Like a parliament, a blockchain is a means by which a group of people collaborates to produce an ordered list of accepted “resolutions” that is deemed authoritative and legitimate by some community it represents. That list of resolutions may cause the construction of alteration of some side-product. Laws passed by Congress create or alter the United States’ legal code. “Blocks” accepted by Bitcoin “miners” change account balances in an implicit ledger of who owns what Bitcoins. But the authoritative source is always an ordered list of accepted resolutions, from which the state of the side products may mechanically be derived.
.. Most obviously, the leadership of a deliberative assembly may be capable of preventing consideration of resolutions that the membership would pass if required to vote on the question. Anyone who follows real-world politics understands that it matters very much who “controls” a legislative house.
.. Among blockchain enthusiasts, preventing the consideration of a potentially acceptable resolution is usually referred to as a “censorship attack”.
.. Every few minutes, or even seconds, the winner of a new lottery is announced. The winner gets to submit resolutions for consideration by the parliament, and is financially rewarded if her “block” of resolutions is accepted by the majority. The proposal of resolutions is not restricted to miners. They may be submitted by, well, anyone at all. Miners check the resolutions and decide if they are likely to pass. They combine the ones that do seem likely to pass into a “block”, and hope to win the lottery. A miner may try to exclude resolutions that are likely to pass but that she herself disagrees with, but that sort of censorship is unlikely to have any effect, since she is unlikely to win the lottery in any particular round.
.. Blockchains reward consensus: It is lucrative to go along with most others would go along with. Understanding the will of the majority of their colleagues and bending to it is the job of each and every legislator.
.. If more than half of the participants in the Bitcoin blockchain suddenly decided that User A was evil and should not, in fact, be permitted to spend her money, then lottery-winners would quickly learn to exclude her resolutions, and that would become a new, communally enforced norm. People in the Bitcoin community who consider a norm like this illegitimate would refer to it as “censorship” or a “51% attack”. But “51% attack” is just another way of describing “majority rules” when you don’t like the decision of the majority.
.. Ones weight in the parliament is determined by how much computing power one can bring to bear, and, it turns out, sometimes by the form of the computing power, as Bitcoin for example is best run by very specialized chips.
.. A blockchain, like a parliament, is much more a social institution than a technological one, although very clever technology was necessary to design blockchain systems that could become socially credible.
We Need to know Who Satoshi Nakamoto is
“At the end of the day, knowing the identity of Satoshi is about as important as knowing who created HTTP or HTML,” a bitcoin entrepreneur named Jason Weinstein told Slate. “Every day people communicate, socialize, get information, move money, and transact business over the Internet using these protocols without knowing how they work or who created them.”
.. The search for Nakamoto, the argument goes, undermines the anti-authoritarian premise of bitcoin. Andreas Antonopoulos, a well-known bitcoin entrepreneur, laid out this argument in a post on Reddit explaining why he declined an offer to meet Wright:
Identity and authority are distractions from a system of mathematical proof that does not require trust. This is not a telenovela. Bitcoin is a neutral framework of trust that can bring financial empowerment to billions of people. It works because it doesn’t depend on any authority. Not even Satoshi’s.
.. The Economist pointed out, this latest saga unfolded during a heated “civil war” that has broken out among bitcoin developers over how to deal with an increase in transaction volume in the bitcoin network. The network processes transactions in batches known as “blocks.” As the number of blocks has increased, the network has become in danger of being overloaded. One side in the dispute wants to change the bitcoin code, increasing the block size to allow the system to process transactions more quickly. The other side sees this as a betrayal of the integrity of the original code, arguing that a change would lead to more centralization in the system (the greatest sin for a bitcoin believer) and consequent problems.
.. In this context, the fight over Nakamoto looks more like the jostling of courtiers to install a sympathetic heir to the throne than an objective analysis of the cryptographic proof.
.. Unlike HTML or HTTP, bitcoin was an ideological project from the start.
.. Turning away from the question of Nakamoto’s identity is a way to deny the fact that bitcoin, like all technology, is ultimately, imperfectly, human.
Susan Athey: What is the state of bitcoin and blockchain technology as of early 2016?
Three years ago, institutions scoffed at the idea of decentralized solutions to storing items of value; instant settlement was predicted to be at least a decade off in the future; and the idea that a nation would move to entirely digital currency seemed like science fiction. Bitcoin was a proof of concept that inspired the imaginations of engineers, entrepreneurs, and innovators all over the world; and it also served as a catalyst for an industry that had been resisting innovation as it was bogged down by and distracted by regulatory compliance and recovering from the financial crisis. The industry went from saying “we’ll never all be able to coordinate on technological changes” to “if change is coming, I want to be a part of it.” In my view, the importance of a catalyst for action cannot be understated, especially when dealing with large, conservative firms with disparate interests.
.. One way to think about it all is like the beginning of the internet. Early on there was a lot of discussion of protocols, packets, etc., but it took many years and many layers of services on top before it was useful. And the first commercial uses had a lot of questionable elements (policy-makers in the 1990s were alarmed by the pornography and use of the internet for criminal activity).
Bitcoin Technology Piques Interest on Wall St.
Instead, many of the top minds in finance have come to believe that the software that brought the virtual currency into existence also enables a fundamentally new way of transacting and maintaining records online — allowing people and banks to directly exchange money and assets like stocks and bonds without having to rely on a long chain of expensive middlemen.
.. executives from more than a dozen large banks gathered to confidentially discuss how the technology underlying Bitcoin could be used to change foreign currency trading, the largest financial market in the world, according to people who attended the meeting.
Central banks like the Federal Reserve and the Bank of England have their own teams looking at the technology.
.. The Nasdaq software will allow the trading of stocks in private companies, like tech start-ups, on a new kind of blockchain. This will replace the existing system in which private companies issue and trade shares using paper certificates — a process that means that even basic trades can take weeks to complete.
.. at two Barclays offices in London dedicated to the technology — are looking at ways to use the blockchain to speed up and lower the cost of consumer payments, to compete with credit cards and direct money transfers.
But bankers generally say that most of the work is aimed at changing the systems that big Wall Street traders and investors use to buy and sell sophisticated assets like syndicated loans and corporate bonds.