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Can Blockchain Make Music Great?

Can Blockchain Make Music Great?

  

Blockchain technology can't write songs or play instruments – at least not yet. But, it might be able to ensure that those who do get the proper credit and compensation, a problem that has always bedeviled this $15bn industry. Since the start of  2017 alone, both The Three Degrees and The Carpenters have brought cases against their record companies for alleged unpaid royalties. And the modern move towards streaming services, like Spotify and Jay Z's Tidal, has brought a plethora of cases where artists said they have not been adequately compensated for the use of their music.

In 2015, for example, Spotify was sued for $150m by a group of artists who claimed that the service had reproduced and distributed their music without permission. Tidal, too, has been hit with law suits over the issue. The Open Music Initiative (OMI) is a newly launched consortium that seeks to leverage blockchain technology to solve disputes like these, but it's far from the only one.

There are a number of companies dedicated to building a blockchain solution for music, including dotblockchain Music (dotBC), Mycelia, MusicChain and UjoMusic, said attorney Jason Epstein, a partner in the Nashville office of Nelson Mullins, where he co-leads the technology and procurement industry group. OMI is being led by the Berklee College of Music Institute for Creative Entrepreneurship (BerkleeICE) in Boston, in collaboration with the MIT Media Lab and IDEO, and with support from a number of major music labels, media companies, streaming services, publishers, collection societies and nearly 100 other founding entities.

Panos Panay, co-founder of OMI and founding managing director of BerkleeICE told CoinDesk:

"The objective behind the initiative is to use our academic neutrality and research abilities to advance the process of creating an open protocol."

If that sounds dense or unfamiliar, you're not alone.

Stuck in the Middle With You

To understand how the blockchain could benefit the music business, it's important to first understand a bit about that industry, Panay notes. For one, it's a complex mesh of many players, most who stand between the artists and musicians who create the music and the consumers who listen to it. All of these players – record companies, publishers, streaming service providers – have their own separate databases to keep track of who owns the rights to the music and who is owed what money.

But none of these databases talk to each other. On top of that, ownership of the underlying assets – the composition of the songs as well as the sound recordings of the music – change hands all the time. Another problem is the "dynamic and conflicting nature of the metadata itself", Epstein said. "One company's data will have identifiers for works, contributors, recordings and artists as one thing and another company may have different identifiers altogether. Often, there are even conflicts with the data in the same company," he continued.

For example, Chuck Berry, Charles Berry and other variations on the name could all be the same person, but might have different identifiers. This makes it very difficult to identify the works and who to pay, Epstein said. "This lack of interoperability, coupled with the complexity of the way music is being both created and consumed, has created an issue where hundreds of millions of dollars are not really sent to their rightful owners," Panay said in interview.

He sums up the problem, and the opportunity for blockchain, succinctly:

"Just about every lawsuit you hear about in the music industry is ultimately the result of this lack of uniform way of identifying ownership."

Ball and Chain

Panay took his argument a step further, suggesting that this design also holds the industry back from its own ability to innovate. The cost of starting a new streaming service, he said, is prohibitively expensive, largely because of rights and licensing. "Right now if your music gets played on the radio or in a restaurant or on a streaming service, it takes a minimum of 18 to 20 months to get paid, and when you get paid you have no idea if that is the right or wrong amount,” Panay said.

Panay argues a blockchain-type system could add oversight – a subject he knows about as the founder of Sonicbids, a leading platform for bands to book gigs and market themselves online. OMI, he said, "is an attempt that uses the underlying technology of blockchain to effectively create a distributed ledger that enables all of these different databases and applications to interoperate."

Indeed, the distributed nature of blockchain tech, he said, is "catalytic" to making music industry participants excited about joining OMI. "The technology is proving critical to getting the players to the table to advance this," Panay said. "For me it's all because of the nature of the underlying technology." For example, it sidesteps the past issues that have become apparent when central authorities have entered the equation, Panay said, adding:

"At its core, this is a distributed ledger where they are able to share data and validate transactions without having to give up their individual sovereignty."

Nevertheless, blockchain isn’t necessarily a panacea, said Epstein.

"Tracking royalties and licensing rights is only as good as the metadata associated with the data," he explained, suggesting that the solution may lie in combining blockchain with other technologies. For example, one of his clients, Dart Data, uses machine learning to resolve the dynamic nature of data conflicts, which would facilitate the use of blockchain in the music industry.

Come Together

The exploration, while still in its infancy, has also attracted some major players who you might not associate with the finer arts. For example, OMI is using Intel's Sawtooth Lake, an active open-source project within Hyperledger, as its reference platform. Sawtooth Lake is a modular platform for building, deploying and running distributed ledgers. The platform supports customizable data models to capture the current state of the ledger, transaction languages to change the ledger state, and consensus methods to validate transactions.

While that might not sound like the perfect match with OMI's initiative, Reed argues the opposite. "We have been encouraged by the banks and the music providers who have collaborated with us," he said. "Both collaborations have informed requirements that will increase the robustness and the versatility of Sawtooth Lake in the future." Still, OMI is admittedly a bit of an oddity in comparison to Intel's other work. Intel is a founding member of Hyperledger and is working across its more than 100 members, Reed said. In addition to starting work with OMI, the company has had success with a bond-trading proof of concept with R3’s banking consortium.

Waiting Game

But how soon until all this becomes reality?

Panay notes that OMI is still in its early stages of development and acceptance. The entire coalition is planning to hold its third technology meeting in New York in the next few weeks to discuss the progress. "I would expect between now and the end of the summer we will be able to demonstrate some early prototypes of what this can do," Panay said, but noted that it will take a few years to fully implement. Epstein of Nelson Mullins notes that there are many different data standards for blockchain as well as various and emerging blockchain business models, factors he said will make development slow.

"It will take some time for those standards and models to develop before enterprises are willing to go all in," he said. Over time, however, "change is inevitable and it is merely a function of how all stakeholders in the industry adopt". If the music initiative succeeds in this process, it could have wider implications for other similar creative and entertainment fields, such as book publishing, movies, television and the like. "The implications are tremendous for efficiency in terms of payment flows, cutting out intermediaries, the ability of these companies to monetize content," Panay said, adding:

"In most places right now, that's virtually non-monetizeable."

Chuck Reynolds
Contributor

You may not realize it yet, but blockchain could change your life

You may not realize it yet,
but blockchain could change your life

Bitcoin (virtual currency) coins

It appears that once again, the technological genie has been unleashed from its bottle. Summoned by an unknown person or persons at an uncertain time in history, the genie is now at our service for another kick at the can- to transform the economic power grid and the old order of human affairs for the better.

We’re not talking about the social web, artificial intelligence, big data, robotics, or even self-driving cars. We’re talking about the blockchain, the technology behind digital currencies like Bitcoin. Block. Chain. OK, not the most sonorous word ever– it sounds like a combination of blocking and tackling and a chain gang. Sonorous or not, this technology represents nothing less than the second generation of the Internet, and it holds the potential to transform money, business, government, and society. Let us explain.

The Internet today connects billions of people around the world. It’s great for communicating and collaborating online. But because it’s built for moving and storing information and not value, it has done little to change how we do business. When you send someone information like an email, PDF, PPT, or JPG, you’re really sending a copy not the original. Depending on the rights granted to recipients, they may be able to print a copy of these files.

 

But under no circumstances should you print, say, money. So with the Internet of information, we have to rely on powerful intermediaries to establish trust. Banks, governments, and even social media companies like Facebook work to establish our identity and ownership of assets. They help us transfer value and settle transactions.

Overall, they do a pretty good job — with limitations. They use centralized servers, which can be hacked. They take a fee for their services – say 10 percent to send money internationally. They capture our data, not just preventing us from monetizing it, but often undermining our privacy. They are sometimes unreliable and often slow. They exclude two billion people who don’t have enough money to justify a bank account. In sum, they capture a lopsided share of the benefits of the digital economy.

Enter the blockchain, the first native digital medium for peer to peer value exchange. It's protocol establishes the rules—in the form of globally distributed computations and heavy duty encryption—that ensure the integrity of the data traded among billions of devices without going through a trusted third party. Trust is hard-coded into the platform. That’s why we call it the Trust Protocol. It acts as a ledger of accounts, a database, a notary, a sentry, and clearing house, all by consensus.

Every business, institution, government, and individual can benefit in profound ways. The blockchain is already disrupting the financial services industry.How about the corporation, a pillar of modern capitalism? With this global peer-to-peer platform for identity, reputation, and transactions, we will be able to re-engineer deep structures of the firm for innovation and shared value creation.How about these billions of connected smart things that will be sensing, responding, sharing data, generating and trading their own electricity, protecting our environment, managing our homes and our health? And this Internet of Everything will need a Ledger of Everything.

And how about growing social inequality? Through the blockchain, we can go from redistributing wealth to distributing value and opportunity fairly in the first place, from cradle to grave. Including billions of people in the global economy: protecting rights through immutable records like land titles; creating true sharing economy by replacing service aggregators like Uber with distributed applications on a blockchain; ending the remittance rip-off and helping diasporas return funds to their ancestral lands; enabling citizens to own and monetize their data (and protect privacy) through owning their personal identities rather than identities being owned by big social media companies or governments; uunleaunleashing halcyon age of entrepreneurship by enabling small companies to have all the capabilities of large companies; helping build accountable government through transparency, smart contracts and revitalized models of democracy.

So rather than just re-distributing a posteriori, wealth, we can pre-distribute a priori by democratizing the creation of wealth in the first place.As with all major paradigm shifts, there will be winners and losers. But if we do this right, blockchain technology can usher in a halcyon age of prosperity for all.

Chuck Reynolds
Contributor

How The Blockchain Will Transform Everything From Banking To Government To Our Identities

How The Blockchain Will Transform Everything
From Banking To Government To Our Identities

Just as their new book, “Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, And The World,” came out, ventures centered on blockchain, the technology behind Bitcoin, were in the news — including the DAO, the most funded crowdfunded project in history, which had raised $147 million as of press time. But the seeds of their book were first planted back in 2013 when Alex began hearing about Silk Road. “I approached it with some level of caution, but the deeper I got the more convinced I became that this technology held the potential to be a really big deal and to transform a lot of industries,” he says.

At the time, Don was running a $4 million research project called Global Solution Networks at the University of Toronto on new ways of doing global problem solving, including Bitcoin. Since Alex, a former investment banker who now heads up blockchain advisory firm Northwest Passage Ventures, had almost a decade in financial services, he wrote the 2014 paper, “A Bitcoin Governance Network,” which in turn led to their book deal.

Additionally, Don, CEO of Tapscott Group, who, in 1994, had written one of the first books on the web and business, “The Digital Economy.” In 2013, he was working on some mini-chapters for the 20th anniversary. He realized that he had written that it was possible the internet would be “captured by powerful forces and the benefits will be asymmetrical, leading ultimately not to prosperity but growing social inequality,” he says. Realizing he’d been on the mark, he began considering technologies that could help create a more prosperous world, which piqued his curiosity in Bitcoin and blockchain.

The two discuss the transformation this technology will unleash.

Why do you think the blockchain will revolutionize our world?

The first generation of the Internet was a great tool for communicating, collaborating and connecting online, but it was not ideal for business. When you send and share information on the Internet, you’re not sending an original but a copy. That’s good for information — it means people have a printing press for information and that information becomes democratized — but if you want to send an asset, it’s a problem. If I send you $100 online, you need to be sure you have it and I don’t, and that I can’t spend the same $100 somewhere else. As a result, we need intermediaries to perform critical roles — to establish identity between two parties in a transaction, and to do all the settlement transaction logic, which includes record-keeping.

With blockchain, for the first time, we have a new digital medium for value where anyone can access anything of value — stocks, bonds, money, digital property, titles, deeds — and even things like identity and votes can be moved, stored and managed securely and privately. Trust is not established though a third party but with clever code and mass consensus using a network. That’s got huge implications for intermediaries and businesses and society at large — everything from financial services, trade and trust and intermediaries to technology firms, which have been organizing everything from how we hail a cab with Uber to how we interact on Facebook to how we search for information on Google. And also with government, as a central repository of information an entity that delivers services.

There’s an opportunity to disrupt how those organizations work. Intermediaries, though they do a good job, have a few problems — they’re centralized, which makes them vulnerable to attack or failure — ask any customer at Morgan Stanley or Target. They tax the system: Sending money overseas can cost 10%. They capture data which prevents us from monetizing it and undermines our privacy. They exclude billions of people from the global economy because they can’t open a bank account without a birth certificate, passport or utility bill or the funds to justify it. There’s an opportunity to right a lot of those wrongs and create an economy and society more open, inclusive and fair.

Don: The only public policy solution to inequality is the redistribution of wealth. Everywhere you hear people saying we need to tax wealthy people more. That may end up being necessary, but there’s another opportunity created by this internet of value — rather than the redistribution of wealth, the pre-distribution of wealth. With blockchain, we can go from redistributing wealth to distributing value and opportunity value fairly a priori, from cradle to grave.

This can be done by protecting rights through immutable records like land titles, creating a true sharing economy by replacing service aggregators like Uber with distributed applications on the blockchain, ending what we call the remittance ripoff and helping diasporas return funds to their ancestral lands and families, enabling citizens to own and monetize their data to owning their personal identities — rather than them being owned by big social media companies and governments — by unleashing a new age of entrepreneurship, enabling small companies to have the benefits of Bitcoin without liabilities, and helping build accountable governments through transparency, smart contracts and revitalized models of democracy.

How will the blockchain help us manage our identities?

Alex: The virtual you is owned by large intermediaries. Every time you interact with a bank, the government, social media companies, that leaves behind a trail of crumbs about who you are. This virtual you knows more about you than you do sometimes. You may not remember two years ago what you said on Facebook or where you went with Uber but the virtual you does. So there’s a strange phenomenon from the first generation of the Internet where the most important asset class that’s been created is data —and we don’t control it or own it.

In the book, we discuss individuals taking back their identity through your own personal avatar — you would only apply that fragment of information necessary to receive that service. If you want to buy something, all the counterparties need to know is that you have the money to make that purchase. If you go to a bar, all they need to know is that you’re over 21. There’s an opportunity for you to control how you apply data in different situations, and that will have a big impact on a lot of different companies.

I could imagine distributed applications/social networks where people don’t push their data through a centralized intermediary but control, move and allocate it to certain situations. You can imagine relationships with brands and companies where you give up the data on your Fitbit or Apple Watch in exchange for micropayments, loyalty points or discounts in stores, where that information isn’t a free commodity you’re handing over but an asset you control.

How will blockchain reinvent financial services?

Don: The financial services industry is at the heart of the capitalist economy, and it’s a $100 trillion business. In many ways, it’s quite antiquated. It’s a Rube Goldberg machine, a complicated machine that does a simple thing like crack an egg or open a door. You tap your card at Starbucks, and the bitstream goes through a half dozen computers, some ’70s mainframes, and three days later, a settlement occurs. Some settlements take weeks. With blockchain, there’s an opportunity to profoundly change the nature of the entire industry. The Starbucks transaction should be instant.

At the heart of it, the financial services industry moves value. A CEO of one of the big banks said recently, We’re in the business of transferring value, and because of that, we can store value, lend value, exchange value, and fund and invest value and insure value and account for value. If you take away that movement of value function, you deeply undermine our entire raison d’etre and our foundation for existence, so this is both an existential threat to the financial services industry and an historic opportunity.

Alex: Banks trade on trust, so what happens in a world where trust is not established by intermediaries but rather is a native feature of technology everyone uses? If you’re an intermediary making money because of your historical position in that industry and you’re not adding any value, you will be disintermediated by this technology, and that is good for consumers and the economy. But that doesn’t mean there’s no role for financial services firms. We still need trusted third parties to perform services and functions. The whole aspect of servicing the consumer is critical to any company’s wellbeing, so having banks that can help coordinate all the financial services that people might use on the blockchain could be a huge opportunity.

Within the decade, every single financial asset, which is really just a contract — a stock is a contract, a bond is a contract of paper — those contracts will all move to a blockchain-based format. There’s an opportunity for banks to become securitizers and issuers of those new forms of financial assets. They may not make money as intermediaries trading it, but as originators, there’s a huge opportunity.

They could very well target the billions of people in the world who don’t have access to financial services. Even Goldman Sachs offering retail banking to people with as little as a $1 deposit indicates the shifts happening in the industry even pre-blockchain. Imagine what that will do for the world’s unbanked. There are as many opportunities to create value as there are for disruptions, but it will be the financial services firms that choose to disrupt from within, that choose not to fall victim to the innovator’s dilemma, that survive.

Don: The CEOs of the big financial services companies fall into three categories: Those who are not sure about this tech and fear it; those who view it as an important opportunity to speed up the metabolism of the industry with a common blockchain or blockchains, reduce errors and create a more secure industry and radically cut costs; and then those that view it strategically to create new value and penetrate new markets such as the two billion unbanked. Some of these CEOs understand it will bring about convulsive changes to their business model.

Alex: In the accounting world, a lot of firms rely on costly audits to drive their profits — KPMG, Deloitte, PwC, Ernst & Young. Most accounting is based on double-entry accounting where you record a debit and a credit every time something occurs. With blockchain, you could have a third entry time-stamped in a distributed ledger that could be acceptable to any relevant stakeholders from regulators to shareholders, giving you a perfect record of the truth and thus the financial health of an organization. That would make things like quarterly and annual audits redundant or would at the very least significantly reduce that need for man power.

What does that do to the businesses of the Big 4? It turns out that contrary to popular opinion, they’re only a third audit in what is called their assurance business. The remainder is consulting, advisory and tax. I was speaking to one of the accounting firm’s CEO, and he said, "Maybe it’s an opportunity. Maybe we can offer our accounting and assurance services as a software, and that frees us up to do more of the high-growth, value-added, higher margin business consulting and advisory business. It might mean some pain in the short term in terms of job losses, but in the long run, it might enable us to do much more."

How could the blockchain change what we think of as a corporation today?

Don: Nobel-winning economist Ronald Coase argued that firms exist because transaction costs in an open market are greater than the cost of doing things inside the boundaries of the corporation. He identified four costs — of search, coordination, contracting and establishing trust — that are greater in an open market. Blockchains will profoundly affect all of these. Blockchains will drop search costs — our ability to search for the truth, not just information but what has occurred. What transactions have happened? What physical things interacted with what other physical things?

The cost of coordination will drop, and it’s possible to imagine smart agents provide agency functions for the firm. And you see this with the DAO, which just raised [$142 million as of press time] and doesn’t have management. Software provides the coordination. The third is contracting costs, and smart contracts will profoundly reduce contracting costs in an open market.

The cost of establishing trust — you can now synthesize trust on an open platform and people who’ve never met can trust each other to do certain things. So this results in a whole number of new business models. It will also lead to a deep change in the deep structure and architecture in the firm, and how we orchestrate capability in society to innovate and create goods and services.

How will it connect to the Internet of Things?

Alex: In the next decade or so, hundreds of trillions of daily devices will come online and be integrated into our daily lives, doing everything from monitoring our health, to managing our affairs to driving us around to generating power and selling it. These devices need a way to communicate sensitive data securely and efficiently and to transact with each other peer-to-peer. It turns out the Internet of Everything needs a Ledger of Everything because a lightbulb buying power from your neighbor’s solar panel definitely won’t use banks or the Visa network. It’ll need a new native format for moving, storing and managing value, so we think blockchain is utterly critical to animating the Internet of Things and creating new business models for it. In the book, we talk about a replacement for Uber called SUber, where driverless cars are coordinating, contracting and searching. Those devices, connected to your phone, which is your way of making payments, need a way to store and move sensitive data and value. The only way to do that is with blockchain.

How will it transform government and democracy?

Don: Right now, governments take tax revenue from corporations, individuals, licenses and so on. All of that can change. We can, first of all, have transparency in a radical sense because sunlight is the best disinfectant. Secondly, we can open up governments in a different sense of sharing data. This is not transparency, which is about the sharing of pertinent information to shareholders. Open data is about the release of digital assets.

By doing that on a blockchain platform, governments can enable self-organization to occur in society where companies, civil society organizations, NGOs, academics, foundations, and government agencies and individual citizens ought to use this data to self-organize and create what we used to call services or forms of public value. The third one has to do with the relationship between citizens and their governments.

There are more opportunities to create government by the people for the people — not for big money and strong, vested interests. officials could be elected with a smart contract that specifies what they will do when elected, and that they won’t get paid unless they do what the electorate demanded rather than what their funders demanded.

Many governments have spent billions and billions of dollars trying to figure this out. Electronic voting won’t be delivered by traditional server technology because it won’t be trusted by citizens, but with blockchains, citizens can confirm that their vote was cast. You can — in a way that’s completely private to you — also confirm who you voted for and that your vote was counted.

Chuck Reynolds
Contributor

What is Bitcoin Mining?

What is Bitcoin Mining?

 

Mining is the process of adding transaction records to Bitcoin's public ledger of past transactions. This ledger of past transactions is called the blockchain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.

Mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by miners remains steady. Individual blocks must contain a proof of work to be considered valid. This proof of work is verified by other Bitcoin nodes each time they receive a block. Bitcoin uses the hashcash proof-of-work function.

The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus. Mining is also the mechanism used to introduce Bitcoins into the system: Miners are paid any transaction fees as well as a "subsidy" of newly created coins. This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system. If you clicked the button above, then you are currently mining bitcoin, the math-based digital currency that recently topped $1,000 on exchanges. Congratulations. (It won’t do anything bad to your computer, we promise.)

New bitcoins are created roughly every 10 minutes in batches of 25 coins, with each coin worth around $730 at current rates. Your computer—in collaboration with those of everyone else reading this post who clicked the button above—is racing thousands of others to unlock and claim the next batch. For as long as that counter above keeps climbing, your computer will keep running a bitcoin mining script and trying to get a piece of the action. (But don’t worry: It’s designed to shut off after 10 minutes if you are on a phone or a tablet, so your battery doesn’t drain).

So what is that script doing, exactly?

Let’s start with what it’s not doing. Your computer is not blasting through the cavernous depths of the internet in search of digital ore that can be fashioned into bitcoin bullion. There is no ore, and bitcoin mining doesn’t involve extracting or smelting anything. It’s called mining only because the people who do it are the ones who get new bitcoins, and because bitcoin is a finite resource liberated in small amounts over time, like gold, or anything else that is mined. (The size of each batch of coins drops by half roughly every four years, and around 2140, it will be cut to zero, capping the total number of bitcoins in circulation at 21 million.) But the analogy ends there.

What bitcoin miners actually do could be better described as competitive bookkeeping. Miners build and maintain a gigantic public ledger containing a record of every bitcoin transaction in history. Every time somebody wants to send bitcoins to somebody else, the transfer has to be validated by miners: They check the ledger to make sure the sender isn’t transferring money she doesn’t have. If the transfer checks out, miners add it to the ledger. Finally, to protect that ledger from getting hacked, miners seal it behind layers and layers of computational work—too much for a would-be fraudster to possibly complete.

And for this service, they are rewarded in bitcoins.

Or rather, some miners are rewarded. Miners are all competing with each other to be first to approve a new batch of transactions and finish the computational work required to seal those transactions in the ledger. With each fresh batch, winner takes all. It’s the computational work that really takes time, and that’s mostly what your computer is doing right now. It’s trying to solve a kind of cryptographic problem that involves guessing and checking billions of times until it finds an answer. If this all seems pretty heady, that’s because mining is an elaborate solution to a tough problem that plagues every currency—double spending.

Double spending and a public ledger

As the name implies, double spending is when somebody spends money more than once. It’s a risk with any currency. Traditional currencies avoid it through a combination of hard-to-mimic physical cash and trusted third parties—banks, credit-card providers, and services like PayPal—that process transactions and update account balances accordingly.

But bitcoin is completely digital, and it has no third parties. The idea of an overseeing body runs completely counter to its ethos. So if you tell me you have 25 bitcoins, how do I know you’re telling the truth? The solution is that public ledger with records of all transactions, known as the blockchain. (We’ll get to why it’s called that shortly.) If all of your bitcoins can be traced back to when they were created, you can’t get away with lying about how many you have.

So every time somebody transfers bitcoins to somebody else, miners consult the ledger to make sure the sender isn’t double-spending. If she indeed has the right to send that money, the transfer gets approved and entered into the ledger. Simple, right? Well, not really. Using a public ledger comes with some problems. The first is privacy. How can you make every bitcoin exchange completely transparent while keeping all bitcoin users completely anonymous? The second is security. If the ledger is totally public, how do you prevent people from fudging it for their own gain?

Is there no such thing as a bitcoin account?

Bitcoin’s ledger deals with the privacy issue through a bit of accounting trickery. The ledger only keeps track of bitcoin transfers, not account balances. In a very real sense, there is no such thing as a bitcoin account. And that keeps users anonymous. Here’s how it works: Say Alice wants to transfer one bitcoin to Bob. First Bob sets up a digital address for Alice to send the money to, along with a key allowing him to access the money once it’s there. It works sort of like an email account and password, except that Bob sets up a new address and key for every incoming transaction (he doesn’t have to do this, but it’s highly recommended).

Chuck Reynolds
Contributor

Is Bitcoin Mining Profitable in 2017?

Is Bitcoin Mining Profitable in 2017?

The short answer would be “It depends on how much you’re willing to spend”. Each person asking himself this will get a slightly different answer since Bitcoin Mining profitability depends on many different factors. In order to find out Bitcoin mining profitability for different factors “mining profitability calculators” were invented.

These calculators take into account the different parameters such as electricity cost, the cost of your hardware and other variables and give you an estimate of your projected profit. Before I give you a short example of how this is calculated let’s make sure you are familiar with the different variables:

Hash Rate – A Hash is the mathematical problem the miner’s computer needs to solve. The Hash Rate is the rate at which these problems are being solved. The more miners that join the Bitcoin network, the higher the network Hash Rate is.

The Hash Rate can also refer to your miner’s performance. Today Bitcoin miners (those super powerful computers talked about in the video) come with different Hash Rates. Miners’ performance is measured in MH/s (Mega hash per second), GH/s (Giga hash per second), TH/s (Terra hash per second) and even PH/s (Peta hash per second).

Bitcoins per Block – Each time a mathematical problem is solved, a constant amount of Bitcoins are created. The number of Bitcoins generated per block starts at 50 and is halved every 210,000 blocks (about four years). The current number of Bitcoins awarded per block is 25. However soon enough the block halving will occur and the reward will be downgraded to only 12.5 Bitcoins.

Bitcoin Difficulty – Since the Bitcoin network is designed to produce a constant amount of Bitcoins every 10 minutes, the difficulty of solving the mathematical problems has to increase in order to adjust to the network’s Hash Rate increase. Basically, this means that the more miners that join, the harder it gets to actually mine Bitcoins.

Electricity Rate – Operating a Bitcoin miner consumes a lot of electricity. You’ll need to find out your electricity rate in order to calculate profitability. This can usually be found on your monthly electricity bill.

Power consumption – Each miner consumes a different amount of energy. Make sure to find out the exact power consumption of your miner before calculating profitability. This can be found easily with a quick search on the Internet or through this list. Power consumption is measured is Watts.

Pool fees – In order to mine, you’ll need to join a mining pool. A mining pool is a group of miners that join together in order to mine more effectively. The platform that brings them together is called a mining pool and it deducts some sort of a fee in order to maintain its operations. Once the pool manages to mine Bitcoins the profits are divided between the pool members depending on how much work each miner has done (i.e. their miner’s hash rate).

Time Frame – When calculating if Bitcoin mining is profitable you’ll have to define a time frame to relate to. Since the more time you mine, the more Bitcoins you’ll earn.

Profitability decline per year – This is probably the most important and elusive variable of them all. The idea is that since no one can actually predict the rate of miners joining the network no one can also predict how difficult it will be to mine in 6 weeks, 6 months or 6 years from now. This is one of the two reasons no one will ever be able to answer you once and for all “is Bitcoin mining profitable ?”. The second reason is the conversion rate. In the case below, you can insert an annual profitability decline factor that will help you estimate the growing difficulty.

Conversion rate – Since no one knows what the BTC/USD exchange rate will be in the future it’s hard to predict if Bitcoin mining will be profitable. If you’re into mining in order to accumulate Bitcoins only then this doesn’t need to bother you. But if you are planning to convert these Bitcoins in the future to any other currency this factor will have a major impact of course.

Chuck Reynolds
Contributor

Top Cryptocurrency Projects Created Before Bitcoin

Top Cryptocurrency Projects Created Before Bitcoin

Even though a lot of people seem to think Bitcoin was the first cryptocurrency of its kind, this is not entirely true. Bitcoin is by far the most successful project in the modern era, but the concept of decentralized digital money was not an invention by Satoshi Nakamoto. Four different currencies were well ahead of Bitcoin, each of which deserves a mention.

B-Money

Very few people will recall the days of B-Money, as this type of cryptocurrency was first introduced in 1998, predating bitcoin by more than ten years. However, B-Money is very different from Bitcoin, even though developer, Wei Dai, focused on anonymity and a distributed way of issuing coins.

A whitepaper was released to accommodate the introduction of B-money, which has the same basic principles of modern cryptocurrencies. Digital pseudonyms can send and receive currency on a decentralized network, and even enforce contracts among themselves without third-party involvement. Unfortunately, B-Money never got off the ground past the whitepaper.

Bit Gold

Shortly after the B-Money whitepaper was released publicly, Nick Szabo launched a very similar project known as Bit Gold. This electronic currency system had its very own proof of work system, not all that different from how Bitcoin is minted today. All solutions were cryptographically put together and published for the public, mimicking a modern blockchain.

More importantly, Bit Gold was the first concept to move away from relying on centralized authorities to avoid double spending of the currency. Instead, Szabo wanted to recreate the characteristics of gold by cutting out the middleman altogether. One could say that Bit Gold and Bitcoin are not all that different, despite being created more than ten years apart.

Digicash

Not to be confused with DigitalCash (currently known as DASH), Digicash was created back in 1990, meaning that it even predates both B-Money and Bit Gold. Designed by David Chaum, it was the first type of electronic money that offered anonymity due to its usage of cryptographic protocols. At the time of development, Digicash was a revolutionary concept and one of the earliest forms of electronic money.

By using public and private key cryptography, it also allowed anyone to become his or her own bank and control their funds without third-party oversight. Issued payments would be untraceable for banks and governments. Unfortunately, the company behind Digicash filed for bankruptcy in 1998, and sold in 2002. It is evident that Digicash was a great concept, but well ahead of its time.

Hashcash

One cannot talk about cryptocurrencies without paying respect to the Hashcash project first. Although this currency was designed to be used for different purposes (limiting email spam and preventing DDoS attacks), it made quite a name for itself back in 1997. Using a proof of work algorithm for the generation and distribution of new coins, a lot of Hashcash’s features ended up in the Bitcoin protocol developed by Satoshi Nakamoto.

As more emails were sent through the system, Hashcash required growing numbers of computation resources. Back in 1997, that seemed far more unmanageable than it is today. Low-end systems would eventually have limited accessibility to verify email headers, thus reducing the effectiveness of the system. It was a rudimentary project with a lot of advantages, but also with some flaws that needed to be ironed out. Eventually, most of the Hashcash features became part of the Bitcoin protocol, current spam filter protection, and several email clients.

Chuck Reynolds
Contributor

Reciprocity is the Key to Growing Cryptocurrency Communities

Reciprocity is the Key to Growing Cryptocurrency Communities

With Bitcoin trading well over $1000 right now and its popularity higher now higher than ever, Bitcoin and cryptocurrencies at large still have a long way to go. If one goal of cryptos is to have a wider adoption and use, then something needs to change from the current implementation and advertisement of bitcoin and altcoins.

It seems that the average user of cryptocurrencies is a miner, a trader/investor, or a technophile. In no way am I suggesting that these users are not important pillars of coins, but it does create an environment which may be daunting for the average joe. Lack of guidance, lack of technical knowledge, and skepticism of others could turn away potential new crypto enthusiasts. To draw a parallel to fiat currency, the vast majority of Americans do not know how fractional reserve banking (FRB) works or what the Federal Reserve Bank is, but they use currency generated by FRB and issued by the Fed on a daily basis.

French sociologist Marcel Mauss’ seminal work The Gift may be able to lend some valuable insight into building the crypto communities. Mauss suggests that communities and interpersonal relationships are built on the foundation of reciprocity, gift giving, and social debts. This is to say that the creation of social obligation forges bonds between individuals. He argues that these gifts were given usually were self-interested If you give a good or service to someone, they become indebted in some way. It mandates engagement with others.

I’ve actually witnessed a similar kind of reciprocal crypto community already: Dogecoin. At the height of active users in the Dogecoin community, they were sending teams to the Olympics, funding a NASCAR sponsorship, and helping provide clean water to less fortunate communities. In addition to these large philanthropic endeavors, dogecoin remained very active among smaller time cyrpto users as well via giveaways and tipping. Since Dogecoin is relatively cheap and rather stable against fiat, members of the community will often give away small amounts of coins to other users to keep everyone excited. They’ll also tip some coins during discussions about anything ranging from the future of the coin to how an individual is feeling that day.

The creation of these social debts created opportunities and obligations to have community members return often and participate. This is where Mauss’ idea seems obvious to me. Obligation to participate grows a community. For a fair amount of time, Dogecoin was one of the most traded altcoins. Sadly, the same is true about less frequent participation. Dogecoin’s active members have seen a downtick recently, which have affected popularity and participation.

Bitcoin also used to have an easy way to tip others on the Internet via ChangeTip. This service allowed easy mircopayments between individuals across a plethora of social media and networking platforms. ChangeTip was very popular. It saw over $250,000 worth of tips sent and received with most tips hovering around $1. Despite this, the service shut down in November 2016. Maybe we need a new alternative to ChangeTip?

In no way am I suggesting that everyone start throwing large amounts of bitcoin around at each other in the same way Doge was able to. However I am suggesting that if small crypto tips are not available, that we think of Mauss and gift what we can to newcomers and veterans alike. This can be small amounts of altcoins (if the transaction fees allow), but more so knowledge and guidance. Helping individuals get started with crypto is the single easiest way to create that social obligation, to engender participation. Because participation is likely the most effective way to wider adoption and use.

Chuck Reynolds
Contributor

Indian Bank Wants Joint Effort To Share Data On Blockchain

Indian Bank Wants Joint Effort To Share
Data On Blockchain

Recently, the Bank of Uganda has warned citizens against investing in cryptocurrencies, putting Onecoin and Bitcoin in the same trash buсket. What is behind the positions of governments of developing countries like Uganda and Nigeria? Before Uganda, such warnings have come out of some other developing countries like Nigeria.

So today in Nigeria a lot of individuals now take extra care when making transactions in local banks for Bitcoin-related products or services. Users most often clearly advise depositors not to include such in the description of the purpose of a transaction, so as to avoid having their bank accounts blocked or frozen.

Quasi-currencies

A lot of individuals have fallen victim to cryptocurrency scams by investing in what they thought were real and genuine cryptocurrencies. Many experts and economists consider OneCoin as the current number one scam coin in the world. It does not possess the fundamental characteristics of a genuine cryptocurrency, instead, its followers pursue the cause of OneCoin as a religion. But why Bitcoin gets mixed up with that “currency” that is built similarly to other MLM pyramids?

Government position

Data Architect at Central Bank of Nigeria, Ayodeji Odusote thinks that there are technical differences in the warnings from Nigeria and Uganda. While Nigeria addressed specifically stakeholders in the regulated financial services sector, Ugandan authorities appealed to the wider public.

Odusote notes however that both governments did not make any distinction between genuine and scam cryptocurrencies for a simple reason that "from a currency perspective, the veracity of a cryptocurrency is irrelevant as it poses a direct threat to the authority of the regulator to control the money supply." According to Odusote, for both governments, it is irrelevant whether the cryptocurrency is genuine or fake. Both do not serve their financial objectives.

Odusote says:

“The perspective of these regulators, owing to their publications, is strictly monetary. It futile to say something is genuine, yet unacceptable and another is fake, which is also unacceptable. Both are not. So there is no need for distinction.”

But for regulators who have identified the opportunities offered by the technology embedded in cryptocurrencies, the Blockchain, such distinction might be important.

Hypocrisy

CEO of Hyperchain Technologies, Chigozie Ononiwu thinks that linking Bitcoin to Onecoin is wrong in any case. Ononiwu describes Onecoin as a mediocrity compared with Bitcoin. While Ononiwu describes Bitcoin as “innovation”, he suspects policymakers of developing countries in corrupt practices regarding Bitcoin. Ononiwu thinks some of these leaders may acquire Bitcoins for themselves while introducing measures to keep the people away from doing the same thing:

“They're busy stockpiling Bitcoin while scaring everyone off.”

To avoid problems, Ononiwu suggests that any cryptocurrency offering HYIP should be barred from transactions, and every company dealing in Bitcoin and Blockchain tech should be properly and transparently vetted.

Ononiwu concludes:

“Government needs to encourage mass adoption by partnering with companies like ours. Our Virtual Bitcoin ATM is a clear example that Bitcoin can be purchased by all with ease.”
 

Chuck Reynolds
Contributor

Blockchain explained

Blockchain explained

If electronic money is just data, nothing physically stops a currency holder trying to spend it twice.
Enter the Bitcoin blockchain.

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Blockchain is an algorithm and distributed data structure designed to manage electronic cash without any central administrator. The original blockchain was invented in 2008 by the pseudonymous Satoshi Nakamoto to support Bitcoin, the first large-scale peer-to-peer crypto-currency, completely free of government and institutions.

Blockchain is a Distributed Ledger Technology (DLT). Most DLTs have emerged in Bitcoin's wake. Some seek to improve blockchain's efficiency, speed or throughput; others address different use cases, such as more complex financial services, identity management, and "Smart Contracts".

Seemingly every day there's another story about Internet of Things devices being compromised or used for large-scale attacks. Here's how to ensure that your deployment remains secure.The central problem in electronic cash is Double Spend. If electronic money is just data, nothing physically stops a currency holder trying to spend it twice. It was long thought that a digital reserve was needed to oversee and catch double-spends, but Nakamoto rejected all financial regulation and designed an electronic cash without any umpire.

The Bitcoin (BTC) blockchain crowd-sources the oversight. Each and every attempted spend is broadcast to a community, which in effect votes on the order in which transactions occur. Once a majority agrees that all transactions seen in the recent past are unique, they are cryptographically sealed into a block. A chain thereby grows, each new block linked to the previously accepted history, preserving every spending ever made.

A Bitcoin balance is managed with an electronic wallet, which protects the account holder's private key. Blockchain uses conventional public key cryptography to digitally sign each transaction with the sender's private key and direct it to a recipient's public key. The only way to move Bitcoin is via the private key: lose or destroy your wallet, and your balance will remain frozen in the ledger, never to be spent again. The blockchain's network of thousands of nodes is needed to reach consensus on the order of ledger entries, free of bias, and resistant to attack. The order of entries is the only thing agreed upon by the blockchain protocol, for that is enough to rule out double spends.

The integrity of the blockchain requires a great many participants (and consequentially the notorious power consumption). One of the cleverest parts of the BTC blockchain is its incentive for participating in the expensive consensus-building process. Every time a new block is accepted, the system randomly rewards one participant with a bounty (currently 12.5 BTC). This is how new Bitcoins are minted or "mined".

How Blockchain Will Evolve In 2017

 

 

In the past, blockchain — which is known as a distributed ledger technology for both financial and non-financial transactions — seemed like a mysterious concept that only technologists could understand. However, the various advancements in blockchain applications in 2016 helped more people and more businesses see its potential. For others in the business environment, blockchain is something they're still just exploring. But as we get further into 2017, there are a few trends that I think will be interesting to trace as the year progresses.

In working with blockchain myself as part of the payments industry, where most applications are tied to some type of banking or financial application, I see some of these trends already in progress. However, some of them go beyond payments and may offer applications for other business segments, helping startups and established businesses address a particular need.

Growth In Applications

With ongoing research and greater understanding of how the blockchain works, one of the biggest trends I predict in 2017 is the use of this technology in new application areas across industries. I see this happening especially in business segments that have always had a middleman as part of the transaction. This means that many service-oriented businesses decentralize. For example, ride sharing transactions could be handled directly by drivers and passengers using the blockchain, which could then give once-disruptive companies like Uber and Lyft a run for its' money.

Other applications include streaming services. We could let artists decide how their music is sold and shared, and everyone — from the writer to the producer to the singer — could receive a payment immediately through the blockchain when a song is downloaded, rather than getting their share later on. Rather than waiting for royalty checks to arrive that are processed by a publishing company, the artist can take greater control over their process from publication to payment through blockchain applications.

Regulatory Frameworks

One of the most challenging aspects of giving blockchain the space to grow into what it is capable of becoming is the lack of a regulatory environment that would help countries feel more comfortable about its use. Recently, countries like Japan have gone as far as to create legislation that would regulate bitcoin in their country, while other countries have formed task forces to research what’s involved in the use of bitcoin and blockchain. These are both major first steps toward a larger global framework.

Since everything to date has been fragmented in terms of a standardized regulatory framework to allow blockchain to work across geographical borders, blockchain has been slow to catch on. However, there are signs that greater progress will be made across multiple countries to determine some type of regulatory process that will increase use.

Chuck Reynolds
Contributor

How to Stay Focused With Your Social Media Marketing

How to Stay Focused With Your Social Media Marketing

Chuck Reynolds
Contributor