Bitcoin Bits: 30 April, 2016

A roundup of some of the more interesting bitcoin and blockchain articles from the past week:

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Bitcoin and Blockchain Tech Are Fueling a Fourth Industrial Revolution – by Andrew Quentson, for Bitcoin Magazine

A thought-provoking article on the impact bitcoin can have on things.

“What has slowly been building for two decades has started to gain steam due to the invention of digital currencies such as Bitcoin and Ethereum. Sometimes referred to as programmable money, these currencies and systems allow machines to have their own Bitcoin addresses, which function much like bank accounts due to Bitcoin’s permissionless nature. In combination with other technologies, “bank account power” gives machines, in effect, a level of intelligence that allows them to manage and allocate funds according to stated rules.”

The new power that these things will have is what is fuelling the fourth industrial revolution.

“One of the genius aspects of Bitcoin is that it turns money into pure and free information, thus transforming physical cash and gold into the natural habitat of machines which are experts at managing, storing, manipulating and communicating information.”

It’s early days yet. We’re still laying the groundwork for the infrastructure. But the revolution is coming.

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by Alex Wong for Unsplash
by Alex Wong for Unsplash

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Europe’s Regulatory Blockchain Shift on Display at Private Parliament Event – by Gabrielle Patrick, for CoinDesk

In an event organized by the European Digital Currency & Blockchain Technology Forum (a public policy think-tank for distributed ledger and digital currency applications), in which the EU Commission, the Bank for International Settlements, the World Bank, the United Nations, Europol, ESMA, the UK Treasury, the Bank of England, Nasdaq, and a couple of blockchain startups took part, a series of roundtables discussed the role of the blockchain in future regulation, and the role of future regulation in the blockchain.

“The roundtables explored how cryptocurrencies have sparked an examination of the issuance of money itself and the structural instability of financial systems. Since monopolies rely on a lack of inter-connectivity and diversity of systems, they are structurally unstable – and cryptocurrencies can see the end of a 300-year old bank debt monopoly.”

Although there are no transcripts of the discussions (Chatham House Rules, which means no press or follow-up), emphasis was placed on the need to not over-regulate.

“As analyzed during the roundtables, regulation needs to support innovation, not be overly burdensome and above all, constitute clear policy goals…

Therefore, what must be kept in mind is whether the current regulatory goals are limiting creative disruption and, if they are, what changes are needed. Also, roundtable participants described shared ledgers and cryptocurrencies as a nascent but disruptive innovation, so that there must be a dedicated effort to identify gaps in current regulations and determine how to fill those gaps without premature or overly burdensome regulation.”

The evidence that governments are beginning to take the blockchain potential seriously is increasing, and the open discussion of the dangers of over-regulation is encouraging.

“Regulators commented that with new innovation brings new risks, but that cryptocurrencies and shared ledgers represent a cheap and efficient global payments infrastructure, the use of which should not be over regulated at this time.”

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Does the Lightning Network Threaten Bitcoin’s Censorship Resistance? – by Kyle Torpey, for Bitcoin Magazine

Kyle Torpey addresses some of the concerns surrounding the Lightning Network.

“The Lightning Network may well be Bitcoin’s primary solution to the issue of scalability, but many skeptics believe there are unresolved issues with this layer-2 system for the blockchain. The possibility of too much centralization via so-called “supernodes” is one of the common criticisms of the Lightning Network, and attached to that is the fear of these new, mostly-centralized payment hubs having the capacity to censor transactions.”

While the functionality of the Lightning Nodes has yet to be tested in a real-world scenario, it is possible that the privacy on Lightning ends up being greater than on the bitcoin blockchain, since not all transactions are broadcast.

“Although not perfect, the Lightning Network does offer the advantage of keeping information related to specific transactions away from an open, transparent ledger. Whether the Lightning Network can offer better privacy than a traditional bank account (where only the bank and the parties involved in a transaction know about it) is an unknown at this point.”

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Banks Bitcoin and Digital Identity – by Jeff Handler, for Finextra

An in-depth look at the privacy issues that block bitcoin from becoming useful for banks:

“While Bitcoin has been built to facilitate open, peer to peer payments by keeping track of who has what through decentralized consensus, the Bitcoin blockchain alone cannot provide a record of ‘who’ that is compatible with how government and law enforcement want money to move.”

Which characteristic of bitcoin is more important for its users? Privacy? Or efficiency? That’s a very difficult question to answer, and we do not yet have a solution that satisfies both needs on an institutional level.

“Challenges surrounding scaling still need to be overcome, and top down approaches to ‘banking the unbanked with Bitcoin’ that fail to properly assess and understand the consumers and communities they are trying to reach, will likely leave Bitcoin as a solution looking for a problem.”

We’re getting close though. Ideas such as tokenization and unbundling are helping us to redefine what we mean by identity, and to contemplate what information we actually need, and why.

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It’s 2016, What Are Bitcoin’s Real Use Cases? – by Bitcoin Magazine, for Nasdaq

A good overview of the main use cases, just in case we forget.

  1. Digital gold
  2. Trading and speculation
  3. Discount shopping
  4. Darknet marketplaces and ransomware
  5. Online gambling
  6. Sales of digital goods

Most of the people I know that use bitcoin are in it for speculation. Just sayin’.


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