Tag Archives: Bitcoin

What Is A Blockchain?

The Linux Foundation started a blockchain initiative involving many of its large corporate members. The initiative will devise a viable new approach to blockchains (presumably implemented as open source software) that can be used for any application where a distributed ledger is a useful data structure.

It’s easy to confuse “blockchain”, a distributed document database technology that operates without an authoritative master copy, and “bitcoin”, a virtual currency associated with one particular instance of blockchain technology. So here’s an explanation of the blockchain.

800px-bitcoin_block_data

The “blockchain” is a database, journal or ledger for storing arbitrary documents. It’s maintained as a linked list, with cryptographic signatures verifying each entry. As a public resource, there’s a risk of journal entries being made too often (a bad thing for performance, especially over time, creating a risk of DoS). To prevent this, every entry needs to be accompanied by a token indicating the good standing of the author.

Since issuing tokens from a central authority defeats the purpose of the blockchain, they are instead created by each author independently but verifiably. For the Bitcoin blockchain and many others, the token takes the form of a “proof of work” – a cryptographic evidence of having solved a computationally-complex cryptographic problem within a globally-identified sequence.

There is no master copy of a blockchain; copies of it may be kept anywhere. The validity of each entry in the blockchain can then be independently confirmed by every participant. In the case of the Bitcoin blockchain and many others, this is done by every user replicating the entire blockchain and then comparing new entries against the findings of other users. A voting mechanism between replicas allows the “wisdom of crowds” to identify and reject flawed or fraudulent entries. The crowd involved can be public (as in the case of Bitcoin), or private or indeed a mixture of both.

While Bitcoin is the best-known application of the blockchain, there are many others, including different approaches to the entry token and to cryptography. We expect blockchain to become an important part of distributed systems in many roles: creating auditable logs of transactions, establishing provenance of reference documents such as inventions or contracts, providing a micro-currency for automated transactions in a heterogeneous “internet of autonomous things” and many more beyond the familiar use as a virtual currency.

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Bitcoin Donations

Observant readers will have spotted the new “Donate Bitcoins” button on the Meshed website (over there on the right).  If you would like to encourage us in our activities, we would be grateful for a few satoshii thrown our way.

The donation mechanism uses Coinbase. We picked this rather than,  say, Paypal because it allows anyone anywhere in the world to easily make a donation in relative anonymity. You can use bitcoin in your own Bitcoin wallet, or you can pay Coinbase in your local currency. Do give it a try so you can tell your friends you have used Bitcoin!

Bitcoin Exchanges: A Beginners Guide

Simon’s been putting together a quick tour of the world of Bitcoin exchanges, based on his experience of trying them out over the last six months. The nature of the services offered by the different exchanges seems to vary  quite a bit, so this handy walkthrough makes a great beginners guide to working out what different services are being offered. If you’re looking for more detail about how you might expect to be treated as a user at the sites mentioned, last weeks InfoWorld article fleshes out some of the details. But for a general overview of what Bitcoin’s good for and some of the ways you can make the most of yours, checking out this slideshow is a solid place to start.

Bitcoin exchanges need to get their act together

Sometimes it seems as though bitcoin is a required fixture in the news. The recent collapse of Mt Gox is just the latest in a string of headlines that may have you wondering why people even bother. Bitcoin itself though remains a powerful idea and its transparent, open source approach have enabled it to stand up to scrutiny and criticism with head held high. Not only does it hold a lot of potential in its own right, it also stands as a shining innovative example of the potential for distributed, peer-authenticated ledgers. Far more problematic are the “exploitative ad-hoc businesses” which have grown up around it.

Over the last six months Simon’s been trying out a selection of different bitcoin services and exchanges. The different results he’s encountered generally reflect badly on this admittedly young industry and suggest that they have yet to really find their feet. In particular he claims that they need to work on transparency, user trust and business rigor. Despite his experiences, the process of exploring this world has left him confidently re-assured by the underlying potential behind bitcoin as a concept. Read more in this weeks InfoWorld article.

Bitcoin coming into its own

Bitcoin has been in the news a lot over the last few weeks. It’s astronomical rise, then the crash after the Peoples Bank of China took cautionary moves to avoid it destabilising the Chinese domestic currency and finally the recovery of Bitcoin’s price over last few days.

The attention that Bitcoin and other virtual currencies are getting should come as no surprise. The internet is creating a meshed society in which each of us is able to start businesses, trade goods, conduct relationships, publish, editorialise, and conduct politics, all without needing an intermediary to empower us. An alternative currency that is managed not by a bank but by the consensus of its users, becomes increasingly necessary as this meshed society matures.

For more detail and commentary check out this weeks InfoWorld article from Meshed Insight’s Simon Phipps.