How the Blockchain can be valuable while bitcoins are not - A hypothetical scenario

With so much talk about the value of bitcoins versus the value of the Blockchain, I thought it would be fun to think about a possible scenario in which the Bitcoin blockchain (aka the "World Wide Ledger" or just "The Ledger") has significant value while bitcoins have little or none. Although I have a vested interest in seeing the value of bitcoins increase, it’s healthy to take the contrarian view once in a while. Below is the scenario that I came up with.  I would welcome comment.

Imagine if you will, the following chain of events:

1. Major financial institutions and governments decide to issue fiat currencies on the World Wide Ledger.  (i.e. they create coloured coins like USDcoin, EURcoin, GBPcoin, CNYcoin, etc.)

• Reason 1: these organisations can reduce their production and administration costs, significantly improve the trackability of their issued currencies and further strengthen access to new lucrative international markets. (UPDATE: Citi group is already recommending that the UK government consider doing this!)
• Reason 2: by creating fiat coloured coins, governments gain the benefits of the blockchain while still retaining control over monetary policy with respect to their national currencies.

2. Bitcoin miners start only accepting transactions with fees denominated in fiat coloured coins.

• Reason 1: No consensus is required for bitcoin miners (or "ledger verifiers") to choose which transactions they accept or reject. In fact this happens routinely today.
• Reason 2: Earning fees in fiat coloured coins, which may have less price volatility, zero exchange rate risk and will presumably be accepted in millions of places worldwide (in the case of a USDcoin, EURcoin or CNYcoin for example), will be compelling.
• Reason 3: Given the various savings the issuers will achieve, it is reasonable to assume that the value of fees given in coloured coins could be significantly higher than fees given in bitcoin, at least initially.

3. Consumers start to use fiat coloured coins en masse

• Reason 1: The institutions backing these coloured coins will have the financial, marketing, political and physical resources needed to promote these currencies and even mandate their use among populations they oversee.
• Reason 2: From the average consumer's point of view, these fiat currencies will appear to be the best of both worlds.  They will have many of the benefits of cryptocurrencies and fiat currencies combined. Although some will understand the benefits of a purely decentralised currency like bitcoin, it may be a while before a average person in Boston, Lagos, Buenos Aires or Manila prefers a bitcoin backed by the "Blockchain" over a USDcoin backed by the US government.

Conclusion: In this hypothetical scenario, the value carried on the Ledger could grow exponentially and indefinitely while the value of bitcoins not associated with a coloured coins (what I call "naked bitcoins") will tend towards zero.

• Reason 1: There will be very few things that the average person could not do with fiat coloured coins that you could do with bitcoins.
• Reason 2: There will be less and less consumers or businesses willing to accept naked bitcoins as the reasons to do so diminish.
• Reason 3: This still leads to a stable ecosystem.  It is just one where naked bitcoins (awarded or earned through fees) have little or no value and that value is replaced by coloured bitcoins that are easier to understand and utilise for consumers and ledger verifiers alike.

Fundamentally, 2 premises would need to come together to make this scenario possible.

1. There exist very large, well capitalised and powerful institutions who like the potential benefits that a world wide ledger could bring for them but have a strong vested interest in maintaining control of their currency.
2. Ledger verifiers would prefer to earn fees in coloured fiatcoins over naked bitcoins as they feel that these transactions will make them the most money for the least effort.

Final thought:

This is only one interesting experiment where I have attempted to think of a particularly extreme scenario. This is not some kind of Pascal's Scam where I am trying to convince you that a particular version of the future is more or less likely.  In the end there are so many variables that it is by no means certain what will happen.  However, as a member of Coinfloor, a UK based bitcoin focused company, I am privileged to have a front row seat while this all plays out.

The Transfer, the Block chain's missing link

There is more to the block chain than Blocks and Transactions.

Bitcoin and most of its alternatives have one fundamental element - the Block chain.  The block chain is a shared list of all the bitcoin transactions that were ever made.  The transactions are conveniently grouped up into sets called blocks that get created roughly once every 10 minutes.

However, I believe that there is another type of object scattered across the block chain that you may not be directly aware of.  In fact, even though it is by far the most prevalent, it has remained unnamed (AFAIK).

I like to call it the OutIn  Transfer*.

Bitcoin transactions are made up of a number of inputs (which are references to outputs from previous transactions or "coinbase" in the case of newly mined bitcoin) and a number of outputs (which collectively contain information about who the transaction should pay and how much it should pay them).

Every input can reference nought or one output and every output can only be referenced by nought or one input.  Furthermore, once a relationship has been formed between an output and an input, it can never be broken except by a major event such a block chain split.  So basically, these output and input pairs behave an awful lot like two sides of the same coin (pun definitely intended).

It was this realisation that made me think about what it would mean to treat outputs and inputs as Transfer objects connected to two transactions on either side but existing separately from both. This was in contrast to how they are thought of at present as simply a set of transaction attributes.

At this point a pretty graph may be in order:

The Block chain with missing Transfer "links"

In this graph you can easily see a few things:

• Transfers are clearly shown as being distinct entities and not subsets of either transactions or blocks.
• The value in bitcoin associated with a Transfer is always held in the "Out-side transaction".
• You can see that "Unspent Transaction Outputs" (UTxOs) are actually just Transfers that have not yet been linked to an "In-side transaction".
• Similarly, it is easy to surmise that freshly mined bitcoin would come from Transfers with coinbase In-related data.

 I believe that this way of viewing the block chain as a series of block-bound transactions connected by a number of Transfer "links" extremely useful for a number of reasons:

• It's easy to visualise and think about.
• It's intuitive.
• It clarifies the chain-like nature of the Block chain. Transfers are actually the missing links of the Block chain.
• Contrary to popular belief, transactions are not user or address specific but Transfers are. Although today most transactions tend to have inputs from and outputs to addresses all owned by one entity, with the increased need for scale and the growing desire for privacy, the use of services such as CoinJoin will mean that more and more transactions will involve multiple parties.  Over time, a representation such as the Transfer will become more and more useful as a way of thinking about the subset of transactions that relate to an address or set of addresses in isolation.
• Transfers are efficient ways of thinking about address specific block chain operations (see below).

An example of the utility of Transfers can be seen if one thinks about retrieving a list of unspent transaction outputs (UTxOs) for a particular address.

Currently, if you were to explain to someone how to generate this list you might tell them to do the following:

1. Go to each block where you have transactions confirmed and list the transactions.
2. For each of these transactions, list the outputs that you were responsible for.
3. Record each output.
4. For each subsequent block, locate transactions that have inputs referencing one of the recorded outputs.  If there is a match remove it from the recorded list.
5. If you have any outputs left this is your list of unspent transaction outputs.

In contrast, if you are thinking about the connections between transactions as Transfers you would describe how to get the list of unspent transaction outputs as follows:

1. Get a list of all Transfers with no In-side transaction details.
2. Return the Out-related data only.

It is a similar story if you want to retrieve a list of past transactions or any other address specific query.  

I will continue to explore the Transfer object, focussing especially on its query efficiency compared to more traditional block chain representations.

* Thanks Matt W for the alternative name suggestion.
Thanks Eze and Matt for a number of suggestions with respect to improving the approach.

How Bitcoins work - a clear and (relatively) simple explanation

Bitcoins are cool and will change the world.

I would say this however as I have more than a passing interest.

But it is fair to say that it is not easy to find a clear and relatively simple description of how a Bitcoin transaction works.

That was until I came across this infographic from Dr. Constantin Gurdgiev. 

(best viewed when opened in a new window)

I will likely return to write about more specific aspects of Bitcoin, the Bitcoin protocol and the Block chain at a later stage but for now enjoy.

After Earth - A movie more important than 12 Years a Slave, Django, The Butler and Mandela combined?

Bear with me while I explain myself ...

After Earth, the movie starring Jaden Smith and his father Will Smith, received mix reviews from the critics and the public alike and has so far struggled to make a profit.

Conversely, 12 Years A Slave, starring one of my favourite British actors, Chiwetel Ejiofor, has been nominated for two Oscars while Django Unchained, The Butler and Mandela: Long Walk To Freedom have all received strong reviews.

So why do I believe that After Earth is more significant than all of the above? Because it is one of the few examples of a big budget film that completely eschews the stereotypical portrayal of a black lead actor.

In the movie, Will Smith is a giant among men.  He has no vices, is a family man, a dutiful soldier and revered by all who know him.  By the end of the movie, his son played by Jaden also goes on to become just as fearless and accomplished as he.  No mention is made of the colour of their skin and although the leads are both black, it is completely incidental to the plot.

Contrast this with 12 Years A Slave directed by the uber-talented Steve McQueen.  Although it is undeniably an amazing movie, the plot follows the well-worn path of showing a black man, cruelly tricked and oppressed by evil white men.  Although executed extremely well this is not a new idea.

What Will Smith has done is create a film which doesn't just make black people feel angry and white people feel at best guilty and at worst pity.  Instead, it creates a new narrative - one where both black and white moviegoers can come away with a feeling of respect, admiration and even a little jealousy towards the protagonists.  The unapologetically positive depiction of the black leads presented in After Earth is extremely rare, especially in such a big budget movie.

I believe more movies like After Earth need to be made.  Films like this will in the long run, have more of an effect on changing the perception the public has of black people than any movie about, slaves, servants or the downtrodden ever could.

In case you were wondering, I have watched After Earth and found it to be a very enjoyable movie.

The Rawlemon Betaray - the transparent, super efficient, spherical concentrating solar power device

Sometimes the most powerful ideas are the simplest.

Solar power is the world's most abundant form source of energy.  Everyday, thousands of times more solar energy hits our planet than we need to fulfil all our energy requirements. It is also able to be harvested in usable quantities from almost any part of the world where people live.  Finally, it can be converted into useful energy using environmentally clean and reversible processes.

Given all these massive benefits you may wonder why there is not much more research into this space. There are many answers to that question but I am of the view that the short term benefits of developing simple, efficient, decentralised and easily maintainable solar power generation do not make sense commercially for the existing players in the energy space.  Worse still, it would likely cannibalise their vested energy interests.  As the saying goes, "Turkeys don't vote for Christmas".

So it is left to the passionate individual to spearhead research in this space.  Pioneering individuals like Dan Nocera and his Artificial Leaf or Marjolein Helder and the team working on the Plant-E Microbial Fuel Cell are making progress where multi-billion dollar energy companies are seemingly failing to.

One recent example is the Rawlemon Betaray, an extremely simple and beautiful solar energy device that works by using a transparent ball lens to super efficiently concentrate the rays of the sun on to a small solar panel, stirling engine or some combination of the two.  The advantage of this is extremely efficient, low cost and low complexity energy generation.  Also, as it is nearly 100% transparent it is aesthetically much more pleasing than normal solar panels.

For more information please visit the Rawlemon website.

-O

Bitcoins - If you don't know what all the fuss is about then find out ... Now!

Crytocurrencies like Bitcoin are undoubtedly some of the hottest and most disruptive technologies to appear in recent times.

For a number of reasons, I am not in a position to elaborate much further at this present time but if you don't know what bitcoins are then I would strongly recommend you find out.

You should check out the links here, here, here, here and here to get you started.

-O

In the beginning...

Anyone who knows me knows that I love to talk.

I talk about crytocurrencies, 3D printing, wearable technology, robots, sousveillance and the internet of things.

I talk about online learning, mesh networks, privacy and visual programming.

I talk about non-standard solar power generation, water purification, vertical farms and the technological singularity.

I even talk about technocracy, demarchy, anarcho-capitalism, fairness, combatting systemic imbalances in society and generally how groups make decisions.

I talk about a lot of things but there is a single insight that ties these seemingly disparate threads together:

The world will ultimately become a bleak dystopia (this is very bad) or an amazing utopia (this is very good) and it is technology that will decide which vision of the future becomes a reality.

This blog is my attempt to catalogue some of the technologies that will hopefully bring about the utopian future and occasionally discuss why they are so significant.

Welcome and enjoy.

-O