General was a fine believer in delegation and autonomy. to a detrimental extreme. The General’s pizzeria was not one, but many restaurants, each independently taking orders, delivering pizzas, and keeping its own running tabs on customers. If one franchise received an order but ran out of ingredients, for redundancy’s sake it would send requests to several other nearby restaurants to finish the order, but without any consistent reconciliation system. Orders were permanently intercepted and modified by competitors and pranksters. Some customers would receive dozens of pizzas after ordering just one; others would have their tabs called in by several franchises independently, referencing dozens of phantom pizzas they never ordered.

But the pizzas that were successfully delivered? Magnifico. Best in the land.

Owing to runaway costs and severe mismanagement, General Byzantine’s Distributed Pizzeria was shuttered two weeks after its grand opening. Well, three weeks. Unsurprisingly, it was hard to communicate the closure to all the General’s pizza outposts. It was a beautiful, flawed experiment.

Why the story of his failed pizzeria? A few reasons: everybody loves pizza, and the very first real-world transaction to ascribe value to Bitcoin involved a pizza delivery (a cool Ten,000 BTC for a single pie, worth $20 then and $6 million as of this writing).

The Building Blocks Behind Building Blockchains: A Story In Three Parts

Not to be too hard on poor General Byzantine, but explicitly understanding his pizzeria’s problems will help expose how a blockchain could mitigate them.

Problem 1: Order and Pizza Integrity

The General couldn’t ensure the authenticity of the orders sent inbetween restaurants and customers, leading to modified orders, pizzas, and customer tabs (thanks to pranksters and competitors).

Problem Two: No Consistent or Authoritative Record

When a restaurant ran out of ingredients, it would send requests to many different restaurants to fulfill its order, potentially resulting in the pizza getting delivered many times, or not at all. Customer debts might be duplicated or dropped after haphazard reconciliation. The final record was a mess, because one didn’t truly exist.

Problem Trio: The Dual Pepperoni/Spend Problem

As a consequence of both problems above, some particularly sneaky customers may attempt to deliberately pay once for numerous pizzas; especially if they knew that a restaurant was running out of ingredients, or could intercept and modify messages about their tabs. Without a consistent, authoritative record, and no ensure of message authenticity, what’s to stop these thieves?

Ownership and Transferring Value: A Generalized Distributed Pizzeria

It should come as no surprise that inconsistency, data malleability, and double-spends plague systems beyond our hypothetical General Byzantine’s pizzeria. Like supply chains with dozens of different participants, or individuals wishing to exchange value amongst themselves, or—perish the thought—even banks.

The typical solution to these problems is to simply designate a central (sometimes outer) party as the ultimate arbiter and record. In our pizzeria example, that might mean all orders and customer tabs flowing into a single designated restaurant; in the bank case, they rely on SWIFT and credit card companies for payments, and central banks for loan capital. This is not a fundamentally bad solution, but it creates fresh risks by relying on a centralized party with out-sized authority on the final record. For banks, that translates into big security risks and effective monopoly pricing power for the centralized party in control (and why remittances, credit cards, and bank fees tend to be so damned expensive).

Come in Our Plucky Hero, The Blockchain

What if we could solve all these issues without relying on a single trusted party? Where every participant could download and update their own copy of the ledger, controlling the rows where they have authority, yet none can double-spend or create conflicting orders? What if we could make General Byzantine’s Distributed Pizzeria work? What if these were more than just leading questions? (We can, they can, we can, they’re not)

As you likely suspect, public blockchains—like Bitcoin and Ethereum—are the reaction. Public blockchains provide a practical solution to our problems, without relying on a single trusted party to arbitrate consensus and data integrity. And here’s the key insight why:

A public blockchain like Bitcoin is simply a set a of rules and incentives for a public, permissionless, immutable ledger.

The “how” it manages this magic requires more exploration, which we’ve divided into four parts below. The concepts are introduced in the order necessary to understand a blockchain from its most fundamental unit very first (transactions) before graduating to more abstract concepts (blocks, a chain of blocks, the consensus mechanism/incentives). Presenting it this way also conveniently matches solving our Byzantine pizzeria problems in the order they were introduced.

Part 1: Public-Key Cryptography and Transactions

Let’s begin at the most fundamental unit of a blockchain: its transactions. Consider Alice and Bob (and yes, before you ask, their parents were cryptographers who couldn’t spare precious imagination on naming them).

Bob is the manager of one of General Byzantine’s pizza shops, and Alice is a customer. Alice wants to send Bob some bitcoin in exchange for pizza. So she sends a message to an open, public network of computers that transfers bitcoin from her control to Bob’s control. In the most naive case, what prevents someone from modifying this message? If it’s an open ledger that anyone can download and interact with, can’t someone intercept Alice’s message and switch it?

Gratefully not! Because this message—which is indeed a transaction—takes advantage of Public-Key Cryptography. You can read more about how this works on its wonderful Wikipedia page, but here’s a brief explanation in a nutshell:

Take a random number, selected from a very large range (like

2^256 large, in Bitcoin and Ethereum’s case). This is your “private key.”

Now from this private key, you can perform a series of mathematical operations to generate a fresh number, called your “public key.” In good cryptosystems, it’s effortless to generate a public key from a private key, but nigh unlikely to do the switch roles; these operations sate the properties of a one-way function. The operations are arcane and complicated, and depend on the cryptography you’re using. in Bitcoin and Ethereum’s case, it’s ECDSA over the secp256k1 curve. If that doesn’t mean much to you, that’s okay; you can accept that it’s fancy and trust it works, but again, Wikipedia has a nice explanation for the interested reader.

Now here’s where things get “taken to 11”. mathematically. With your private key, you can “sign” arbitrary data, and then anyone with the resulting data from this operation (called a “signature”) and your public key can mathematically verify that you signed the data. without ever exposing your private key! It’s kinda like affixing your handwritten signature to the bottom of a message/document in real life. But unlike a handwritten signature, this one is nigh unlikely to forge brief of stealing the private key, and signing data doesn’t expose you name, private key, or private information.

So to recap: with a public-private key pair, you can demonstrate you signed messages with a particular private key without ever exposing the private key! What does this have to do with Alice and Bob?

Well, imagine instead of Alice’s and Bob’s name in this collective ledger (or heaven forbid, checking/routing number) you have Alice’s public key and Bob’s public key, and the associated amounts of bitcoin. When Alice sends bitcoin to Bob, she can send a transaction that says “take the bitcoin associated with my public key, and instead, associate it with Bob’s public key,” along with a signature that validates this message. Then anyone can verify that she was the right person—or more appropriately, her private key was valid for her public key—to send it! And Bob can do the same thing for future transactions with his public key. Again, this is a simplification and the actual rules differ a bit inbetween Bitcoin and Ethereum, but it’s a fair simplification.

Now imagine that we set up a ledger that requires valid signatures derived from public-private key pairs for all transactions, and everyone agrees to run this version of the ledger. Now if someone attempts to modify Alice’s message without her private key, the modification would be rejected by all participants, and the ledger would not be updated.

Public-key cryptography is central to a public blockchain’s permissionless and secure nature. Since the number of possible private keys is such a mind-bogglingly large number (2^256 is on the order of 1.15 * 10^77, which is close to the number of atoms estimated to exist in the Universe) you can generate one offline with a practical assure that nobody else will generate the same one. You can then generate a public key from this private key, copy it to an online computer, and then distribute this public key widely to accept payment. Used this way, public-key cryptography is not only vastly more secure than traditional means of payment acceptance and storage, it also enables a user to generate a practically limitless number of “accounts” offline, without ever having to ask anyone’s permission to participate in the system.

Put more succinctly: if you can generate a 256-bit number, you can accept bitcoin (and ether, in Ethereum’s case). Neat huh? And to get a little ahead of ourselves, since a public-private key pair is just a duo of numbers, “you” doesn’t have to mean a person; machines can generate addresses to pay or send value to other humans or machines! Think of the possibilities.

But Wait, None of This Means We Have An Authoritative Record or Solves Double-Spends

Right you are, astute, idealized reader! There’s nothing particularly novel about public-key cryptography in and of itself; it’s a powerful, prevalent technology in today’s world, but it only solves part of the blockchain puzzle. Consider our current take on the Alice and Bob pizza problem: Sure, with signed messages, you can cryptographically validate that Alice sent the message telling “give Bob my bitcoin,” and Bob received it. but how do you know that Alice didn’t send the same message to dozens of others, attempting to send her same “bitcoin” many times over? How does one actually reach a consistent, authoritative ledger?

To get there, we need to introduce another cryptographic construct, which will enable us to discuss how many transactions are structured into the latticework of blockchains. and in the process reaction where the term “blockchain” got its name.

Part Two: Cryptographic Hashing and Blocks

With just public-key cryptography, we have verifiable messages that ensure transaction integrity and authenticity, but we cannot stop Alice (or any other participant) from attempting to double-spend transactions, irreconcilably drifting everyone’s copy of the ledger into disarray. To tackle this problem, we need to introduce a fresh cryptographic construct into our repertoire: The Cryptographic Hash. Fortunately it’s simpler to understand than public-key cryptography, but it’s just as critical.

Much like a signature from public-key cryptography, cryptographic hashing lets you prove data is valid. but instead of proving it’s valid from a private key, you’re proving it’s valid from the data itself. Confused? Now that we’ve read that sentence back, so are we; let’s build on our example to help.

Let’s say I have a bundle of transactions from Bob’s pizza shop. They look something like this:

Alice sent Bob one bitcoin.

Chris sent Bob two bitcoin.

Dave sent Bob five bitcoin.

Bob sent Eve three bitcoin.

Let’s call this list of four transactions a single page in our ledger. or a “block” if you will (hint, hint). We can use a cryptographic hashing function to create a unique ID for each transaction, based on the data itself. Let’s attempt doing that with SHA256; a cryptographic hash function used extensively in Bitcoin. Let’s commence with the very first line:

Alice sent Bob one bitcoin.

We can use OpenSSL in the guideline line to generate the hash of the very first row:

echo -n ‘Alice sent Bob one bitcoin.’ | openssl sha256

The output is a thirty two byte (256-bit) hash, encoded in hexadecimal. Note that this value is unique for the message ‘Alice sent Bob one bitcoin.’ Let’s switch it to say ‘Alice sent Bob 1.1 bitcoin’ and see what happens to the hash:

echo -n ‘Alice sent Bob 1.1 bitcoin.’ | openssl sha256

Despite the initial data—which is also known as a “pre-image” in fancy cryptography terms—switching only slightly, the resulting hash looks very different. This is a desirable outcome for a cryptographic hash; you want the output to show up very random, and switch dramatically even if the “pre-image” switches only slightly. Without knowing the initial data, the output will show up very random, and it would be very difficult to predict the input. the only way to do so is to brute-force the inputs (that is to say: guess a chunk of data, run your cryptographic hashing function on this guess. If the output isn’t what you’re looking for, you repeat the cycle with a fresh guess. over and over and over again).

So let’s go back to our list of transactions and convert all of our messages into SHA256 hashes; here’s what our list looks like:

You don’t need to take my word that this is the list; you can verify that these are the right hashes by using the instruction line on our original list, or a website like this.

Armed with this list of hashes, it’s possible to generate a single, cryptographically verifiable hash (and ID) for this block of transactions. How? By hashing the hashes! The particular structure used by blockchains for transactions is typically a Merkle tree. Once you know how cryptographic hashes work, it’s effortless to understand; you just concatenate your hashes into pairs, then find the hash of each pair. With those hashes, you do the same thing. and if you have lots of hashes, you keep doing it until you have a single hash (known as the “Merkle root”). Let’s attempt it with our list of hashes. Very first, we concatenate the two pairs (shortened here for readability’s sake).

Then we apply SHA256 onto each of these; in case you’re wondering, we pipe through xxd to convert our hex string into raw binary data. (Again, hashes shortened for readability)

echo -n ’96f9ee71. ‘ | xxd -r -p | openssl sha256

echo -n ‘4b1267af. ‘ | xxd -r -p | openssl sha256

Our list went from four to two hashes:

Now we do this entire process again, resulting in our final Merkle root:

echo -n ‘a4e0820e0743. ‘ | xxd -r -p | openssl sha256

Tadaa! Now we have a single hash that represents—and validates!—our list of transactions, using the data of each transaction. Consider what would happen to this hash if you modified a single transaction’s data. It would switch the hash of the transaction, which would then cascade through the Merkle tree, switching all of the branches’ affected and eventually modifying the root.

This is pretty much how transactions are structured in blockchains. A “block,” equivalent to a page in an old-fashioned accounting ledger, contains both the data of each transaction and each transaction’s cryptographic hash, along with a Merkle root indicating all transactions contained therein.

While this is a bit of a simplification (transactions aren’t written in English and we’re missing tons of detail), it’s a fair demonstration of how cryptographic hashes validate and structure a block. But even with this structure, it’s unclear how this could solve the double-spend problem, or help us achieve group consensus on our ledgers. If everyone is sending transactions to each other and assembling blocks themselves, and Alice desired to be mischievous, there’s nothing about this structure that would prevent her; she’d simply have to send separate transactions to different parties assembling these blocks.

But don’t fret! Now that you understand public-key cryptography, hashes, and block structure, we can solve that final riddle. And boy is the solution a doozy.

Part Three: . Chaining Blocks, Reaching Consensus? Always. Be. Hashing.

As previously shown, a cryptographic hash function like SHA256 generates hashes that are thirty two bytes (aka two hundred fifty six bits) long. In essence, SHA256 takes any arbitrary data, and outputs a 256-bit number (introduced in our examples above in hexadecimal).

Knowing what we know about SHA256, lets ponder a puzzle. Assuming the output of SHA256 is randomly distributed given random input data, what’s the probability that the output of SHA256 on any chunk of data is below 2^256? Well, it’s 100%. All 256-bit numbers are below 2^256, from zero to 2^256-1.

How about below 2^255? Reminisce that 2^256 / two = 2^255. so you are effectively halving your “success” condition for this probability. So we go from 100% to 50%. Now how about 2^254? You halve your success space again, from 50% down to 25%. You can see the pattern. the smaller your desired SHA256 output, the smaller the probability you’ll find one. If you want to find a particularly low number, it may take millions, billions, trillions, quadrillions, or even quintillions of guesses!

But remarkably, it’s very effortless to verify that your solution is correct; all someone need do is take your data, apply the SHA256 hashing function, and verify the reaction is below the amount they require. This is a desirable feature of cryptographic hashes; they are one-way functions—like deriving a public key—but in the context of cryptographic hashes, it’s difficult to guess without having the pre-image/prior data, but effortless to verify.

When you broadcast a pre-image and hash that meets these criteria, you’re publicly demonstrating that you spent a lot of computational time guessing the hash, which anyone can verify quickly. Or more succinctly, you’ve shown Proof-of-Work. In a sense, Proof-of-Work (PoW) is a proxy for voting with computing power, but cryptographically tied to the data it hashed. Or to put another way, it’s a way of notarizing data with computational power. “This data is valid to me, and to prove it, here’s the time and money I spent on computing a hash that meets your criteria.”

Aye, this is just the trick we need to conjure some blockchain magic. Let’s add some fresh rules to our hypothetical open/collective block-based ledger:

  • All transactions in a block must have valid signatures, a la public-key cryptography, and all transaction inputs must spend money from previous outputs (e.g., if Alice’s public key only has one bitcoin from a prior transaction, she can’t send two to someone else from this public key). Thanks to public-key cryptography, any participant can verify these are valid without exposing private keys.
  • Upon receiving a transaction, participants can choose to include it in a candidate block that they’re in the process of assembling.
  • Every block hash must be lower than a number generated by an agreed upon difficulty formula. Some lumps of data in the block can be randomly adjusted without affecting transaction validity (to enable participants to generate fresh block hashes).
  • The difficulty formula is self-adapting based on how quickly or leisurely blocks with hashes below the difficulty threshold were found; in Bitcoin’s case, the protocol adjusts the difficulty to target a ten minute average block confirmation time.
  • All blocks contain a hash of the previous block (which includes transactions, transaction hashes, the Merkle root of all transactions), thus chaining them together.
  • The longest chain with the most Proof-of-Work is the authoritative ledger.

And that, good reader, is a blockchain! How exactly does this setup prevent mischievous Alice from double-spending her pizza money? Let’s run through an example, where we have four participants with equal computing power; Alice, Bob, Chris, and Dave. Alice creates a transaction that sends money to Bob’s public key; we’ll call it one bitcoin for plainness’s sake. So it looks like this:

To Bob, Chris, Dave (75% of PoW computing power):

Alice sends Bob one bitcoin.

She broadcasts this transaction to Bob, Chris, and Dave. BUT, being sneaky, she creates a different transaction that takes this same bitcoin and sends it to another public key she controls (recall, it’s very effortless to create fresh public-private key pairs), and determines to use her computing power to attempt to find a block before everyone else. This transaction looks like this:

To Alice (25% of computing power):

Alice sends Alice one bitcoin.

This transaction sits in all the participants “mempools”; a staging area for transactions that haven’t yet been included in blocks. They are all working in parallel to find a hash lower than an agreed upon difficulty. Assuming this plain distribution of computing power, 25% of the time, Alice would detect a hash that creates a valid block (with bitcoin sent back to her), while 75% of the time, Bob, Chris, or Dave would detect a hash that creates a valid block (sending Alice’s bitcoin to Bob).

Already, the odds are against Alice; at very first glance it emerges she’ll only be successful 25% of the time. However, it’s even worse in practice. Because Bob doesn’t fully trust the other participants—having been burned by Alice’s cyberized five-finger discount before—he determines to wait until Alice’s transaction has been “confirmed” by being deep in the blockchain; that is, by waiting until her transaction has several discovered blocks ahead of it. Consider a case where Bob says he will wait six blocks. Now, in order to double-spend Bob, Alice will have to “hammer” the other three participants after they detect six more blocks; in other words, she’ll have to find the same number of fortunate hashes, with a lot less computing power. There’s a mathematical discussion in the original Bitcoin paper that explains the probability in detail.

This Proof-of-Work consensus mechanism works marvelously, as long as at least

51% of the participants are fair. In fact, a public blockchain with these constraints practically solves a difficult problem in computer science: the Byzantine Generals’ Problem. And yes, our own hypothetical General Byzantine’s eponymous name was not a coincidence.

Why Hash At All? Satoshi’s One Weird Trick: Marrying Technology and Incentives

Our blockchain story is almost finish. But one thing should very likely be nagging at you. where do the “bitcoin” (or “ether”) come from in this ledger? Since according to the rules listed above, you can never create more bitcoin in a transaction; you can only spend previously unspent bitcoin. But how does the bitcoin get minted into the ledger? Who has that power?

The response is a testament to the elegance of Bitcoin’s enigmatic founder, Satoshi Nakamoto. The best way to response that question is to very first ask another question: why should anyone agree to engage in Proof-of-Work for chaining blocks? It takes lots of computational power, and while it’s a public service to secure the network, that’s not usually a compelling incentive. but what if you incentived those who secure the network with the power of minting currency?

That’s exactly what Satoshi designed! Every block contains what’s known as a “coinbase” transaction, which includes freshly minted bitcoin. That is why these players in the blockchain ecosystem are known as “miners.” The number of bitcoin given as a prize is coded into the software that describes the protocol; it has a known schedule, and if you attempt to crack it with a freshly discovered block, it will be soundly rejected by other participants. The native token schedule differs by blockchain; for Bitcoin there will only ever be 21,000,000 bitcoin (each one sub-divisible to 10^8) making it a naturally deflationary currency. Ethereum, meantime, has no hard cap, but its inflationary rate decreases over time.

In addition to the “minted” bitcoin/ether (which are known as the “block prize”), anyone who detects a block is also entitled to fees that are added to all transactions within that block. This is to incentivize including transactions, especially in Bitcoin’s case, where the block prize halves every four years and will eventually entirely vanish.

It’s this alignment of incentives and technology which marks the difference inbetween a plain collection of preexisting cryptography, and Bitcoin/Ethereum. At the time of this writing the Bitcoin and Ethereum ecosystems are collectively worth $11bn, and are both protected by an unfathomable amount of computing power. And thanks to this incentive alignment, there are ultimately free, permissionless, secure, immutable ledgers that have the potential to switch the world in ways we can’t even imagine. Perhaps thanks to blockchains, General Byzantine’s Distributed Pizzeria might actually work. well, at least the payment and supply management components. No idea how he’s going to stop people stealing his delicious pizzas en route.

Take a Deeper Slice of Blockchains: Further Reading/Viewing

There is much, much more to blockchains; this is but a discreet, developer-friendly introduction. But for the nosey reader, there’s a wealth of free information out there on the web. Here’s some suggested reading/viewing to get you commenced, introduced in recommended order:

Khan Academy Bitcoin Introduction

Khan Academy did a wonderful movie series about Bitcoin which covers the topics raised here in an approachable, but technical, manner. You can embark the very first movie here.

Original Bitcoin Whitepaper

On a fateful Halloween Day in October, a pseudonym named Satoshi Nakamoto posted their world-changing research in a succinct, remarkably matter-of-fact manner: “I’ve been working on a fresh electronic cash system that’s fully peer-to-peer, with no trusted third party.” The Bitcoin Whitepaper remains one of the most cogent explanations of Bitcoin’s workings, a remarkable feat for the paper that introduced the concept. Read it here.

The Bitcoin.org Developer Reference

Now that you have a basis for understanding the world’s most prominent blockchain, it’s time to dive into the weeds. The Bitcoin.org Developer Reference is a fine place to add depth to your understanding.

Ethereum, Solidity, Clever Contracts, Oh My

Imagine someone took the clever ideas behind Bitcoin’s blockchain, and said, “if it’s good enough for embedding static data and transferring money, it’s good enough for a general state machine.” That’s Ethereum. While newer and smaller than Bitcoin, in its two years of existence it has catapulted to the 2nd largest blockchain by market capitalization and one of keen developer interest. We just embarked supporting it ourselves, and plan on expanding our API services to include many of Ethereum’s advanced features. Ethereum has a number of differences compared to Bitcoin: accounts have balances of a native currency called “ether,” there can be self-executing “accounts” that have fully-baked programming logic to permit exotic, conditional exchanges. hence why Ethereum calls itself a “world computer.” It has much more plasticity than Bitcoin, but is also a fair bit riskier. Here are a few places to embark your journey into Ethereum:

Our Documentation

Now, at long last, we recommend checking out our API services. BlockCypher is like a bridge for blockchains; instead of running your own knots, our API scales and manages connections to public blockchains so you can spend your time working on your game-changing Bitcoin/Ethereum application. Our own reference documentation is available here:

No matter where your curiosity takes you, we wish you the best of luck on your journey into the wild and wonderful world of blockchains. We are still early in this experiment, and already blockchains and cryptocurreny are switching the way millions of people engage in their economies, both locally and globally. Projects taking advantage of blockchains run the gamut from helping bring the unbanked online to building partially autonomous organizations through wise contracts. A better economy is yours to build. And if you happen to successfully build a distributed pizzeria, certainly let us know; it’s an idea whose time has certainly come.

BlockCypher Developer Portal – Blockchain one hundred one

blockchain khan academy

You’re excited. So excited. The hum has ultimately caught you; everywhere you go you hear “blockchain” this, “distributed ledger” that. You’re ready to make your mark in Switching the World Through Blockchains (tm pending). You turn on your computer, your beloved text editor springs into activity. Except. you are drawing a blank as copiously empty as the makeshift file you haven’t yet created.

You don’t have the faintest idea how to use a blockchain. Or what a blockchain is, indeed.

Don’t worry. Almost everybody who uses “blockchain” in a sentence is as confused as you are. They’re just in too deep to admit it. But never fear, we’re here to help! Below is a high-level, 30-minutes-or-less crash course on public blockchains, geared toward inquisitive developers who don’t have a cryptography background. We use Bitcoin as the blueprint, but with a few differences it can extend to other public blockchains.

General Byzantine’s Distributed Pizzeria

A long time ago, there was a General of grand pomp and import, who garnered fairly a reputation for pizazz in his station. Upon retirement, he transformed his panache for pizazz into something more palatable: pizza. Thus was General Byzantine’s Distributed Pizzeria born. It was a bit old-fashioned, but it was the best pizza in antiquity. if you could get it.

Sadly, the General’s pizza venture was short-lived, primarily owing to his archaic method of delivery and accounting. The General was a good believer in delegation and autonomy. to a detrimental extreme. The General’s pizzeria was not one, but many restaurants, each independently taking orders, delivering pizzas, and keeping its own running tabs on customers. If one franchise received an order but ran out of ingredients, for redundancy’s sake it would send requests to several other nearby restaurants to accomplish the order, but without any consistent reconciliation system. Orders were permanently intercepted and modified by competitors and pranksters. Some customers would receive dozens of pizzas after ordering just one; others would have their tabs called in by several franchises independently, referencing dozens of phantom pizzas they never ordered.

But the pizzas that were successfully delivered? Magnifico. Best in the land.

Owing to runaway costs and severe mismanagement, General Byzantine’s Distributed Pizzeria was shuttered two weeks after its grand opening. Well, three weeks. Unsurprisingly, it was hard to communicate the closure to all the General’s pizza outposts. It was a beautiful, flawed experiment.

Why the story of his failed pizzeria? A few reasons: everybody loves pizza, and the very first real-world transaction to ascribe value to Bitcoin involved a pizza delivery (a cool Ten,000 BTC for a single pie, worth $20 then and $6 million as of this writing).

The Building Blocks Behind Building Blockchains: A Story In Three Parts

Not to be too hard on poor General Byzantine, but explicitly understanding his pizzeria’s problems will help expose how a blockchain could mitigate them.

Problem 1: Order and Pizza Integrity

The General couldn’t ensure the authenticity of the orders sent inbetween restaurants and customers, leading to modified orders, pizzas, and customer tabs (thanks to pranksters and competitors).

Problem Two: No Consistent or Authoritative Record

When a restaurant ran out of ingredients, it would send requests to many different restaurants to fulfill its order, potentially resulting in the pizza getting delivered many times, or not at all. Customer debts might be duplicated or dropped after haphazard reconciliation. The final record was a mess, because one didn’t indeed exist.

Problem Trio: The Dual Pepperoni/Spend Problem

As a consequence of both problems above, some particularly sneaky customers may attempt to deliberately pay once for numerous pizzas; especially if they knew that a restaurant was running out of ingredients, or could intercept and modify messages about their tabs. Without a consistent, authoritative record, and no assure of message authenticity, what’s to stop these thieves?

Ownership and Transferring Value: A Generalized Distributed Pizzeria

It should come as no surprise that inconsistency, data malleability, and double-spends plague systems beyond our hypothetical General Byzantine’s pizzeria. Like supply chains with dozens of different participants, or individuals wishing to exchange value amongst themselves, or—perish the thought—even banks.

The typical solution to these problems is to simply designate a central (sometimes outward) party as the ultimate arbiter and record. In our pizzeria example, that might mean all orders and customer tabs flowing into a single designated restaurant; in the bank case, they rely on SWIFT and credit card companies for payments, and central banks for loan capital. This is not a fundamentally bad solution, but it creates fresh risks by relying on a centralized party with out-sized authority on the final record. For banks, that translates into big security risks and effective monopoly pricing power for the centralized party in control (and why remittances, credit cards, and bank fees tend to be so damned expensive).

Come in Our Plucky Hero, The Blockchain

What if we could solve all these issues without relying on a single trusted party? Where every participant could download and update their own copy of the ledger, controlling the rows where they have authority, yet none can double-spend or create conflicting orders? What if we could make General Byzantine’s Distributed Pizzeria work? What if these were more than just leading questions? (We can, they can, we can, they’re not)

As you likely suspect, public blockchains—like Bitcoin and Ethereum—are the reaction. Public blockchains provide a practical solution to our problems, without relying on a single trusted party to arbitrate consensus and data integrity. And here’s the key insight why:

A public blockchain like Bitcoin is simply a set a of rules and incentives for a public, permissionless, immutable ledger.

The “how” it manages this magic requires more exploration, which we’ve divided into four parts below. The concepts are introduced in the order necessary to understand a blockchain from its most fundamental unit very first (transactions) before graduating to more abstract concepts (blocks, a chain of blocks, the consensus mechanism/incentives). Presenting it this way also conveniently matches solving our Byzantine pizzeria problems in the order they were introduced.

Part 1: Public-Key Cryptography and Transactions

Let’s embark at the most fundamental unit of a blockchain: its transactions. Consider Alice and Bob (and yes, before you ask, their parents were cryptographers who couldn’t spare precious imagination on naming them).

Bob is the manager of one of General Byzantine’s pizza shops, and Alice is a customer. Alice wants to send Bob some bitcoin in exchange for pizza. So she sends a message to an open, public network of computers that transfers bitcoin from her control to Bob’s control. In the most naive case, what prevents someone from modifying this message? If it’s an open ledger that anyone can download and interact with, can’t someone intercept Alice’s message and switch it?

Gratefully not! Because this message—which is indeed a transaction—takes advantage of Public-Key Cryptography. You can read more about how this works on its wonderful Wikipedia page, but here’s a brief explanation in a nutshell:

Take a random number, selected from a very large range (like

2^256 large, in Bitcoin and Ethereum’s case). This is your “private key.”

Now from this private key, you can perform a series of mathematical operations to generate a fresh number, called your “public key.” In good cryptosystems, it’s effortless to generate a public key from a private key, but nigh unlikely to do the switch sides; these operations sate the properties of a one-way function. The operations are arcane and complicated, and depend on the cryptography you’re using. in Bitcoin and Ethereum’s case, it’s ECDSA over the secp256k1 curve. If that doesn’t mean much to you, that’s okay; you can accept that it’s fancy and trust it works, but again, Wikipedia has a nice explanation for the interested reader.

Now here’s where things get “taken to 11”. mathematically. With your private key, you can “sign” arbitrary data, and then anyone with the resulting data from this operation (called a “signature”) and your public key can mathematically verify that you signed the data. without ever exposing your private key! It’s kinda like affixing your handwritten signature to the bottom of a message/document in real life. But unlike a handwritten signature, this one is nigh unlikely to forge brief of stealing the private key, and signing data doesn’t expose you name, private key, or private information.

So to recap: with a public-private key pair, you can demonstrate you signed messages with a particular private key without ever exposing the private key! What does this have to do with Alice and Bob?

Well, imagine instead of Alice’s and Bob’s name in this collective ledger (or heaven forbid, checking/routing number) you have Alice’s public key and Bob’s public key, and the associated amounts of bitcoin. When Alice sends bitcoin to Bob, she can send a transaction that says “take the bitcoin associated with my public key, and instead, associate it with Bob’s public key,” along with a signature that validates this message. Then anyone can verify that she was the right person—or more appropriately, her private key was valid for her public key—to send it! And Bob can do the same thing for future transactions with his public key. Again, this is a simplification and the actual rules differ a bit inbetween Bitcoin and Ethereum, but it’s a fair simplification.

Now imagine that we set up a ledger that requires valid signatures derived from public-private key pairs for all transactions, and everyone agrees to run this version of the ledger. Now if someone attempts to modify Alice’s message without her private key, the modification would be rejected by all participants, and the ledger would not be updated.

Public-key cryptography is central to a public blockchain’s permissionless and secure nature. Since the number of possible private keys is such a mind-bogglingly large number (2^256 is on the order of 1.15 * 10^77, which is close to the number of atoms estimated to exist in the Universe) you can generate one offline with a practical assure that nobody else will generate the same one. You can then generate a public key from this private key, copy it to an online computer, and then distribute this public key widely to accept payment. Used this way, public-key cryptography is not only vastly more secure than traditional means of payment acceptance and storage, it also enables a user to generate a practically limitless number of “accounts” offline, without ever having to ask anyone’s permission to participate in the system.

Put more succinctly: if you can generate a 256-bit number, you can accept bitcoin (and ether, in Ethereum’s case). Neat huh? And to get a little ahead of ourselves, since a public-private key pair is just a duo of numbers, “you” doesn’t have to mean a person; machines can generate addresses to pay or send value to other humans or machines! Think of the possibilities.

But Wait, None of This Means We Have An Authoritative Record or Solves Double-Spends

Right you are, astute, idealized reader! There’s nothing particularly novel about public-key cryptography in and of itself; it’s a powerful, prevalent technology in today’s world, but it only solves part of the blockchain puzzle. Consider our current take on the Alice and Bob pizza problem: Sure, with signed messages, you can cryptographically validate that Alice sent the message telling “give Bob my bitcoin,” and Bob received it. but how do you know that Alice didn’t send the same message to dozens of others, attempting to send her same “bitcoin” many times over? How does one actually reach a consistent, authoritative ledger?

To get there, we need to introduce another cryptographic construct, which will enable us to discuss how many transactions are structured into the latticework of blockchains. and in the process reaction where the term “blockchain” got its name.

Part Two: Cryptographic Hashing and Blocks

With just public-key cryptography, we have verifiable messages that ensure transaction integrity and authenticity, but we cannot stop Alice (or any other participant) from attempting to double-spend transactions, irreconcilably drifting everyone’s copy of the ledger into disarray. To tackle this problem, we need to introduce a fresh cryptographic construct into our repertoire: The Cryptographic Hash. Fortunately it’s simpler to understand than public-key cryptography, but it’s just as critical.

Much like a signature from public-key cryptography, cryptographic hashing lets you prove data is valid. but instead of proving it’s valid from a private key, you’re proving it’s valid from the data itself. Confused? Now that we’ve read that sentence back, so are we; let’s build on our example to help.

Let’s say I have a bundle of transactions from Bob’s pizza shop. They look something like this:

Alice sent Bob one bitcoin.

Chris sent Bob two bitcoin.

Dave sent Bob five bitcoin.

Bob sent Eve three bitcoin.

Let’s call this list of four transactions a single page in our ledger. or a “block” if you will (hint, hint). We can use a cryptographic hashing function to create a unique ID for each transaction, based on the data itself. Let’s attempt doing that with SHA256; a cryptographic hash function used extensively in Bitcoin. Let’s embark with the very first line:

Alice sent Bob one bitcoin.

We can use OpenSSL in the directive line to generate the hash of the very first row:

echo -n ‘Alice sent Bob one bitcoin.’ | openssl sha256

The output is a thirty two byte (256-bit) hash, encoded in hexadecimal. Note that this value is unique for the message ‘Alice sent Bob one bitcoin.’ Let’s switch it to say ‘Alice sent Bob 1.1 bitcoin’ and see what happens to the hash:

echo -n ‘Alice sent Bob 1.1 bitcoin.’ | openssl sha256

Despite the initial data—which is also known as a “pre-image” in fancy cryptography terms—switching only slightly, the resulting hash looks very different. This is a desirable outcome for a cryptographic hash; you want the output to show up very random, and switch dramatically even if the “pre-image” switches only slightly. Without knowing the initial data, the output will show up very random, and it would be very difficult to predict the input. the only way to do so is to brute-force the inputs (that is to say: guess a lump of data, run your cryptographic hashing function on this guess. If the output isn’t what you’re looking for, you repeat the cycle with a fresh guess. over and over and over again).

So let’s go back to our list of transactions and convert all of our messages into SHA256 hashes; here’s what our list looks like:

You don’t need to take my word that this is the list; you can verify that these are the right hashes by using the guideline line on our original list, or a website like this.

Armed with this list of hashes, it’s possible to generate a single, cryptographically verifiable hash (and ID) for this block of transactions. How? By hashing the hashes! The particular structure used by blockchains for transactions is typically a Merkle tree. Once you know how cryptographic hashes work, it’s effortless to understand; you just concatenate your hashes into pairs, then find the hash of each pair. With those hashes, you do the same thing. and if you have lots of hashes, you keep doing it until you have a single hash (known as the “Merkle root”). Let’s attempt it with our list of hashes. Very first, we concatenate the two pairs (shortened here for readability’s sake).

Then we apply SHA256 onto each of these; in case you’re wondering, we pipe through xxd to convert our hex string into raw binary data. (Again, hashes shortened for readability)

echo -n ’96f9ee71. ‘ | xxd -r -p | openssl sha256

echo -n ‘4b1267af. ‘ | xxd -r -p | openssl sha256

Our list went from four to two hashes:

Now we do this entire process again, resulting in our final Merkle root:

echo -n ‘a4e0820e0743. ‘ | xxd -r -p | openssl sha256

Tadaa! Now we have a single hash that represents—and validates!—our list of transactions, using the data of each transaction. Consider what would happen to this hash if you modified a single transaction’s data. It would switch the hash of the transaction, which would then cascade through the Merkle tree, switching all of the branches’ affected and eventually modifying the root.

This is pretty much how transactions are structured in blockchains. A “block,” equivalent to a page in an old-fashioned accounting ledger, contains both the data of each transaction and each transaction’s cryptographic hash, along with a Merkle root signifying all transactions contained therein.

While this is a bit of a simplification (transactions aren’t written in English and we’re missing tons of detail), it’s a fair demonstration of how cryptographic hashes validate and structure a block. But even with this structure, it’s unclear how this could solve the double-spend problem, or help us achieve group consensus on our ledgers. If everyone is sending transactions to each other and assembling blocks themselves, and Alice desired to be mischievous, there’s nothing about this structure that would prevent her; she’d simply have to send separate transactions to different parties assembling these blocks.

But don’t fret! Now that you understand public-key cryptography, hashes, and block structure, we can solve that final riddle. And boy is the solution a doozy.

Part Trio: . Chaining Blocks, Reaching Consensus? Always. Be. Hashing.

As previously shown, a cryptographic hash function like SHA256 generates hashes that are thirty two bytes (aka two hundred fifty six bits) long. In essence, SHA256 takes any arbitrary data, and outputs a 256-bit number (introduced in our examples above in hexadecimal).

Knowing what we know about SHA256, lets ponder a puzzle. Assuming the output of SHA256 is randomly distributed given random input data, what’s the probability that the output of SHA256 on any lump of data is below 2^256? Well, it’s 100%. All 256-bit numbers are below 2^256, from zero to 2^256-1.

How about below 2^255? Reminisce that 2^256 / two = 2^255. so you are effectively halving your “success” condition for this probability. So we go from 100% to 50%. Now how about 2^254? You halve your success space again, from 50% down to 25%. You can see the pattern. the smaller your desired SHA256 output, the smaller the probability you’ll find one. If you want to find a particularly low number, it may take millions, billions, trillions, quadrillions, or even quintillions of guesses!

But remarkably, it’s very effortless to verify that your solution is correct; all someone need do is take your data, apply the SHA256 hashing function, and verify the reaction is below the amount they require. This is a desirable feature of cryptographic hashes; they are one-way functions—like deriving a public key—but in the context of cryptographic hashes, it’s difficult to guess without having the pre-image/prior data, but effortless to verify.

When you broadcast a pre-image and hash that meets these criteria, you’re publicly demonstrating that you spent a lot of computational time guessing the hash, which anyone can verify quickly. Or more succinctly, you’ve shown Proof-of-Work. In a sense, Proof-of-Work (PoW) is a proxy for voting with computing power, but cryptographically tied to the data it hashed. Or to put another way, it’s a way of notarizing data with computational power. “This data is valid to me, and to prove it, here’s the time and money I spent on computing a hash that meets your criteria.”

Aye, this is just the trick we need to conjure some blockchain magic. Let’s add some fresh rules to our hypothetical open/collective block-based ledger:

  • All transactions in a block must have valid signatures, a la public-key cryptography, and all transaction inputs must spend money from previous outputs (e.g., if Alice’s public key only has one bitcoin from a prior transaction, she can’t send two to someone else from this public key). Thanks to public-key cryptography, any participant can verify these are valid without exposing private keys.
  • Upon receiving a transaction, participants can choose to include it in a candidate block that they’re in the process of assembling.
  • Every block hash must be lower than a number generated by an agreed upon difficulty formula. Some chunks of data in the block can be randomly adjusted without affecting transaction validity (to enable participants to generate fresh block hashes).
  • The difficulty formula is self-adapting based on how quickly or leisurely blocks with hashes below the difficulty threshold were found; in Bitcoin’s case, the protocol adjusts the difficulty to target a ten minute average block confirmation time.
  • All blocks contain a hash of the previous block (which includes transactions, transaction hashes, the Merkle root of all transactions), thus chaining them together.
  • The longest chain with the most Proof-of-Work is the authoritative ledger.

And that, good reader, is a blockchain! How exactly does this setup prevent mischievous Alice from double-spending her pizza money? Let’s run through an example, where we have four participants with equal computing power; Alice, Bob, Chris, and Dave. Alice creates a transaction that sends money to Bob’s public key; we’ll call it one bitcoin for plainness’s sake. So it looks like this:

To Bob, Chris, Dave (75% of PoW computing power):

Alice sends Bob one bitcoin.

She broadcasts this transaction to Bob, Chris, and Dave. BUT, being sneaky, she creates a different transaction that takes this same bitcoin and sends it to another public key she controls (reminisce, it’s very effortless to create fresh public-private key pairs), and determines to use her computing power to attempt to find a block before everyone else. This transaction looks like this:

To Alice (25% of computing power):

Alice sends Alice one bitcoin.

This transaction sits in all the participants “mempools”; a staging area for transactions that haven’t yet been included in blocks. They are all working in parallel to find a hash lower than an agreed upon difficulty. Assuming this ordinary distribution of computing power, 25% of the time, Alice would detect a hash that creates a valid block (with bitcoin sent back to her), while 75% of the time, Bob, Chris, or Dave would detect a hash that creates a valid block (sending Alice’s bitcoin to Bob).

Already, the odds are against Alice; at very first glance it shows up she’ll only be successful 25% of the time. However, it’s even worse in practice. Because Bob doesn’t fully trust the other participants—having been burned by Alice’s cyberized five-finger discount before—he determines to wait until Alice’s transaction has been “confirmed” by being deep in the blockchain; that is, by waiting until her transaction has several discovered blocks ahead of it. Consider a case where Bob says he will wait six blocks. Now, in order to double-spend Bob, Alice will have to “hammer” the other three participants after they detect six more blocks; in other words, she’ll have to find the same number of fortunate hashes, with a lot less computing power. There’s a mathematical discussion in the original Bitcoin paper that explains the probability in detail.

This Proof-of-Work consensus mechanism works marvelously, as long as at least

51% of the participants are fair. In fact, a public blockchain with these constraints practically solves a difficult problem in computer science: the Byzantine Generals’ Problem. And yes, our own hypothetical General Byzantine’s eponymous name was not a coincidence.

Why Hash At All? Satoshi’s One Weird Trick: Marrying Technology and Incentives

Our blockchain story is almost accomplish. But one thing should very likely be nagging at you. where do the “bitcoin” (or “ether”) come from in this ledger? Since according to the rules listed above, you can never create more bitcoin in a transaction; you can only spend previously unspent bitcoin. But how does the bitcoin get minted into the ledger? Who has that power?

The reaction is a testament to the elegance of Bitcoin’s enigmatic founder, Satoshi Nakamoto. The best way to response that question is to very first ask another question: why should anyone agree to engage in Proof-of-Work for chaining blocks? It takes lots of computational power, and while it’s a public service to secure the network, that’s not usually a compelling incentive. but what if you incentived those who secure the network with the power of minting currency?

That’s exactly what Satoshi designed! Every block contains what’s known as a “coinbase” transaction, which includes freshly minted bitcoin. That is why these players in the blockchain ecosystem are known as “miners.” The number of bitcoin given as a prize is coded into the software that describes the protocol; it has a known schedule, and if you attempt to crack it with a freshly discovered block, it will be soundly rejected by other participants. The native token schedule differs by blockchain; for Bitcoin there will only ever be 21,000,000 bitcoin (each one sub-divisible to 10^8) making it a naturally deflationary currency. Ethereum, meantime, has no hard cap, but its inflationary rate decreases over time.

In addition to the “minted” bitcoin/ether (which are known as the “block prize”), anyone who detects a block is also entitled to fees that are added to all transactions within that block. This is to incentivize including transactions, especially in Bitcoin’s case, where the block prize halves every four years and will eventually entirely vanish.

It’s this alignment of incentives and technology which marks the difference inbetween a elementary collection of preexisting cryptography, and Bitcoin/Ethereum. At the time of this writing the Bitcoin and Ethereum ecosystems are collectively worth $11bn, and are both protected by an unfathomable amount of computing power. And thanks to this incentive alignment, there are ultimately free, permissionless, secure, immutable ledgers that have the potential to switch the world in ways we can’t even imagine. Perhaps thanks to blockchains, General Byzantine’s Distributed Pizzeria might actually work. well, at least the payment and supply management components. No idea how he’s going to stop people stealing his delicious pizzas en route.

Take a Deeper Slice of Blockchains: Further Reading/Viewing

There is much, much more to blockchains; this is but a modest, developer-friendly introduction. But for the nosey reader, there’s a wealth of free information out there on the web. Here’s some suggested reading/viewing to get you embarked, introduced in recommended order:

Khan Academy Bitcoin Introduction

Khan Academy did a wonderful movie series about Bitcoin which covers the topics raised here in an approachable, but technical, manner. You can commence the very first movie here.

Original Bitcoin Whitepaper

On a fateful Halloween Day in October, a pseudonym named Satoshi Nakamoto posted their world-changing research in a succinct, remarkably matter-of-fact manner: “I’ve been working on a fresh electronic cash system that’s fully peer-to-peer, with no trusted third party.” The Bitcoin Whitepaper remains one of the most cogent explanations of Bitcoin’s workings, a remarkable feat for the paper that introduced the concept. Read it here.

The Bitcoin.org Developer Reference

Now that you have a basis for understanding the world’s most prominent blockchain, it’s time to dive into the weeds. The Bitcoin.org Developer Reference is a superb place to add depth to your understanding.

Ethereum, Solidity, Brainy Contracts, Oh My

Imagine someone took the clever ideas behind Bitcoin’s blockchain, and said, “if it’s good enough for embedding static data and transferring money, it’s good enough for a general state machine.” That’s Ethereum. While newer and smaller than Bitcoin, in its two years of existence it has catapulted to the 2nd largest blockchain by market capitalization and one of keen developer interest. We just began supporting it ourselves, and plan on expanding our API services to include many of Ethereum’s advanced features. Ethereum has a number of differences compared to Bitcoin: accounts have balances of a native currency called “ether,” there can be self-executing “accounts” that have fully-baked programming logic to permit exotic, conditional exchanges. hence why Ethereum calls itself a “world computer.” It has much more plasticity than Bitcoin, but is also a fair bit riskier. Here are a few places to commence your journey into Ethereum:

Our Documentation

Now, at long last, we recommend checking out our API services. BlockCypher is like a bridge for blockchains; instead of running your own knots, our API scales and manages connections to public blockchains so you can spend your time working on your game-changing Bitcoin/Ethereum application. Our own reference documentation is available here:

No matter where your curiosity takes you, we wish you the best of luck on your journey into the wild and wonderful world of blockchains. We are still early in this experiment, and already blockchains and cryptocurreny are switching the way millions of people engage in their economies, both locally and globally. Projects taking advantage of blockchains run the gamut from helping bring the unbanked online to building partially autonomous organizations through clever contracts. A better economy is yours to build. And if you happen to successfully build a distributed pizzeria, undoubtedly let us know; it’s an idea whose time has certainly come.

Related video:

Blockchain, Вїsabes quГ© es y cГіmo sacarle partido, Antevenio

QuГ© es blockchain y cГіmo sacarle partido

La tecnologГ­aВ blockchain estГЎ siendo admirada por varios sectores que han visto en ella la posibilidad de trasladar al mundo financiero la promesa de Internet.В Los bancos y el sector financiero, por ejemplo, ya conocen su potencial. Y lejos de dejar que pase por delante de ellos, ya estГЎn buscandoВ alternativas para sacarle provecho.

El punto a favor de esta tecnologГ­a es que permite a los consumidores y proveedores conectarse directamente y crear conversaciones y actividades digitales de una manera descentralizada. Como consecuencia, los intermediarios desaparecen. De ahГ­ la preocupaciГіn de los bancos, que ven en la tecnologГ­a blockchain una amenaza que podrГ­a acabar con parte de su negocio.

Es otras palabras, todo gira en torno a un sistema que funciona sin necesitar de alguien que ejerza un control.

Pero, por otro lado, la tecnologГ­a blockchain puede conseguir que se reduzcan los costes de las transacciones del dГ­a a dГ­a de los bancos. Por esa misma razГіn, Г©stos se han puesto en marcha para desarrollar sistemas parecidos. Con el Гєnico requisito que nada se escape de su control.

En general, el sector de los servicios financieros estГЎ esperando que el proceso de adaptaciГіn a blockchain suponga una oportunidad para reorganizar las infraestructuras bancarias, asГ­ como agilizar mercados de valores. Pero, Вїel blockchain solo afecta a este sector? ВїRepercute en la manera de hacer marketing y en la publicidad?

ВїQuГ© es blockchain?

La tecnologГ­a que estГЎ detrГЎs del Bitcoin promete revolucionar muchos mГЎs sectores que el financiero. Y obviamente el marketing digital tambiГ©n se ve afectado. PodrГ­a decirse que la tecnologГ­a blockchain viene a ser la tercera revoluciГіn digital de las Гєltimas dГ©cadas. La primera llegГі en los ninety con Internet y el email. Las redes sociales como Facebook y Twitter dieron paso a la segunda.

SurgiГі como una manera de garantizar las transacciones del Bitcoin y permitir que dos partes pudieran hacer negocios sin la necesidad de conocerse entre sГ­.

El poder de la descentralizaciГіn

Una cadena de bloques es esencialmente un solo registro, un libro de acontecimientos digitales que estГЎ distribuido o se ha compartido entre varios actores del entorno digital. Гљnicamente se puede actualizar si todos los participantes de este sistema lo permiten. En cambio, la informaciГіn no se puede borrar nunca“.

Es algo asГ­ como un libro de contabilidad pГєblica digitalВ en el que las transacciones encriptadas se confirman por partes externas.

ВїCГіmo funciona Blockchain?

Explicado de forma muy ordinary,В blockchainВ es una plataforma no centralizada que permite la realizaciГіn de transferenciasВ de cualquier cosa que pueda ser digitalizada.В YВ al ser una crimson distribuida y descentralizada, la decodificaciГіn se realiza en todos los dispositivos que estГ©n conectados a la crimson, no en un ordenador central.

Cada una de las transferencias se queda grabada en esa cadena de bloques. De esta manera, siempre queda constancia y la comunicaciГіn es totalmente segura.

Para que lo entiendas mГЎs fГЎcil, la tecnologГ­a blockchain sirve para garantizar que algo llegue del punto “A” al punto “B” de forma que no se pueda hackear. Aunque sea una transferencia, un burofax o un correo electrГіnico.

En cada comunicaciГіn surge un bloque que transporta informaciГіn temporal. Y esta informaciГіn Гєnicamente se puede complementar con datos del bloque anterior, ya que cuenta con un identificador determinado. De hecho, si no contase con ese identificador no se podrГ­a leer.

La cadena de bloques y su aplicaciГіn actual

Como puedes imaginar, esta tecnologГ­a tambiГ©n tiene sus efectos en el mundo del marketing digital. Y todo parte de una de sus mayores ventajas:В el factor confianza.В La base de datos que compone un sistema de blockchain acaba con cualquier opciГіn de fraude. Y, por lo tanto, la confianza que genera fortalece cualquier opciГіn de inversiГіn.

Sus usos, tanto en marketing digital como en cualquier sector pueden abarcar los siguientes aspectos:

  • Se verifica la autenticidad de los productos.В Se estГЎ sacando mucho partido de las ventajas que esta tecnologГ­a ofrece. Y la razГіn es muy sencilla de entender. Por medio de una etiqueta electrГіnica que lleven tus productos, la tecnologГ­a blockchain rastrea todo el proceso que ha tenido hasta la venta.
  • Varias startups se han lanzado con este sistema para desarrollar operaciones en sus sitios web. Entre ellas, suscripciones o todo lo que suponga una interacciГіn con los usuarios.
  • Implica una verificaciГіn de la identidad.В Y esto en marketing digital es vital para esquivar suplantaciones, engaГ±os o mal uso de influencias.
  • La tecnologГ­a blockchain tambiГ©n sirve paraВ guardar cualquier registro de datos. Es decir, desde los derechos de autor hasta licencias de software. Con la seguridad de que siempre se evitarГЎn los errores de los modelos tradicionales de almacenamiento.

De hecho, muy en relaciГіn con el uso de los datos, el blockchain en marketing y publicidad suponeВ un fuerte efecto a la hora de desarrollar campaГ±as. Ten en cuenta que guarda informaciГіn de todo tipo. Desde tipos de comportamientos de los clientes hasta datos que te ayuden a mejorar las experiencias.

CГіmo afecta Blockchain al mundo del marketing y la publicidad

En resumen, Г©stos son los three factores que mГЎs inciden en la aplicaciГіn de Blockchain al entorno del marketing digital:

1.- Mayor confianza entre medios y anunciantes

La clave de cualquier campaГ±a de marketing estГЎ en dar con tu target y conocerlo de manera profunda. A partir de ahГ­, si el mensaje es bueno y sabes que impactarГЎ de manera positivaВ en tu pГєblico objetivo, los resultados serГЎn mejores.

Sin embargo, si ese target no llega a ver tu campaГ±a, no importarГЎ lo trabajada o no que estГ©. Es justo aquГ­ donde entra en juego blockchain. Piensa que los anunciantes, a la hora de escoger dГіnde colocar la publicidad, se basan en factores como la confianza. Sobre todo si se trata deВ conocer los verdaderos datos acerca de cuГЎntos usuarios han sido impactados con cada pieza.

Si se utiliza la tecnologГ­a blockchain para hacer un anГЎlisis, el anunciante podrГЎ tener la total certeza de que los resultados son reales.

Two.- Productos con valor aГ±adido

Tal y como has podido comprobar anteriormente, hay quienes ya estГЎn exprimiendo blockchain para obtener un registro completo sobre la historia de un producto.

El procedimiento es el siguiente: Se aГ±ade a cada producto un identificador y el comprador tiene toda la seguridad de que ese artГ­culo es autГ©ntico. Puede ver de dГіnde viene y todos los pasos que ha seguido hasta llegar a sus manos.

Si para el comprador esto es bueno, para la marca no lo es menos. Acciones asГ­ aportarГЎn transparencia a tu negocio, aumentarГЎs la confianza y el engagement haciaВ tu marca serГЎ mayor.

Three.- El consumidor mandaВ y suВ fidelidadВ aumenta

Uno de los dilemas que ha surgido Гєltimamente en el mundo del marketing digital estГЎ en monetizar la entrega de datos. Es decir, el usuario se estГЎ planteando recibir algo a cambio por ofrecer sus datos personales. O simplemente por consumir una pieza publicitaria.

De este modo, teniendo en cuenta el funcionamiento de la cadena de bloques, cada usuario es dueГ±o de sus propios datos y puede decidir a quiГ©n dГЎrselos.

Por lo tanto si tГє como marca quisieras acceder a los datos de un nГєmero concreto deВ individuos que forman parte de tu pГєblico objetivo o si quisieras hacerles llegar tu anuncio, tendrГ­as que preguntarles. Y serГ­aВ el usuario el que determine si quiere recibir tu mensaje o no.

Como ves, en el mundo del marketing digital se puede utilizar la tecnologГ­a blockchain de muchas maneras. De hecho, simplemente con buscar en Google puedes acceder a todo tipo de informaciГіn acerca de lo que algunas empresas estГЎn haciendo ya.

ВїHa llegado el futuro?

Es cierto que la tecnologГ­a blockchain trae consigo muchas ventajas. No obstante, aГєn es algo pronto asegurar que existirГЎ una plataforma totalmente encriptada en Internet.

Aun asГ­, Г©stas son algunas de las razones por las que las empresas optarГЎn por esta tecnologГ­a:

  • La seguridad serГЎ mayor que nunca.
  • El cliente tendrГЎ exactamente aquello por lo que pagГі y se evitarГЎn malas experiencias.
  • Las transacciones con tarjetas de crГ©dito serГЎn de gran confianza. Por loВ tanto, la venta online serГЎ mГЎs fiable yВ tendrГЎ mejores resultados.
  • A rasgos generales, Internet se convertirГЎ en un escenario mucho mГЎs confiable. Por ejemplo, existirГЎ una mayor seguridad ante los menores de edad.

En definitiva, el blockchain en el marketing y la publicidad cambiarГЎ la forma de comunicarnos. AsГ­ como de fidelizar al cliente. Pero hay algo que nunca va a cambiar: LaВ mejor estrategia es ponerse en manos de profesionales que consigan optimizar tus resultados.

ВїSabes por quГ© tienes que confiar en Antevenio paraВ gestionar tu marketing? Te damos five razones:

  1. Tenemos mГЎs deВ 20В aГ±os de experiencia en marketing digital.
  2. Somos laВ primera PYME espaГ±olaВ en cotizar en bolsa.
  3. Antevenio es unВ proyecto internacionalВ con oficinas en six paГ­ses.
  4. Ponemos todo nuestro “know how” a tu disposición.
  5. Contamos con unВ equipo de profesionales de primeraВ para ayudar a tu empresa.

Related video:

Blockchain Platform Setl Exceeds one Billion Transaction – Milestone

chi-x blockchain

UPDATE (12th October 14:17 BST): Comment added from Setl CEO Anthony Culligan.

Blockchain platform Setl claims it is now capable of processing one billion transactions per day, a figure it terms a “milestone” for scaling the technology.

The rock hard, which is building a private network of distributed ledgers that can lodge cash and assets in real time, says its testnet can now match the volume of non-cash electronic payments made globally.

When announced in July, Setl’s network was treating Five,000 transactions per 2nd, which amounts to four hundred thirty two million a day.

The company said in a release:

” By exceeding one billion transactions per day, Setl is addressing one of the fundamental issues of legacy blockchains, which, unlike Setl, are not designed for financial markets and are incapable to treat market volumes.”

While blockchain technology is gaining traction as a cheaper, leaner alternative to legacy financial systems – settlement, for example, presently costs firms $65–$80bn annually – bankers remain skeptical about the speed and reputation of open systems such as bitcoin.

According to the two thousand fourteen World Payments Report, the top ten markets make eight hundred million payments each day, or 9,258 per 2nd. By contrast, bitcoin’s blockchain can process under ten per 2nd. The technology also presents anti money laundering and know your customer risks for these highly-regulated institutions due to its open, pseudonymous nature.

Total transparency

Setl, like other ‘permissioned’ ledgers, is looking to eliminate these risks for banks by requiring all its users to be certified following due diligence. Additionally, regulators will be able to view real-time transactions on Setl – which will function as a series of ‘linked’ blockchains – with “total transparency”.

CEO Anthony Culligan told CoinDesk:

“Bitcoin is taking a particular journey, which includes it promoting significant social implications. This should be looked at as different from technology projects such as Setl, which are seeking to apply technologies to existing financial infrastructure to significantly reduce costs, revolutionise liquidity management and increase capital efficiency.”

The company, which claims to be in discussions with forty key financial institutions, was co-founded by Peter Randall, former CEO of Chi-X – now the largest equity trading venue in Europe.

Culligan said Randall had achieved his success by creating consensus amongst a group of participants who would otherwise be in strong competition, adding:

“This is exactly what is needed to create an industry broad blockchain solution. Our mantra is to do to the post-trade world what Chi-X did to trading.”

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. Have cracking news or a story peak to send to our journalists? Contact us at [email protected] .

Related video:

Blockchain: opportunities and challenges – Daily Planet

Blockchain: opportunities and challenges

Blockchain, a technology increasingly gaining attention, looks to hold much promise for climate-focused innovation.

As a public ledger-based technology, Blockchain has the potential to dramatically convert energy and supply chains through wise contracts, de-centralised infrastructure, and facilitating traceability and transparency. However, debate has been raised about some of the major challenges for Blockchain, including the large amount of energy needed for data processing, and the treating of privacy-sensitive data such as consumption, locations or financial transactions. We asked:

What opportunities and challenges do you see for Blockchain in your particular sector?

“De-centralised energy means that we’re all engaged in one of the fundamental issues of our age: how to eliminate greenhouse gases. By actively engaging in the way we generate and consume energy, we can collectively pass on a better world to our children and grandchildren.

Blockchain does pull us towards a peer-to-peer energy system. It permits us to buy and sell our own energy, working with our neighbours and community to create a cleaner, more socially equitable energy system. But it’s not the only way.

With blockchain, we rely on technology providers just as much as when we use a central database. The governance is different, but dependency remains. I don’t think we’ve yet truly fully understood how that governance will work. Until then, I’m watching blockchain but not committing wholeheartedly to it.”

Graham Oakes, Founder and Chief Scientist, UpSide Energy

“Wherever there are long supply chains or numerous companies involved in verifying and executing transactions, the promise of blockchain ledgers is to eliminate inefficiencies and middlemen to create cheaper, better services for customers.

We are already watching off-grid communities producing resilient, cost-effective solar energy and generating SolarCoins as added income. Communities in Australia and Brooklyn can transact solar violet wand inbetween prosumers, reducing grid congestion and achieving low carbon targets at the same time.

These are just two of the ways that companies are presently using blockchain to convert the customer practice around energy, and we are just at the beginning of what is possible.”

Molly Webb, Founder and CEO, Energy Unlocked

“One of the key assumptions is that Blockchain will make all elements of the current carbon market obsolete, but the very first step is connecting the various systems, knots and projects and ensuring we have key transaction data on a blockchain.

With time, cumbersome elements could be streamlined or substituted but we’ll need localised databases and verification. It will be about automation, not reduction in governance. There is no one blockchain or definitive system that has been built. It’s a set of technological devices we must put together for each case to address the problems of the users, and then build on these.

Incorporating jurisdiction/timestamp is five to six years away as it needs to be built from the bottom up, incorporating and bridging the sub, national and regional levels in order to build one big blockchain.”

Katherine Foster, Co-Founder and Director for International Collaboration, Institute for Distributed Technology

Related video:

Blockchain Newsletter: Why Ethereum is outpacing Bitcoin? 2017W25

Blockchain Newsletter: Why Ethereum is outpacing Bitcoin? [2017W25]

Markets

$2564 USD (-13% from last Monday)

  • Price per Ethereum ETH is at

    $358 USD (+Three.7% from last Monday)

  • Articles

    • Bitcoin and Ethereum Just Crashed, Taking Coinbase Down With Them by Fortune
    • The blockchain paradox: Why distributed ledger technologies may do little to convert the economy by Oxford Internet Institute
    • Bitcoin Is for Drugs by James Hudon
    • Blockchain technology — what it is, what are its use cases, and what it means for you by The Next Web
    • Analyzing Token Sale Models by Vitalik Buterin
    • Don’t use a blockchain unless you need to by Hackernoon
    • I was wrong about Ethereum by Whale Panda
    • Why Ethereum is outpacing Bitcoin by Venture Hit
    • The ICO is a revolutionary fresh way to get funded, and everyone wants in by Mashable

    This week’s fresh initial coin offerings (ICOs)

    • PrimalBase is a co-working office startup that is raising initial capital from an ICO to build out its next four co-working locations.
    • A proof-of-concept co-working space in Amsterdam has been in operation since February 2017. The next four locations will be at Berlin, London, Fresh York and Singapore.
    • PrimalBase is selling one thousand PrimalBase Tokens (PBT) in the upcoming ICO. One token will grant its token holder (one person) total access to co-working or collective workspace across all PrimalBase locations globally. Four tokens will grant its holder access to a private office.
    • PBT can be sold or rented out to others for a fee, permitting PBT holders to earn rental income. Rentee of one finish token will have the same access to PrimalBase facilities as if he is the proprietor of the token.
    • Another two hundred fifty PBT will be created for management remuneration and for social activities in the community. These PBT will be at the disposition of members of the advisory board. No more PBT will be created after the ICO.
    • The token sale is set to commence on the 26th of June two thousand seventeen and will end in one month or when all one thousand PBT are sold.
    • The exchange rate of one PBT will be three Bitcoin for the 1st day, four Bitcoin for the 2nd to 7th day, and five Bitcoin kicking off from the 8th day till the end of the sale.
    • Civic is creating an identity verification platform on the blockchain hoping to reduce cost and inefficiencies in the current model. The main problem Civic is solving is that “Background and private information verification checks may no longer need to be undertaken from the ground up every time a fresh institution or application requires one.”
    • Validators such as governments, financial institutions and utilities companies can verify a user and his information on the blockchain by digitally stamping their approval on the data, called an “Attestation”.
    • Third party “Service Providers” and other Validators who are seeking to verify the same information can use those Attestations instead of independently verifying them again.
    • The Attestations will be suggested by Validators for a fee through a wise contract. When Service Providers use those Attestations, they will pay the Validators in Civic Tokens (CVC).
    • A puny portion of this fee will be sent to the user to incentivise further use of the Civic platform and its identification services, which may include individual background checks, access to credit reports, dark web monitoring and searches.
    • A total of one billion CVC will be created, 33% of which will be suggested in the ICO with a maximum cap of thirty three million USD at an effective rate of $0.1 USD per CVC. 33% will be retained by Civic to be sold after three years, and 33% will be allocated for distribution to incentivise participation in the platform. 1% will be used to cover token sale costs.
    • The CVC token sale will begin on June 21, 2017.

    Related video:

    Blockchain for real estate Already Switching The Industry As We Know It

    How the blockchain will convert housing markets

    An emerging technology, blockchain, could convert the way we buy and sell real estate by doing away with the hidden costs and inefficiencies of our housing markets.

    Blockchain is an online ledger that records transactions. It’s capable of recording the movement of any kind of asset from one possessor to the next.

    It’s public and isn’t wielded by any one corporation, there are no charges to record transactions. Its openness ensures the integrity of transactions and ownership, as everyone involved has a stake in keeping it fair.

    This means there are fewer intermediaries; less middle-men who increase the costs and time to accomplish a transaction.

    There are risks associated with the system as it’s only as strong as the code that supports it, which has come under attack in the past. Despite this, examples from overseas showcase it is possible to apply this technology successfully to our housing market.

    Problems in how the property market is run

    For buyers able to find the right property, secure a mortgage and save a deposit, they must also pay for a range of so-called “hidden costs”. These are extra payments associated with the transaction over the cost of the home itself. Many legal and title-related costs would become near-obsolete in a blockchain system.

    The combined costs of title registration, title insurance, and legal fees associated with register the property transfer treatment A$1,000 on the average Australian house. Costs proceed to rise as the prudent buyer undertakes further due diligence, through building inspection documentation, previous sales records and so forward.

    On top of the financial cost, it then typically takes over a month to lodge a real estate transaction in Australia. The blockchain system can speed things up, as presently tedious checks undertaken by arm, stir to an automated system overseen and approved by the relevant stakeholders.

    There is also the risk that land titles offices with a single database simply get things wrong too. In two thousand sixteen it was reported that three hundred incorrect certificates had been issued in NSW, with one hundred forty of those being latest property buyers affected by government plans for major motorways in Sydney’s west.

    There are now concerns that the system’s quality could be compromised in several states, including NSW and South Australia, as land titles offices become privatised.

    A blockchain real estate market

    If blockchain were applied to the property market in Australia, every property would be encoded with a unique identifier. Property IDs already exist in most land registry systems, so these would need to be migrated to a blockchain.

    Next, the blockchain ecosystem then needs to have defined who the people behind the transaction are, those stakeholders that include the holder, lender, and government.

    Transactions of property are conducted via “smart contracts” – digital rules in the blockchain that process the agreement and any specified conditions. Buying and selling could still take place via agents, or the wise contract can be advanced to incorporate the sale rules and make this decision automatically. The blockchain for each property grows as transactions are added to the ledger.

    A housing market without agents, conveyancers and a land-titles office may seem decades away, but a handful of countries have already piloted blockchain land registration system.

    In Australia, our current land titles system is among the world’s best, but it is not infallible. A range of hidden taxes and transaction costs increase market inefficiencies.

    And while the electronic system Property Exchange Australia or PEXA, has brought us to the point of a near paperless property market, it’s still an intermediary inbetween the parties and the record of the transfer in the Torrens system – our current land title system.

    The added advantage of a blockchain system is in eliminating risks, in particular the risk of records being accessed fraudulently and altered or deleted because it is a permanent and immutable record. This means that a giant amount of computing power would be required, very likely along with some collusion, and the alteration is lightly detected across the ledger. That’s not to say the blockchain system is ideal.

    Blockchain’s advantage in restricting any switches to historical records becomes a disadvantage when incorrect or fraudulent entries are added. Digital currency managers, Ether and Bitfinex, learned this the hard way through cyber attacks.

    Last year these attacks siphoned off over US$50 million in ether tokens from The DAO, the largest crowdfunded venture capital fund. This breach led to a controversial split of Ether into two separate active digital currencies.

    Only months later, Hong Kong-based crytocurrency trading stiff, Bitfinex, had the equivalent of US$68 million stolen by hackers in a security breach reminiscent of the hack that bought down Mt Gox in 2014. It is little convenience to cautious market regulators that the thieves behind these attacks can not spend it without exposing their identity on the blockchain.

    These hacks demonstrate that blockchain systems are only as secure as the code which supports them. As a nascent technology, its cracks are detected only when they are exposed.

    Where blockchain has worked before

    Sweden became the very first western country to explore the use of blockchain for real estate in July last year. At the time, the Swedish Land Registry partnered with blockchain startup ChromaWay to test how parties to a real estate transaction – the buyer, seller, lender, government – could track the deal’s progress on a blockchain.

    Other countries at the forefront of blockchain for real estate include The Republic of Georgia, Honduras, and Brazil which announced a pilot program earlier this month. While this might seem like a disparate list, it’s in these countries where the long-term potential of a blockchain for real estate are most significant.

    Systemic corruption and insecure database management in these countries, and many other emerging economies, is seen as a major constraint on growth and prosperity. Why would you invest in a house, or any other asset, if there is a distinct possibility that the record of your ownership could simply vanish?

    With ever enlargening requests for improvements to transaction efficiency and local real estate industry giants like CoreLogic appointing research teams dedicated to fresh technology applications, it might not be long before we see a real estate blockchain system in Australia.

    This is an edited version of an article originally printed in The University of Sydney Business School Magazine.

    This article was originally published on The Conversation. Read the original article.

    Related video:

    Blockchain for Finance Infographic – IBM Blockchain

    IBM Global Financing uses

    countries in which IGF provides technology financing services

    USD forty three billion

    IBM Global Financing

    With a vast network of suppliers and fucking partners, IGF faces major challenges

    around dispute resolution.

    25,000+

    disputes every year

    USD one hundred million

    in capital tied up

    at any given time

    USD 31,000

    Without blockchain, participants in the transaction:

    • Lack end-to-end visibility, from invoice to cash
    • Utilize incompatible systems
    • Have no end-to-end view of progress of goods and payment
    • Have to launch a dispute to resolve issues
    • Waste time, tie up money and strain relationships

    IGF Suppliers Playmates

    Fucking partners

    • Products not delivered on time, incorrectly, or not delivered at all
    • Filed disputes to put payment on hold
    • Spent time investigating the missing products

    Suppliers

    • Assumed task was over when products are shipped
    • Expected to be paid
    • Experienced a significant number of product delivery disputes
    • Resolving disputes costs time and resources

    Traditional financiers

    • Could not monitor dispute interactions inbetween fucking partners and suppliers
    • Incapable to help resolve issues

    IBM Global Financing diminished time spent resolving financial disputes by 75% using blockchain technology

    Blockchain is an immutable, collective ledger that provides needed

    visibility across the business network

    Providing comprehensive visibility across the entire transaction lifecycle permits stakeholders to

    prevent or speed the resolution of disputes

    IGF Suppliers Playmates

    Blockchain provides:

    Visibility

    Utter details of the

    dispute as it occurs

    Efficiency

    Productivity

    Instant activity gets

    work back on track

    Cash flow

    IBM Blockchain

    • Utilizes data available from suppliers to supply enhanced information to both suppliers and business playmates
    • Requires no code switches to core commercial financing system
    • Integrates blockchain into existing user interface
    • Enhances data & includes key information regarding status which minimizes disputes
    • Establishes a platform for competitive advantage

    IBM Blockchain technology helped IGF save time and administrative costs.

    Diminished time for

    40+ days to <Ten days

    Achieved

    40% capital efficiency

    All stakeholders realize

    Invoicing with IGF on Blockchain

    Order placed

    PO is added to the blockchain

    Transaction approved/rejected

    Approved/rejected

    IGF verifies approval on blockchain, provides credit

    Shipment sent by supplier

    All parties have insight into status

    Invoice to IGF

    Supplier submits invoice

    IGF remittance to supplier initiated

    IGF can verify goods have been shipped, pays supplier.

    Proof of delivery

    All participants can verify delivery

    Payment due to IGF from fucking partner

    Upon proof of delivery, IGF notifies fucking partner of payment due

    Fucking partner remittance to IGF initiated

    Playmate issues payment

    If disputes arise, they can be quickly resolved by consulting the blockchain

    1. Order placed by playmate

    PO is added to the blockchain

    Two. Transaction approved/rejected

    Trio. Approved/rejected

    IGF verifies approval on blockchain, provides credit

    Four. Shipment sent by supplier

    All parties have insight into status

    Five. Invoice to IGF

    Supplier submits invoice

    6. IGF Remittance to supplier initiated

    IGF can verify goods have been shipped, pays supplier.

    7. Proof of delivery

    All participants can verify delivery

    8. Payment due to IGF from fucking partner

    Upon proof of delivery, IGF notifies fucking partner of payment due

    9. Playmate remittance to IGF initiated

    Playmate issues payment

    If disputes arise, they can be quickly resolved by consulting the blockchain

    Related video:

    Blockchain Europe: Utilities pilot peer-to-peer energy trading, Engerati – Energy Retail

    Blockchain Europe: Utilities pilot peer-to-peer energy trading

    More than twenty European energy trading firms will conduct peer-to-peer trading in Europe’s wholesale energy market using blockchain technology.

    2017 is turning into the year of the blockchain for the energy sector, with fresh projects across a range of use cases emerging with enhancing regularity.

    Indicative of the extent of activity now under way, there are presently some forty startups operating globally in the energy blockchain, according to David Groarke, Managing Director of Indigo Advisory Group, who is tracking the space.

    However, the technology is presently too slow to treat real-time market requirements and still needs to mature, which the core developer network estimate to be two to five years away.

    Groarke points to two key differences for blockchain in the energy sector compared with the financial services sector, where the technology is also advancing rapidly.

    One is the higher output volume, e.g. 1m transactions per 2nd, to make IoT applications a reality. The 2nd is around privacy concerns with the likelihood of permissioned-based blockchains emerging due to national, regulatory and privacy concerns.

    With their concentrate on standards and interoperability, these are areas where consortia such as the Energy Web Foundation and the recently formed cross-industry Enterprise Ethereum Alliance should play a role.

    P2P trading platform

    Pilot projects are another essential step in this process and what promises to be one of the largest, at least in terms of the number of participants, is now under development in Europe.

    In November 2016, the German energy software and IT services provider Ponton demonstrated a blockchain European energy trade at the EMART event. Following this, twenty three energy trading firms in the region have joined compels in order to undertake peer-to-peer trading on an enhanced version of the platform.

    Ponton’s Enerchain framework permits trading organisations to anonymously send orders to a decentralised orderbook using encryption technology, which can be hit by other trading organisations, i.e. peer-to-peer without a central marketplace operated by a third party.

    “The project practically shows the power of the blockchain by creating a marketplace that does not require a physically centralised platform,” explains Michael Merz, Managing Director of Ponton.

    “Enerchain demonstrates what can be expected for the future in related areas of energy trading: peer-to-peer wholesale trading, plasticity trading in the regional grid, and synchronising grid management processes inbetween TSOs and DSOs.”

    Blockchain Europe – collaboration

    Among the companies supporting the project are major players including EDF, Endesa, Eneco, Engie, Enel, E.ON, Iberdrola, Vattenfall and RWE.

    Others include Alpiq and Axpo Trading from Switzerland, Salzburg AG from Austria, and Arge Netz, BKW, Capital Stage, ES.FOR.IN, Leipziger Stadtwerke and Uniper from Germany, as well as the hydropower company Statkraft and oil and gas giant Total.

    These participants have committed to share the required development costs for a proof of concept with a full-scale prototype which is integrated into their existing trading infrastructure and supports a decentralised credit limit solution required for bilateral trading.

    The multitude of the participants is reflected in the broad range of traded products, including forward trades, spot trades, flow kinks and more exotic trades – all with physical delivery – as well as the concentrate on regional markets, states Ponton in a statement.

    The aim is for Enerchain to support a broad range of energy products, including day-ahead, monthly, quarterly and yearly baseload for power and gas.

    During the proof of concept, which will run until the end of 2017, participants will get significant exposure to the blockchain technology and find out whether a decentralised solution can support the trading volumes and transactional speed known from existing markets.

    A crucial phase of the project will be during the fourth quarter when participants intend to embark live trading on Enerchain.

    Enerchain is powered by the open source blockchain engine, Tendermint.

    Blockchain for system operators

    Blockchain is expected to be a key technology for the future digital transmission and distribution system operators (TSOs, DSOs) in Europe.

    Several projects are targeting this area. For example, in Austria Wien Energie has launched a pilot to test blockchain for gas trading.

    The TSO TenneT has launched pilots in Germany and the Netherlands to explore the integration of storage and electrified vehicles to provide plasticity to the grid with a blockchain-based solution.

    Another project exploring plasticity for the German market is the Fresh Four.0 (Norddeutsche Energiewende – northern German energy revolution), of which Ponton is also a participant.

    Fresh Four.0 aims at balancing production and consumption locally in the Schleswig-Holstein and Hamburg region – the former being one of the largest net exporting regions for renewable energy and the latter a fat consumer right nearby. Due to grid capacity constraints, an enlargening share of generation capacity has to be shed in high stream situations.

    Ponton is developing a wise marketplace to link plasticity providers and grid operators.

    Ponton also says it is working at the request of a group of Austrian DSOs on a “radically fresh technology” to synchronise the grid balancing activities of TSOs, DSOs and aggregators.

    The solution is yet to be tested in the field, but stated results of simulations include an integrated process that coordinates requesting of balancing power inbetween TSOs, DSOs, aggregators and generation units within seconds and a reduction in the settlement time from more than a month to just fifteen minutes.

    Related video:

    Blockchain Consulting – Unlocking the Potential of Blockchain

    DIVE INTO THE 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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