The bank of england has no capacity to determine what a good blockchain idea is. And if it did - there's no damn way the winners would want their prize. This is hilarious
There's maybe 100 people in the world who have a good concept of what a good blockchain project is, and they are all in very, very high demand - and principally working on Bitcoin projects.
I don't think the BoE has this capacity, as demonstrated by the design of this landing page. I'd be willing to bet that the BoE thinks blockchains are for checksumming.
> What could you win? Firstly, your whole team will get an exclusive invitation to visit the Bank. You’ll meet some of the key people in our Projects, Data and Technology team.
My advice would be to not share your ideas with anyone who would take ownership of them when the possible "reward" is minimal.
I'm already employed full time as a software engineer, as I suspect are most other readers here. This doesn't appeal to me at all.
Also, if I really had a cool idea that I could execute on that could potentially change the world of finance, why would I give it up for a measly six week paid internship? I'd do a start-up, of course.
Students would be interested as this is a nice addition on their initial portfolio. I agree though on the marginality of the price for the potential value of the idea.
Ideas are cheap. The work to make a successful startup, that's the hard part. I have more ideas than I could ever possibly spin into companies, even if I were that sort of person - most of them I'm happy to give away entirely if it means they actually get implemented instead of forgotten. If I had an idea that I thought could change the world of finance for the better, then I would accept that I know bugger-all about finance and push that idea towards the nearest person who did know something. Not everything is about personal gain.
Give us your best Blockchain based idea and a working proof of concept and "win" a visit to the bank and a 6 week internship (if you are eligible). Is it me or that does not sound really great?
I guess this is their equivalent of the Federal reserve bank? I could see it as valuable for someone who might want to make some potentially valuable connections among regulators. Maybe especially students that might want to make a future career in policy/govt in that country and combine it with their love/knowledge of Digital currencies. At least I can see myself being open to an equivalent offer from the Feds
The Bank of England is one of the very best places you could start to make contacts and learn about finance, in the world's capital of international finance.
Well, that's assuming that both a) the best idea is worth something on the free market, and b) the person submitting would possess the know how to take their PoC and capitalize on it themselves.
Hopefully, anyone that fits in A&B would agree with you and wouldn't submit. For everyone else, this seems like a fun way to add to their resume.
I love how blockchain has been completely de-branded out of Bitcoin, as if Bitcoin is some heinous forbidden term that can only be associated with criminality and must not be mentioned even once. The blockchain, of course, is the entire raison d'etre of Bitcoin. It's the innovation that makes Bitcoin work as a decentralized currency. Everything else Bitcoin does -- signature verification, P2P, cryptographic hashing, public-key cryptography, etc. -- was on a well-trammeled path. The blockchain is the break-through, and to disassociate it in this way is misleading and petty.
The separation of "bitcoin" and "blockchain" is not only correct, but further more it's a good thing people/media are becoming aware of the distinction between the blockchain as a protocol and bitcoin as an application (one of potentially thousands) based on this protocol.
Big finance doesn't give a sh*t about bitcoin. They don't see it as a threat, it barely registers. What they do see is the enormous applications and potential cost-savings that blockchains could enable - in areas like settlements, transaction signing, new products and so on. Hence coverage is moving from "Bitcoin" to "Blockchain".
The blockchain is only useful if you need decentralization across pseudo-anonymous actors. This doesn't apply to Big Finance. The blockchain is also only useful with a large mining base, because security is achieved through having a large aggregate hashing power that cannot be overpowered by a bad actor. That is why almost all Bitcoin competitors are worthless -- they have nowhere near the hashing power, and are thus nowhere near as secure. The network effects here are huge. Having multiple blockchains is like running multiple competing power distribution networks across the country operating at different voltages. It makes more sense to standardize and have everything operate on one good one. And that's what Bitcoin already is.
This is like saying AT&T should have no interest in VOIP because they already have a PSTN protocols. Banking systems are full of very antiquated technologies hobbled together to allow them to work. They would be dumb not to investigate the benefits of blockchain type systems. Even if the system is limited to trusted parties and forgoes the whole mining incentive, there's still a lot of value there.
> Even if the system is limited to trusted parties and forgoes the whole mining incentive, there's still a lot of value there.
If you take away proof-of-work, then it's no longer a blockchain. It's just a unary Merkle tree, an idea which has been around for a long time. You can't surgically extract out the most fundamental and important part of a given idea and then call what remains the same thing.
They will just point out that PoW incentive systems existed in the 90s along with Merkle chains; bitcoin marries the two but maybe its rise is simply revealing to banks how useful distributed consensus protocols could be for building private exchanges instead of these crypto primites remaining one among many in the huge collection of esoteric crypto protocols to arise in the crypto-Cambrian era of the 90s.
Nice work Cyde. @retube seems to think blockchains are for notarizating messages between trusted parties, instead of value transfer between untrusted parties.
The bitcoin network isn't as mighty and powerful as you make it out to be. The hashing power you talk about is spent doing redundant work, and the network caps at 7 transactions a second (by design). Hashing power is moot when organizations can (and routinely do) bring down the network by spamming it with "stress tests".
Just because there haven't been any wildly successful block chain implementations doesn't mean that the technology can't be employed elsewhere. Many technologies are in play today that were once deemed as not being useful, and even though I'm critical of block chain, I can still think of a few validation use cases for big banks with it.
>the network caps at 7 transactions a second (by design).
That's going to be changed fairly soon.
I suspect that a lot of people are just going to use the bitcoin blockchain out of inertia, just because it's easier to use a proven platform than something you build yourself.
Unless someone needs a feature that bitcoin doesn't provide, I don't see any competing blockchain taking its place.
No, it's not. We have already seen four individual proposals to the network to increase the block size. Each requires a consensus by the miners and each was shot down.
The miners are incentivized not to increase the transaction rate, because they profit from the increased competition and fees from smaller blocks. By design, the decentralized control of bitcoin is actually what is preventing it from improving itself.
The miners are incentivized to do whatever is best for the value of Bitcoin, because that's what their block rewards and transaction fees are paid off in. Maximizing the block fee in a way that hurts Bitcoin itself would be myopic and irrational, and they aren't doing that. Most pools are on board with increasing the block size.
>The miners are incentivized to do whatever is best for the value of Bitcoin
No they aren't.
The miners are rational actors and incentivized to do what's best for themselves, not Bitcoin. The entire network is built on the premise that the miners are rational, and it has been demonstrated four times already.
Bitcoin is an example of how Tragedy of the Commons applies to digital networks.
And thanks to side-chains, which Blockstream and others are working on, you can add arbitrary functionality on top of Bitcoin while still maintaining the benefits of having its large secure network.
In my view, anything using blockchain technology that isn't actually using Bitcoin's blockchain is a nonstarter. It's a fundamental misunderstanding of what Bitcoin's strengths are. It'd be like trying to come out with a new model of car that can't run on the existing roads (which actually has instructive parallels to the complete failure of earlier self-driving car attempts of the 60s that needed specialized roads).
Side chains are centralized I.O.U.s that still need bitcoin transactions in order to be fulfilled. They remove the benefits of using the decentralized bitcoin network while still using the network.
If 10 m people used side chains (just for today), it would take some of their transactions up to 40 days to fulfill. If 10 m used it again (just tomorrow), it would take almost 3 months for some transactions to fulfill.
Most merchants will not wait that long for an I.O.U., especially with fluctuating BTC exchange rates, making side chains much worse and less competitive than ACH.
That you have to share with everybody else, with flooding attacks, ... For other categories of "good", the biggest network is not necessarily the best.
Interesting. It definitely sounds like it did some damage, but not a lot, and software has already evolved to handle it better. Plus, such an attack continues getting more and more expensive as the transaction fees you need to spend to keep it going get higher. Obviously I'm not saying this is a good thing for Bitcoin, but on the whole of things it seems like a blip. It's not like any of the fundamental algorithms underlying Bitcoin were seen to have vulnerabilities. And if I have to put up with increased transaction fees every so often during an attack in order to have a decentralized currency, well, there's worse things in the world.
You can have a blockchain without bitcoin, but why is that useful or interesting? Isn't the Nakamoto distributed consensus the key innovation of bitcoin as a protocol? Without that incentive structure in place, we can't trust the state of the blockchain without also trusting the participants. This may work fine for banks, but so does ACH.
> You can have a blockchain without bitcoin, but why is that useful or interesting? Isn't the Nakamoto distributed consensus the key innovation of bitcoin as a protocol?
What does the second have to do with the first? Just because bitcoin was the first to use it, doesn't mean everything that uses same mechanism suddenly is "Bitcoin", at least not in the commonly used sense.
The "blockchain" works because all the mutually-distrustful participants' incentives are roughly aligned (in theory). You can't attack the network without spending a huge amount of money on mining hardware, and as long as you're financially motivated you'd be better off just mining (again, in theory)
You could have a "blockchain" without mining, but it wouldn't provide the same properties Bitcoin does, and solutions that give you similar properties to such a system have been around for a long time, and are probably faster and more efficient.
I think banks are now interested in the "blockchain" because of some combination of hype, FOMO, and fundamentally misunderstanding Bitcoin/blockchain.
Yes, but there are tons of blockchains that have mining and the same incentive structure, but you wouldn't call them "Bitcoin"? from "simple variations" (Litecoin) to projects building additional features like Ethereum. Bitcoin is only one application using such a blockchain.
The implication when finance people talk about "the blockchain" is they want the properties (or at least the hype) of Bitcoin's blockchain without Bitcoin (or any other alt-coin) the currency.
>they want the properties (or at least the hype) of Bitcoin's blockchain without Bitcoin (or any other alt-coin) the currency.
A blockchain without a currency or decentralized network is called a database. All banks currently use one already. There is no reason for any of this. Think of it like intranet (blockchain) vs. internet (bitcoin). Sadly, many do not realize this.
The blockchain is nothing. It's just a database with some transactions which have a hash of the previous blocks... it's just a simple database in and of itself, no better than an ordinary (centralised) database.
The cool part is that it's decentralised, and you can only do that with bitcoin, or some equivalent decentralised value token (call it a currency if you want, doesn't matter but there has to be a token with value).
Big finance has very silly ideas about a bitcoinless blockchain. No other POW or equivalent protocol has a value token anywhere near the size of bitcoin, and thereby nowhere near the security. The blockchain is nothing without bitcoin, until it is usurped and there's zero indication of that happening.
There are lots of 'internal' blockchain ideas floating around right now, i.e. not decentralised, proprietary 'blockchains', which are really just ordinary centralised databases which have nothing to do with the concept 'blockchain' at all and are not novel in any way and have been around for many, many years, and Big Finance is eating that stuff up. It's nonsense really.
Right. I take this verbal tic as an indication that the banks do not think bitcoin is a viable financial protocol, as the reward structure of bitcoin is essential to how it works. Blockchain without bitcoin, or blockchain that distributes tokens arbitrarily, is not trustworthy. It is "trusted" ie vulnerable to defection by any member institution. The banks pushing blockchain without bitcoin might as well be using the Ripple protocol for their desired applications, given that they do not seek the benefits of nakamoto distributed consensus.
You don't really understand blockchains very well if you think that a trusted party blockchain is vulnerable to defection by one member institution. In fact, they are vulnerable to defection by 1/3 of the member institutions (or 1/3 of validation power, if you're assigning different amounts of validation power to different institutions). Also, a compromise leaves a huge paper trail implicating those responsible.
Ripple is overly complicated, includes the XRP currency for the sole purpose of enriching the founders, and has been shown to not be secure on networks larger than one node. There's no real reason for a bank to use it instead of just building their own application with the underlying technology. When I see comments like this, I always assume the commenter owns XRP or BTC.
Maybe I wasn't clear enough. I'm not making any technical claims about what portion of nodes or miners need to collude to compromise Nakamoto consensus. I'm also not arguing that Ripple is superior to bitcoin or vice-versa. I'm arguing that the bitcoin protocol without the Nakamoto consensus is not an improvement over conventional clearing technology, and at least in terms of its claimed features is not much different from ripple consensus -- ie, the federated open source protocol, not the Ripple network that requires XRP and is maintained by Ripple Labs or whatever they are calling themselves these days.
Yes I do hold XRP, Bitcoin, and a number of other digital assets, which is consistent with my view that they could become valuable in the future. That doesn't mean I think banks should adopt these protocols to transfer conventional assets. But when I read a press release talking about "blockchain technology" I assume the author either does not understand bitcoin or else is making a wrong prediction about the future.
I also hold Bitcoin, I have nothing against it. However, I don't see what's wrong with using and referring to blockchains in contexts that are not Bitcoin. Sure, it's an assembly of technologies used to accomplish a goal, like any software. It's like getting mad about people saying "database", when "everyone knows that databases are just conventional data structures and indexes".
It's fine to talk about non-Bitcoin blockchains, e.g. Litecoin and Dogecoin both have perfectly functional non-Bitcoin blockchains. No one would argue that. The issue is when you try to apply the word "blockchain" to a technology that has been neutered to the point that it no longer has proofs-of-work in it. It's not really a blockchain at that point because you've removed the main innovation that actually makes the blockchain idea useful. That is what the commenter you responded to meant when he said:
> I'm arguing that the bitcoin protocol without the Nakamoto consensus is not an improvement over conventional clearing technology
As an analogy, let's say you design a car with no engine, but still insist on calling it a car because it looks like a car and it has most of the same parts. It's not really an illuminating discussion to keep debating whether or not it should be called a car so long as you understand the objection that the car-shaped-object is no longer useful for the purposes that people commonly associate cars with serving.
Blockchains are necessary for Bitcoin, but Bitcoin is not necessary for blockchains.
"The Blockchain" (big B) is the original blockchain (small b) used for Bitcoin, but it's only one possible implementation. It's like saying Postgres, MySQL, etc. aren't 'true' SQL databases only Codd's original implementation is -- now, obviously the metaphor doesn't quite hold because of the distributed nature of blockchains, but it's disingenuous to say that there's only one canonical implementation of a technology.
The Blockchain and Bitcoin are valuable proof-of-concept implementations of blockchains, but there's value to be gained from separating the general ideas from specific instances.
This is only partially true. While you can have a blockchain without bitcoin, you cannot have a blockchain without some sort of native digital asset giving value to the network supporters (in bitcoin terminology, the miners). I think many people don't realize this, and think they can somehow spin up a new blockchain without needing to also create a separate currency and convince enough people to start giving it value.
Realistically, most "blockchain" tech these days is actually using the bitcoin blockchain, because it is the most secure and widely-supported blockchain available.
Correct. The specific innovation brought to us by blockchains is "objective truth" over subjective truth. We've had journaled, auditable, shared, and logged databases for years. Even PGP signed SMTP was a sufficient mechanism for transmitting shared data. The innovation of Blockchains are their proof of work mechanism by which truth is objectively determinable.
Oh - and of the thousands of blockchains out there, only one is worth a damn. The others are barely burning more than $10k per day in anchoring their objective truth.
It is absolutely not an objective truth! It's an expensive consensus.
The mental image of 'burning' increasing amounts of wealth for a financial instrument of dubious value gets more strange the more you think about it, like a funeral pyre or a hugely destructive potlatch.
It's certainly an objective truth - it's attested to by the energy spent in producing it. Attesting to alternate truth is often possible (we have orphan blocks all the time) but - the older the truth, the more objective it is.
The intrinsic value of bitcoin is censorship resistant storage. The speculative value of bitcoin is somewhere above 0.
If you don't need censorship resistance - don't use it. But if you think no-one needs censorship resistance, then you are empirically wrong, as demonstrated by the hundreds of thousands of transactions per day in Bitcoin.
As for burning increasing amounts of wealth - well, the network is pretty well calibrated. It's not a chain reaction that will take over the world, it'll scale to precisely the size that the market demands.
Uh, no, you do not need to create a currency. You might need that if you want to attract random outside miners, but that isn't necessary to have a blockchain.
I remember designs for DNS-like services on alternative blockchains where you were supposed to pay the miners in Bitcoins after the fact. Or the miners could be paid for processed blocks by a central organizer (e.g. the central bank if we think about a banking application people seem to be desperately searching for some reason).
There has to be an incentive for miners to work with the network, but it doesn't have to be intrinsic to the network.
Like Namecoin (supported by a separate currency) or Blockstore (uses the Bitcoin blockchain)?
Even if you have a central organizer/bank, you are simply using their currency as the native token. You could use a native token which has external value _if_ you have the authority to issue that token (e.g. a fiat currency if a central bank decided to create their own blockchain), but that doesn't remove the need for the network to have a native token.
Aren't the miner incentives are only necessary if it's an open blockchain that requires public hashing power?
You can have a relatively smaller number of actors incentivized by other means on a network - e.g. organizations in an industry that validate transactions amongst each other.
True, but decentralized databases (where all nodes are trusted) were already invented long before bitcoin came along. You do not need a blockchain if all actors are trusted.
For perfect trust, sure, but amongst competitors in a same market space you would think that it's more 'imperfect' trust, even with contracts.
If the transactions are small and numerous, it would seem easier to maintain a block chain ledger than managing multiple write points and masters for a decentralized database. I'm not saying it's concrete, but it would be an interesting experiment at least.
How do you determine who gets to participate in this separate blockchain? Can anyone join? Or are there barriers to entry? Because if there are barriers to entry, then you've now created a single centralized authority that issues these keys, and you thus don't really have a decentralized system at all.
If each participant individually judges the merits of other participants, then everything will quickly diverge as some blocks are accepted by some participants but not by others, and the whole network collapses into forks.
There are barriers to entry, for the miners - that's the whole point of having a closed block chain. Nodes and addresses could be open depending on the hypothetical.
Mass decentralization is only a selling point for Bitcoin, but even then the Bitcoin organization (who controls the code) has authority to push a hard fork on the miners. They won't do it obviously (e.g. increase block size), because it would alienate their user base.
Miner validation can be controlled by the same organization in charge of the code, which isn't aligned with any one competitor in the industry.
The only barrier to entry for a Bitcoin miner is that you have to have an Internet connection and a computer. That is completely decentralized; anyone can buy a computer and Internet access. I don't understand your point. Surely any system you were proposing would require that as well. Your comment was talking about a blockchain amongst "organizations in an industry that validate transactions amongst each other". That seems like it would require a barrier to entry to me, namely, that you would have to validate to someone that you were actually so-and-so organization in so-and-so industry. Can you more fully flesh out your proposal? I'm seeing additional barriers to entry, requiring centralization, that Bitcoin does not have.
In practice you probably want a special purpose computer that is GOOD at calculating SHA256 hashes. But anyone can acquire these without limitation or restriction.
Hard forks push changes to the protocol from a centralized location, namely the bitcoin organization. You know how hard forks work, right?
It's not a "vs. bitcoin" comparison... just an example of how organizations in an industry would use block chain to store numerous small transactions, instead of a decentralized database.
You keep deflecting and not answering my questions and it's getting really annoying. I'm not going to keep responding to all of your tangents when you can't even address a single one of my points. Please respond to what I've been saying in a relevant manner, then I'll respond to your other stuff.
I've been telling you that you're making the wrong assumptions about blockchain applications because you're assuming it has to be based on bitcoin designs. Again, a closed blockchain doesn't require it to be open to the public for miners.
If you're getting frustrated and think that is deflecting then it's possible you have a cognitive bias.
You don't have to have forks. When there is no agreement, the network can just stop working. Some might think that a bit useless, but when you're trying to reach agreement it is in many respects a lot better than a fork...
But then anyone can trivially shut down the network by submitting a single invalid block. The very first bit of abuse and everything is shut down and stops working indefinitely. How could this design serve a useful purpose? It seems a lot less useful than the way Bitcoin does it.
But who's going to abuse it? Why would it shut down indefinitely? This is a group of people or entities that has decided to do this. Presumably they all feel it's in their interests to make it work. Same as with any mutual agreement of this kind, if there's some kind of a falling-out, they'll probably just figure it out somehow.
(As for invalid blocks - in the absence of a bug in the code that runs the system, all validators will say no to the invalid block(s), so there's no disagreement, and things carry on.)
So now we're back to having trusted parties only, and you thus have centralization, and don't need a blockchain at all. You just need signed transactions among trusted peers. We keep going round in circles.
It's only centralized from the point of view of somebody who isn't involved. Those who are involved most likely won't see it as such - since if they did, they'd have chosen some other mechanism. They don't need to trust one another.
The mining incentive can just as easily be usage of service provided by the network which uses the given blockchain.
Even if the miners weren't interested in consuming the provided services on their own, the network could rely on miners being rewarded with services which they then sell access to.
This article makes it particularly bad by saying things like "blockchain" where should really be "blockchains" or "blockchain technology". I just reads as technically illiterate to me.
'Blockchain has the potential...' should probably be 'Blockchains have the potential...'. "Blockchain" is not a single technology but a group, it's like saying "teleporter can move you from place to place" vs "teleporters can move you from place to place". Blockchain isn't a proper noun, but a plural grouping of many implementations.
Bitcoin consists of two parts: a one-legged Merkle tree which I'm going to call a "merkle ledger", and a very very expensive proof-of-waste distributed stamping service to prevent double-spend.
One of the obvious things about Merkle ledgers is that everyone can have their own. You could have one per tradeable instrument on an exchange, for example. Anyone can start an altcoin; why not the BoE?
The proof-of-waste system allows the system to be fully distributed by continuously burning electricity such as to push up the minimum cost of overwriting some other node's choice of doublespend (note: NOT ability to forge transaction!) to very high levels.
If you discard the "distributed" requirement, you can save a lot of electricity by having a single or multiple CA-like series of authorized stamp-issuers. It then looks a lot more like Chaum's digital cash.
If you discard "pseudonymous" as well, noting that bitcoin pseudonymity is both fragile and directly contrary to KYC/AML, you can make further optimisations.
Old, but not yet widely deployed outside of the browser-CA system. Getting banks to use proper digital signature technology would be a major upgrade.
(Also, remember in the UK we have both EMV and "faster payments", so the US problems of stolen magswipes and waiting for cheques are not so prevalent.)
"proof of waste" - I like the phrase, sums it up well.
If you drop the distributed requirement you can run an equivalent system on on a pentium 4 in someone's basement, without wasting GWs of power and spewing carbon dioxide into the atmosphere.
But it's unbounded wasteful, why does nobody get that. There is no correlation with proof of work energy spent and actual value of transactions. Even worse, proof of work is almost exponentially getting worse over time.
> Even worse, proof of work is almost exponentially getting worse over time.
Huh? Exponentially? The difficulty level is rising exponentially, but that's owing to continued investment in specialized hashing hardware. I certainly don't think that the actual amount of electricity being put into hashing is still growing exponentially. It would only grow exponentially if the price of Bitcoin continued to appreciate exponentially, and that hasn't been the case in years.
The network burns precisely as much energy as is needed to throttle the rate of consumption (roughly 25 btc per 10 minutes). It is bounded by the intrinsic and speculative value of Bitcoin.
Gasoline at least gets you from A to B.
Burning cycles is much more wasteful. Bitcoin's proof of work/waste is really something like 'I can prove that it is statistically likely that I wasted a shit-ton of power heating this data centre, doing SHA hashes, trying to find one that has a high number of leading zeros.' That's pretty wasteful IMO.
Burning cycles is the glue that binds a new block to the chain. The strength of this glue is what enables bitcoin's censorship degree of resistance. You may find censorship wasteful (and I don't particularly need that either), but the entirety of the bitcoin economy disagrees. Similarly I think people who have a two hour drive to work is wasteful.
There's nothing particularly special about a one-legged Merkle tree though. It was around before Bitcoin and it wasn't widely used for much. Without proof-of-work you don't actually have a functioning distributed currency system. What is the point of a blockchain without proof-of-work? What problem does that solve in a uniquely good way? Or are you just saying that banks are so far behind in technology in general that even this (i.e. cryptographically signed transactions) would be a big improvement?
If you haven't heard of Ethereum, check it out. It seems to be one of the leaders in blockchain platforms. Even Microsoft is working with it, along with many others.
Bitcoin, although the largest chain right now, will be a small player in an enormous field. The idea of one cryptocurrency to lead them all is not going to work. In fact, the 'currency' part is somewhat insignificant relative to what the blockchain industry will be.
Every 'token' or 'currency' that represents an asset in a smart contract, or an asset such as cash, will be easily and instantly exchangeable for any other liquid asset. (i.e. U.S. Dollars). Having something like bitcoin is actually little use to us. That's not saying I think bitcoin was stupid or bad, it has done much to further the blockchain advancement.
Ethereum's chain is a mess. It's only burning 25k USD per day, and the project plans to switch off of it entirely. The claim that this project can cure whatever ails you on such a weak foundation is at best dubious, and probably just a scam.
Can you please back this up with some actual citation or something. I'm pretty involved in the Ethereum community as a developer and this statement seems founded either in fantasy or in information that I'm not aware of.
> Ethereum's chain is a mess.
I'm unsure what you mean here.
> It's only burning 25k USD per day, and the project plans to switch off of it entirely.
Burning 25k USD of what? Switch off of what?
> The claim that this project can cure whatever ails you on such a weak foundation is at best dubious, and probably just a scam.
Which claims are you referring to. What part of Ethereum is a scam?
I went over the numbers with vitalik a couple weeks ago - he'll corroborate my claim. You can tell roughly how much energy is being burned per day based on calculating the token price multiplied by the daily issuance rate.
Vitalik knows the Ethereum chain won't scale so he's renovating the entire thing to Proof of Stake. (Which is a bad idea as well). Hunt around this is public knowledge.
Claims: There are so many. If you haven't seen them , watch the videos of the Ether team during the crowdsale.
I think you have a misunderstanding of what a blockchain really is and/or what Ethereum is doing. Provide some reasoning to your claim, I'm not even sure what you mean...
You can look me up. My claims are outlined under the post adjacent to this one. Ethereum is a very dubious project, and if you don't understand my claims - I'm guessing you're new, or at the center of the hype machine.
> Bitcoin, although the largest chain right now, will be a small player in an enormous field.
I don't know how you can say this with any degree of certainty (read: I want your crystal ball). Network effects are incredibly important here, as the security of the system is exactly its total hashing size. Bitcoin has such a head start that I don't see how anything could overtake it without providing incredible new features that can't be implemented even as side-chains.
You're assuming that there has to be a 'leader' of some sort. A blockchain network could be you and I. It could be my neighborhood, my city, or a group of companies that wish to participate. Any blockchain platform that can support smart contracts, of which each smart contract can have whatever 'token' of value it chooses.
I can make a token and call it 'potPlantCoin'. That token can be valued at '1 potted plant' of a certain size in my neighborhood blockchain, whereas, the token is backed by a potted plant... I could then effectively have a distributed, decentralized ledger in my neighborhood that uses the value of a potted plant as the means of exchange. I don't have to worry about any other network than the small amount of processing power within the nodes in my neighborhood.
Maybe that example helps you understand how the blockchain doesn't need a 'leader' or something like bitcoin that is 'so far ahead'. Bitcoin is completely irrelevant in my neighborhood. Sorry, no crystal ball here, but I do have an extremely high degree of certainty =p
None of your examples make any sense to me. It seems like it'd be a lot easier and safer to simply piggyback on the existing Bitcoin blockchain. To use your trivial example of a two person blockchain, what are you trying to do? If we trust each other already, then we don't need a blockchain, we just need signed transactions. If we don't trust each other then having our own private blockchain solves nothing, as whoever has more processing power can perform a 51% attack on the network, deny the other person's transactions, and double-spend your own. Having a blockchain makes no sense in this context.
That's why you use the biggest existing blockchain, not a separate one. There's no way in hell I can cheat you if we do our transactions on the Bitcoin blockchain, because I can't beat the overall hashing power of the system, but I sure as hell can beat your hashing power if we have a blockchain that's only for two people, or just for a neighborhood.
For smaller-scale blockchains you would probably adopt a non-proof-of-work consensus mechanism.
(This is probably what you want, anyway, when the value of the assets that back the network exceeds the value of mounting an attack! You might argue againt the wisdom of having the network secured by general mutual mistrust, but it's no worse than relying on cost.)
It's all just part of the curve of slow bitcoin adoption.
First, bitcoin was completely unknown.
Then, bitcoin was outright laughed at (some HN commenters are still at this stage of evolution).
Next, people jumped on "blockchain" as a sort-of gateway drug, using it in sentences which amount to: "Well, computers are useless. But the Internet, the Internet is where the real power comes from!".
Eventually, we will come full circle and people will realize that you cannot have a blockchain without bitcoin (or a close analog), which is what the bitcoin fanatics were saying right from the start.
I strongly believe we'll end up with an ecosystem of major blockchains with smart contract support where it's standard to push transactions across them as needed to interface with applications working with a given blockchain or set of blockchains.
Not to mention sharding solves a lot of scaling issues.
Guys, it's on their 'early careers' website. I don't think this is them trying to be YCombinator.
I think it's quite a cool little idea for them to get people from non-traditional backgrounds into the BoE. Most crypto people would never think of applying to the BoE for an internship normally I don't think.
Andrew Jackson is also the guy who thought it fine to ignore the Supreme Court's ruling that under established treaty the Cherokee owned their land, sent the US Army in to evict them, and wound up killing a third of their population.
I'm not exactly a fan of his public policy positions.
That is true. However in that case, you should agree and disagree on the positions based on the merits of the arguments for the position, and not the authority of the person.
Therefore I may happen to agree with Andrew Jackson on some things, but appealing to Andrew Jackson as an argument for those things is still a bad argument.
While this seems like a great opportunity for some, and not so for others, I urge you to think it over yourself first.
Yes, this could actually be a very good opportunity for the right student to get an internship/possible job in a market that will be extremely hot. It it's a good way for BoE to find students that want to get involved in this industry.
On the other side, please know that this is not the only way. The community in many growing blockchains is very good. There are many resources that are available and free for you to explore your idea and create something new that is actually YOURS.
I'm not saying you should try and do something on your own out of school, it is perfectly okay to get a regular job, and this might be what you want. However it is also perfectly okay for you to not participate and expand on your idea on your own or with partners. There are/will be many opportunities and positions out there in this industry in the near future, this is not your only option.
EDIT: Another interesting point is the time frame which this challenge is allowing. I do not know when it was announced, but I'm assuming based on the timer that, when it started, the time given is 24 hours. It seems odd to me. This is a challenge that should be given more time, especially given how many students are wrapping up their semester and will be heavily involved in projects/finals right now.
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And wouldn't it be up to the entrants to decide whether they want the reward? Sure they might not enjoy it, but it would certainly be educational.
I don't think the BoE has this capacity, as demonstrated by the design of this landing page. I'd be willing to bet that the BoE thinks blockchains are for checksumming.
My advice would be to not share your ideas with anyone who would take ownership of them when the possible "reward" is minimal.
> You’ll win a six-week paid internship if you’re in your first, second or penultimate year of study.
I don't know much about UK culture, but it's possible that this is quite valuable.
Also, if I really had a cool idea that I could execute on that could potentially change the world of finance, why would I give it up for a measly six week paid internship? I'd do a start-up, of course.
Hopefully, anyone that fits in A&B would agree with you and wouldn't submit. For everyone else, this seems like a fun way to add to their resume.
Big finance doesn't give a sh*t about bitcoin. They don't see it as a threat, it barely registers. What they do see is the enormous applications and potential cost-savings that blockchains could enable - in areas like settlements, transaction signing, new products and so on. Hence coverage is moving from "Bitcoin" to "Blockchain".
If you take away proof-of-work, then it's no longer a blockchain. It's just a unary Merkle tree, an idea which has been around for a long time. You can't surgically extract out the most fundamental and important part of a given idea and then call what remains the same thing.
Just because there haven't been any wildly successful block chain implementations doesn't mean that the technology can't be employed elsewhere. Many technologies are in play today that were once deemed as not being useful, and even though I'm critical of block chain, I can still think of a few validation use cases for big banks with it.
That's going to be changed fairly soon.
I suspect that a lot of people are just going to use the bitcoin blockchain out of inertia, just because it's easier to use a proven platform than something you build yourself.
Unless someone needs a feature that bitcoin doesn't provide, I don't see any competing blockchain taking its place.
No, it's not. We have already seen four individual proposals to the network to increase the block size. Each requires a consensus by the miners and each was shot down.
The miners are incentivized not to increase the transaction rate, because they profit from the increased competition and fees from smaller blocks. By design, the decentralized control of bitcoin is actually what is preventing it from improving itself.
No they aren't.
The miners are rational actors and incentivized to do what's best for themselves, not Bitcoin. The entire network is built on the premise that the miners are rational, and it has been demonstrated four times already.
Bitcoin is an example of how Tragedy of the Commons applies to digital networks.
In my view, anything using blockchain technology that isn't actually using Bitcoin's blockchain is a nonstarter. It's a fundamental misunderstanding of what Bitcoin's strengths are. It'd be like trying to come out with a new model of car that can't run on the existing roads (which actually has instructive parallels to the complete failure of earlier self-driving car attempts of the 60s that needed specialized roads).
If 10 m people used side chains (just for today), it would take some of their transactions up to 40 days to fulfill. If 10 m used it again (just tomorrow), it would take almost 3 months for some transactions to fulfill.
Most merchants will not wait that long for an I.O.U., especially with fluctuating BTC exchange rates, making side chains much worse and less competitive than ACH.
What does the second have to do with the first? Just because bitcoin was the first to use it, doesn't mean everything that uses same mechanism suddenly is "Bitcoin", at least not in the commonly used sense.
The "blockchain" works because all the mutually-distrustful participants' incentives are roughly aligned (in theory). You can't attack the network without spending a huge amount of money on mining hardware, and as long as you're financially motivated you'd be better off just mining (again, in theory)
You could have a "blockchain" without mining, but it wouldn't provide the same properties Bitcoin does, and solutions that give you similar properties to such a system have been around for a long time, and are probably faster and more efficient.
I think banks are now interested in the "blockchain" because of some combination of hype, FOMO, and fundamentally misunderstanding Bitcoin/blockchain.
A blockchain without a currency or decentralized network is called a database. All banks currently use one already. There is no reason for any of this. Think of it like intranet (blockchain) vs. internet (bitcoin). Sadly, many do not realize this.
The cool part is that it's decentralised, and you can only do that with bitcoin, or some equivalent decentralised value token (call it a currency if you want, doesn't matter but there has to be a token with value).
Big finance has very silly ideas about a bitcoinless blockchain. No other POW or equivalent protocol has a value token anywhere near the size of bitcoin, and thereby nowhere near the security. The blockchain is nothing without bitcoin, until it is usurped and there's zero indication of that happening.
There are lots of 'internal' blockchain ideas floating around right now, i.e. not decentralised, proprietary 'blockchains', which are really just ordinary centralised databases which have nothing to do with the concept 'blockchain' at all and are not novel in any way and have been around for many, many years, and Big Finance is eating that stuff up. It's nonsense really.
Ripple is overly complicated, includes the XRP currency for the sole purpose of enriching the founders, and has been shown to not be secure on networks larger than one node. There's no real reason for a bank to use it instead of just building their own application with the underlying technology. When I see comments like this, I always assume the commenter owns XRP or BTC.
Yes I do hold XRP, Bitcoin, and a number of other digital assets, which is consistent with my view that they could become valuable in the future. That doesn't mean I think banks should adopt these protocols to transfer conventional assets. But when I read a press release talking about "blockchain technology" I assume the author either does not understand bitcoin or else is making a wrong prediction about the future.
> I'm arguing that the bitcoin protocol without the Nakamoto consensus is not an improvement over conventional clearing technology
As an analogy, let's say you design a car with no engine, but still insist on calling it a car because it looks like a car and it has most of the same parts. It's not really an illuminating discussion to keep debating whether or not it should be called a car so long as you understand the objection that the car-shaped-object is no longer useful for the purposes that people commonly associate cars with serving.
... but not the other way around, hence it can be omitted.
"The Blockchain" (big B) is the original blockchain (small b) used for Bitcoin, but it's only one possible implementation. It's like saying Postgres, MySQL, etc. aren't 'true' SQL databases only Codd's original implementation is -- now, obviously the metaphor doesn't quite hold because of the distributed nature of blockchains, but it's disingenuous to say that there's only one canonical implementation of a technology.
The Blockchain and Bitcoin are valuable proof-of-concept implementations of blockchains, but there's value to be gained from separating the general ideas from specific instances.
Realistically, most "blockchain" tech these days is actually using the bitcoin blockchain, because it is the most secure and widely-supported blockchain available.
Oh - and of the thousands of blockchains out there, only one is worth a damn. The others are barely burning more than $10k per day in anchoring their objective truth.
The mental image of 'burning' increasing amounts of wealth for a financial instrument of dubious value gets more strange the more you think about it, like a funeral pyre or a hugely destructive potlatch.
The intrinsic value of bitcoin is censorship resistant storage. The speculative value of bitcoin is somewhere above 0.
If you don't need censorship resistance - don't use it. But if you think no-one needs censorship resistance, then you are empirically wrong, as demonstrated by the hundreds of thousands of transactions per day in Bitcoin.
As for burning increasing amounts of wealth - well, the network is pretty well calibrated. It's not a chain reaction that will take over the world, it'll scale to precisely the size that the market demands.
There has to be an incentive for miners to work with the network, but it doesn't have to be intrinsic to the network.
Even if you have a central organizer/bank, you are simply using their currency as the native token. You could use a native token which has external value _if_ you have the authority to issue that token (e.g. a fiat currency if a central bank decided to create their own blockchain), but that doesn't remove the need for the network to have a native token.
You can have a relatively smaller number of actors incentivized by other means on a network - e.g. organizations in an industry that validate transactions amongst each other.
If the transactions are small and numerous, it would seem easier to maintain a block chain ledger than managing multiple write points and masters for a decentralized database. I'm not saying it's concrete, but it would be an interesting experiment at least.
If each participant individually judges the merits of other participants, then everything will quickly diverge as some blocks are accepted by some participants but not by others, and the whole network collapses into forks.
Mass decentralization is only a selling point for Bitcoin, but even then the Bitcoin organization (who controls the code) has authority to push a hard fork on the miners. They won't do it obviously (e.g. increase block size), because it would alienate their user base.
Miner validation can be controlled by the same organization in charge of the code, which isn't aligned with any one competitor in the industry.
In practice you probably want a special purpose computer that is GOOD at calculating SHA256 hashes. But anyone can acquire these without limitation or restriction.
It's not a "vs. bitcoin" comparison... just an example of how organizations in an industry would use block chain to store numerous small transactions, instead of a decentralized database.
If you're getting frustrated and think that is deflecting then it's possible you have a cognitive bias.
(As for invalid blocks - in the absence of a bug in the code that runs the system, all validators will say no to the invalid block(s), so there's no disagreement, and things carry on.)
The mining incentive can just as easily be usage of service provided by the network which uses the given blockchain.
Even if the miners weren't interested in consuming the provided services on their own, the network could rely on miners being rewarded with services which they then sell access to.
'Blockchain has the potential...' should probably be 'Blockchains have the potential...'. "Blockchain" is not a single technology but a group, it's like saying "teleporter can move you from place to place" vs "teleporters can move you from place to place". Blockchain isn't a proper noun, but a plural grouping of many implementations.
One of the obvious things about Merkle ledgers is that everyone can have their own. You could have one per tradeable instrument on an exchange, for example. Anyone can start an altcoin; why not the BoE?
The proof-of-waste system allows the system to be fully distributed by continuously burning electricity such as to push up the minimum cost of overwriting some other node's choice of doublespend (note: NOT ability to forge transaction!) to very high levels.
If you discard the "distributed" requirement, you can save a lot of electricity by having a single or multiple CA-like series of authorized stamp-issuers. It then looks a lot more like Chaum's digital cash.
If you discard "pseudonymous" as well, noting that bitcoin pseudonymity is both fragile and directly contrary to KYC/AML, you can make further optimisations.
signature verification, P2P, cryptographic hashing, public-key cryptography
Old, but not yet widely deployed outside of the browser-CA system. Getting banks to use proper digital signature technology would be a major upgrade.
(Also, remember in the UK we have both EMV and "faster payments", so the US problems of stolen magswipes and waiting for cheques are not so prevalent.)
If you drop the distributed requirement you can run an equivalent system on on a pentium 4 in someone's basement, without wasting GWs of power and spewing carbon dioxide into the atmosphere.
Huh? Exponentially? The difficulty level is rising exponentially, but that's owing to continued investment in specialized hashing hardware. I certainly don't think that the actual amount of electricity being put into hashing is still growing exponentially. It would only grow exponentially if the price of Bitcoin continued to appreciate exponentially, and that hasn't been the case in years.
Gasoline at least gets you from A to B. Burning cycles is much more wasteful. Bitcoin's proof of work/waste is really something like 'I can prove that it is statistically likely that I wasted a shit-ton of power heating this data centre, doing SHA hashes, trying to find one that has a high number of leading zeros.' That's pretty wasteful IMO.
There's also proof-of-burn in the context of bidding for the right of block validation, though that's far less developed than proof-of-share.
If you haven't heard of Ethereum, check it out. It seems to be one of the leaders in blockchain platforms. Even Microsoft is working with it, along with many others.
Bitcoin, although the largest chain right now, will be a small player in an enormous field. The idea of one cryptocurrency to lead them all is not going to work. In fact, the 'currency' part is somewhat insignificant relative to what the blockchain industry will be. Every 'token' or 'currency' that represents an asset in a smart contract, or an asset such as cash, will be easily and instantly exchangeable for any other liquid asset. (i.e. U.S. Dollars). Having something like bitcoin is actually little use to us. That's not saying I think bitcoin was stupid or bad, it has done much to further the blockchain advancement.
> Ethereum's chain is a mess.
I'm unsure what you mean here.
> It's only burning 25k USD per day, and the project plans to switch off of it entirely.
Burning 25k USD of what? Switch off of what?
> The claim that this project can cure whatever ails you on such a weak foundation is at best dubious, and probably just a scam.
Which claims are you referring to. What part of Ethereum is a scam?
Vitalik knows the Ethereum chain won't scale so he's renovating the entire thing to Proof of Stake. (Which is a bad idea as well). Hunt around this is public knowledge.
Claims: There are so many. If you haven't seen them , watch the videos of the Ether team during the crowdsale.
Thus far it is shaping up to be a powerful platform with some realistic potential to changes to how internet software is built.
I don't know how you can say this with any degree of certainty (read: I want your crystal ball). Network effects are incredibly important here, as the security of the system is exactly its total hashing size. Bitcoin has such a head start that I don't see how anything could overtake it without providing incredible new features that can't be implemented even as side-chains.
I can make a token and call it 'potPlantCoin'. That token can be valued at '1 potted plant' of a certain size in my neighborhood blockchain, whereas, the token is backed by a potted plant... I could then effectively have a distributed, decentralized ledger in my neighborhood that uses the value of a potted plant as the means of exchange. I don't have to worry about any other network than the small amount of processing power within the nodes in my neighborhood.
Maybe that example helps you understand how the blockchain doesn't need a 'leader' or something like bitcoin that is 'so far ahead'. Bitcoin is completely irrelevant in my neighborhood. Sorry, no crystal ball here, but I do have an extremely high degree of certainty =p
That's why you use the biggest existing blockchain, not a separate one. There's no way in hell I can cheat you if we do our transactions on the Bitcoin blockchain, because I can't beat the overall hashing power of the system, but I sure as hell can beat your hashing power if we have a blockchain that's only for two people, or just for a neighborhood.
(This is probably what you want, anyway, when the value of the assets that back the network exceeds the value of mounting an attack! You might argue againt the wisdom of having the network secured by general mutual mistrust, but it's no worse than relying on cost.)
First, bitcoin was completely unknown.
Then, bitcoin was outright laughed at (some HN commenters are still at this stage of evolution).
Next, people jumped on "blockchain" as a sort-of gateway drug, using it in sentences which amount to: "Well, computers are useless. But the Internet, the Internet is where the real power comes from!".
Eventually, we will come full circle and people will realize that you cannot have a blockchain without bitcoin (or a close analog), which is what the bitcoin fanatics were saying right from the start.
Not to mention sharding solves a lot of scaling issues.
I think it's quite a cool little idea for them to get people from non-traditional backgrounds into the BoE. Most crypto people would never think of applying to the BoE for an internship normally I don't think.
[1] http://www.darkpolitricks.com/2013/01/who-owns-the-bank-of-e...
[2] https://en.wikipedia.org/wiki/Bank_War
I'm not exactly a fan of his public policy positions.
Therefore I may happen to agree with Andrew Jackson on some things, but appealing to Andrew Jackson as an argument for those things is still a bad argument.
But yeah, he also slept around, so by that logic who cares right ?
[1] https://en.wikipedia.org/wiki/Executive_Order_11110
While this seems like a great opportunity for some, and not so for others, I urge you to think it over yourself first.
Yes, this could actually be a very good opportunity for the right student to get an internship/possible job in a market that will be extremely hot. It it's a good way for BoE to find students that want to get involved in this industry.
On the other side, please know that this is not the only way. The community in many growing blockchains is very good. There are many resources that are available and free for you to explore your idea and create something new that is actually YOURS.
I'm not saying you should try and do something on your own out of school, it is perfectly okay to get a regular job, and this might be what you want. However it is also perfectly okay for you to not participate and expand on your idea on your own or with partners. There are/will be many opportunities and positions out there in this industry in the near future, this is not your only option.
EDIT: Another interesting point is the time frame which this challenge is allowing. I do not know when it was announced, but I'm assuming based on the timer that, when it started, the time given is 24 hours. It seems odd to me. This is a challenge that should be given more time, especially given how many students are wrapping up their semester and will be heavily involved in projects/finals right now.