Nasdaq experiments with Bitcoin's blockchain
theguardian.com
theguardian.com
FTA: The company will be creating “coloured coins”, appending special information to the blockchain indicating that a particular fraction of a particular bitcoin can be redeemed according to the terms written into it. That coloured coin can then be passed around just like a normal bitcoin, while preserving a record of who owns the asset it is linked to.
Ok. I don't have an inherent dislike for bitcoin. I understand how bitcoin works. I understand the incentives. I've read the whitepaper. I don't see how decentralization is useful for this task. Why would I want to store asset records on the blockchain? What does this make possible that isn't already possible without the massive computational overhead of a global decentralized ledger? I understand the implications that financial assets can be tagged to colored coins and that those coins can be traded without the need for a third party. I understand that it's all public and that the blockchain's data integrity is fortified through global consensus. Why does this matter? What does this make possible?
I also wonder how the institutions will react when rich investors start getting their colored coins stolen by hackers. Will the NASDAQ honor the value of APPL colored coins that were pilfered from someone's laptop? What about in situations where coins are lost or accidentally sent to the wrong address? Will some random bitcoiner wake up one day to discover that they're a majority shareholder of Microsoft?
As I said, I'll wait and see, because if I was as smart as these finance people then I'd probably have an apartment in the heart of Manhattan to prove it.
I look at bitcoin more as a breakthrough computer science theoretical finding. It's not just an idea that needs to "make something possible". It exists in nature whether we find a use case for it or not.
Sure, it's possible it's the only way to get all of the benefits that we all love. But I really wish there was a better way.
(I know, POS is much maligned, but once people see more currencies using it and succeeding I think public opinion will change)
Your goal is to make sure that whatever bits you receive are exactly the same as everyone else is seeing. In other words, that it is practically impossible for an attacker to produce alternative bits satisfying your requirements and show them to someone else (and not showing to you). One way to make it is to make these bits fully predictable (like digits of Pi), but that's not useful. Another way is to implement a gigantic ever-growing proof-of-work that implements the condition of "practical impossibility". You receive some bits with such a big pile of PoW that you can be sure it's not possible for someone to quietly build an alternative bunch of bits with the same PoW and unleash it on you or anyone else.
Protein folding and proof of stake do not help with this problem. You need abstract ever-growing scarcity implemented by converting energy into a short number.
You might ask: why should we be so strict with the security requirement? Well, because history of civilization shows that people always try really hard to build hierarchies of power to manipulate property and human beings. Any system of global consensus outside of existing power structures will face huge amount of resistance and therefore must be designed from ground up to withstand it.
Bob Greifeld, Nasdaq’s chief executive, said: “Utilising the
blockchain is a natural digital evolution for managing
physical securities. Once you cut the apron strings of need
for the physical, the opportunities we can envision
blockchain providing stand to benefit not only our clients,
but the broader global capital markets.”
The problem with trying to store data that does not represent actual BTC transactions in the Blockchain is that it simply does not offer a lot of storage space. Currently one 1 MB block is added on average every 10 minutes. That's 144 MB a day that the chain can store. The miners operating the network receive a reward of 25 BTC per block plus transaction fees. At a price of 235 USD/BTC that is at least ~5900 USD per MB stored which makes storing anything in the BC extremely expensive.
Unless the BTC developers make a decision to implement changes in order to improve the scalability of the network, I really don't see why you would even try to use the BC for something like this. When you start to actually store meaningful amounts data in the BC, you are going to jam the network since there is no elastic supply of storage space. Secondly, the increased demand for inclusion of transactions is going to drive the transaction fees higher. In the end, you will have a high costs for a solution that does not even remotely offer the kind of performance you need.
As I understand it, it is potentially possible to attack Blockchain integrity by amassing the majority of computational capacity among the people computing the blockchain.
Who would be computing blockchain changes in the NASDAQ case and what are the implications of this kind of attack for NASDAQ?
Apologies if this is a silly question.
In short, that's why NASDAQ is using bitcoin rather than their own blockchain app, as it is the most secure blockchain in terms of a computational attack.
Anyone with a large amount of Bitcoin mining capacity is implicitly incentivised to not mount an attack on the integrity of the Blockchain because doing so would probably dent confidence in Bitcoin, causing the price to drop. That would reduce the "net present value" that the miner can expect to receive going forward, likely by more than the short-term "win" they could achieve through a successful attack.
However, if the Blockchain is being used for other purposes (e.g. recording ownership of high-value assets) and the potential gain to someone with a large amount of mining power of attacking/rewriting the Blockchain is large enough that it significantly outweighs the "net present value" that can be realised from normal mining operations, then the incentive to not attack the Blockchain is somewhat diminished.
That's the argument Bitcoin advocates always use, but it oversimplifies the problem. The assumption is that no one would do this, because it is not in their long-term best interest. What it leaves out that mounting one attack of a series of attacks in quick succession may actually make it worth the costs in the short-term. This is especially true when we talk about large amounts of real assets. Furthermore, there may be malicious entities that are prepared to pay the costs just for the sake of wreaking havoc. The argument that 51% attacks cannot happen has, in fact, already been disproven since there is evidence that the GHash mining pool did perform such an attack [1]. All it takes for something like this to happen is one rogue employee in an organisation that controls enough hashing power.
Since failures fade away silently most of the time they are left wondering why these 'victories' aren't leading to increased prices and repeating the phrase "how can we have all this good news and no increase in price?".
Will it disappear anytime soon? Not a chance.
Is it past its peak? Did it miss its chance at mainstream success? Quite possibly.
Quite possibly but it's too soon to tell. The fact is that price isn't always the best proxy for success. More people using it, more companies getting involved etc, can be more important.
When we look at price historically we can find strange things like the price being a fraction of a dollar (some 70 cents or so) in April in 2011. Only a few months later, in June 2011, the price was $30. And then it collapsed that very same year and the price dropped to $2, a few times more than it was earlier, but far from the peak.
It'd have been pretty myopic to then conclude that bitcoin was past its peak, even though in the short term it was, having lost more than 90% of its value at peak. It'd also have been wrong to say it missed its chance at mainstream success.
Today the price is an order of magnitude larger, and users, usage and involvement with mainstream (large) companies has grown even more.
So again, it's quite possible, but I think too soon to tell.
As for the lack of interest from the general public... I think bitcoin at its core is a utility, like you could say the internet is. The internet is extremely uninteresting to people, very few get it, nobody is excited about it. But the web is huge, as is emailing and skype and netflix. That's completely different from the Internet though, the boring platform/utility/infrastructure that supports it. I can't blame someone not being interested in bitcoin. But internet of things having digital wallets and doing payments, contracts, deeds etc on the bitcoin ledger, where all the consumer sees is that it 'just works', that's interesting. It's up to companies then to build ontop of bitcoin, and there is tons of interest from companies, both startups and traditional (tech) companies. Which means it's not very surprising to see companies and VCs get excited, but the general public not, in the same way that few got excited about the Internet, but Internet entrepreneurs did, who built companies like Amazon or Skype that people did get excited about. The fact that bitcoin couldn't start out like that and had to grow based on a small amount of fanatics looking to avoid the dollar/euro/etc and live on a new currency is probably a great source of distraction from the larger point of bitcoin as a platform, as it reduces bitcoin to being a currency used to shop online and not many feel like doing that, making it look as there is no interest from the general public and nobody will ever use it etc.
Payments - It isn't actually a better experience for customers so it is failing against the incumbents. The only play it is better is DNMs.
Store of Value - It is extremely risky so the only people pushing this are ones that are already bought in and figure hoarding is the only thing that will drive the prices back up
Sharing money between friends - Venmo and friends far and away destroy bitcoin in this use case.
Remittance - Has potential but all the companies so far are basically saving money by skirting money transfer laws and using other peoples services. That isn't sustainable. The expensive part of remittances has never been the movement of value. They are also all extremely secretive about their numbers which makes me suspicious since their reasons given are extremely week.
Micropayments - Bitcoin sucks for micropayments so every solution for this is basically an off chain system. Soon enough they will discover that all the other micropayments services shut down because the demand for micropayments is non-existent
Data Storage - We're seeing this one more and more. The problem is all the things people are trying to do still require third party validation and registration(shareholders and landholders need to be identifiable and someone needs to verify that information). I don't see this panning out in any big way.
Communications protocols - This is another big one. With the 21 announcement everyone and their dog is talking about how the blockchain will allow devices to communicate without needing to agree on a protocol. But they are ignoring the fact that in that use case the blockchain is a medium not a protocol so there would still need to be an agreed protocol on top and if you're going to do that might as well just centralize it or use private APIs.
Did I miss any?
Bitcoin people also love to compare it to the early internet but the existence of the internet itself makes that comparison weak since the internet has massively sped up the distribution of information and technologies. They then say that its different because it involves money but look at the early Paypal growth. It wasn't like getting people to use their credit cards online was easy in 2000.
There is a lot of room for improvement in traditional banking but bitcoin doesn't really solve those problems.
https://blockchain.info/charts/n-transactions?timespan=all&s...
It seems to be increasing. Given that using BTC isn't useful unless someone else uses BTC (like email), the growth is impressive to me. I remember when the number of people I knew that had email addresses was very limited. It took about 10 years between me and my mother getting one.
https://blockchain.info/charts/n-transactions-excluding-popu...
Looks like there is about 10k transactions to popular addresses per day.
https://blockchain.info/charts/n-transactions-excluding-chai...
Chain transactions can't be completely discounted but as of yet no one has come up with their actual purpose and they really don't make sense other that inflating the transaction count. Once you subtract the above 10k to popular addresses that leaves you with about 20-25k actual transactions per day.
Prices are incredibly increased, from the $0.0001 USD/BTC they used to be on the open markets.
Your statement shows that you completely misunderstand how markets work. Anything that can be predicted about the future, is already "priced in" -- (to the degree that it can be predicted by the best possible predictor and discounting risk. Also discounting any entity's willingness to burn substantial money to temporarily manipulate the market.)
In other words, things about the future that were easily predictable long ago would have changed the price long ago, not waiting until they happen.
And BTC's price did change long ago, incredibly!! More than 1000x change. And if it took you much longer than mid-2011 to predict all these things, then you're just incredibly too slow, and that's why you missed that big price increase.
Yes they increased a lot in the past. Then they started falling and they've been doing that for a year and a half now.
>Your statement shows that you completely misunderstand how markets work.
It's not my statement as I said it's an example of a common sentiment in the bitcoin community.
Adoption demand has overall followed a rather clear and steady trend, so it's a bit hard to say that there's anything very unpredictable going on here.
2. Go look at any predictions thread on /r/bitcoin from 6/12/18 months ago and tell me our current position is predictable.
RE sophisticated market - Yes, BTC is now far closer to a sophisticated market, which is mostly reflecting the consensus prediction of cumulative future value, instead of a totally unsophisticated market that fluctuates around purely based on present demand of people directly using the asset for non-investment purposes.
Where do you get your serious predictions about bitcoins future? /r/bitcoin|/r/bitcoinmarkets|bitcointalk cover the vast majority of users actually involved in bitcoin regularly.
>Adoption demand has overall followed a rather clear and steady trend
Given that price has been dropping for 18 months are you saying that the clear and obvious trend is towards failure? Since the future is priced in?
>Willy bought a very large amount of bitcoin on MtGox during the period of September 27 – November 30 during 2013 (and later, though the leaked logs end on this date), a total of over 250,000 BTC. There is a very high probability that this had a large effect on the price of bitcoin, opening up the possibility that this may have been a plan to manipulate the market rather than (or in addition to) fraudulently acquiring bitcoins.
and
>There are even some suspicious incidents where Willy becomes absent and soon afterwards the market "corrects" itself to a lower price level.
But it makes you wonder why anti-bitcoiners create discussion boards when they have no stake in bitcoin's failure, like the guy sanswork in whose comment tree we're posting, who is known to be an active member of 'buttcoin', a board which mostly serves to ridicule the bitcoin community, something in which he has participated in on numerous occasions for no financial gain.
It seems quite evident then that you don't need a financial stake to bring out the worst in either community.
(Unless of course they massively short bitcoin and believe their discussions on buttcoin make the price drop in any substantial way, but neither is very likely.)
I don't see a future for it but it doesn't mean it can't be entertaining in the short term.
Also you clearly know my history so you must know that very little of what I do involves ridicule. I'll be snarky for some truly out there comments, and I have to deal with a lot of undeserved hate, name calling, etc which can lead to less than great replies by myself but generally my conversations are balanced and friendly.
It's actually pretty simple to explain. Buttcoin was the invention of the Something Awful community, which exists primarily to mock stuff on the Internet for comedy purposes. The fact of the matter is that the Bitcoin community is stuffed to the gills with all sorts of absurd and ill-informed beliefs which make it a rich source for mockery (and thus comedy). Given that this behavior is so common online, it's curious that the Bitcoin community doesn't seem to get why this is happening.
Technology fundamentalism does no-one any favours, especially when there is nothing hugely wrong with the dominant players (Windows desktops, real money, and so on) that would lead to a natural upheaval. Compare the rise of Google, for example, which had a significantly better search engine than the incumbents.
Be that as it may, the title, "Nasdaq bets on bitcoin's blockchain as the future of finance," was written by the Guardian, not the Bitcoin community. So I'm not sure what one has to do with the other.
Note that the article also describes Coinbase as a "bitcoin bank".