Category: bitcoin

Is it a blockchain or is it a DLT?

In various discussions I often hear people saying “But that’s not blockchain! That’s DLT!”. This sounds like blockchain and DLT would be two totally different things, while in fact, blockchain is a specific implementation of a DLT.  What most people actually mean is something like this: “But that’s not public, unpermissioned and egalitarian! That’s private, permissioned and authoritarian!”.

While I’m waiting to see the terminoligy get standardized, I have decided for myself to apply the following three-dimensional categorization:

private / public – connectivity to the network. E.g.: are nodes accesible via Internet or Intranet? Can anyone join or is it limited to a closed user group?

permissioned / unpermissioned – access regulation. Do I need a permission/invitation to join the network?

egalitarian / authoritarian – are all participants (potentially) equal in their rights?

The obvious two categories are the two well known extrems:

Public unpermissioned egalitarian – The participant doesn’t have to ask someone for permission to join. He can create an account (private/public key pair) by himself  and he can immediately start to use the network via Internet. Every participant in the network has the same rights (but not necessarily the same means). Typical representants of this category are Bitcoin and Ethereum.

Private permissioned authoritarian – The participant needs a permission or an invitation to join the network. There are authorities, which grant/revoke the rights. The network is private and/or the connection to it is regulated (firewals, whitelists, VPN, …). Typical representants are Hyperledger Fabric and Corda.

How about the other 6 categories? Of what use could they be? Let me try to describe the public one first, since the private variants are a narrower version of it.

Public permissioned egalitarian -the participant needs a permission to join the network, but as soon as he joined, he has the same rights as other participants. For instance an invite-only social network.

Public permissioned authoritarian – the network is open to everyone, but the onboarding and transaction validation is done by the network authorities. Example for this are Ripple, Tobalaba Test Network, and Infrachain (maybe?). What I also could imagine is to have for instance a Europe-wide Proof of Authority Ethereum network. Let’s call this theoretical construct Eurochain. In Eurochain each government has a sealing node and is onboarding its citizents after checking their identity.

Public unpermissioned authoritarian – Same as above but with the difference that participants can join without asking for a permission.

Private permissioned egalitarian – this seems weird at first, but if you put it in the context of an extranet (see CredNet for example, which is the network connecting all German saving banks (Sparkassen)), it starts to make sense again. However, I have not observed one yet.

Private unpermissioned authoritarian – a narrower variant of the public one. For instance if the theoretical Eurochain is not intended to be used by the citizens but only for the communication between governments themselves.

Private unpermissioned egalitarian – more open variant of the permissioned one.

An overview of the blockchain universe

The blockchain universe is evolving very fast. New products and platforms are announced daily. This post should help you to get a rough overview about the existing blockchain technologies.

wich BC.001

I categorize the blockchain technologies into 3 tiers:

tier 1The market leaders.Bitcoin, Ripple, Ethereum
tier 2The challengers, upcoming blockchains where we see the potential to reach tier 1 during the next 6 month.Hyperledger, Quorum, Stellar
tier 3Promissing technololgies and conceptsMonero, Corda

 

Tier 1:

Namebitcoin
Linkshttps://bitcoin.org
https://blockchain.info
https://github.com/bitcoinbook
Main application areavalue transfer, crypto-currency
Characteristicsstable, secure
Consensusproof of work
Governanceopen source, 5 committers, non commercial
DescriptionBitcoin is the first blockchain implementation. The network has started in 2009 and the consensus mechanism has not been hacked yet, despite countless attacks. Bitcoin does not support smart contracts like Ethereum do, however, it offers limited scripting possibilities, which haven been applied in various Bitcoin extensions (e.g. Coloured Coins).

Very often we hear the criticism about performance of the Bitcoin blockchain, the lightning networks shows a possible solution.

In any case, everyone new to blockchain should put his hands on bitcoin and try it at least. The book of Andreas Antonopoulos gives a good introduction to it.
NameRipple
Main application areacurrency independent money and security exchange
Links https://ripple.com/
https://github.com/ripple/rippled
Characteristicsfast
Consensusprobabilistic voting consensus
Governanceopen source managed by Ripple Labs
DescriptionThe ripple concept is based on IOUs and trust relations between network participants. For instance, if a person B trusts that a person A will pay his debts, and C trusts that B will be paying his debts, A will be able to send money to C by introducing following debts (IOUs): 1) A owes money to B, 2) B owes money to C. The network is only managing the ledger of IOUs, the concrete payment is done outside of the network. Moreover, Ripple offers a FX market for transferring between currencies. The FX is offered directly by Ripple. The idea of the systems is, to always use the cheapest liquidity provider.

Ripple is used by several banks as an alternative for the classic correspondent bank based international money transfer. The implementations I looked at still look experimental.
NameEthereum
Linkshttps://www.ethereum.org
Main application areaprogrammable blockchain (smart contracts)
Characteristicsflexible smart contract implementation
ConsensusProof of Work, Proof of Stake in preparation
Governanceopen source, maintained by a foundation
DescriptionEthereum is the leading smart contract platform with a turing completed virtual machine. This means that you can implement every kind of algorithm in this smart contract. If you hear the first time about smart contract concepts, it's a little bit complicated to understand the universal power of this kind of tool. The members of the foundation call it the “world computer”. If you think of the bitcoin blockchain as a large distributed Excel spread sheet, Ethereum would be like having the ability to script every single cell of your spread sheet. Disadvantage of this flexibility is that Ethereum has a large attack surface as we already experienced by recent attack. The good news is that the consensus algorithm didn't fail yet at any point in time.

It is not recommended to implement complex algorithms in Ethereum. Every execution step costs a predefined amount of gas and is much more expensive than the cost of your own CPU at home. It is easy to prototype your own ideas with Ethereum.

 

Tier 2

NameHyperledger
Interesting linkshttps://www.hyperledger.org/
http://www.ibm.com/blockchain/
Main application areano specific
Characteristicsblockchain tool box
Gouvernanceopen source, Linux Foundation
DescriptionHyperledger is not a public Blockchain like Ethereum or Bitcoin, it is more an blockchain building kit under the roof of the linux foundation. The focus of this tool box is building business blockchain apps in private networks. The most active participant seems to be the IBM, they offer also a lot of useful services and extensions around Hyperledger. The IBM bluemix cloud services offers a low entrance level to the technology.
The tool box concepts makes it little bit complicated to define the main characteristics of hyperledger, because you can implement a lot of different kind of distributed ledgers or blockchains.
NameStellar
Interesting linksstellar.org
Main application areacurrency independent money and security exchange
Characteristicsfast
ConsensusStellar Consensus Protocol
Gouvernanceopen source, stellar.org, nonprofit
DescriptionStellar started as a fork of the ripple network. If you look from a distance to both networks you see parallels in the functionality and features. The participance of the stellar network should be individuals, ripple focuses on institutional partners. The consensus algorithm was also changed in the stellar implementation. Stellar could also become a SWIFT competitor like ripple.
NameQuorum
Linkshttps://www.jpmorgan.com/country/US/en/Quorum
https://github.com/jpmorganchase/quorum
Main application areaprivate blockchain for business apps
Characteristicstrust, speed
Consensusmajority voting
Gouvernanceopen source, JP Morgan
DescriptionQuorum is the shooting star of the last months. JPM extended Ethereum with privacy and a voting consensus mechanism. These two extensions match the requirements in the financial industry pretty well. I am excited to see what will happened with this technology in the next months. Most probably, JPM will come up with new business applications and processes based on their new platform.

 

Tier 3

NameCorda
Interesting linkshttps://www.corda.net/
Main application areaFocus on banking applications
Characteristicsno blockchain, just distributed ledger technology
Gouvernanceopen source, Linux Foundation
DescriptionCorda is not really a blockchain it is a distributed ledger system. It comes from the R3 consortiums. R3 started noisy, now first members already left the group. Corda moved under the hyperledger project umbrella, at the moment Hyperledger and Corda are not technical connected, some function exists in both tool boxes in different implementations.
The focus of corda is to become a distributed backend database for the banking industry. Today in the institutes you find different IT systems which are loose coupled by enterprise bus systems. The vision of Corda is, to bring this systems to the same distributed database. From my point of view it is a nice vision from a childlike architecture view, but it will not be realistic. I think the technology can be used to realize a new class of distributed backend systems, like distributed Master Data Management or distributed Business Process Management systems in decentral organized enterprise structures.
NameMonero
Interesting linkshttps://getmonero.org
Main application areaexchanging coins
Characteristicsanonymization
Consensusproof of work
Gouvernanceopen source
DescriptionMonero's focus is on exchanging the Monero coin. The anonymization level is much higher the in the most other crypto currencies. This could also be useful for legal usage. The ideas behind this crypto are similar to bitcoin, but it’s completely new coded. Monero uses an own protocol which is different to all other blockchain implementations. It’s also not possible to see inside the blockchain without the private key or a special view key. This feature enables also an absolutely private communication between the participants. The transactions will also be splintered and merged, so it is not possible to reproduce a single transaction again.

In general, blockchain is a new technology, using it will feel experimental. You’ll have all problems you can get with new technologies in early stages.

In this post we have not discussed all the tokens based of Ethereum. This would be a good content for a follow-up article. 

BitBond – the future of Loans

Last week the P2P lending platform BitBond got a license from the German BaFin. BitBond is a fine little platform with lot of nice features. It’s unique selling point is that it is completely bitcoin based. You can get loans and invest on a USD and BTC base, but the complete backend is based on bitcoins. This will simplify the backend processes for all participants in a radical way and it can be used by unbanked population from undeveloped regions all over the planet. 

The internal account will be managed only in BTC. Yes, this radical bitcoin p2p implementation will be a barrier for anyone who is not familiar with BTC, but it shows how easy this complicated business can become in the future.

The amount of loans is still rising and the platform has good chances for the disruptive network effect. It also has an open API to integrate the functionality into the own business or application and it gives us an idea about the connected business processe for small business.

Another nice feature is “AutoInvest” for all lazy investors, which are not interested in studying the loans on their own.

Ok, lets look on the other side of the coin. The interest rates are pretty high, up to 30% and the credit risk is also really high. On the platform you can look on the credit portfolios of the investors, they diversify their capital to a lot of loans and do not win in every case. Over all they earn money, but it’s not the holy grail. 

BitBond Team, good luck with your platform, thumb up for your platform implementation and ideas !

KW 39.16 – Weekly Blockchainers Recap

The kind of blockchain news are rapidly changing these days.

  • Two years ago: Bitcoin is some dirty stuff for anarchists and criminals. 
  • One year ago: Hmm, the blockchain behind Bitcoin, it sounds interesting, lets have a look on it.
  • Half year ago: Let’s start some prototyping to find out how to use it for us, if we can’t stop the technical progress let it work in our direction.  
  • And today? I see more and more commercial projects or productive systems using the BC, DLT how ever they call it. It’s really inspiring to be a part of the development of this disruptive technology, let us have a look on some brand new examples: 

Ethereum – der neue große Rivale des Bitcoin

Das Thema Ethereum ist in der deutschen Mainstream-Presse angekommen. In dem Artikel “Das ist der neue große Rivale des Bitcoin” schreibt Die Welt:

Der Bitcoin war das Nonplusultra, wenn es um digitales Geld ging. Der Konkurrent Ether könnte das aber nun ändern – auch weil er mehr kann als Bitcoin. Ether übersprang jetzt eine magische Hürde.

Die magische Hürde war die Marktkapitalisierung von mehr als 1 Milliarde Dollar, die aus den Berechnungen von Coinmarketcap.com hervorgeht. Im Vergleich dazu liegt Bitcoin bei einer Marktkapitalisierung von rund 6,3 Milliarden Dollar.

Des Weiteren schreibt Die Welt:

Experten gestehen Buterins Erfindung ein großes Potential zu, von einer revolutionären Technik ist die Rede. Unternehmen wie UBS, Microsoft, Samsung und seit neuestem auch der deutsche Energieversorger RWE experimentieren mit der Währung.

Auch auf den Börsen, die den Kryptowährungshandel anbieten, entkoppelt sich Ethereum immer mehr von Bitcoin. Kraken bietet seit längerem die Möglichkeit Ether direkt in Euro zu kaufen. Laut Welt, möchte auch die größte deutsche Bitcoinbörse Bitcoin.de in den Ether-Handel einsteigen und Bitfinex hat bereits offiziell angekündigt, dass sie ab dem 14.3. den Ether/Dollar Handel anbieten werden.

Der 14.3. ist nicht zufällig gewählt. An diesem Tag, bei Ethereum-Block 1.150.000, wird das neue Ethereum Homestead-Release aktiviert. Dabei wechselt Ethereum in einen, den Entwicklern zufolge, stabilen Betriebsmodus. Die Ethereum Website wurde bereits aktualisiert und das durchgestrichene “Safe” wurde entfernt.

KW 08.16 – Weekly Blockchainers Recap

Bitcoin 0.12 Release Seit dem 23.2. gibt es das neue Bitcoin Core Release, im Link sind die Verbesserung ausgeführt. Bitcoin Skeptiker sehen in der Geschwindigkeit und der Limitierung der Transaktionen immer einen Grund warum das Bitcoin Netzwerk oder die Blockchain Technologie sich nicht komerziell durchsetzt. Ich bin lange genug in er Branche dabei um sagen zu dürfen, dass sich Performanceprobleme in IT Systemen immer mit ausreichend KnowHow lösen lassen. Das aktuelle Release ist ein Schritt in genau diese Richtung. Hyperleger Die IBM Blockchain Marketing Maschine ist gut angelaufen, in diversen Kanälen verkündigen sie was sie mit der Blockchain alles machen werden. Vehicle ist  das Linux Foundation Hyperleger Projekt. Viel zu sehen ist auf der Webseite noch nicht viel. Der IBM ist es aber zuzutrauen, dass etwas entsteht, was der (Berater-) Industrie gefällt. https://www.hyperledger.org  Ich erwarte ein private Blockchain für Smartcontracts nach dem “proof-of-stake” Verfahren. Mich würde es nicht wundern, wenn die Programmierung etwas komplizierter wird. Video am Wochenende Für alle die keine Lust zu lesen haben produziert Amanda ihren Video Blog   “The Daily Decrypt”  http://thedailydecrypt.com . Das Niveau variiert sehr stark, so viele Videos produzieren ist auf jeden Fall viel Arbeit, mal sehen wie lange sie durchhält. Der ein oder andere Interviewpartner kommt aus dem tiefsten Nerdistan.